Aalders v PA Putney Finance Australia Pty Ltd

Background 12A Statement of Agreed Facts and Issues was prepared prior to the hearing and where I have referred to those agreed facts in the narrative below I have indicated the relevant paragraph number. Paul prepared a document with additional matters, not agreed between the parties, the substance of which I have noted in italics next to the agreed facts to which those matters relate. Adrian does not concede that the Agreed Facts are relevant to the proper construction of the Confidential Terms of Settlement entered into on 15 July 2010 (which he accepts is the only issue to be determined in this hearing) and therefore has agreed to these facts expressly on the basis that this is without prejudice to his position to argue that they are not relevant to the proper construction of the Confidential Terms of Settlement entered into on 15 July 2010 and are relevant as background to the matter only. 13It is agreed that there was a dispute between the two brothers, and companies variously controlled by one or both of them, about the management of a number of businesses providing rental agreements in respect of vehicles and other equipment. ([1]) 14As to the relevant parties, it is agreed ([2]) that, apart from the two brothers, and Paul's wife Suzanne, the relevant companies are: Anzax Finance Australia Pty Ltd (Anzax Finance Australia), of which both Paul and Adrian were directors and shareholders until at least late 2009 and of which Paul and Suzanne have been the sole shareholders and directors since execution of the Terms of Settlement on 15 July 2010 (there being a factual dispute about the shareholding and directorship of the company between late 2009 and 15 July 2010); Anzax Custodians Pty Ltd and Anzax Finance Pty Ltd, being companies of which both Paul and Adrian were directors and shareholders until 2006, but which have been entirely owned and controlled by Paul since that time; and Alders Finance Pty Ltd (Alders Finance), being a company of which both Paul and Adrian were directors and shareholders until 2006, but which has been entirely owned and controlled by Adrian since that time. 15From around 2001, Anzax Finance Australia provided vehicles or equipment to customers pursuant to the arrangements described in [3] of the Statement of Agreed Facts & Issues. In summary, Anzax Finance Australia purchased the vehicles or equipment; pursuant to a Principal & Agency Agreement, Anzax Finance Australia borrowed funds, on security of the relevant vehicle or piece of equipment, from St George Bank to fund the said purchases; customers entered rental agreements with, and paid rent to, Anzax Finance Australia in respect of the vehicles or equipment during the life of the said rental agreements (I note that a copy of a typical rental agreement was in evidence); Anzax Finance Australia retained a proprietary interest in the title of the vehicles (the scope of which interest was acknowledged to be in dispute between the parties); the rental agreement provided that there was a minimum term, but that the obligation to pay rent would continue following the expiry of the minimum term; the rent to be paid over the course of the minimum term was usually enough to cover repayments to St George Bank (both principal and interest), so that by the end of the minimum term, the loan from St George Bank to Anzax Finance Australia would be fully repaid; and, at the end of minimum term, one of the following events occurred: (i) the customer would continue to pay rent on a quarterly basis (described internally as "inertia rent", which was a significant part of Anzax Finance Australia's profits); (ii) the customer would re-negotiate a reduced rental in respect of the vehicle or equipment; (iii) (at least if Anzax Finance Australia offered), the customer would upgrade the equipment or vehicle with a new rental agreement through Anzax Finance Australia (sometimes with the benefit of a discount in respect of the new vehicle or equipment); (iv) the customer would return the vehicle or equipment to Anzax Finance Australia (although it is acknowledged that there was a dispute as to whether this occurred in practice); or (v) the customer might purchase the vehicle or equipment (there was a dispute between the parties about the nature of this option). ( Paul notes that Anzax Finance Australia retained ownership of the vehicles - clause 18 of the standard form rental agreements - and that the written terms of the rental agreement expressly provided that the customers had no right to purchase the vehicles. ) 16From 2001 to 2006, Adrian and Paul were directors and shareholders in each of Anzax Finance Australia, Alders Finance, Anzax Finance and Anzax Custodians. ([4]) 17In 2006, Paul resigned as a director of Alders Finance and sold his shares in that company to Adrian, and Adrian resigned as a director of Anzax Finance and Anzax Custodians and sold his shares in those companies to Paul, but Paul and Adrian remained as shareholders and directors of Anzax Finance Australia. ([5]) There was a factual dispute between the parties about the discussions that led to this separation, and about the basis on which the profits of Anzax Finance Australia would be accounted for between Paul, Adrian and the other corporate entities. ([6]) 18From at least 2007, Alders Finance (owned and controlled by Adrian) provided financing services in competition with Anzax Finance Australia. ([7]) 19Throughout this period (which I understand to be the period from 2007), Paul had primary management of the financial and accounting affairs of Anzax Finance Australia. There was a factual dispute about the extent of Adrian's involvement, if any, in the management of Anzax Finance Australia before and after 2006. ([8]) 20Adrian's position was that Paul took money out of Anzax Finance Australia by unlawfully authorising a number of payments, loans or other transfers for the benefit of himself, Suzanne and entities related to them. Paul's position was that they were authorised and that they reflected oral agreements between Paul and Adrian about the allocation of profits and the right to remuneration. This was one of the significant factual issues at the trial before Palmer J. ([9]) 21In late 2009, there was a meeting between Paul and Adrian. Paul's position was that at the meeting, Adrian agreed to resign as a director of, and sell his shares in, Anzax Finance Australia. Paul took consequential steps following the meeting, including notifying ASIC of Adrian's resignation. Adrian's position was that he did not resign or agree to sell his shares. ([10]) 22Adrian commenced proceedings in this Court in early 2010 asserting that he was a director and shareholder of Anzax Finance Australia, and seeking relief including the winding up of Anzax Finance Australia and orders for the repayment by Paul to Anzax Finance Australia of the allegedly unauthorised transfers. ([11]) 23It is agreed ([12]) that one of the issues between Paul and Adrian at trial related to representations or promises said to have been made by Adrian to customers of Anzax Finance Australia that they could purchase vehicles for 10% of the purchase price (the 10% Purchase Promises). In relation to that issue: (a) Adrian's position was that he made the 10% Purchase Promises because this was the deal that he and Paul agreed would be offered to customers; (b) Paul's position was that he and Adrian specifically agreed that the customers would not be offered an option at the beginning of the rental agreement to purchase the vehicles at the end of the minimum term; (c) Paul's position was either that Adrian did not make the 10% Purchase Promises or that, if Adrian did make those promises, then his so doing was misleading or deceptive and was in breach of his obligations to Anzax Finance Australia as Anzax Finance Australia's director and agent. Paul and/or Anzax Finance Australia sought damages suffered by reason of the 10% Purchase Promises; and (d) One of the reasons Paul gave for his position was an ATO ruling to the effect that if rental agreements included a pre-contractual right to purchase the vehicle for less than its market value, and the vehicle was in fact purchased by the customer for that amount, then they would be treated for tax purposes as hire purchase agreements. ( Paul adds that the ATO ruling meant that a customer would not be able to deduct the full amount of the rent for income tax purposes. Paul's position was that Adrian had told customers that their rent payments were tax deductible. Paul refers to evidence given by him that he did not wish to expose himself, his companies or his customers to tax liabilities (including the risk of allegations of tax evasion) that would follow if customers were given a right to purchase vehicles for less than market value, and the rental agreements were subsequently re-characterised as hire purchase agreements. ) 24A related issue between Paul and Adrian at trial concerned Anzax Finance Australia's exposure to customers in connection with the 10% Purchase Promises. In relation to that issue, it is agreed ([13]) that: (a) In 2009 and 2010, a number of customers had asserted the right to purchase their vehicles at the end of the minimum term for 10% of the purchase price. (b) Paul's position was that the customers only asserted this right following encouragement by Adrian and/or recent representation by Adrian of the 10% Purchase Promise. The level of Adrian's encouragement or communication with these customers in 2009 and 2010 was one of the matters in dispute in the proceedings. (c) By the time of the trial, five customers of Anzax Finance Australia had commenced proceedings in the Consumer, Trader and Tenancy Tribunal seeking to enforce the 10% Purchase Promise. Paul's position was that this was following statements made by Adrian designed to encourage (or likely to encourage) such proceedings. Adrian disputed this assertion. (d) Paul and/or Anzax Finance Australia alleged that Adrian's recent statements to customers about the 10% Purchase Promises were either misleading or deceptive or otherwise in breach of Adrian's obligations to Anzax Finance Australia. Paul and/or Anzax Finance Australia sought damages in respect of those recent statements. (e) Paul alleged further that Adrian encouraged customers seeking to take advantage of the alleged 10% Purchase Promise to breach other terms of their rental agreements, including by failure to make rental payments and by refusal to return their vehicles at the end of the minimum term. Adrian disputed this assertion. 25On the last day of the trial before Palmer J in these proceedings (15 July 2010), the parties signed the Confidential Terms of Settlement and orders were made by Palmer J, by consent dismissing the proceedings ([14]). 26I also note that, though this was not included in the agreed facts, that on the third day of the trial before Palmer J, his Honour ruled that he would not decide whether customers in fact had the right to purchase their vehicles or equipment from Anzax Finance Australia pursuant to the alleged 10% Purchase Promises. Mr Emmett relies, in the context of the present application, on the fact that in the course of the discussion that led to that ruling, Palmer J said (at T 130.41 on 9 July 2010): If I accept Paul Aalders' evidence that whatever Mr Adrian Aalders is telling people about a 10% deal, he as a director of this company did not authorise that and it wasn't approved, if I accept that evidence then I could make a declaration that if anybody sues the company and the company suffers loss, it is a result of Mr Adrian Aalders' breach of duty. Nobody has sued the company. The company hasn't suffered any loss as far as I am aware. 27At T 131.7, his Honour went on to say: It hasn't suffered any loss because nobody yet has proved to a Court's satisfaction that these statements were made and they were not honoured. 28His Honour said that he could make a declaration if he accepted Paul's evidence and that if he did not, and he accepted Adrian's evidence, "then I would find that, if Mr Adrian Aalders had made statements to this effect, they were authorised by the other director and, therefore, he is not liable on his own". 29Mr Emmett submits that this indicates that, while the effect of the Court's ruling was that it would not decide whether the 10% Purchase Promises were actually made, the Court might still (if it accepted Paul's evidence) declare that Adrian would be liable for any loss suffered (by Paul and/or Alders Finance Australia) by reason of the 10% Purchase Promises and that the fact that this statement was made (and presumably the grant of declaratory relief to this effect remained a possibility) is part of the surrounding circumstances in which the Terms of Settlement were negotiated and came to be executed. 30Counsel for Adrian (Mr Cleary) submits that, when construing the Terms of Settlement, limited, if any, weight can be placed on the observations made by his Honour. As I understand it, this is because it is said that the negotiations were taking place outside the courtroom simultaneously with the proceedings being heard. (If so, then I accept that I could not be confident that his Honour's dicta had been heard or, if heard, the import thereof appreciated, by the brothers themselves during those settlement negotiations.) 31There is some difficulty in any event in assuming that particular conclusions were drawn by the parties from observations that fell from his Honour in the course of argument during the trial. With no disrespect at all to his Honour, that comment seems to be in the nature of what was referred to in Brunner v Greenslade [1971] Ch 993 at [1002] - [1003], by Megarry J (as the Vice-Chancellor then was) as " a mere passing remark or a statement or assumption" in the course of argument - not something that means that this is the relief that his Honour would ultimately have been minded to grant had the matter proceeded to judgment even if his Honour had accepted the evidence of one or other of the brothers on the points there under consideration. Further, I note the aversion expressed by Kirby P, as his Honour then was, in Rajski v Bainton [1991] NSWCA 231 to attempts to divine the intention of the court from transcript (his Honour noting that "judges frequently put propositions in order to test them, without necessarily expressing any concluded opinion"). The weight that might be expected to have been placed by the parties on such dicta when negotiating the Terms of Settlement is therefore moot. 32After the signing of the Terms of Settlement, by letter dated 22 July 2010, Adrian's lawyers wrote to Paul's lawyers, referring to clauses 4.1-4.3 as intended to cover all current vehicles, and stated: Alders Finance Pty Ltd seeks to be in a position to pay out the moneys owing under the vehicle rental agreements in accordance with the payout figure which is current until 6 August 2010. The payout figure must provide sufficient information and details of calculations so that it is able to be reconciled by customers with their records. This payout will apply regardless of whether the vehicles remain in the possession of the renters or have been returned to Anzax Finance Australia and Anzax Custodians Pty Ltd. It is understood that the status quo will be preserved, which is to say that your client [Paul] have not dealt with any of these vehicles and will not deal with these vehicles other than for collection of payments due, and in particular will not receipt payouts directly from the renters without the prior written consent of our client [Adrian] 33The letter noted that clause 5 would be triggered by notice given by Alders Finance that the payout figure is accepted and requiring a tax invoice for the payout figure to be issued. Amendments to the draft Deed prepared by Paul's lawyers were suggested and the letter went on to say: So as not to delay commercial aspects of implementation of the Terms of Settlement, in terms of the Deed of Settlement and Release, we request that the information that we have requested pursuant to clause 4 of the Terms of Settlement be provided by ... 23 July 2010 34I accept that the wording of this letter is consistent with an intention on the part of Adrian and his company at that stage to exercise the option in clause 4 over the whole of the vehicle book. However, it does not seem to me that this is sufficient to amount to an admission that the option is only exercisable in that fashion. 35On 26 July 2010, a tax invoice was issued to Alders Finance noting the purchase option price at $1,193,011.93 plus GST. 36It was at this point that a dispute arose as to the interpretation of the terms of Settlement (to which [15] refers and which is now raised on the applications before me). It arose when, on 27 July 2010, Adrian first purported to exercise the option but did so with reference to an individual vehicle (not the book of vehicles). This prompted a telephone discussion between the respective lawyers on 28 July 2010 in which Adrian's solicitor asserted Adrian's right to exercise independent purchase options in relation to individual vehicles and Paul's solicitor said that this was contrary to the request that had been made for a payout figure current as at 6 August 2010. Perhaps tellingly, there was apparently no suggestion by either of the lawyers involved in the negotiation of the Terms of Settlement that the position taken by the other side on this issue was contrary to any express statement made during the negotiations. On 29 July 2010, Paul's lawyers responded by asserting that it could not have been intended that the clients continue to deal with each other for 2 years and that the discussions on 15 July 2010 had been driven by a desire to effect an early settlement (both statements somewhat inconsistent with the agreement to set a 2 year option period). 37On 30 July 2010, Paul sent an email to Adrian in which he asserted in forthright terms that Adrian had one purchase option to purchase all of the vehicles and did not have a range of separate purchase options to purchase each vehicle separately. 38As at that early date, therefore, the parties were clearly in dispute as to the construction of clause 4 of the Terms of Settlement. There followed a series of communications from Adrian exercising the option to purchase particular vehicles and calling for the issue of tax invoices, which requests were not complied with by Paul who maintained his insistence that there was only one option open to be exercised in relation to all of the vehicles (i.e. the whole of what I have referred to as the book of vehicles). By 5 August 2010, Adrian had sought to exercise the option in relation to some 32 items. 39As to the agreement contemplated by clauses 6 and 7 of the Terms of Settlement to embody the indemnity and mutual releases, on 6 August 2010, Adrian's lawyers wrote, responding to the draft that had been forwarded on 22 July 2010 and confirming Adrian's willingness to enter into a further agreement contemplated in clause 8 of the Terms of Settlement but not a deed going beyond that. They also maintained that there was an option to purchase each of the vehicles individually (and argued that had it been intended that the option was to purchase the whole fleet then the clause would have used the word "all" or "each and every"). 40During August 2010, Paul took issue with Adrian informing customers that they could purchase vehicles (and emphasised that he could not take possession of vehicles) that he did not own. 41By letter dated 17 August 2010, Paul's lawyers asked for advice as to the terms that Paul would be willing and able to enter into in relation to the agreement referred to in clauses 6 and 7 of the Terms of Settlement. The response by letter dated 19 August 2010 was that "our client does not propose to enter into a Deed of Settlement outside the Terms of Settlement dated 15 July 2010". (I read this as a continuing objection to a deed going beyond the terms of the indemnity and release provided for in the Terms of Settlement, not a refusal to honour the agreement itself, although I note that there was no indication thereafter of the terms to which Adrian would agree - a matter relied on by Paul as a breach of the best endeavours clause.) 42The objection that Paul appears to have had to the exercise of individual options (at least at that time) seems to be indicated in the letter dated 13 September 2010 written by him on Anzax Finance letterhead to Adrian's solicitors in which it says that Adrian's treatment of the option as a series of concurrent options - one per vehicle and exercisable at different times - was an attempt "to force through the purchase of vehicles at different times, particularly those that have come to the end of the minimum term or are nearing the end of the minimum term". It was said that this meant that for vehicles not purchased, where representations had been made, and customers were in arrears this left the problem that Paul did not want to sell the vehicles for the 10% price and thus be exposed to breaches of the tax legislation. (In that regard, I interpose to note that given that the option was able to be exercised up until 31 December 2012, the problem as to whether Paul was required to sell at 10%, with the exposure he feared from that position, would potentially persist for some time even if the option was a single "all or nothing" option, unless it were to be exercised quickly and that would be dependent on Adrian's election and beyond Paul's control.) Paul, in this letter, said that the settlement provided a mechanism whereby the vehicles would not be sold for 10% but for a higher percentage of original costs plus the remaining rent and arrears plus a per diem rent. (That is so but again is the case whether the option was an omnibus option or one exercisable on multiple occasions.) 43Paul's position as at that date was that the: ...only way I wish to sell those vehicles is as a fleet so that I will not be a party to any questionable tax practices and he complained that if Alders Finance exercised its purchase option I(n the fashion that it sought to do) he would have no control over whether or not the vehicles were on-sold by Adrian to customers at 10% or at any price, stating that: I was able to offer the option to purchase the vehicle fleet to Adrian with exercise price comprising 10% plus remaining rent plus arrears plus per diem rent. This is because there was a material disincentive for Adrian to on-sell ...for 10% insofar as he would suffer unsustainable losses if chose to on-sell for only 10%. 44It would seem, therefore, that Paul considered that the Terms of Settlement had effectively forced Adrian into a position where he would have to act as Paul contended he was obliged to do (notwithstanding that Paul was aware that Adrian did not accept that position) but only if the option were construed as a single option. Whether that was clear to Adrian, however, is by no means apparent. Although, at least by September 2010, Paul was speaking of the composite group of vehicles the subject of the option as the 'fleet', no such description is to be found in the Terms of Settlement. 45By letter dated 29 November 2010, Paul's solicitors proposed a regime on a 'no admissions' basis whereby Paul would pay all moneys attributable to rent for the vehicles into a joint account. That proposal was not accepted. Paul's solicitor, Ms Farmer, deposes in an affidavit affirmed 2 May 2011 that a controlled moneys account has been set up into which all moneys paid by or behalf of Alders Finance in relation to the purported exercise of the option to purchase have been deposited other than the portion of payment attributable to rent and that as at 29 April 2011 the sum of $352,615.53 had been deposited to that account.

Questions for separate determination 46Pursuant to the consent orders made on 27 April 2011, the following eight questions are raised for determination:

1. Is the promise by Paul to pay Adrian the sum of $400,000 under Clause 1 on or before 15 October 2010: (a) independent of substantial compliance by Adrian and Alders Finance with their obligations under the Terms of Settlement, so that Paul is obliged to pay $400,000 on or before 15 October 2010 regardless of compliance by Adrian with other parts of the Terms of Settlement; or (b) dependent upon substantial compliance by Adrian with some or all of clauses 4, 5, 6, 8 and 9 up to that date?
2. How should Clause 4 of the Terms of Settlement be construed? In particular does Clause 4 give Alders Finance either: (a) individual options to purchase each of the individual vehicles and items or equipment listed in the Schedule to the Terms of Settlement each of which may be exercised at any time before 31 December 2012; or (b) a single all-or-nothing option to purchase all vehicles or equipment listed in the Schedule attached to the Terms of Settlement which may be exercised at the one time before 31 December 2012.
3. If the proper construction (of clause 4) is that outlined in 2(b) above, then has Alders Finance exercised that all-or-nothing option by its correspondence to Paul?
4. If the proper construction of Clause 4 is that outlined in 2(a), then: (a) Is there an implied obligation on Alders Finance, should it exercise one of the options, to exercise all of the options by the end of the option period? (b) Was Alders Finance obliged to pay the whole of the option price, so that failure to pay the whole of the option price in respect of a particular option means that the option has not yet been exercised? (c) If the answer to subparagraph (b) above is "yes", then in respect of how many options has Alders Finance actually exercised the option?
5. What is the quantum of Adrian's and Alders Finance's liability under clause 6 of the Terms of Settlement?
6. Does the draft Deed of Settlement and Release attached to the letter dated 20 July 2010 from Paul's solicitor to Adrian's solicitor: (a) accurately reflect the agreement contained in the Terms of Settlement? (b) need to be entered into?
7. If not, is clause 8 of the Deed of Settlement otherwise amenable to specific performance and, if so, is it appropriate to order specific performance of that clause in the present case?
8. What costs order should be made at this stage of the proceedings?

General principles 47The general principles to be applied in the construction of contracts are not in dispute. The parties' intentions, as expressed in the contract, are to be determined objectively ( Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165). In Toll v Alphapharm , the High Court said: It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. 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 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 reasonable person would have understood them to me. That, normally, requires consideration not only of the text, but also the surrounding circumstances known to the parties, and the purpose and object of the transaction. 48Reference was made by Mr Cleary to the various canons of construction outlined in Lewison, The Interpretation of Contracts (2007) (4th edn), including that particular clauses must be considered in the context of the whole the document ( Chamber Colliery Ltd v Twyerould [1915] Ch 268) and that the words of a contract should be interpreted using their plain, ordinary and popular sense meaning ( Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896). Reference was also made to BCC v Ali [2002] 1 WLR 896, where the task was described as one of reading the terms of the contract "as a whole, giving the words used their actual and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding a transaction so far as known to the parties". 49As to the import of surrounding circumstances, again there seemed to be no dispute that the position in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 41 ALR 367, per Mason J, as his Honour then was, at [374] - [375] had explained was that: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. 50Both parties refer to the commercial purpose of the contract as relevant where the contract is entered into in a commercial context (see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at [771] to the effect that in a commercial contract the court will interpret words in a way that a reasonable commercial person would construe them so as to make commercial sense of the contract). 51It is also noted that if the language of the contract is open to two constructions, then the Court should prefer a construction that avoids results that are unreasonable, capricious, inconvenient or unjust, even though the construction adopted is not the most obvious or the most grammatically accurate. 52As to subsequent conduct or communications, in Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251, McLelland J (as his Honour then was), considering the circumstances in which subsequent communications could legitimately be referred to in determining the existence of a contract, noted that subsequent communications might be legitimately used against a party as an admission by conduct of the existence or non-existence as the case may be of a subsisting contract, there referring to Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647. 53With the above general principles in mind, I turn to the particular questions for determination. At the outset, I note that the Terms of Settlement bear the hallmarks of a document that was prepared 'on the run', so to speak, in the course of settlement negotiations presumably taking place under the time pressure imposed by the fact that the hearing was ongoing at that time. In particular, I note that the parties signed a document apparently only first the subject of negotiation on that day (Ms Fiona Ta'akimoeaka, Adrian's solicitor, by affidavit affirmed on 9 August 2010, has deposed that the first draft of the Terms of Settlement was received by her on the day it was signed and that there was one further draft between the first version and that which was signed) and on which there were a number of handwritten annotations (rather than having the amendments inserted into a final typed document) and, secondly, that clause 7 refers not to the parties but to 'your client' and 'our clients' (which is referable to an earlier draft on that day and suggests that the final version was not carefully proofed at the time). 54The apparent speed with which the document was finalised may perhaps be the explanation for the fact that clause 1 in its terms appears to impose an obligation on an unidentified 'nominee' to pay the sum in question (which cannot have been the intention as such an obligation would be unenforceable in the absence of privity of contract with the nominee). It presumably was intended by the reference to Paul's nominee that the payment to be made to Adrian could be made by a third party on Paul's behalf. Nothing turns on this particular feature of clause 1 (and it was not the subject of argument before me). I raise it simply to illustrate that a literal textual construction of the relevant clauses must be treated with some caution if the document itself was rushed in its preparation and may not have been reviewed with the precision now applied to its construction.

Question 1: Proper construction of clause 1 - is it a dependent or an independent obligation? 55As set out above, clause 1 is brief and to the point:

1. Paul Aalders (or his nominee) agrees to pay Adrian Aalders the sum of $400,000 on before 15 October 2010. 56Mr Cleary notes that this promise is not made dependent upon or subject to the performance of any other obligation contained in the Terms of Settlement. Mr Emmett contends, however, that the obligation of Paul to make that payment was dependent on substantial compliance by Adrian (and also, it would seem, Alders Finance) with his (and its) obligations under the Terms of Settlement. (I note that the allegation that there has been a lack of substantial compliance involves a consideration of the position of Alders Finance since not only is compliance by the company referred to in the question posed by 1(a) but also since reference is made in 1(b) to clauses 4, 5, 6, 8 and 9 of the Terms of Settlement, only some of which impose any obligations on Adrian as opposed to Alders Finance - particularly, clause 4.) 57There seems to be no dispute that, as a general principle, the question whether promises in a contract are independent of, or mutually dependent on, each other is one of construction. In Tito v Waddell (No 2) [1977] Ch 106; 3 All ER 129, Megarry VC said : If an instrument grants rights and also imposes obligations, the court must ascertain whether on the true construction of the instrument it has granted merely qualified or conditional rights, the qualification or condition being the due observance of the obligations, or whether it has granted unqualified rights and imposed independent obligations. In construing the instrument, the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights. The question must always be one of the intention of the parties as gathered from the instrument as a whole. (my emphasis) 58In Lewison, The Interpretation of Contracts (4 th edn) at [15.15], the author notes that whether a contractual obligation is a dependent or independent obligation is a question of construction but goes on to add that: ...if the obligation constitutes the whole of a substantial part of the consideration for the contract, the court is likely to construe it as a dependent obligation. noting that the distinction between the two types of obligation is often linked to the order in which contractual obligations are to be performed. It is in that context that Carter, Peden and Tolhurst, Contract Law in Australia , at [28-05]-[28-06] consider the distinction. There, the authors note (at [28-07] that: The rationale for construing promises as independent was that, in the absence of clear words to the contrary, the court would presume that each party had bargained for the other's promise, rather than the performance of the promise. This meant that if either party failed to perform the other would have a remedy, in damages, on the promise. But reliance could not be placed on the other party's failure to perform as a ground for not performing. However, towards the end of the 18 th century the courts took a more practical approach and were less willing to apply a presumption of independency. Accordingly, the existence of a relation of independency of obligation was said to depend on the good sense of the case' [citing Campbell v Jones (1796) 6 TR 570 at 572; 101 ER 708 at 709] and not on any 'formal arrangement of the words' [citing Ritchie v Atkinson (1808) 10 East 295 at 306;103 ER 787 at 791]. The more practical approach prevailed, with the result that, today, the presumption is that obligations are dependent in character. 59There are, of course, as Lewison notes, areas in which obligations will ordinarily be seen as dependent (such as the vendor's obligation to convey and the purchaser's obligation to pay the purchase price in the context of a sale of land - as considered in Heard v Wadham (1801) 1 East 619) or alternatively as independent (such as the obligation of the tenant to pay rent and that of the landlord for quiet enjoyment or the like - Edge v Boileau (1885) 16 QBD 117). 60Carter, Peden & Tolhurst go on to note that where dependency of obligation exists "one party's obligation to perform is dependent on the occurrence of an event termed a 'condition precedent'". To construe clause 1 as dependent on the obligations contained in a raft of other provisions in the Terms of Settlement, as is Paul's position, would thus seemingly require a construction of that particular contract term as one performance of which was to be conditional on the performance of other obligations some at least of which relate to matters that might be expected to arise (if at all) after the date on which payment was required under clause 1 to be made (such as the ongoing indemnity). 61In that regard, I note that in Lewison , it is submitted that in the case of a contract which is not wholly executory the court is less willing to hold that obligations are dependent (reference there being made to Carter v Scargill (1875) LR 10 QB 564, where the question for construction arose some four years after the sale of a business). Lewison cites the following dicta of Field J in Carter v Scargill : Now, whatever might have been the question if it had been raised while the agreement was executory, we are clearly of opinion that, the defendant having received a substantial portion of the consideration, it is no longer competent to him to rely upon the non-performance of that which might have been originally a condition precedent 62The Terms of Settlement must be construed having regard to the circumstances and their commercial purpose at the time of entry into the contract (at which time the obligations under the Terms of Settlement were all yet to be performed). However, what might be taken from Carter is the proposition that where, by the time stipulated for payment of the sum in clause 1, a substantial portion of the consideration for that promise will have been received, then it is less likely that the promise will be construed as dependent on other promises contained in the contract (notwithstanding the modern presumption identified by Carter, Tolhurst & Peden that obligations are dependent in character). 63Mr Cleary submits that clause 1 is clear and unambiguous in its terms and that the reasonable person reading this clause in a commercial context would understand it to mean that Paul had agreed to pay the sum of $400,000 to Adrian on or before 15 October 2010 and that this was not conditional upon, or subject to, anything else happening. He submits (and I think there is force in this submission) that had the parties intended clause 1 to be made subject to or conditional upon the performance of other obligations in the Terms of Settlement, they could readily have included those words or words to similar effect at the beginning of the clause. Indeed, the fact that the parties have included the words "Subject to" at the beginning of clauses 7 and 9(i) suggests that they were quite capable of recognising (and indicating in the text of their agreement) when obligations in their contract were to be conditional on or qualified by other matters. Mr Cleary submits that the fact that these words appear elsewhere but not at the beginning of clause 1 demonstrates that the common intention of the parties was that clause 1 would not be subject to any other obligations contained in the Terms of Settlement. 64Mr Emmett, however, contends that the contract should be construed such that clause 1 is a dependent obligation, having regard to matters going beyond the textual considerations. He notes that where, as here, a document does not make explicit whether a particular promise is dependent on the other promises in the contract or is independent of those promises, then regard must be had not only to textual and contextual considerations but also to the objective commercial purpose of the transaction and the surrounding circumstances in which the contract was executed. 65Mr Emmett submits that the context and commercial purpose of the contract point strongly towards Paul's promise to pay $400,000 being dependent on substantial compliance by Adrian with his obligations, on the basis that this promise is said to be a major part of the consideration for the holistic settlement of wide-ranging disputes between the parties. Thus it is said that the promise to pay $400,000 was in order to secure the "mutual re-statement" of the parties' respective obligations and relationship. 66Mr Emmett submits that for so long as there is a substantial departure (or non-compliance) by Adrian from his contractual obligations Paul would reasonably be regarded as being absolved from the obligation to perform the promise in clause 1. (He makes clear that Paul does not suggest that the promise to pay $400,000 was dependent on strict (as opposed to substantial) compliance by Adrian and that Paul accepts that substantial non-compliance by Adrian would only have the effect of suspending Paul's obligation to pay $400,000 rather than absolving Paul of his obligation altogether). 67In essence, what Paul says is that the time for payment of the sum provided for in clause 1 is deferred or suspended for as long as Adrian is failing substantially to comply with his obligations. Further, it is submitted that Paul would be entitled to set off, as against the $400,000 payable by him, any damages award in respect of Adrian's breaches. 68Mr Emmett argues that if (by analogy with the doctrine of equitable set off), Adrian's claim for $400,000 and Paul's claims for damages for breach of other contractual obligations are sufficiently closely intertwined that the latter may be said to impeach Adrian's title to the former, then Paul's claims for damages would provide a substantive defence to Adrian's claim for $400,000 and that this indicates the mutual dependence of the relevant promises. Thus it is said that substantial breaches by Adrian of his promises would afford a ground for Paul to resist an immediate obligation to pay $400,000. (In that regard, Mr Cleary points to the fact that there is no equitable set-off defence before the court.) 69As to the breaches alleged to have been committed by Adrian and Alders Finance (said to amount to substantial departure from the Terms of Settlement), Paul relies upon evidence to suggest that they have failed to refer to his companies any customers with equipment rental agreements (as required under clause 9(ii)) and relies upon their refusal to meet a demand for reimbursement of legal costs incurred in relation to various Tribunal proceedings brought in relation to the 10% Purchase Promises (said to be in breach of the obligation to indemnify the Paul interests contained in clause 6) as well as the alleged breach of the obligation in clause 8 to use their best endeavours to execute an agreement embodying the indemnity and mutual releases provided for in clauses 6 and 7 of the Terms of Settlement. 70As to the first of those breaches, the referral agreement excludes customers on the list attached to the Terms of Settlement. There may be various explanations as to why any other customers had not been referred by Adrian. As to the balance of the breaches, there has been raised on the present application an issue as to whether any liability under the indemnity has yet arisen or as to whether there has been any breach of the 'best endeavours' clause. At least in the case of the 'best endeavours' clause, there must also be an issue as to whether, if there has been any such breach, it would nevertheless amount to substantial non-performance (particularly given the difficulty in seeing any damage that would flow from this). 71Further, it is alleged by Paul that Adrian and Alders Finance are in breach of the obligations contained in clause 4 (on whichever is the correct construction of that clause) on the basis that: (i) if clause 4 gives Alders Finance a single option, then Adrian and Alders Finance are in breach of the Terms of Settlement by dealing with customers as though individual options have been exercised; and (ii) if clause 4 gives Alders Finance multiple options, but any of the options purportedly exercised by Alders Finance was not actually exercised (by which I understand the submission to mean that any one or more of the options has not validly so been exercised) because Alders Finance has not paid the full amount payable under that option, then Adrian and Alders Finance are in breach of the Terms of Settlement by dealing with customers as though the option(s) had been exercised. 72As to the latter scenario (which, on the findings I make, is the only applicable scenario), there is likely to be an issue as to whether any failure to tender the correct option price is attributable at least in part to the conduct of Paul in refusing to submit tax invoices, which would potentially influence any assessment of the character of any non-compliance by Adrian or Alders Finance with the settlement agreement in this regard. 73As noted earlier, Mr Emmett submits that the Court is not in a position to decide the extent of these breaches on the evidence put forward at the hearing on 10 May 2011 and, therefore, that if the declaration sought in prayer 2A is made (that being predicated on a finding that clause 1 is dependent on substantial compliance by Adrian with his other promises), the Court should simply make directions for the investigation and preparation of Paul's claims in respect of these breaches (and the payment of $400,000 should await determination or other resolution of those claims). 74Turning then to the construction of clause 1, the first difficulty I have in construing clause 1 as an obligation dependent on the substantial performance of the clauses identified by Paul is in accepting that Paul's promise to pay $400,000 should be seen as the whole or a substantial part of the consideration for provisions of the contract (such as clause 4) that relate to the way in which the motor vehicle arm of the business was thenceforth to be dealt with by Adrian. The structure of the agreement reached between the brothers, as explained by Mr Emmett, is that Paul was to take over the equipment rental business and Adrian was to take over the motor vehicle rental business. 75In essence, therefore, the payment of $400,000 might be seen as the price for which Adrian gave up his claims to the equipment rental business and those he had made in the proceedings in relation to Anzax Finance Australia (including his claims that the company was entitled to recover unauthorised payments made to Paul and his interests) and the arrangements in relation to the motor vehicle business were a separate issue (with Adrian being given the opportunity to acquire the vehicles the subject of the business that Paul was no longer to run on the one hand for a price set out in the relevant formulae). It is not therefore necessarily the case that there is a direct dependence between the promises in relation to the former and those in relation to the latter. 76In relation to the analogy drawn with the doctrine of equitable set-off, had the parties sought to make the obligation Paul to pay the sum provided for in clause 1 conditional on the performance of obligations in relation to the motor vehicles, then they could easily have done so just as they could have provided for a direct set-off between moneys payable under clause 1 and those under on any exercise of the option in clause 4 (be that a multiple or single option). The disparity between the payment date in clause 1 and the option period provided in clause 4 suggests that there was not intended necessarily to be such a link. Furthermore the concept of mutual dependence in the context of set-off is by no means determinative of whether obligations in a contract are dependent or independent (and I was taken to no authority to suggest that was the case). 77The main difficulty I have with construing the obligation in clause 1 as dependent on substantial performance of the obligations in the clauses identified by Paul is that it would then be uncertain when and if any payment was required to be made under clause 1. It seems unlikely that the parties (and particularly Adrian) would have intended there to remain any uncertainty as to when a not insubstantial sum (seemingly payable to buy Adrian out of the equipment rental business and/or to surrender the rights he had claimed in relation to Anzax Finance Australia) was to be paid (and as to when Adrian would be in a position to sue for that amount if not paid), particularly given the history of the disputes between the parties. 78Clause 1 is specified by reference to a particular date, not to the performance of one or more of a different set of obligations. By the time stipulated for payment in clause 1 arrives (it must be remembered) under the Terms of Settlement Adrian would already have given up his claims in relation to Alders Finance Australia and would have withdrawn his claimed entitlement as a director or shareholder of that company (as provided in clause 3). 79Ultimately, I consider that the fact that clause 1 is not expressly made referable in any way to performance of any other obligation in the Terms of Settlement and relates, it would seem, to a relatively separate aspect of the settlement (involving the giving up by Adrian of his claims, which he did at the time of entry into the settlement), coupled with the fact that there are other clauses which, unlike clause 1, are expressly made subject to particular matters, leads me to the conclusion that Adrian's construction is correct and that this is not an obligation dependent on Adrian's substantial performance of the obligations in clauses 6, 7, 8 or 9 or Alders Finance's performance of the obligations in those clauses and in clauses 4 and 5.

Question 2: Proper construction of clause 4 - single or multiple options? 80In relation to the construction of clause 4, the fundamental issue is whether (as Paul contends) it provides for a single option exercisable only once by Adrian in respect of all the vehicles/equipment set out in the schedule to the Terms of Settlement in effect as a complete book of assets or whether (as Adrian contends) he is able to exercise a separate option in respect of each vehicle or piece of equipment and may do so at different times throughout the period up to 31 December 2012. 81Mr Cleary places reliance on Leadenhall Australia Ltd v Digicall Group Ltd (1996) 19 ACSR 141, which followed ABC v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109, for the proposition that where the terms of a contractual option are ambiguous the court should prefer a construction which is not capricious or inconsistent with the expressed intentions of those terms. 82Emphasis is placed on use of the word "each" and on the need to calculate the particular amounts due under the respective individual contracts, as making the construction advanced by Adrian the only reasonable construction and that which best serves the commercial purpose of the settlement agreement. 83In summary, it is contended by Mr Cleary that the construction advanced by Adrian is correct (and that advanced by Paul is incorrect) for three reasons. 84First, weight is placed on the text of the clause. It is submitted that the option set out in clause 4 of the Terms of Settlement is not expressed as a single "all-or-nothing" option. Mr Cleary contends that clauses 4.1, 4.2 and 4.3 are not couched in the terms of standard call option agreements, which give rights over specific subject matter. Rather, under the terms of clauses 4.1, 4.2 and 4.3, Alders Finance is given the option to purchase "each of the vehicles or equipment" set out in the attached schedule upon the payment of certain amounts of money (those amounts to be calculated differently, depending on the particular sub-clause into which the relevant rental contract falls). The payment to be made (in general terms) is the amount to be calculated to pay out the amount outstanding of each of the rental contracts, for each of the 108 specific vehicle or equipment contracts listed in the schedule. (There are over 100 different third parties named as parties to the rental contracts listed in the schedule.) 85It is submitted that a distinction is to be drawn in this regard between use of the words "each of " rather than, say, "all of" in the drafting of clause 4. Mr Cleary accepts that if the parties had used the latter wording, then this may have supported an argument that clause 4 contained a single all-or-nothing option exercisable only once prior to 31 December 2012 but submits that if the parties had intended there to be only one all-or-nothing option then the words "each of" have no meaning or work to do in clause 4. (In other words, had the intention been that the option could only been exercised in relation to the book of vehicles, then the words "each of" could have been omitted without affecting the operation of the clause.) 86Pausing there, it seems to me that use of the word "each" is the strongest textual indication (coupled with the fact that elsewhere the parties have expressly made obligations "subject to" others) that what was intended was to give Alders Finance the option (or, less technically perhaps, a right) to make a separate decision whether or not to purchase each of the vehicles or pieces of equipment listed in the schedule at or for the price set out in the clause. Fowler's Modern English Usage (3 rd edn) notes that the word "each" as the subject, even when followed by "of them" is invariably singular - hence had the wording been along the lines "Each of the vehicles is the subject of an option to purchase" it would be clear that the clause directed attention to the individual vehicles not the composite group. (Mr Emmett does not suggest that the use of the word 'each' is inconsistent with there being multiple options but, rather, submits that 'each' can in an appropriate case be used to mean "all" (in the sense of each and every one) and submits that there are reasons why it should be construed as so meaning in this case.) 87Against the weight attributed to use of the word 'each' by Mr Cleary, is the use of the singular ("this option") in the clause and particularly in the last sentence of clause 4.3 (which in its terms qualifies not just clause 4.3 but the whole of clause 4). That last sentence provides that " this option to purchase in clause 4.1, 4.2 and 4.3 each of the vehicles expires on 31 December 2012" (my emphasis). If the clause, properly construed, grants a series of individual options, then the description of it as "this option" is strictly incorrect. (It would be more correct to say "each of the options contained in this clause expires ...".) 88The second reason advanced by Mr Cleary in support of the multiple option construction is that, had the parties intended that there would be only one all-or-nothing option to purchase all of (and no less than all of) the vehicles and equipment, then the schedule would have contained the price (or the total amount of payments) that Alders Finance would have had to pay in order to exercise the option, or a mechanism for working out the total price, rather than annexing a schedule that does not contain any information that would enable the reasonable person reading the agreement to determine what the total amount of payments would be as at the date the parties signed the Terms of Settlement. Mr Cleary points out that Adrian did not find out until after the Terms of Settlement were signed what Paul contended the total price for all of the vehicles/equipment listed in the schedule would be. 89Moreover, Mr Cleary notes that under the terms of the agreement the amount payable for each vehicle or item of equipment in the schedule decreases as the monthly rental payments are made by the customers under the terms of their rental agreements to either Anzax Finance Australia or Anzax Custodians. 90Mr Cleary submits that the fact that the parties did not include a final figure in the terms of settlement is redolent of a common intention at the time that they signed the Terms of Settlement that the option to purchase was not a single option (exercisable only for the complete list or vehicles/equipment) but a series of options exercisable over individual items and at different times. 91On that point, it seems to me that both the fact that a single price was not included in the Terms of Settlement (and could not have been determined from the schedule) and the fact that the price might decrease from time to time depending on when the option was exercised are somewhat neutral factors in construing the clause (since the document sets out a mechanism for the calculation of the price in respect of vehicles or equipment falling within one or other of the classes in the sub-clauses to clause 4 and there must equally be a need to apply the formula, which may vary from time to time, whether the option is exercisable over one vehicle or over the entire book of vehicles). 92The third reason advanced in support of the construction of clause 4 contended for by Adrian is that it more properly accords with (and is more likely to give effect to) the commercial purpose of the settlement agreement. This submission is based on the following: that it was unknown at the time of entry into the settlement agreement what the individual payments in clauses 4.1 and 4.2 were, and when such information for each individual vehicle or piece of equipment would be known; that each vehicle or piece of equipment is the subject of a separate contract; and that each rental contract is with a third party. It is submitted that the commercially sensible construction favours the construction that the clause was intended to give Alders Finance a series of individual options to purchase each of the vehicles or equipment after it was able to ascertain in each case matters such as where the vehicles/equipment were located and what payments are required to be made on each vehicle or piece of equipment before purchase. 93In this regard, it is not clear to me that I can assume there was any such need for Alders Finance to ascertain the location of particular vehicles/equipment (as opposed to being in a position to satisfy itself as to the amount payable under the respective finance contracts). The terms of the rental agreements do not require the consent of customers to an assignment of the agreements - clause 19 - (and they provide that title to the vehicle/equipment is retained by the financier - clause 18). Therefore, it is not immediately apparent why it is that Alders Finance might be thought to have any objective need to ascertain the location of the particular vehicles or to contact individual customers rather than simply relying on the rights it would have under the rental contracts once assigned to it. In the course of argument on this point I was informed that the registration of the vehicles the subject of the rental agreements was in the name of the customer (hence the demands by Adrian that Paul notify the relevant motor vehicle authority of a change in relation to the vehicles). However, again, it was not immediately apparent that this would alter the position. 94Ultimately, I am not persuaded that the commercial purpose of the option as identified by Adrian tends towards Adrian's construction by reference to any need to locate individual customers. It may well be that Adrian's wish to contact customers before deciding whether to exercise the option is explicable by a desire to ascertain what the potential loss would be if Alders Finance acquired the vehicle for the price set under the option and then was committed to on-sell the vehicle for a lesser price to the customer by reference to a 10% Purchase Promise. However, that does not seem to me to be a matter going to the parties' common objectively ascertained purpose of the settlement - rather, it would go to the weighing up by Adrian of whether it was in his commercial interests for Alders Finance to exercise the option for one or more of the vehicles. Furthermore, there is a degree of circularity in this proposition since it was Adrian who is said to have made the 10% Purchase Promises and he might therefore be expected to know to whom they were made. (I note, for completeness, that in cross-examination before me Adrian asserted - it was suggested, although Adrian adamantly denied this, that such an assertion was here made for the first time - that Paul had made similar such representations to customers. I am not, of course, in a position to test any evidence as to the making of representations (or not) by either of the brothers, save to note that Adrian accepted that he had made representations to at least some of the customers to that effect and that it was his intention to honour them.) 95Mr Emmett quite candidly accepts that there are textual factors that support either construction of clause 4 but submits that the weight of these considerations supports the construction advanced by Paul. 96In Adrian's favour, is said to be the fact that clause 4 is broken down into three parts (although Mr Emmett refers to the earlier drafts of the Terms as negativing any inference from the trifurcation of the clause on the basis that this was the easiest drafting technique to show how the single option price will be calculated by reference to vehicles in three different situations). Mr Emmett concedes that, linguistically, the use of the word "each" might be said to support Adrian's construction, although he suggests that this consideration is of minor significance since an all-or-nothing option to purchase all vehicles might also readily be described in ordinary parlance as an option to purchase "each of the vehicles in the attached list". (I should add that I do not place any weight on the earlier drafts of the Terms of Settlement, having regard to the authorities which caution against the use of prior negotiations or subjective intent in construing contracts, though I have referred to the timing of them as indicating that the document was finalised with some degree of haste.) 97In Paul's favour, Mr Emmett points to a number of textual considerations. First, it is said that the use of the singular ("the" option or "this option") suggests a single option (as does the reference in clause 5 also in the singular to "the option ... set out in clause 4". (It seems to me that this is the strongest textual indication against the construction advanced by Adrian although ultimately I consider that it can be read in a manner consistent with Adrian's construction.) 98Secondly, Mr Emmett contends that Paul's construction is further supported, as a textual matter, by clauses 10 and 11 (which give separate options to purchase specifically identified vehicles) since those clauses show the (different) drafting approach taken by the parties when an individual option was clearly granted. In that regard, however, clauses 10 and 11 relate to specific vehicles in respect of which a different approach is being taken to the nomination of the price for purchase of the vehicle, so it does not appear to me that much can be drawn from the distinction between clause 4 and those later clauses in this regard. 99Finally, as to textual indicators, Mr Emmett refers to clause 9(ii), which requires Paul to refer any customers on the attached schedule to Adrian, and clause 12, which provides for the original client files in respect of all the rental agreements in the attached list to be given to Adrian by 29 July 2010. It is submitted that these would be surprising provisions if the parties had anticipated that Adrian would have a right "to cherry-pick" vehicles from that list. However, the force of that last submission is lessened in my view by the disparity between the date on which the option (be it singular or multiple) remains open to be exercised (31 December 2012) and the date on which the client files were to be returned (29 July 2010), since in either case files might be returned for vehicles that did not ultimately come to be acquired by Alders Finance pursuant to the option. (Mr Cleary relies on the fact that the client files were to be forwarded to Alders Finance as supporting Adrian's construction on the basis that it indicates that Alders Finance was likely to contact those customers individually to work out what payments had been made so as to calculate the amount payable on exercise of the option.) 100Further, Mr Emmett submits that where (as he says clause 4 is) a clause is ambiguous, then the surrounding circumstances and the commercial purpose of the clause are particularly likely to assist the Court and that here these considerations add support to Paul's construction. 101In particular, Mr Emmett notes that the agreement was reached in order to settle proceedings in which a major issue was how these customers had been dealt with in the past and how they should be dealt with in the future (Adrian asserting that they should be given the opportunity to purchase their vehicles for 10% of the purchase price; Paul asserting that Anzax Finance Australia should be permitted to enforce the rental agreements according to their strict terms and that Adrian had encouraged the customers to breach their contractual obligations). Mr Emmett places weight on the latter assertion by Paul, since one of Paul's grievances (that Mr Emmett says was to be resolved by the Terms of Settlement) was that Adrian had interfered with certain customer relationships and had caused those relationships to deteriorate or break down. It is also noted that Palmer J had made it clear that he was not going to rule on whether Adrian had in fact made the 10% Purchase Promises (referring to T 132 of the transcript of the hearing before his Honour). 102It is said that against the above background it may be inferred that the commercial purpose of clause 4 was to bring about a situation where either Adrian's company took all of the disputed customers from Paul's company for a fixed figure or Paul was to be in a position, at the end of the option period, to enforce the rental agreements according to their terms. Mr Emmett submits that such a commercial purpose is served by a single all-or-nothing option; not by leaving Adrian in a position to "cherry-pick" customers. 103In this regard, I accept that an all or nothing option would be likely to minimise the scope for ongoing disputes with customers since, assuming that the option were to be exercised by Alders Finance, it would then be open to Adrian (albeit, if Paul is right, to his disadvantage from a tax perspective) to sell vehicles/equipment as represented by the 10% Purchase Promise and there would be no cause for customers to raise disputes for non-compliance with that promise. 104Mr Emmett submits that, by fixing a collective price for all the vehicles that took into account both the 10% figure and the additional rent, the parties had found a resolution that meant that Anzax Finance Australia was not selling individual vehicles for the equivalent of 10% of the purchase price, but Adrian's company was able to purchase vehicles on terms that might enable him to give effect to his perception of the 10% Purchase Promises (noting that whether this had any taxation consequences would then be a matter for Adrian and his customers). That may well be the case, but it does not explain why this purpose is not equally served by multiple options (particularly having regard to the indemnity proffered by the Adrian interests, in effect to meet any liability if Paul or his company were obliged to honour a 10% Purchase Promise for a vehicle not acquired under the option by Alders Finance). 105Accepting that the commercial purpose must have been at least to achieve an end to the disputes then between the parties (and even accepting that this was put forward by Paul as a way to permit Adrian to act as he considered he should in relation to customers to whom a 10% Purchase Promise had been made but at the same time give Paul the comfort of knowing that he and his companies were not selling at a price that might expose themselves to tax or other liability), it is not clear to me that such a purpose could not equally be satisfied by an option exercisable on a vehicle by vehicle basis. (The prospect of litigation in relation to the 10% Purchase Promise would remain in either event unless the whole of the vehicle book was acquired.) 106The existence of the indemnity in clause 6 seems to me, if anything, to make it more likely that what was intended was a situation that might potentially result in not all of the vehicle rental book being acquired by Alders Finance. 107Further, if the commercial purpose of Adrian was to enable him to honour 10% Purchase Prices were made, it is also possible that this would more readily be served by a vehicle by vehicle option (dependent on whether the customers in question were asserting any such entitlement). 108Ultimately, I am not satisfied that I can draw any particular conclusion (in favour of either of the parties) from the commercial purpose each has identified of the agreement. It therefore seems to me that I must determine the construction of clause 4 on the textual considerations. In that regard, I place weight on the use of the word "each" rather than "all". I consider that in ordinary parlance that focuses attention on each individual contract (rather than the whole group of contracts) and therefore that what clause 4 gave Alders Finance was an option (able to be exercised separately but within the option period on more than one occasion in respect of each particular vehicle/piece of equipment listed in the schedule) in relation to each individual item to purchase that item at the cost to be determined under the clause. 109Whether that be described as conferring multiple options or as a single option exercisable in one or more individual instances during the course of the option period is probably a moot point (though the latter is the one I think is the correct construction as it accords with the use of the singular in referring to the option in clause 4.3 and clause 5; and with the reference to "a tax invoice" in the singular in clause 5). In other words, I read the "option" in clause 4 as being the grant of a right which is exercisable on up to 108 different occasions, each time giving rise to the consequence that Anzax Finance Australia or Anzax Custodians would be obliged to transfer title to the vehicle (and to issue a tax invoice in relation to the vehicle), and Alders Finance would be bound to acquire the vehicle, at the price calculated in accordance with clause 4. 110(Insofar as this is said to be inconsistent with Paul's purpose being not to have to deal with his brother over the course of a further two years, while I accept that it appears that there is no love lost between the brothers, I am not satisfied that such a desire should be taken as informing the construction of clause 4. Had the parties intended a complete walk-away situation as at mid July 2010 this could have been achieved in a number of ways other than solely by requiring that the option be exercised only once and in relation to the whole book of vehicles/equipment. The same result (i.e. minimisation of ongoing contact between the brothers) could have been achieved in other ways. For example, the option period could have been minimised or dealings in the option period could have been mandated to be conducted through a third party arrangement. Further, even if this had been a common objective of the parties, it is not necessarily inconsistent with a vehicle by vehicle option (since the administration of that option need not involve direct contact between the brothers). Therefore, it does not seem to me that I can place much weight on this factor. What seems to me more likely is that there was simply not an appreciation as to the import of this clause on the parties' ongoing relationship while the option period was in force.)

Question 3: If clause 4 is a single all or nothing option, has Alders Finance exercised the option? 111In light of the answer to question 2, this question does not arise. Even had it arisen, it was conceded by both parties in the course of argument that if the proper construction of clause 4 was that the option to purchase could only be exercised in respect of all (and not merely some) of the vehicles/equipment listed in the annexure, then the correct position is that Alders Finance has not yet exercised the option (and it was further conceded, as I understand it, that in those circumstances it would remain open to Alders Finance, up until 31 December next year, to do so.) 112With respect, it is difficult to see how there could be any contention that Alders Finance has exercised or purported to exercise an 'omnibus' option. Instead, the series of emails sent by Adrian from as early as 27 July last year (in which he notifies of an exercise of the option in respect of particular contracts) make it clear that what Alders Finance was seeking to exercise was, on each occasion, what it understood that it had - a right to purchase the particular assets the subject of the particular contracts.

Question 4: Consequential questions if clause 4 grants a series of individual options (or an option that may be exercised separately as to individual vehicles/items of equipment) 113A series of questions follows from the determination that clause 4 is construed broadly as contended for by Adrian. Those are dealt with below: (a)Is there an implied obligation on Alders Finance, should it exercise one of the options, to exercise all the options by the end of the option period? 114Paul contends, in effect, that if Adrian exercises the option in clause 4 to acquire any one of the vehicles, then there is an implied term that Adrian will exercise the option to acquire the entire book of vehicles. The implication of such a term is said to arise by reference to the matters relied upon by Paul for the construction for which he had contended in relation to the clause itself (question 2 above). In particular, reliance is placed on the fact that clause 9(ii) provides that Paul refer to Adrian any customers with rental agreements for motor vehicles on the schedule and that clause 12 provided for the return to Adrian of the original client files for the rental agreements in that schedule. 115Further, it is submitted that in light of the surrounding circumstances (from which the commercial purpose of the agreement was said to be as set out earlier), such an implied term meets the tests set out for the implication of an implied term as set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 per Lord Simon: Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. 116That said, Mr Emmett accepted that the factors relevant to the question of construction of clause 4 (in relation to question 2 above) would inform this issue and it seems to me that Paul's construction of clause 4 not having been accepted, the reasons that led to that conclusion similarly lead to the conclusion that the claim based on an implied term fails. 117Mr Cleary submits that if there is a right to exercise individually an option to purchase each of the vehicles in clause 4.1, 4.2 and 4.3 (such right expiring on 31 December 2012), then it is not necessary to imply any obligation to exercise the option in clause 4 in respect of the whole of the vehicles listed in the schedule to give business efficacy to the Terms of Settlement. I agree. Moreover, such an implied term would seem to be inconsistent with the notion that there is a right to consider (and make different decisions in relation to one or more of) each vehicle or item of equipment so listed. I am of the view that there is no basis for the implication of a term requiring Alders Finance, if it exercises its right to purchase one or more of the vehicles/items of equipment, to purchase the whole of the listed vehicles/items of equipment. (The only limitation on the option, it seems to me, is that if Alders Finance wishes to exercise a right to purchase any one or more of the vehicles or items of equipment set out in the schedule on the terms set out in the Terms of Settlement then it must exercise that right in relation to each such vehicle or piece of equipment prior to 31 December 2012.) (b)Was Alders Finance obliged to pay the whole the option price, so that failure to pay the whole of the option price in respect of a particular option means of the option has not yet been exercised? 118This issue appears to have arisen because Paul contends that (in some but not all of the cases where Alders Finance has notified its intention to purchase vehicles or equipment listed in the schedule) Alders Finance has not paid the full amount of the option price (because it has failed to make payment for the whole of the arrears said to be owing by customers in some instances). Those instances are set out in the annexure to Paul's third affidavit. 119Adrian's position in this regard (expressed, perhaps infelicitously, in terms of an "obligation" to make payment "upon which" an option to purchase would arise) is that Alders Finance was obliged to make the payment it had agreed to make for each individual vehicle or item of equipment prior to 31 December 2012, and that upon such payment it had the option to purchase each of the vehicles or equipment. 120The basis on which Paul claims that Adrian has not paid the proper option price for any of the vehicles set out in Annexure "A" to Paul's third affidavit was explained in some detail by Paul in the witness box. This is said to be because for each of those vehicles Adrian has taken the figure from a table provided by Paul in support of the tax invoice dated 27 July 2010 (for $1,312,313.12, that being in respect of the whole of the book of vehicles). Mr Emmett explains that that table was current as at 27 July 2010 but that an application of the formulae contained in clauses 4.1 to 4.3 means that the exact option price for any particular vehicle or item of equipment will depend on the date on which the option is exercised. 121It is submitted that there is nothing in the Terms of Settlement to suggest that Alders Finance can acquire title to the vehicles without having paid the whole option price and therefore that the Court should declare that Alders Finance has not yet exercised any option in respect of the vehicles at Annexure "A" to Paul's third affidavit. That, with respect, seems to elide the exercise of the option with the transfer of title on completion of the purchase, whereas what would happen on exercise of the option (by analogy with the position on exercise of an option in a property context) would be that there came into existence a binding agreement for the sale and purchase of the item in question - under which each party would have obligations in relation to the sale. 122In that regard, I accept that the introductory words of each of clauses 4.1 and 4.2 provide that Alders Finance "has the option to purchase each of the vehicles or equipment upon payment of ....." (my emphasis). By contrast, clause 4.3 provides that Alders Finance has the option to purchase the vehicles there specified " at the minimum trade price ...." (my emphasis). However, clause 5 clearly contemplates that a tax invoice is to be issued within 7 days "of the exercise of the option" and that Alders Finance agrees to pay the said invoice within 7 days of receipt. Therefore, the option to purchase cannot arise only upon tender of the correct (or any) purchase price because it is not contemplated that Alders Finance will pay the invoiced amount until somewhere up to 14 days after the exercise of the option. 123Those clauses can only be construed consistently with each other, in my view, if the Terms of Settlement are read as conferring on Alders Finance as at 15 July 2010 the right (or, to use the words of the clauses, the option) to acquire any one or more of the vehicles/items of equipment at the price calculated for each vehicle by reference to the applicable formula under the clause, such payment to be made after Alders Finance has notified that it is exercising the option in relation to that vehicle or item of equipment and within 7 days of a tax invoice being issued for that amount. 124There is no doubt that in the present case there has been no invoice issued at least in the case of any of the individual vehicles or items of equipment the subject of an exercise of the option for which provision is made in clause 4. Alders Finance cannot possibly be in breach of an obligation to pay within 7 days of invoice an amount for which no invoice has been rendered. 125I accept that there is nothing in clause 4 or 5 that suggests that title to any vehicle/item of equipment passes until the purchase price is paid. It would seem to me likely that the correct position (by analogy with the position in option clauses in other contexts) is that, upon notification by Alders Finance that it is exercising the option in relation to the purchase of a particular vehicle or item of equipment, a binding contract for the purchase of that vehicle or item comes into existence (obliging Anzax Finance Australia or Anzax Custodians, as the case may be, to transfer title to the item and obliging Alders Finance to pay the purchase price on receipt of which the title will be transferred - and, in that respect, I accept the obligations would be dependent obligations). 126Anzax Finance Australia or Anzax Custodians is obliged under the Terms of Settlement to issue a tax invoice for the vehicle at the price determined by reference to the relevant sub-clause and Alders Finance is then obliged to pay the price within 7 days of receipt of such a tax invoice. (Until Anzax Finance Australia or Anzax Custodians complies with its obligation to issue a tax invoice, it can hardly complain that Alders Finance has not tendered the full amount of the purchase price.) 127Therefore, while I accept that title to any vehicles/items of equipment in respect of which the full price has not yet been paid is unlikely to have passed to Alders Finance (a matter the responsibility for which would seem to lie largely with the companies associated with Paul), this doe not seem to me to lead to a conclusion that the option in respect of those vehicles has not validly been exercised so as to bring into existence a binding agreement for the transfer of title to the vehicles once payment in full has been made. 128In the meantime, Alders Finance has paid nearly $350,000 for the vehicles and items of equipment that it has invoked the option to acquire (that amount presently being held in a controlled moneys account pending determination of the dispute). It seems to me that it has done all it could do at this stage in relation to the agreement for the purchase of the items and the likely position would be that while the title to the items (as between Anzax Finance Australia or Anzax Custodians on the one hand and Alders Finance on the other) is retained by Anzax Finance Australia or Anzax Custodians it would hold its interest in the items on trust for Alders Finance (on the basis that the agreement to purchase would be specifically enforceable at the suit of Alders Finance). 129(As to whether the claimed underpayment is factually correct, I am not in a position to make any concluded assessment. Paul has prepared a number of detailed spreadsheets and explained in the witness box how the underpayment had arisen in what seemed to me to be a logical fashion. It seems to me that it is incumbent on Paul's companies now to issue tax invoices for the relevant vehicles/items of equipment. I would hope that the parties could then resolve amicably and in short order the extent of any further payment required to be made by Alders Finance (noting that in some instances the difference is minor and that the total claimed underpayment, including GST, as calculated in Paul's affidavit of 2 May 2011 is in the order of only $10,120.03 in the context where the total amount he acknowledges as having been received is $406,763.92).) (c)In respect of how many options has Alders Finance actually exercised the option? 130Adrian's affidavit sworn 4 May 2011 deposes (at [10]) as to the vehicles/items of equipment in respect of which Alders Finance had by then communicated its intention to exercise the option to purchase. As at the date of the hearing before me, in summary, Alders Finance had purported to exercise the option to purchase 81 out of the 108 vehicles and or items of equipment referred to in the schedule to the Terms of Settlement and had paid a total of $348,856.07 (this being said to be net of any rental payments made since 15 July 2010 by customers or Alders Finance in relation to those items) to Anzax Finance Australia (out of what is said to be the potential total payable to Anzax Finance Australia of $405,364.35, again net of rental payments since 15 July 2010) if the option were to be exercised for the whole of the vehicles and or items of equipment referred to in the schedule). Thus it is submitted that some 78.23% of the total potential price has been paid (net of rental payments). In addition, it is submitted that Alders Finance has paid rent of $252,567.61. A total of $601,423.68 is said to have been paid. 131Mr Cleary submits that customers would also have paid rent to Anzax Finance for part or all of that period (though I understand that this is disputed on the basis that it is contended that Adrian has encouraged some customers to default on their contracts). 132There remained at that stage some 27 vehicles or items of equipment in respect of which the option had not been exercised (and in respect of which it was suggested that rent would still be payable to Anzax Finance Australia). 133As at May this year, Adrian's evidence was that Alders Finance expected to exercise its option to purchase a further 21 (out of the remaining 27) vehicles and items of equipment referred to in the schedule prior to 31 December 2011 (Adrian's 4 May 2011 affidavit at [12]). Adrian has deposed (at [12]-[13]) that in relation to the remaining six vehicles it is unable to exercise its option to purchase because the customers are in dispute with Anzax Finance Australia regarding amounts owed by them to Anzax Finance Australia. (Somewhat confusingly, Adrian then refers to one remaining car, as to which he says he has been unable to contact the client in possession of it (Ausway Constructions Pty Ltd) (see [14]) .) 134On the basis of that evidence I would conclude that Alders Finance has exercised the option to acquire 81 of the 108 vehicles or items of equipment (though, as noted, it will only have acquired title for those in respect of which it has paid the full purchase price).

Any further claims by Paul following the determination of Questions 2 to 4 135Mr Emmett has noted that Paul may seek to bring consequential claims against Adrian depending on the answers to the various questions of construction raised in Issues 2 to 4. Those claims were identified as follows: (i) (If clause 4 gives Alders Finance a single option rather than multiple options), claims against Alders Finance and/or Adrian for purportedly exercising options individually, dealing with customers on those terms, and potentially putting the vehicles themselves outside Anzax Finance Australia's control. (ii) (If Alders Finance has not yet exercised any option in respect of the vehicles at Annexure "A" to Paul's third affidavit), claims against Alders Finance and/or Adrian for dealing with customers on the basis that the options had already been exercised. 136It is submitted that the above conduct by Adrian and Alders Finance would be a breach of an implied obligation in the Terms of Settlement to take reasonable steps to ensure that Paul and his associated entities are able to enjoy the intended benefit of the contract, and/or to refrain from taking such steps as would deprive Paul and his associated entities of the substance of that for which they had bargained and might also expose Adrian and/or Alders Finance to claims for conversion or for damages for misleading/deceptive conduct. 137Mr Emmett did not seek (nor could I make) any ruling in relation to claims of this kind at this stage but foreshadowed seeking further directions for these claims to be dealt with following determination of the issues set down for hearing on 10 May 2011. Nevertheless, it was submitted that if it is accepted that Paul has a prima facie case for alleging these breaches of contract, then this is indirectly relevant to the first question posed as to whether Paul is entitled to rely on to suspend any obligation otherwise arising at this stage to pay $400,000 under clause 1 of the Terms of Settlement.

Question 5: Indemnity given by Adrian and by Alders Finance in clause 6 138Under clause 6 of the Terms of Settlement, as set out earlier, Adrian and Alders Finance agreed to indemnify the Paul interests from "any past, present or future liability (including any liability for legal costs) to any person, body or entity in respect of, concerning or arising out of" the alleged 10% Purchase Promises. The clause provided that the indemnity was to extend to any past, present or future liability "whether or not the facts or law giving rise to such actual or potential liability are known at the date of execution of the indemnity". 139Mr Emmett submits that if there were any want of clarity about the scope of this indemnity (and this is not admitted), it would be informed by the surrounding circumstances in which the Terms of Settlement were executed (including the observations by Palmer J to which I have referred above, in which it is said that his Honour foreshadowed a declaration that if Paul's evidence were accepted then if anybody sued the company and the company suffered loss, then it would be a result of Adrian's breach of duty It is submitted that therefore one of the things that remained in issue between the parties was the extent to which Adrian should make the company whole in respect of losses (including following legal action) arising from the 10% Purchase Promises. Mr Emmett submits that it is clear that the commercial purpose of clause 6 of the Terms of Settlement was to procure such an indemnity. 140It does not seem to me that there is any dispute as to the meaning of the indemnity. Where the dispute lies is whether any liability under the indemnity has yet arisen. 141Paul's claim is based on the fact that he has incurred legal costs in relation to five sets of proceedings that were commenced in the Consumer, Trader and Tenancy Tribunal in which claims had been made against one or more of the defendants by reason of the asserted 10% Purchase Promises. Details of those claims emerge from the exhibits to Paul's second affidavit. Of those five claims, none is now on foot. Most were withdrawn or dismissed prior to hearing; one (the claim brought by Wayne Black & Associates) was heard and dismissed for want of jurisdiction. The legal costs incurred in defending those proceedings are set out in the three affidavits affirmed by Paul's solicitor, Ms Kirsten Farmer. 142The claim by Paul in this regard amounts to $53,645.30 (plus interest). The relevant question is whether the indemnity in clause 6 covers the legal costs of defending proceedings in which an allegation is brought but there is no resolution of the claim (and, in particular, no finding that any such representation was made within the meaning of the clause). In argument, what was contended for by Mr Emmett was that the indemnity covers the situation where customers have been induced to commence proceedings by Adrian leading them to believe that they had the 10% purchase rate (but this assumes a finding against Adrian that he did so). 143Mr Cleary submits that in order for the Paul interests to rely upon clause 6 to recover any of these costs, there must first have been a finding by a Tribunal or Court in each of those matters that Adrian had in fact made the relevant representation; that it was relied upon by the customer making the claim, to the detriment of that customer; and that Adrian was not authorised to make such a representation. (It is further noted that in the one claim that has been pressed to a hearing, but which was dismissed for want of jurisdiction, the allegation made was that the representations were made by Paul not Adrian - referring to Exhibit AA11 to Adrian's 5 May 2011 affidavit.) 144It seems to me that on the plain reading of clause 6, what is required for liability on the indemnity to arise, relevantly, is that there be a liability (including for legal costs) on the part of the Paul interests "in respect of, concerning or arising out of" a 10% Purchase Promise representation made by Adrian . I would accept that the liability is in its terms broad enough to cover costs incurred in the defence of an allegation of that kind even though the claim itself might not have proceeded to a final judgment provided that there is a basis on which to conclude that there had been a representation of the relevant kind made by Adrian. (Although there might be an issue in some circumstances as to whether, if the reason the matter did not proceed to judgment because a settlement was reached, the indemnifier is responsible if that settlement was on objectively unreasonable terms, that issue does not arise here). 145However, in its terms, the indemnity does not cover liability arising out of claims made by representations by persons other than Adrian (much less a representation said to have been made by the very person seeking to invoke the indemnity). Therefore, without testing the evidence as to whether the claim made to Mr Black was made by Adrian alone or by both Adrian and Paul or by Paul alone (and on whose representation reliance was placed by Mr Black) it is difficult to see at this stage that Paul has made out a claim under the indemnity to costs incurred in relation to the claim made in the Tribunal by Wayne Black & Associates. 146As to the other claims, I accept the submission of Mr Cleary that in order to establish a claim on the indemnity it would be necessary to show that Adrian made the representation on which those claims were based. (Otherwise, the indemnity would extend to the making of mere allegations that a representation was made and I see no warrant for reading the indemnity that broadly.) However, in the present case, Adrian accepts that he gave evidence in the trial before Palmer J that he had made those representations in relation to four of the claimants in the Tribunal proceedings (Messrs Maynard, Whitehead, Figueroa and Norton) (see T. 38.27 - T 39.27) and he did not seek to resile from that evidence. (Further, while there is a warranty in the Terms of Settlement, to which I was taken by Mr Cleary, that no representations as to purchase of equipment were made to the customers of the equipment business - clause 6A - no such warranty is made in the Terms of Settlement in relation to the motor vehicles.) 147Where Adrian did not seem to accept that he had made the 10% Purchase Promise (and asserted that it had been made by Paul) was in relation to Mr Black (T 33.39), though he also said that there were representations made to Wayne Black "by all parties" (T 33.44), though he accepted when taken in cross-examination by Mr Emmett to affidavit evidence that had been filed in his case before Palmer J that Mr Black in those proceedings had asserted that Adrian had made such a representation (T 34.31-34). I have considered the position of the Black claim above. 148In relation to the four customers in respect of whom Adrian accepts that a representation was made, the position therefore seems to be that those customers commenced Tribunal proceedings seeking relief in relation to those representations. Costs incurred in defending those proceedings would seem to me to fall within the indemnity in clause 6 of the terms of Settlement. Whether Adrian was authorised to make those representations by Paul could, in the context of the indemnity, only be relevant if it was relied upon as conduct precluding Paul from enforcing the indemnity. However, the dispute as to that issue was well known between the parties at the time the Terms of Settlement were signed and it cannot have been intended that, in the context of resolving their disputes in relation to the alleged making of these representations, an indemnity was proffered which would require the whole issue to be retested if any claim were to be made on the indemnity. 149Therefore, while I do not accept that Paul has established a liability on the part of Adrian and Alders Finance under the indemnity as claimed in relation to the costs of the Wayne Black & Associates Tribunal proceedings (as to which there is conflicting evidence), I do accept that costs incurred by the Paul interests in defending or preparing to defend the remaining Tribunal proceedings are covered by the indemnity. Those costs have not been separately quantified although, by reference to Ms Farmer's affidavits, those costs would not exceed $14,772.53 (but it is not clear how much of this amount was referable to the Black proceedings).

Question 6: Draft Deed of Settlement and Release 150Adrian and Alders Finance do not deny that they have an obligation under clause 6 of the Terms of Settlement to enter into a written agreement embodying the terms of the indemnity (and, correspondingly, under clause 7 of the Terms of Settlement embodying the terms of the mutual releases). However, they contend that the draft Deed of Settlement and Release submitted under cover of the letter dated 20 July 2010 from Paul's solicitors does not accurately reflect the agreement contained in paragraphs 6 and 7 of the Terms of Settlement. In particular, it is said that clauses 2, 3, 4, 5, 6.2 and 6.3, 7 and 8 of the draft Deed do not reflect the agreement contained paragraph 6 of the Terms of Settlement for reasons set out in a letter dated 22 July 2010 from Adrian's solicitor. 151In these proceedings, it was not pressed by Paul that there should be an order requiring execution of the draft Deed as submitted (and it was conceded by Mr Emmett that there may be little purpose served by requiring the parties to execute a document which goes no further than the indemnity and releases contained in the Terms of Settlement (which are themselves binding). Therefore, I would answer the second part of the question posed for consideration in the negative. (I would in any event have considered that there was no objective need to document what is already a binding obligation in another document - however, the parties appear to have intended that this be the case and therefore their objective common intention seems to be one that recognised a mutual benefit in so doing.)

Question 7: Best endeavours obligation in clause 8 of the Terms of Settlement 152Clause 8 of the Terms of Settlement, as extracted earlier, imposes an obligation on the parties to use their best endeavours to execute an agreement embodying the indemnity and mutual releases before 5.00pm on 16 July 2010 or as soon as reasonably practicable thereafter. (As Mr Cleary notes, there is nothing in the clause that requires this agreement to be documented in the form of a deed.) 153Paul takes issue with Adrian's compliance (or to be more precise his alleged non-compliance) with this obligation. In evidence before me were copies of correspondence exchanged from 16 July 2010 to around 27 July 2010 as to the draft Deed of Settlement, Indemnity and Release. After that time (by which time the dispute had arisen as to the proper construction of clause 4), it is said that Adrian simply stopped making any endeavours to agree the terms of the agreement for which provision had been made in the Terms of Settlement. 154It is submitted that the dispute as to clause 4 was no excuse for Adrian to refuse to negotiate about the indemnity and mutual releases as required by clause 8 of the Confidential Terms of Settlement. It is noted that, by letter dated 22 July 2010, Adrian had already indicated, through his solicitors, that he agreed to clauses 6.1 and 6.4 but required changes to clauses 6.2 and 6.3 (in which clause the indemnity and mutual releases were set out) as well as his agreement to draft clauses 9 to 15. Mr Emmett submits that if the changes sought by Adrian are made, Adrian should be able to execute an agreement in the form of the amended clauses 6 and 9 to 15 (and that if Adrian's position has changed and he no longer agrees to these clauses, Adrian should indicate his position in relation to the draft deed in compliance with his obligation to use his best endeavours to agree and execute an agreement as required by clause 8). 155(Paul relies on Adrian's alleged non-compliance in this regard as a further respect in which Adrian is said to have failed to comply with the terms of the Terms of Settlement in the period leading up to the date on which the $400,000 would otherwise have been due for payment, though Mr Emmett concedes that this breach is of less significance than the others on which Paul relies in this regard, and is one of the matters on which Paul is entitled to rely to suspend his immediate obligation to pay $400,000.) 156I do not read the correspondence from Adrian's solicitors as more than a refusal by Adrian to execute a deed going beyond what was provided for in the Terms of Settlement, although I accept that the response as to what terms would be acceptable for the documentation of the agreement was not particularly helpful. It seems to me that, from a practical point of view, this dispute became subsumed in the disputes currently before me and there is little weight to be attached to the breakdown in negotiations in relation to the draft deed (and certainly it is difficult to see what if any damages would have been suffered thereby). 157As to the question posed for consideration, I have difficulty with the proposition that an obligation to use best endeavours is specifically enforceable as such (given the uncertainty as to what the scope of that obligation might be in any given factual scenario and the difficulty for a court in enforcing or supervising the performance of such an order). However, I consider that the obligation (implicit in clauses 6 and 7) for the parties to enter into an agreement embodying the indemnity and mutual releases, coupled with the necessary inference from clause 8 that the parties intended the best endeavours obligation to encompass at the very least the execution of such an agreement, would be amenable to specific enforcement in appropriate circumstances. 158If it had been pressed, I would have been inclined to consider it appropriate to order that the Paul interests specifically perform the obligation implicitly contained in clauses 6 and 7 to execute a written agreement (though not necessarily a deed) embodying the terms of the indemnity and mutual releases contained in the Terms of Settlement. However, having regard to the atmosphere of mutual distrust between the brothers (and with a view to minimising the ongoing legal costs), I would first have made directions for the submission of a document setting out the terms of that indemnity and those releases, so that any dispute as to the content could be resolved before the making of any order for its execution. As it is, this issue does not arise in a practical context.

Question 8: Costs 159The respective parties each seek their costs of the applications before me in the event that their construction of the relevant clauses in the Terms of Settlement is correct. Mr Cleary submits that the costs order sought by Adrian in that event should be made as a final costs order in the proceedings given that the proceedings will (by entry of a judgment in his favour on the $400,000) be concluded within the terms of s 73 of the Civil Procedure Act. Mr Emmett sought the opportunity to make further submissions as to costs in the event that I were to accept some but not all of the submissions made on behalf of Paul (and, in any event, had foreshadowed the desire to make further submissions in relation to the entry of judgment for the $400,000 in the event that I were against Paul on that aspect of the matter). 160On the ordinary principle that costs should follow the event it seems to me that the appropriate order would be for Paul to pay Adrian's costs of the motion for relief under s 73 of the Act and of his own application. However, I will hear any further submissions before making final orders. Conclusion 161The questions posed for separate determination are answered as follows:

Question 1: Proper construction of clause 1 - is it a dependent or an independent obligation? On its proper construction, the promise by Paul to pay Adrian the sum of $400,000 under clause 1 of the Terms of Settlement on or before 15 October 2010 is not a dependent obligation (and is therefore independent of substantial compliance by Adrian and Alders Finance with their obligations under the Terms of Settlement). Accordingly, Paul was obliged to pay $400,000 on or before 15 October 2010 regardless of compliance by Adrian with his obligations under the other parts of the Terms of Settlement to which reference was made in the evidence before me (clauses 6, 7, 8 and 9) and regardless of compliance by Alders Finance of its obligations under those clauses and under clauses 4 and 5.

Question 2: Proper construction of clause 4 - single or multiple options? On its proper construction, clause 4 of the Terms of Settlement gives to Alders Finance the option (whether that be described as a series of individual options or as one option exercisable on more than one occasion) exercisable separately and from time to time up to 31 December 2012 in respect of each of the individual vehicles and items or equipment listed in the schedule to the Terms of Settlement to purchase any one or more of those vehicles and items of equipment. It is not a single all-or-nothing or 'omnibus' option exercisable only once to purchase as a 'book' all the vehicles or equipment listed in the schedule attached to the Terms of Settlement.

Question 3: If clause 4 is a single all or nothing option, has Alders Finance exercised the option? This question does not arise. However, had the proper construction of clause 4 been that it conferred a single all-or-nothing or 'omnibus' option (as outlined in question 2(b)), then the parties are agreed that Alders Finance has not yet exercised that all-or-nothing option and that concession seems to me to be well-founded.

Question 4: Consequential questions if clause 4 grants a series of individual options (or an option that may be exercised separately as to individual vehicles/items of equipment) The following issues arise on the basis that I have construed the option in clause 4 as not a single "all or nothing" option: (a) There is not an implied obligation on Alders Finance, should it exercise the option to purchase one of the vehicles or items of equipment, to exercise the option to purchase all of the remaining vehicles or items of equipment by the end of the option period. (b) Alders Finance is obliged, within 7 days of the issue of a tax invoice in respect of a vehicle or item of equipment the subject of the exercise by it of the option to purchase, to pay the whole of the option price. A failure to pay the whole of the option price to date in respect of a particular vehicle or item of equipment does not mean that the option has not yet been exercised but means that title to that vehicle or item of equipment has not yet passed (and Anzax Finance Australia or Anzax Custodians, as the case may be, holds its interest in that vehicle or item of equipment on trust for Alders Finance pending completion of each contract which came into existence on exercise of the option(s)). (c) On the evidence before the Court, as at May 2011 Alders Finance had exercised the option in respect of 81 of the vehicles/items of equipment listed in the schedule to the Terms of Settlement.

Question 5: Indemnity given by Adrian and by Alders Finance in clause 6 I am not satisfied that Paul has established that Adrian or Alders Finance has any liability under clause 6 of the Terms of Settlement in respect of the costs incurred in defending the Consumer, Trader and Tenancy Tribunal claim brought by Wayne Black & Associates. However, I am satisfied that they are liable to indemnify Paul for the costs incurred in defending or preparing for the defence of the Tribunal proceedings brought by the four other customers identified in the evidence before me (on the basis that Adrian accepts that he made the 10% Purchase Promises to each and the claims made by them arise out of the making of those representations). I am not in a position to quantify those costs.

Question 6: Draft Deed of Settlement and Release The draft Deed of Settlement and Release attached to the letter dated 20 July 2010 from Paul's solicitor to Adrian's solicitor does not accurately reflect the agreement referred to in clauses 6 and 7 of the Terms of Settlement. As a practical matter, it does not seem to me that there is a need for an agreement falling within the description in those clauses to be executed (since the indemnity and mutual releases given in the Terms of Settlement are already binding). (I note, however, that the Terms of Settlement do impose an obligation on the parties to use their best endeavours to enter into such an agreement, as implicitly so do clauses 6 and 7 of the Terms of Settlement.) In any event, this question was not ultimately pressed by Paul, in the sense that no determination is sought that there is any obligation to execute this document.

Question 7: Best endeavours obligation in clause 8 of the Terms of Settlement The obligation on the parties to use their best endeavours to execute such an agreement is not in its terms specifically enforceable due to its breadth (and the difficulty a court would have in supervising its exercise). However, the implicit obligation to execute a written agreement embodying the indemnity and mutual releases provided under clauses 6 and 7 of the Terms of Settlement would be amenable to an order for specific performance. Such an order was not pressed in the present case.

Question 8: Costs Subject to further submissions, I consider that the appropriate costs order would be for Paul to pay Adrian and Alders Finance's costs of the respective applications made in these proceedings. 162As a consequence of the above, it would seem to me that the following orders are now appropriate:

1. Judgment be entered in favour of Adrian Aalders in the sum of $400,000 plus interest from 15 October 2010 at Supreme Court rates to the date of payment.
2. Declaration that on the proper construction of clause 4 of the Confidential Terms of Settlement dated 15 July 2010, Alders Finance Pty Limited has the right until 31 December 2012 to exercise an option (exercisable separately in respect of each such vehicle or item of equipment) to purchase any one or more of the vehicles and items of equipment listed in the schedule annexed to those Terms of Settlement at a purchase price for each such vehicle or item of equipment to be determined in accordance with whichever is applicable of clauses 4.1, 4.2 or 4.3.
3. Declaration that Adrian Aalders and Alders Finance Pty Limited are liable to indemnify Paul Aalders and the parties referred to in clause 6 of the Terms of Settlement for costs incurred by them in defending or preparing for the defence of the proceedings brought in the Consumer, Trader & Tenancy Tribunal in relation to the "10% Purchase Promises" by each of Lee Maynard, Adam Whitehead, Pablo Figueroa and Robert Norton. 163As noted earlier, I will hear any submissions from Counsel before I finalise those orders.

Amendments 30 August 2011 - Typographical Error Amended paragraphs: 53 30 August 2011 - Changed 'Alders Finance Australia' to 'Anzax Finance Australia' Amended paragraphs: 4, 9, 14 - 23, 23(c), 24, 24(c), 24(d), 26 30 August 2011 - Changed 'Alders Finance Australia' to 'Anzax Finance Australia' Amended paragraphs: 75, 77, 89, 101, 104, 109, 125, 126, 128, 130, 132, 133, 135, 161 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 August 2011