Thus, a teaching hospital could be ancillary to the educational purposes of the University even though that hospital would augment those educational purposes.
64 The semantic significance of ancillary was apparently not argued before her Honour, nor was it argued before us, but consideration of that significance reinforces the view that I have taken as to the construction of the clause.
65 It was odd that so little attention was paid to the actual words of clause 4 and to its genesis. There was considerable material before the judge which was admitted into evidence as to how the Kitchener Project Agreement developed. The whole flavour of this surrounding circumstance evidence was to the effect that Mr Batterham would contribute the capital, his land, and Mr Makeig would, in the first instance, bear the costs and do the necessary work with the statutory authorities, doing what was required to obtain development approval. This material to my view reinforces the view which I have taken on the construction of clause 4.
66 As was put to counsel during argument, the purpose of the agreement appears to be that Mr Batterham is to contribute capital to the joint venture being his land. It is a layman's agreement and should be construed according to its commercial purpose, not in any pedantic way. Project costs were at least to cover the expenses involved with consultants. In addition to those expenses, ancillary costs in the services of consultants were to be paid by Mr Makeig.
67 When one looks at the reason why the council required the money, one can see that it was required so that the consultants, whom the parties may have thought they would need to retain to pay preliminary costs of getting the Kitchener precinct included in the Cessnock master plan, could be paid by the council. The tag "lodgement fee", with respect, only seeks to divert attention from the question of construction. In strict sense, the lodgement fee was not payable until after the Kitchener precinct had been included in the master plan.
68 Her Honour in para [258] when she said that the amounts paid by Mr Batterham in November/December 2006 were Phase 2 and 3 lodgement fees refers to annexures A and B to his affidavit of 1 December 2008. However, annexures A and B do not assist. Annexure A are cheque butts which merely show that money was paid to the Cessnock City Council for council fees re land rezoning and annexure B is the bank statement showing where the cheques were cleared. They do not in any way assist in assuming that Mr Makeig's description of lodgement fees is a correct tag. It follows that in my view on the proper construction of clause 4, Mr Makeig was liable to pay these fees. It is clear he did not pay them. It is clear he was asked to pay them. Why didn't he pay them?
69 If one looks at the evidence, the reason given by Mr Makeig for not making the payments was not that he was not liable to pay them; indeed he said that were it not for his poker face he may eventually have paid them. He was playing a game of poker in which he was bluffing in order to achieve an advantage to himself by having the council do one or both of two things: (a) acknowledge in writing that the fees would be refunded if there was a successful rezoning or at least if there was a successful rezoning and s 94 contributions were obtained; and (b) that he was remunerated for his time between 2003 and 2006.
70 There is, as far as I know, no judicial definition of a poker faced attitude, but the meaning is clear. A person playing poker may have thoughts in his or her mind, but the last thing that he or she will do is to convey by words or expression or even facial expression that he or she is doing anything else than what appears from his or her actions.
71 Accordingly, the only thing that Mr Makeig could mean by his evidence which I have already quoted, "I would have paid if my poker hand had failed. My poker hand was I am not interested in paying that unless we get the agreement", is that whatever his subjective intentions, Mr Makeig conveyed and intended to convey a definite refusal not to pay. One can easily infer that Mr Batterham certainly got that impression.
72 Accordingly, we have a breach of the agreement, an intentional breach of the agreement on the part of Mr Makeig.
73 The next question that must be addressed is, did that breach justify Mr Batterham treating that breach as a breach of an essential term or a repudiation?
74 The primary judge said at [310]:
I am of the view that while the obligation on Mr Makeig's part to pay consultants' costs … would have the necessary quality of essentiality, I do not see the obligation to pay those costs 'in a timely manner' as having that same quality. In other words, while a failure or blanket refusal to pay consultants' fees properly due in respect of the project would in my view have amounted to a breach of an essential term of the parties' agreement giving rise to a right to terminate for breach, I am not satisfied delay in payment of itself would give rise to a right of termination.
75 That finding appears to be a finding that breach of the term to pay consultants' costs and ancillary costs was breach of an essential term justifying termination by the opposite party. When that proposition was put to Mr Sirtes, he replied, "I don't believe her Honour's finding went that high. I think her Honour found that there was a distinction between payment - non-payment in a timely manner and a blanket refusal to make a payment." Assuming that that is correct, though I am not at all sure it is, in my view we have here a situation where there was a blanket refusal to make a payment.
76 Mr Sirtes would dispute that proposition. He says that Mr Makeig's evidence was that if his poker bluff position had been called, he probably would have paid.
77 However, there was no communication of the possibility of payment. Indeed, when one plays poker I understand, one goes out of one's way to make sure that one does not communicate one's real feelings. A reasonable observer would take what his own evidence shows Mr Makeig's attitude was as a blanket refusal despite what his subjective intentions might have been.
78 Mr Sirtes says that Mr Makeig was not aware that the payment had been made until after it had been made. This may literally be true. However, Mr Batterham wrote to Mr Makeig the following day saying he was going to make the payment, an allegation which Mr Makeig just shrugged off as being part of a game Mr Batterham was playing, and if Mr Batterham's evidence was correct, he was actually given the cheque to pay to the council for the $16,000.00. Whether he was or not he knew fairly soon after the payment had been made that it had been made. Her Honour made no finding as to the possible handing over of the cheque for $16,000.00 so that one cannot go any further than what I have just said.
79 Mr Sirtes mentioned "the territory of DT Nominees and Satellite" and says that Mr Makeig was in the position that brought him directly within that territory. The reference to Satellite is Satellite Estate Pty Ltd v Jacquet (1968) 71 SR (NSW) 126 and the other reference is to DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423.
80 In Jacquet which was an appeal from Jacobs J sitting in Equity, Walsh JA said at 140 that the authorities say that the ultimate question as to whether conduct constitutes repudiation of the contract is whether it should be concluded that one party acted in such a way as to evince an intention not to carry out the contract and that the question is one of fact. Asprey JA at 149 said:
Where one party to a contract persists in maintaining that it will only perform an obligation of essential importance in accordance with an untenable construction of that obligation, that should be regarded as amounting to a total repudiation of the contract on the part of that party … . The case may be different where there is a bona fide dispute as to the true construction of "a not very perspicuous document" cf Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699."
81 Those utterances were approved by the High Court in DTR Nominees at 433 by a four to one majority, the majority including Jacobs J. At 431-2 the majority said that the question was whether the intention of the respondents to repudiate may be inferred from the events particularly the appellant's continued adherence to an incorrect interpretation of the contract. "It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of the contract, because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him."
82 Those cases also remind people of two other relevant points: (a) that repudiation is not to be lightly inferred: Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60, 71; and (b) "Contentious observations in the course of discussions or arguments" are not too readily to be used to find a refusal to perform the agreement: Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 at 734.
83 In Jacquet at 149, Asprey JA emphasised that if "in the instant case the respondent was claiming wilfully to be entitled to perform the contract in a manner to which it knew it had no shadow of right", that was repudiation. Mr Sirtes says that in the instant case, not only did Mr Makeig have a shadow of right in that the construction for which he was contending was possible as is illustrated by the fact that her Honour so found, but also he never got to the stage of a definite refusal.
84 At this stage I must digress. If, what the primary judge said at [310] is not a sufficient finding of fact, then the question is whether this Court should make its own findings or whether the matter should be sent back for retrial. Mr Graham asks the Court to deal with the matter; Mr Sirtes suggests that if we are against him, the matter should go back for retrial.
85 Retrials are to be avoided if possible, but if possible means, amongst other things, that a just result can be obtained by this Court analysing the facts.
86 The question of repudiation is a question of fact. However, apart from some criticisms of Mr Makeig's evidence, the judge did not make any significant findings of fact based on credit. The primary facts are there. What has to be done is to assess those primary facts to see whether an ultimate holding of fact of repudiation should be made. In my view, this Court should deal with the matter itself.
87 In view of her Honour's finding it must be accepted that there was an arguable alternative construction of clause 4. However, the evidence clearly shows that it was not on this ground that Mr Makeig declined to make the payments. He made a definite refusal to pay because he was playing a sort of poker game which included bluffing and endeavouring to strengthen his position to obtain from the council a written agreement to make refunds and/or to press his claim for payment for time he had spent on the project. To do this, he had to maintain a firm attitude that he would not perform the contract until he got what he wanted. To my mind, coupled with her Honour's finding that clause 4 was an essential term, and what her Honour said, it seems to me the only conclusion that can be reached is that Mr Makeig repudiated the contract.
88 Accordingly, Mr Batterham's termination of the contract was proper and Mr Makeig's case must wholly fail.
89 It follows that the rest of the appeal can be dealt with fairly shortly.
90 Ground 4 alleges that the primary judge erred in finding that the respondent's conduct in respect of the $450,000.00 issue did not constitute repudiatory conduct. That issue was on Mr Batterham's version of what happened that Mr Makeig made up a fraudulent invoice for time spent on the project before the Kitchener Project Agreement of $450,000.00 and was intending to obtain money from the council by insisting that he would not perform the contract or do anything until he was paid. Apart from the way in which this gets caught up in the first three grounds, it does not seem to me that her Honour made any error in dealing with it and the appeal on that ground fails.
91 Ground 5 says that her Honour was in error in not holding that the respondent's conduct in respect of the $450,000.00 constituted a discretionary bar to relief.
92 In some American States "unclean hands" has come to be a defence to a pure action in law (see eg Mallis v Bankers Trust Co 615 F (2d) 68 (2 Cir 1980) applying New York law) and the review by Dr T Leigh Anenson in Treating Equity Like Law: A Post-Merger Justification of Unclean Hands (2008) 45 American Business Law Journal 469 and following. However, such a proposition cannot be entertained in Australia on the state of the authorities. The present action was purely an action at law: there are no discretionary defences to an action at law. Ground 5 must fail.
93 Ground 6 complained that despite the finding that the appellants acted bona fide, the primary judge erred in holding that their actions amounted to a repudiation of the Kitchener Project Agreement. As I have found that the respondent repudiated that agreement in late 2006, Mr Batterham's solicitor's letter of 9 January 2007 properly notified Mr Makeig that his conduct had been accepted as having repudiated the Kitchener Project Agreement.
94 Grounds 7-11 deal with what has become now a side issue in the case and that is, whether the judge erred in her treatment of the representation that the respondent was "an experienced project consultant". The background facts are that whilst Mr Batterham believed that Mr Makeig was an architect, in actual fact he had never completed his architecture course. He had been involved in property development, but the major development in which he had been involved concerned single lots, not a large scale development such as the present. Mr Makeig appears to have exaggerated his experience and indeed many of the projects about which he boasts were in fact unsuccessful.
95 The primary judge held that the representation that Mr Makeig was an experienced project consultant was true. Her Honour apparently took the view that a person does not cease to be an experienced operator merely because a majority of his or her projects are unsuccessful, or that he or she may appear to be incompetent.
96 These matters are further considered when I deal with grounds 12 and 13.
97 The question of quantum meruit arose incidentally in two places during the argument, only one of which needs mention.
98 There was a back up claim by Mr Makeig for a quantum meruit for the work he had done on the project of $122,335.60. It is a little difficult to describe this as a quantum meruit claim in the strict sense. The claim was that work done by Mr Makeig was worth this sum and that he was entitled under the contract to the reasonable value of the work. This claim fails as the contract was terminated and the right to any payment did not accrue prior to termination: the reimbursement was only due on the completion of the project.
99 I now turn to grounds 12 and 13 in the amended notice of appeal which have to do with the appellants' amended cross-claim.
100 The appellants' amended cross-claim principally claimed that the Kitchener Project Agreement should be set aside under the Fair Trading Act 1987 because of Mr Makeig's misrepresentations or, alternatively that the appellants recover damages.
101 Her Honour did not actually dismiss the cross-claim as one would have thought she would have done in view of her findings. This was an oversight, but it should have been cured by someone going back to her Honour by getting her to make the final order.
102 There is little point in discussing whether her Honour's construction of the term "experienced project consultant" was correct or not. That is because it is quite clear that there was no reliance on the representation quite apart from considering whether it caused any loss.
103 In May 2006, Mr Batterham became aware of matters which led him to consider that Mr Makeig was not an experienced property consultant. It upset him, but he made the decision that he had to carry on and did so. Accordingly, there being no reliance on the misrepresentation, if it be a misrepresentation, it is of no consequence.
104 Her Honour also seemed to consider that a representation that a person was experienced or was a professional did not carry the implication that the person was competent. This view did not affect her ultimate decision. With respect, I would disagree. The kernel of the conception of a professional in modern Australia is a person who has special knowledge and has attained an intellectual or certain manual skill; see eg Robbins Herbal Institute v The Federal Commissioner of Taxation (1923) 32 CLR 457, 461; Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, 219; Prestia v Aknar (1996) 40 NSWLR 165, 184. Although the distinction between a professional and a tradesperson has been largely abandoned in modern speech, the word "professional" does to my mind denote both knowledge and competence in the application of that knowledge.
105 However, in any particular case, whether a person is truly described as "experienced" or a "professional" is a question of fact and degree to be adjudicated on the whole of the evidence.
106 Involved in the debate on these grounds was the question as to whether the primary judge wrongly rejected evidence of Mr Batterham's reaction when he was informed about his misunderstanding as to Mr Makeig's professional experience and qualifications.
107 Mr Graham put that s 66A of the Evidence Act 1995 makes it clear that the hearsay rule does not apply to a contemporaneous representation about a person's health, feelings, sensations, intention, knowledge or state of mind.
108 It is not too clear to me why her Honour rejected this piece of evidence. It would not seem to me to be hearsay, but rather observations, and the evidence was presented as to the fact of what Mr Batterham did and said at the time when the alleged misrepresentations were discovered. In that sense it was not hearsay at all. However, as appears from Walton v R [1989] HCA 9; 166 CLR 283 at 288-9, there is some doubt as to this proposition and it was for this reason that s 66A was passed to resolve the doubt. It would seem to me that the material is admissible if relevant. However, as there was no reliance on the misrepresentation, the evidentiary question is of no moment.
109 For the above reason, the amended cross-claim must fail. This is, however, only of academic interest as the claim has failed for the appeal with respect to the cross-claim was only pressed as a set-off to the respondent's claims.
110 This brings me to the final matter, and that is, the question of the assessment of damages (grounds 14 and 15).
111 Starting at [507] of her judgment, the primary judge considered questions of damage. At [507] her Honour said that what Mr Makeig had been deprived of was the opportunity to obtain a benefit under the Kitchener Project Agreement and that the value of that lost opportunity can be quantified by reference to the benefits Mr Batterham has obtained and is potentially able to obtain. At [512] the primary judge said that Mr Makeig has lost the opportunity in due course to share in the profits if either the put or call option is exercised (or the opportunities to agree with Mr Batterham for the project to be on-sold to someone else for a perhaps greater benefit). At [520] the judge quantified the damages for loss of opportunity at $2,378,638.90 being 7/18ths of $6.1165 million which she discounted by a factor of 12.5% for the possibility that the options under the JPG deed might not ultimately be exercised. The question of GST was left over to be dealt with subsequently.
112 It is necessary to mention some details which have not heretofore been stated.
113 On 15 November 2007, a deed was executed between Mr Batterham and his company of the one part, and Keith Johnson and JPG 58 Pty Ltd of the other part, the deed being a deed of put and call options. By that document, put and call options were put in place which could be exercised up to November 2012. The purchase price was $7,716,500.00. Mr Batterham has actually received $900,000.00 for option fees and deposit pursuant to the agreement. However, although the primary judge thought that was significant, its significance has been disavowed by senior counsel for the respondent.
114 The status of JPG 58 Pty Ltd is that it is a company with a share capital of $1 whose entire assets appear to have been mortgaged or charged to a bank and which is a single purpose company to acquire the subject land plus adjoining land. However, its obligations are guaranteed personally by Mr Johnson who is a property developer with considerable assets and as far as the evidence goes, well and truly solvent. The trial judge proceeded on the basis that it was virtually certain that JPG would exercise its option, or alternatively, that Mr Batterham would compel JPG 58 Pty Ltd to acquire the land and that even if it failed to do so, damages would be payable which would be paid by Mr Johnson. However, as I have noted, she discounted the damages by 12.5%. This consisted of 10% for the possibility that JPG or Mr Johnson would default and an additional 2.5% for other factors.
115 There is no mention in her Honour's judgment of a discount to take account of the fact that money is being received now instead of in 2012 or 2013. It would appear that her Honour was not given any assistance on this aspect of the case. However, it would be standard practice to discount by 0.823 for money not to be received for four years on the 5% tables. This would mean that with her Honour's figure discounted by 12.5% and then further discounted by 0.823, one would arrive at $1,712,917.31.
116 Mr Sirtes objects to the automatic use of the 5% tables. However in the absence of other material a judge is entitled to use such tables in assessing damages.
117 In Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355, four members of the High Court said:
"We consider … that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1) [of the Trade Practices Act ], should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued."