SUPREME COURT OF QUEENSLAND

Transcription

1 SUPREME COURT OF QUEENSLAND CITATION: Frikton v Jelekainen [2007] QCA 451 PARTIES: GYORGY FRIKTON (defendant/appellant) v ARI JUHANI JELEKAINEN (first plaintiff/first respondent) JOANNE WRAIGHT (second plaintiff/second respondent) OLLI MANNER (third plaintiff/third respondent) SEIJA LOWE (fourth plaintiff/fourth respondent) FILE NO/S: Appeal No 4423 of 2007 SC No 3205 of 2005 DIVISION: PROCEEDING: ORIGINATING COURT: Court of Appeal General Civil Appeal Supreme Court at Brisbane DELIVERED ON: 21 December 2007 DELIVERED AT: Brisbane HEARING DATE: 9 October 2007 JUDGES: ORDER: McMurdo P, Holmes JA and Jones J Separate reasons for judgment of each member of the Court, each concurring as to the order made Appeal dismissed with costs CATCHWORDS: CONTRACTS GENERAL CONTRACTUAL PRINCIPLES CONSTRUCTION AND INTERPRETATION OF CONTRACTS OTHER MATTERS where the parties entered into negotiations to release the appellant from his obligations under the joint venture agreement whether a bi-lateral agreement to procure the release of one joint venturer requires the consent of other joint venturers whether the other parties to the joint venture consented by implication CONTRACTS GENERAL CONTRACTUAL PRINCIPLES CONSTRUCTION AND INTERPRETATION OF CONTRACTS OTHER MATTERS whether contract executory whether term was a condition precedent or requiring concurrent performance

2 2 COUNSEL: SOLICITORS: CONTRACTS GENERAL CONTRACTUAL PRINCIPLES CONSTRUCTION AND INTERPRETATION OF CONTRACTS OTHER MATTERS where the transfer of title from the appellant was to occur within a reasonable time where the appellant s delay frustrated the transfer of title where the appellant sought to rely on his own default Club of the Clubs Pty Ltd v King Network Group Pty Ltd [2006] NSWSC 1138, considered Maynard v Goode (1926) 37 CLR 529, applied McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, considered Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252, applied Parmalat Australia Ltd v Norco Co-operative Ltd [2006] QCA 129; CA No 2070 of 2006, 21 April 2006, applied TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, applied Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, applied P J Dunning, with N Jarro, for the appellant R J Douglas, with D J Schneidewin, for the respondents Tim Williams Property Lawyers for the appellant Clinton Mohr Lawyers for the respondents [1] McMURDO P: The appeal should be dismissed with costs. I agree with the reasons of Jones J and with the additional observations of Holmes JA. [2] HOLMES JA: I have read the reasons for judgment of Jones J and agree with all his Honour has said and with his conclusion that the appeal should be dismissed. I would simply add some observations in respect of the third ground of appeal. It suggests that had the appellant appreciated that the trial judge would find it a term of the release agreement that the first respondent procure the release of the appellant from his obligations, he would have led further evidence or cross-examined on the issue. [3] The respondents pleading alleged as a term of the release agreement that the first respondent would make reasonable endeavours to have the defendant released from his obligations. The appellant denied the existence of the release agreement, but there was nothing to prevent him, in the alternative and against the event that the agreement was made out, taking issue with the adequacy of the steps taken by the first respondent to release him from his obligations. He chose not to, preferring instead to rely on denial of the agreement s existence. It seems improbable, had the term been pleaded in the form his Honour ultimately found - that the first respondent would procure the various releases - that the position would have been any different. Certainly nothing specific was suggested as to what evidence might have been advanced or cross-examination undertaken, had the appellant had warning that such a finding could be made.

3 3 [4] There is no reason to suppose that the finding of a more stringent obligation than that pleaded produced any unfairness to the defendant. [5] JONES J: On 18 August 2003 the appellant, Gyorgy Frikton (hereinafter Mr Frikton ) and the respondent Ari Jelekainen (hereinafter Mr Jelekainen ) agreed to purchase two parcels of land at Maleny in the State of Queensland for a price of $995,000. To complete the purchase they arranged for mortgage finance with HSBC Bank secured on the land and on other security provided by Mr Jelekainen. This was in the form of a first mortgage over his land at Riverhills and a guarantee from Aura Sports Pty Ltd in its own right and as a trustee of the adult beneficiaries of the Kariitta Trust. 1 Aura Sports Pty Ltd operates a family business under the control of Mr Jelekainen. He was also a trustee of the Aura Trust, a discretionary trust the beneficiaries of which were Jelekainen and his mother. 2 [6] The purpose of these parties in making the purchase was to join with three others the second, third and fourth respondents in a joint venture to subdivide the two lots and to on-sell the land. These three respondents are identified in the evidence, in the reasons for judgment below and in these reasons as the investors. The terms of the joint venture agreement had been agreed by 29 November [7] Soon thereafter Mr Frikton sought to be released from his obligations under the HSBC loan and the joint venture agreement. The principal issue at trial was whether agreement had been reached between Mr Jelekainen and Mr Frikton for him to be so released. The learned trial judge found that there was such an agreement and that it had been repudiated by Mr Frikton. [8] Mr Frikton appeals against that decision contending that notwithstanding the existence of the release agreement it was not capable of discharging the rights and obligations of the parties and that the learned trial judge erred in failing to allow Mr Frikton the opportunity to raise defences such as breach by Mr Jelekainen of the terms of the release agreement as found. Background facts [9] The proposal was for the land, purchased in the names of Mr Frikton and Mr Jelekainen, to be made available to the joint venture. Their respective capital contributions to the joint venture were determined by agreement. The capital contributions by the principals and the investors were not equal. The joint venturers were entitled to share in the net profits of the venture proportionately to the capital contributions. In the end result the contributions to the joint venture initially agreed upon were found to be as follows:- The Aura Trust (Jelekainen) - $800,000 Mr Frikton $100,000 Ms Wraight $100,000 The Olli Manner Family Trust (Manner) $100,000 Ms Lowe $ 50,000 The joint venture agreement in showing those contributions was executed by the parties on different days but was finalised on 29 November Record at pp Record at p 659.

4 4 [10] Mr Frikton did not in fact make any contribution. Mr Jelekainen agreed that Mr Frikton s contribution of $100,000 would initially be provided from funds advanced by the bank ( HSBC ) and be repaid with interest upon the sale of Mr Frikton s house. Mr Jelekainen s contribution of $800,000 was provided from the balance of HSBC funds ($550,000) supplemented by payment of $250,000 from his personal resources. 3 Mr Jelekainen accepted responsibility for the servicing of the HSBC loan except for the proportion of interest and charges relative to Mr Frikton s borrowing of $100,000. Consequently, Mr Frikton s exposure to risk was as a named co-borrower of the loan. The loan however was well secured against property to which Mr Frikton had made no contribution. [11] Soon after signing the joint venture agreement Mr Frikton had become concerned about his exposure to the financial obligations to HSBC and his obligations under the joint venture agreement. He was concerned also about his lack of control over the joint venture and he was suspicious about the way certain documentation had been handled. He manifested those concerns to his solicitors in early December Following various discussions between the parties and the exchange of s between the solicitors the point was reached by 29 December 2003 that Mr Jelekainen accepted that Mr Frikton should be released from his obligations. Notwithstanding this development the purchase of the land was completed on 29 December 2003 with assurances given to Mr Frikton that he would be released from the obligations which were concerning him. [12] The primary questions at trial, identified in paragraph [1] of his Honour s reasons, were:- (a) Did the copy of the Joint Venture Agreement initially signed by Mr Frikton contain a schedule and was he aware of its contents? (b) What are the terms of agreement entered into between Mr Frikton and Mr Jelekainen concerning the former s contribution of $100,000 to the capital of the joint venture and how does that agreement bear on their respective entitlements under the joint venture? (c) Was there an agreement under which Mr Frikton withdrew from the joint venture, retaining only a right to 10 per cent of the net profits of the joint venture? 4 As to (a) the learned trial judge, accepting the evidence of Mr Jelekainen and the other respondents, determined that Mr Frikton was aware of the contents of the joint venture agreement. This finding is not challenged and it is relevant only tangentially to ground 5 on the appeal. [13] As to (b) and (c) his Honour found that there was an agreement whereby Mr Frikton would be released from prior contractual bindings. Whilst this specific finding is not challenged on the appeal, the efficacy of that agreement to bring about the release is in issue. 3 4 Record at p 68. Record at p 962.

5 5 The pleadings [14] Much of the difficulty on this appeal arises from the manner in which the issue of the release agreement was pleaded and how it was litigated at trial. Relevantly, the pleading defined the issue in the following way:- Amended Statement of Claim 22. By a further agreement made 29 th December 2003 between the first plaintiff and the defendant, in consideration of the first plaintiff releasing the defendant from the obligation to repay under the contribution agreement, and making reasonable endeavours to have the defendant released from his obligations under the mortgage, the defendant agreed to transfer to the first plaintiff his interest as contributor under the joint venture agreement, and any interest or obligation he otherwise had or enjoyed under the joint venture agreement, and in respect of the land, except for his entitlement to equally share in any proceeds of the development project under Clause 7 of such agreement ( the release agreement ). 23. The release agreement was made: in writing, in an exchange of s between the first plaintiff and the defendant, being an dated and sent 28 th December 2003 from the defendant to the first plaintiff, and an dated and sent 29 th December 2003 from the first plaintiff to the defendant; Amended Defence and Counterclaim 22. The Defendant denies the allegation in paragraph 22 of the Statement of Claim, as it is untrue, but the Defendant admits there was an invitation to treat issued by the Defendant which resulted in draft documents being prepared but such invitation did not result in a concluded bargain. 23. As to paragraph 23 of the Statement of Claim, by reason of the facts and matters alleged in paragraph 22 above, the Defendant denies the release agreement as alleged, as it is untrue, and therefore the Defendant denies paragraphs 23.1, 23.2 and further, or in the alternative, orally, in a conversation, to the lastmentioned effect, between the first plaintiff and the defendant had 29 th December 2003; 23.3 further, or in an alternative, orally in a conversation, to the lastmentioned effect, between the first plaintiff and the defendant on 8 th January The defendant repudiated the release agreement by refusing to effect any necessary transfers, and asserting an entitlement under the joint venture agreement, not just in respect of the contribution of $100,000, rather an entitlement based on a higher contribution founded on the mortgage loan By reason of the facts and matters alleged in paragraph 22 above, the Defendant denies the release agreement as alleged in paragraph 24 of the Statement of Claim, as it is untrue Further or alternatively, on or about 27 May 2004 the First Plaintiff and the Defendant agreed that the invitation to treat referred to in paragraph 22 above would not proceed and that the Defendant would continue as a party to the joint venture. 5 [15] The cross-examination of Mr Jelekainen was conducted on the basis that the only release was the reduction of Mr Frikton s 50 per cent interest in the land to one per cent and that there was no release agreement because negotiations were ongoing about Mr Frikton s entitlements. 6 No contest was raised as to the details of the terms of the release agreement contended for by the plaintiff or whether its terms were complied with Record at pp 243-4; pp Record at pp Transcript at pp

6 6 [16] There was no formal expression of the release agreement. Its terms are to be gleaned from precursor s on 28 and 29 December 2003, and the terms of discussions between then and 8 January 2004 resulting in Mr Frikton advising his solicitor on that date that Ari and I agreed to have me taken off the title and the bank loan documents. 8 Thereafter conclusions are drawn from the exchange of s, from admissions and from the subsequent conduct of the parties. 9 His Honour expressly found:- [77] There is nothing in the relevant exchanges prior to mid-april 2004 which suggests to me that the Parties intended to have the terms of their bargain restated in a more formal document or that performance of one or more of the terms was conditional upon the execution of a more formal document. [78] Mr Frikton, in effect, asked to withdraw from the joint venture. Mr Jelekainen agreed to the request and, implicitly, if not expressly, agreed to do all that was necessary to bring about the desired objective. The fact that in order to achieve the agreed result, the Parties had to execute other documents and obtain consents or releases from others does not require the conclusion that no binding agreement was entered into. But the more formal and complex the steps necessary to implement the agreement the more likely it is that the Parties intended not to be bound until a formal contract was signed. 10 Findings below [17] The learned trial judge found the content of the agreement in terms different to the pleaded contention of Mr Jelekainen that he was required only to make reasonable endeavours to have Mr Frikton released from his obligations to HSBC. His Honour found in his reasons as follows:- [85] Mr Frikton was concerned that the Project may not prosper and that he could be cheated. He wanted to leave the joint venture immediately and to have no further obligations in respect of it. Achieving that result was not a matter of complexity. The subject matter of the bargain was straightforward. Mr Frikton s primary concern was to be released from liability to the Bank. Mr Jelekainen agreed that this should be done and set about procuring it. In the process, the Parties appeared to conclude that nothing formal needed to be done to have Mr Frikton released from any obligations under the Joint Venture Agreement. Perhaps this was because of a perception, reasonable in the circumstances, that liability to the Bank posed the only appreciable risk. Also, the fact that Mr Frikton was to have a 10 per cent preferred interest in net profits may have made him reluctant to seek formal documentation of a release from joint venture obligations. [86] The issue is one of the Parties intention to make a concluded agreement, not what they subjectively intended, but whether reasonable persons in their respective positions would consider that a Reasons [24] and [25]. Record at p 966. Reasons [66]-[82] Record pp Record at p 977.

7 7 bargain had been concluded by reference to the words and actions of the Parties. For the reasons just discussed, such reasonable persons would consider that a legally binding commitment had come into existence. [88] For the above reasons, I find that the Release Agreement, slightly different in content from that alleged, was entered into by no later than 8 January The terms of the Release Agreement alleged by the plaintiffs were that in consideration of Mr Jelekainen s releasing Mr Frikton from the obligation to repay moneys under the Contribution Agreement and in consideration of making reasonable endeavours to have Mr Frikton released from his obligations under the mortgage to the Bank, Mr Frikton would transfer to Mr Jelekainen his interest as contributor under the Joint Venture Agreement, any other interest under the Joint Venture Agreement and his interest in the land except for his entitlement to share equally in any proceeds of the development project under clause 7 of the Joint Venture Agreement. [89] I find that the Release Agreement included terms that Mr Jelekainen procure the release of Mr Frikton from any obligations to the Bank and from any obligations under the Joint Venture Agreement. The latter term, in my view, was implicit in the communications which comprise the Release Agreement. I do not accept that Mr Jelekainen s obligation was limited to making reasonable endeavours. As a result of Mr Frikton s repudiation of the Release Agreement, he was not in position to complain about the lack of any formal release by other parties to the Joint Venture Agreement. It is likely that he acquiesced in Mr Jelekainen s conduct in that regard. These issues however, were not pleaded or argued and it is unnecessary to explain them further. (emphasis added) [18] His Honour found that Mr Frikton repudiated the release agreement by seeking to resile from it and to reinstate himself in a position more favourable than his original position. Mr Frikton refused to sign the necessary documents to allow HSBC to release him from the obligation under the loan. The relief sought below was specific performance or an injunction compelling performance of the release agreement. By the time of the hearing, the steps necessary to procure the release had been achieved. [19] An issue raised on appeal but not raised either in the pleadings nor in evidence below was the fact that the investors had not been involved in the release agreement. His Honour expressly proceeded on the basis:- [70] It may be accepted that Mr Jelekainen had no authority to bind other parties to the joint venture but he did not purport to do so. The bargain, if there was one, was struck between himself and Mr Frikton. It was not remarkable that the Parties would consider that Mr Jelekainen had it within his power to procure the release of Mr Frikton from all relevant obligations, provided the Bank consented.

8 8 He was the driving force of the joint venture and other participants, who had relatively minor interests, were his friends or relatives. 11 Grounds of appeal [20] Mr Frikton raises the following grounds of appeal:- 1. The learned trial judge having found at reasons [70] that the first plaintiff/first respondent had no authority to bind the second to fourth plaintiffs/second to fourth respondents, and there being no evidence of those persons agreeing to the Release Agreement, his Honour erred in holding that the Release Agreement between the defendant/appellant and first plaintiff/first respondent was capable of discharging the rights and obligations of the parties to the multi-lateral agreement in the form of the Joint Venture Agreement. 2. The learned trial judge, having found at reasons [89] that the Release Agreement contained a term contrary to that pleaded by the plaintiffs/respondents, erred in failing to hold that in the circumstances the Release Agreement either did not release the plaintiffs/respondents and defendant/appellant from their rights and obligations under the Joint Venture Agreement according to its terms, or alternatively that the Release Agreement had come to an end either by the actions of the plaintiffs/respondents or defendant/appellant without so releasing the parties from the Joint Venture Agreement. 3. In the alternative to ground 2, having found the Release Agreement in terms different to those pleaded, the learned trial judge erred in failing to give the defendant/appellant an opportunity to raise any other defences that arose on the basis of the terms of the Release Agreement as found, such as breach, as opposed to those that had been raised on the basis of the terms pleaded by the plaintiff/respondent. 4. The learned trial judge erred in fact and/or in law in holding that the Release Agreement was an enforceable agreement to discharge all of the first to fourth plaintiffs/first to fourth respondents and the defendant/appellant from each of their respective rights and obligations under the Joint Venture Agreement. 5. The learned trial judge erred in fact and/or in law as to the proper construction of the Joint Venture Agreement. Ground 1: - Was the Release Agreement capable of discharging the rights and obligations under the Joint Venture Agreement. [21] At the outset it is to be noted this issue was not raised on the pleadings and not touched upon in the evidence at trial. As a consequence the learned trial judge was not called upon to make any findings relevant to the issue. Even though Mr Frikton denied the existence of the release agreement, it was open to him to raise in the alternative that if such an agreement as pleaded by Mr Jelekainen was found to exist it was incapable of discharging his obligations under the joint venture agreement. 11 Record at p 974.

9 9 The issue is now raised on the acceptance of the facts as found and beyond that it is to be determined upon the construction of the joint venture agreement. [22] Mr Frikton argues that the release agreement was incapable of releasing him from his obligations under the joint venture agreement unless the other respondents were also parties to the release agreement. It is clear they were not and it is clear also, as his Honour found, that the first respondent had no authority to bind them. [23] Mr Frikton contends that the joint venture agreement did not permit a bi-lateral agreement to bring about a change in the membership of the joint venture, and moreover any such change had to be done in accordance with the terms of the agreement. In this regard the release agreement was characterised as an arrangement involving all the joint venture parties. [24] The relevant provisions of the joint venture agreement relied upon are:- 3. RELATIONSHIP BETWEEN THE PARTIES The parties agree that: (b) nothing in this Agreement will constitute or be construed to constitute a party as the partner, agent, employee or representative of the others unless so constituted expressly; (d) except as specifically provided in this Agreement, a party has no authority to act for, or to create, or assume any responsibility or obligation for the others; 8. DEFAULT 8.1 A party will be in default under this Agreement if; (a) that party transfers all or any of its interests except in accordance with this Agreement; And 11. EFFECT OF AGREEMENT This agreement: (a) contains the entire agreement between the parties and no earlier representation or agreement, whether oral or in writing, in relation to any matter dealt with in this Agreement will have any effect from the date of this Agreement; and (b) will not be changed in any way except with the written agreement of the parties; 12 [25] Mr Dunning of Senior Counsel for Mr Frikton points to the nature of joint venture agreements and relies upon the statement in Joint Ventures Law in Australia (ed. Professor W D Duncan) at ch A joint venture agreement, involving elements of mutual confidence, fiduciary relationships and long-term association for the development of the joint venture project, would normally be a contract incapable of assignment without the consent of the other joint venture parties Joint Venture Agreement (JVA6), Record at pp Duncan, W D, Joint Ventures Law in Australia, 2 nd ed, The Federation Press, Annandale, 2005 at p 203.

10 10 [26] As a general proposition the statement is undoubtedly correct but regard must be had to the terms and nature of the agreement which the parties have chosen for themselves to which later reference will be made. [27] Mr Dunning also referred to the distinction identified in the remarks of Williams JA in Parmalat Australia Ltd v Norco Co-operative Ltd 14 at para [17] as follows:- [17] It is true that in some of the cases it is said that an assignment without consent is valid as between the assignor and assignee even where made in breach of a contractual provision limiting assignment. In those cases the only remedy is damages for breach. But the cases distinguish between those involving protection of personal skill or confidence and those where the identity of the person to whom the benefit passes makes no difference. In the former situation the clause prohibiting or limiting assignment prevails and there can be no valid assignment in breach of the contractual provision; in the latter case the assignment is valid but the assignor would be liable for damages for breach of contract. [28] If the release agreement were to be characterised as effecting an assignment of interest, the circumstances here indicate that the taking over of Mr Frikton s interest by Mr Jelekainen would have made no difference to the investors. The levels of their respective interests were unaffected by the change. They supported the change by their participation in the claim and seeking specific performance of the release agreement. The only essential variation to the written terms of the joint agreement would be to alter the level of Mr Frikton s contribution in the schedule from $100,000 to $0. Mr Frikton was aware that this was required and he recorded in an to his solicitors dated 5 May 2004 that he had no objection to doing so. 15 This was confirmed by Mr Jelekainen in his to Mr Frikton on 24 May 2004 which included the unchallenged expression Non [sic] the less you gave me a solemn undertaking to cancel the $100k. 16 This exchange occurred after the date of the release agreement and indicates Mr Frikton s desire to have its terms implemented. [29] The provisions of the joint venture agreement recognise the difference between the standing of Mr Frikton and Mr Jelekainen on the one hand and the investors on the other. For example, all decisions regarding the joint venture are to be made by [Mr Jelekainen and Mr Frikton] and the joint venture contributors shall accept their decisions ; 17 and the investors jointly and severally indemnifying Mr Jelekainen and Mr Frikton where losses are caused directly or indirectly by any act, omission or default by the relevant Investor. 18 Further, each investor irrevocably appointed Mr Jelekainen and Mr Frikton as its attorney. 19 [30] The substance of Mr Frikton s argument is that the express terms of clause 8.1 of the joint venture agreement prohibit the making of the bi-lateral agreement to assign Mr Frikton s interest to Mr Jelekainen. He relied upon the decision of Bergin J in [2006] QCA 129; CA No 2070 of 2006, 21 April Record at p 600 Record at p 608 Clause 4.3, Record at p 710 Clause 9.1, Record at p 713 Clause 4.2-6, Record at p

11 11 Club of the Clubs Pty Ltd v King Network Group Pty Ltd, 20 where the court considered the scope of an express power held by certain joint venturers to vary a joint venture agreement by appropriating the interests of other participants. The terms of that joint venture agreement relating to default (clause 15) were relevantly similar to the terms of clause 8 here. Her Honour said (at para [210]):- Having regard to clause 15 of the Joint Venture Agreement, any valid agreement that purported to require the transfer of a participant s interest in the Joint Venture to another participant would include the process under clause 15. However that is a different matter to the submissions in respect of the applicability of the equitable doctrine. That process (similarly to clause 8) provided for valuation of interests and the requirement to offer the interests for purchase by non-defaulting participants. Her Honour then went on to consider other questions upon which her decision ultimately turned. Her obiter dicta remarks above were made in the context of an elaborate joint venture arrangement where the participants in the joint venture held differing levels of shareholdings in the corporate vehicle by which the joint venture was conducted and where proposals for the assignment of interests were discussed and purportedly determined at participant meetings. [31] The joint venture arrangements under consideration here are quite different. The agreement makes no provision for the transfer by a joint venturer of its individual interest. The terms of clause 8.1 provide that a party will be in default if that party transfers all or any of its interest except in accordance with this Agreement but then makes no provision for transfer of an interest other than by clause 11 requiring change by written agreement of the parties. An agreement to transfer or assign will ultimately require the written consent of the joint venturers but that does not require them to be parties to the agreement between the assignor and assignee. [32] Properly construed clause 8.1 does not, in my view, operate as a prohibition against a transfer of interest. It is difficult to see how it could even operate to identify some default but at best it defines conduct as a default which is capable of remediation. The remainder of the clause then sets out what might properly be described as the machinery provision to deal with the default. Even so, its terms rather suggest that the sanctions apply only to the investors. [33] In my view there is no basis for contending that the terms of the joint venture agreement rendered the release agreement invalid. The two agreements are quite distinct. It is implicit in his Honour s findings, and undoubted by their conduct of the proceedings, that the investors would have formalised the assignment when required to do so. If default were to be alleged in respect of the joint venture agreement in these circumstances, the default would be against Mr Frikton who cannot rely upon his own default to argue its invalidity. 21 Ground 2: - Failing to hold that (i) The Release Agreement either did not release the parties from their Joint Venture Agreement; or [2006] NSWSC TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at p 147.

12 12 (ii) The Release Agreement had come to an end without releasing the parties from the Joint Venture Agreement. [34] This ground also raises an issue not litigated at trial. It is raised against the background of his Honour s finding that a relevant term of the release agreement was that Mr Jelekainen would procure Mr Frikton s release from obligation, that term being different to the one pleaded. [35] The case as pleaded did not raise an issue whether such term was a condition precedent to the release agreement or whether it required concurrent performance and consequently his Honour made no finding in this respect. [36] Mr Frikton now argues for a determination that the term was no more than a condition precedent to performance of the release. He does so on the basis of the importance to him of being released from his obligations to HSBC and those under the joint venture agreement. He further asserts that these conditions were not fulfilled within a reasonable time i.e. within a month of the agreement. Since no release from those contractual bindings had been achieved by May 2002 he argues he was entitled to terminate. [37] Again, the difficulties of dealing with any issue not litigated at trial are evident. Had the question of the intention of the parties or what was a reasonable time for performance been raised it would have undoubtedly been the subject of further evidence. Mr Frikton accepts the facts as found by the learned trial judge and this includes the finding that the release agreement was complete by 8 January It is also clear that at the time of the termination of the release agreement the joint venture agreement continued to exist. But other evidence which would have been germane to this issue had it been pleaded is not available. The question arises as to whether there should be a new trial. In Stead v State Government Insurance Commission 22 the High Court enunciated the relevant principle in the following terms:- That general principle is, however, subject to an important qualification which Bollen J plainly had in mind in identifying the practical question as being: Would further information possibly have made any difference? That qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility. 23 [38] For the reasons that follow I take the view that a new trial would not lead to a different result. The first question to be determined is whether the contract was executory in character or whether the agreement was conditional upon Mr Jelekainen s procuring a release from HSBC and the other joint venturers. If it is the former, Mr Dunning of Counsel concedes that he would be restricted to arguing the question of performance of the executory contract within a reasonable time. 24 [39] In the absence of any requirement to do so the learned trial judge did not expressly classify the nature of the contractual terms. Mr Frikton contends that it is the very (1986) 161 CLR 141. Ibid at p 145. Transcript at p 30/20-40.

13 13 nature of what was agreed that leads to the conclusion that he would not have given up his valuable stake in the project without having secured release from all contractual obligations, particularly those to HSBC which continued beyond termination. The findings that he was concerned that Mr Jelekainen may be attempting to cheat him 25 and wanted to leave the joint venture immediately and to have no further obligations in respect of it, 26 make it inconceivable that he would give away rights in advance of the actual release. That is consistent also with Mr Frikton s express wish in May/June 2004 to be reinstated in the project. [40] Mr Jelekainen contends the finding that there was a concluded agreement by 8 January 2004 together with the unchallenged evidence, leads to the conclusion that the contract was executory. Reference is made particularly to the postagreement communications between the parties and their solicitors. The starting point is the finding that by 8 January 2004, at the latest, the Parties had reached a consensus and intended to be legally bound. 27 This fact is reflected in the terms of Mr Frikton s to his solicitor that [Jelekainen] and I agreed to have me taken off the title and the bank loan documents, and I will have 10% interest in the proceeds of the property, and his desire to be correctly and totally removed from all the Bank loans. 28 [41] The means by which effect would be given to the release agreement was then put into the hands of the parties respective solicitors. It was envisaged by the learned trial judge that the process would necessitate the execution of documents and obtaining consents or releases from others. 29 The first advice as to the steps to be taken was given to Mr Jelekainen on 16 January This advice was transmitted to Mr Frikton s solicitors and responded to by them on 3 February Thereafter, the following communications are relevant:- 13 February from Mr Jelekainen s solicitors which states [Frikton] will be entirely released from his loan obligations once the transfer has been signed. 30 (i.e. by Frikton) 3 March Frikton s solicitors raise the prospect of receiving a letter from HSBC to acknowledge a release from the loan will be given once the transfer is signed March recording that Mr Frikton will sign the transfer once he receives a letter from HSBC April Mr Frikton instructs solicitors to be vigilant not to agree to me signing the transfer until we are assured that HSBC have no further claim April Confirmation from HSBC that Frikton s liability will be cancelled on lodgement of transfer Reasons [36] Record at p 968. Reasons [85] Record at p 978. Reasons at para [84]. Record at p dated 9 January 2004, Record at p 563. Reasons [78]. Record at p 977. Record at p 573. Record at p 580. Record at p 582. Record at p 583. Record at p 584.

14 14 13 April Mr Frikton s solicitors seek an undertaking about stamping and lodging of the transfer if it is signed April The undertaking is given by Mr Jelekainen s solicitors and accepted by Mr Frikton s solicitors April Mr Frikton is advised of the undertaking and its acceptance. 37 [42] Each of the above actions can only be construed as each party affirming the release agreement and taking the necessary steps for its execution. But the point was reached where the release from the HSBC loans could go no further until Mr Frikton signed the transfer. He refused to do so. The first indication of his reluctance to do so is in his to his solicitors on 24 April This led to Mr Frikton suggesting changes in the terms of the release agreement and then through newly retained solicitors, who, by letter dated 1 June 2004, proposed a whole new agreement. 39 Mr Frikton s release from the HSBC obligation was achieved only during the course of interlocutory proceedings in It was this chain of events which led the learned trial judge to observe that until April 2004 Mr Frikton was not seeking advice as to whether he should remain a joint venturer but as to how his release from his obligations to the Bank and his removal from the title to the land could best be effected 40 and to conclude that the correspondence and actions of the Parties from 3 February until mid-april are also more suggestive of conduct directed to implementing an agreement than of negotiations with a view to concluding an agreement. 41 [43] In the absence of pleadings on any issue as to how the contractual term should have been classified one is left with the task of determining what was the intention of the parties at the time the contract was formed. Such a task is clearly in the province of the trial judge and no doubt would have been done had the issue been raised. The exchanges between the parties prior to reaching agreement suggested that Mr Frikton s concern was to withdraw from the contractual bindings in order to achieve peace of mind. His initial statement to his solicitors on 9 January 2004 suggests that he regarded the release agreement to be complete and his inquiry from then until 24 April 2004 was only about the effectiveness of the steps to execute the agreement. In my view, the language employed and the unchallenged findings of the learned trial judge make it more consistent with the contract being executory in character rather than one that was subject to conditions or requiring concurrent performance. The appellant has failed to establish that there was any error on the part of the learned trial judge such as to require a different order to be made. Ground 3 Was the contract performed within a reasonable time? [44] It was undoubtedly implicit in the terms of the release agreement that Mr Jelekainen would procure the release within a reasonable time. The question, and perhaps the only question given the executory nature of the agreement, is whether this stipulation was fulfilled Record at p 586. Record at p 588. Record at p 590. Record at p 592. Record at p 610. Reasons [68] Record at p 974. Reasons [68] [supra].

15 15 [45] The first observation to be made is there was never any complaint by Mr Frikton about the issue of time. Nor was there a basis for any such complaint when much of the delay was caused by his own demands and his failure to sign the transfer. [46] The question of what is a reasonable time is always relative. As Isaac J said in Maynard v Goode 42 it means a reasonable time under the circumstances. He went on to say:- There is no difference as to this in law or equity. The consequence of a departure from compliance may have very different results in the different jurisdictions. The conduct of one of the parties may render it unfair for him to profit by the failure of the other to adhere to the requirement of the contract as to time, whether definitely fixed or indefinitely stated as reasonable (Stickney v Keeble (1915) AC 386). But that does not affect the question of whether or not the requirement is complied with in point of fact or law. It concerns merely the result. 43 [47] The narrative of the dealings between the solicitors for the parties referred to above not only leads to a conclusion that the contract was being affirmed until 24 April 2004 but that the parties themselves acknowledged that the performance of the release agreement required the intervention of others. Thereafter reasonable steps were taken to procure that intervention. It was reasonable also for the focus of activity to be on the release from the HSBC loan, as the release from the joint venture agreement would not, in accordance with the findings, have given rise to any delay. It is quite unrealistic, given those requirements of HSBC, to expect that performance would occur within a month of the agreement. That was quite plainly not the expectation of any of the parties. The parties may have expected the releases would have been procured before April/May 2004 but there was no particular period of inaction. There is no basis on the evidence to hold that the lapse of time was unreasonable in the circumstances. What brought the release agreement to an end was the repudiatory conduct of Mr Frikton which occurred between April and May As a consequence Mr Jelekainen was relieved of his obligation to procure the formal release by the other joint venturers. 44 [48] This ground of appeal also fails. Ground 5 Error as to the proper construction of the Joint Venture Agreement [49] This challenge to his Honour s finding becomes relevant only if the joint venture agreement remained on foot after a consideration of the issues raised on the other grounds of appeal. Given the view I have taken on those matters I shall deal with this issue briefly. [50] By this ground Mr Frikton seeks a variation of the terms of the joint venture agreement such that it would reflect a different level in the respective capital contributions of Mr Frikton and Mr Jelekainen. Mr Frikton contends that the terms of the schedule to the joint venture agreement do not show Mr Jelekainen as making any contribution whatsoever. Rather, there is a contribution from the Aura Trust, a (1926) 37 CLR 529. Ibid at p 538. Foran v Wight (1989) 168 CLR 385 per Brennan J at p 727; Grieve v Enge [2006] QCA 213 per de Jersey CJ at para [20].

16 16 discretionary trust controlled by Mr Jelekainen and of which he is one of two principal beneficiaries. Mr Frikton points to the terms of clause 6 of the joint venture agreement which requires that The level of individual Capital Contributions by [Mr Jelekainen] and [Mr Frikton] from the finance facility will be reflected in the Schedule beside each parties name. 45 In the schedule the name Jelekainen does not appear. In lieu there is the investor name Aura Trust which is not identified as a signatory to the agreement. Because the contribution of both Mr Frikton and Mr Jelekainen came from the HSBC loan and because of Mr Frikton s continuing joint obligation to the loan he was entitled to have the joint venture agreement rectified to reflect an equal contribution with Mr Jelekainen. The legal underpinning for this submission is the principle that where a contract is reduced into writing, where the contract appears in the writing to be entire, it is presumed that the writing contains all the terms of it and evidence will not be admitted for any previous or contemporaneous agreement which would have the effect of adding to or varying it in anyway. 46 [51] Mr Jelekainen contends that this submission is at odds with the facts as found by the learned trial judge as to the objective background and as to the parties understanding when they entered into the agreement. [52] The learned trial judge dealt with this issue in his reasons at paragraphs [56]-[58]. Against the background circumstances in which the agreement was signed, his Honour found that it is impossible to construe the last sentence of clause 6 as referring only to Mr Jelekainen in a capacity other than his capacity as trustee. 47 On the point of the literal construction of the agreement, his Honour concluded that by reading the document as a whole the reference to the Aura Trust in the schedule would be seen as referring to Mr Jelekainen in his capacity as trustee, because of the link between his obligation to raise finance and the application of those funds to the Capital Contribution. 48 [53] In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd 49 the High Court reaffirmed the principle of objectivity by which the rights and liabilities of parties to a contract are determined. The Court said:- What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction Clause 6.1, Record at p 711. Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252 at p 262. Reasons [63], Record at p 973. Reasons [64], Record at p 973. (2004) 219 CLR 165. Ibid at p 179.

17 17 [54] In McCann v Switzerland Insurance Australia Ltd 51 Gleeson CJ referred to the relevant considerations when interpreting a commercial document in the following terms:- Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure. 52 [55] These were the tests of construction which guided the learned trial judge in coming to his conclusion that a reasonable person who had the knowledge of the background circumstances as he found them to be would have construed the document to conclude that the parties, in agreeing to the joint venture agreement, were aware that Mr Jelekainen was making his Capital Contributions in his capacity as trustee of the Aura Trust. In my view his Honour s conclusion was plainly correct and there was no justification for Mr Frikton to claim a rectification of the agreement. [56] Accordingly, I would dismiss the appeal with costs (2000) 203 CLR 579. Ibid at p 589.