(i) Is there a reasonable prospect of establishing The Merlion was held on trust?
77 The answer is, yes, for the following reasons.
78 The question of whether The Merlion was held on trust for Mr Burrows turns on the construction of certain provisions of the Agreement; in particular cl 2, which relates to the Deposit.
79 The ordinary principles of contract construction are clear and well-settled. A commercial contract is construed objectively by asking what a reasonable businessperson would have understood its terms to mean at the time that the contract was entered into: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462. This requires consideration of "the text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and commercial purpose": Masters Home Improvement Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 440 at [56]; see Mount Bruce Mining v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 at [46].
80 Where contractual language is ambiguous or susceptible of more than one meaning, evidence of events, circumstances and things external to the contract is relevant to the construction of that language. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Mason J (with whom Stephen and Wilson JJ agreed) said, at 352:
… 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.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
81 The construction of the Agreement is not entirely straightforward. It could not be described as a meticulously prepared and comprehensive contract. Counsel for the plaintiff described it as "higgledy-piggledy". I embrace that description. It is tolerably clear that the Agreement has been drafted by lay people, who are no doubt commercially minded, but rather less concerned about legal detail and accuracy. A close reading of the terms of the Agreement tends to obfuscate, rather than illuminate, their meaning.
82 The Reference Schedule to the Agreement on pages 1-2 contains Items A-L, to which the standard terms are attached.
83 Of note, Items B and D reveal that the Broker and the Seller are the same entity, PMY.
84 Item F is in the following terms:
Purchase Price - $1,8000,000.00
Deposit, engine install and ex-factory payments: Trade vessel of 2023 Clipper Hudson Bay 540-02 in lieu of payment of $1,600,000.00
Final payment at handover - $200,000.00
85 Item L(1) of the Agreement provided:
Trade vessel (Clipper 2023 Hudson Bay 540-02) to be handed over after June 30,2023 and value of trade vessel being $1,600,000.00 to be credited to progress payments up to and including ex- factory payment.
86 There is no dispute that the 2023 Clipper Hudson Bay 540-02 refers to The Merlion.
87 In addition to Special Condition 1 above, Item L contained the following special conditions:
…
2. Trade vessel to be surrendered at Fremantle Yacht Club, all costs to transport to Queensland to be borne by Pacific Motor Yachts.
3. New vessel to be commissioned in Queensland at The Boat Works and purchaser to be handed over vessel with orientation when complete prior to shipping to Fremantle.
4. All costs to deliver and handover vessel in Fremantle after acceptance by purchaser in Queensland to be borne by Pacific Motor Yachts.
88 The relevant parts of cl 2 of the Agreement provided:
2.1 Item G the Buyer will pay the Deposit to the Broker who will hold the Deposit in trust for the parties until a party is entitled to receive the Deposit. Within 24 hours of written acceptance by the Seller a copy of the accepted Offer to Purchase and Sales Agreement will be provided to the Buyer.
…
2.3 The parties who will be entitled to the Deposit are:
(a) The Seller if this Agreementsettles;
(b) The Seller and the Broker on a 50 / 50 basis if this Agreement is terminated due to the Buyer's default, and
(c) The Buyer less any expenses incurred, agreed or instructed by the Buyer and not paid by the Buyer at the time of the refund.
(d) If this agreement is terminated due to the Seller's default the Broker will be entitled to claim from the Seller any and all costs incurred by him in relation to the sale and full commission if this Agreement has been signed as unconditional and the Seller has defaulted.
(Errors in original.)
89 "Deposit" is defined in cl 1 as "the sum stated in Item G of the Reference Schedule". However, Item G was blank.
90 Clause 3.1 of the Agreement provided:
On the Settlement Date, the Buyer will pay the Seller the Purchase Price less the Deposit, in exchange for:
(a) Any instrument of transfer required to register or affect the transfer of title in the Vessel;
(b) The Vessel's Papers in the Seller's possession; and
(c) A register-able legal bill of sale to the Vessel (if the Vessel is registered on a shipping register).
Delivery of the Vessel, including the gear and equipment, to theBuyer.
(Errors in original.)
91 The "Settlement Date" was specified in Item K of the Reference Schedule as "Estimated December 2023".
92 Clause 13.1(h)(iv) of the Agreement warranted that "if the Seller is a company, the Seller … (iv) is otherwise unable to pay its debts as they shall fall due forpayment" (errors in original. emphasis added). The errors in this clause are obvious, but it is on the very basis of this clause that Mr Burrows makes his claim for misleading or deceptive conduct.
93 Mr Burrows has not advanced a plea for formal rectification of the Agreement, or argue the implication of a term, but rather, contends that the omission in Item G should be corrected by an exercise of construction. Mr Burrows argued that, notwithstanding the omission of Item G, the Agreement should be construed as intending to refer to The Merlion as a Deposit under the Agreement, and therefore, be subject to cl 2.1.
94 Mr Thurlow contended that the omission of Item G should be construed as evincing an intention on behalf of the parties that there would be no Deposit for the purposes of the Agreement. Instead, he argued the proper construction is that the Agreement is a trade-in contract and the transfer of The Merlion was merely an instalment of the purchase price of the New Vessel. It was submitted by Mr Thurlow that, in circumstances where The Merlion was merely part of the purchase price under the Agreement, there is no basis to conclude that it was held subject to a trust until settlement. Rather, the intentions of the parties were that Mr Burrows would divest his legal and equitable interest in The Merlion when it was transferred after 30 June 2023. That happened, he contended, by 7 July 2023 after the Transfer Documents had been signed.
95 Several textual indicators might be said to support Mr Thurlow's construction. The first is the definition of Deposit as a "sum", which connotes a sum of money. Second, cl 2.3(b) refers to the Deposit being split 50 / 50 between the Broker and the Seller in the event the Buyer defaults. It is difficult to contemplate how anything other than a sum of money could be dealt with in that way. Similarly, cl 2.3(c) permits the deduction of expenses from the Deposit by the Buyer (which I presume should read "Seller").
96 Against that and Mr Thurlow's contention, of course, is the specific reference to "Deposit" in Item F. In accordance with ordinary principles of contract interpretation, being that language specifically inserted by the parties prevails over inconsistent standard terms dealing with the same subject matter, the better conclusion might be that The Merlion, together with the other two components mentioned in Item F to which its value was to be assigned (the "engine install" and "ex-factory payments"), was to constitute the Deposit: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; 128 FCR 1 at [306].
97 Mr Burrows submitted further that the stipulation in Item L(1), that the trade vessel was to be "handed over" after 30 June 2023, suggested that the parties merely intended transfer of possession, rather than ownership. It was contended that the wording of this term was consistent with The Merlion being a "Deposit" under cl 2.1, to which PMY would become entitled upon settlement, pursuant to cl 2.3(a). This was further said to be supported by the language in Special Condition L(2) that the trade vessel was to be "surrendered at Freemantle Yacht Club" (error in original). Neither the concept of a hand over, nor a surrender, necessarily connotes transfer of ownership, rather than mere possession.
98 Some assistance might be gleaned from the email dated 4 May 2023, sent by Mr Foster to Mr Burrows, exhibited to the Affidavit of Terence Roy Burrows dated 8 October 2023 (Second Burrows Affidavit). It sets out the terms of the proposal to trade in The Merlion for the New Vessel. That document appears to have been annotated with handwriting. Mr Burrows does not make any reference to the annotations. There is no evidence as to whose handwriting it is. Nevertheless, it seems possible that whoever annotated the document struck through the words that suggested ownership of The Merlion would be transferred in Fremantle. The relevant annotated part of the email reads:
As for your trade boat Hudson Bay 540 Clipper would take ownership* ex
Freemantle so you would not be responsible for freight back to Queensland.
(Errors in original.)
99 Further, the omission of any reference in the special conditions to any relevant instrument of transfer or registrable bill of sale in relation to The Merlion supports an inference that "ownership" was not intended to be transferred at the same time that her "hand over" or "surrender" was to be completed.
100 The Agreement uses similar language of "hand over" in relation to the New Vessel. Item L(3) says that the "purchaser to be handed over vessel with orientation" prior to shipping to Fremantle" (emphasis added). Item L(4) speaks of costs to "deliver and hand over vessel in Fremantle after acceptance by purchaser in Queensland". It is tolerably clear, however, that cl 3 deals with the detail of steps necessary to effect the transfer of ownership in the vessel that is the subject of the Agreement.
101 The Transfer Documents do not take the matter of construction much further. Mr Burrows says that the forms were accessed online by him and returned fully executed, bearing Mr Thurley's signature. Mr Burrows also deposes that Mr Thurley was the sole director of PMY. Nevertheless, he deposes to having been surprised by the fact that Mr Thurley himself, rather than PMY, was identified in the forms as the purchaser. Mr Burrows deposes that he did not lodge the Forms with DOTWA, and it appears that neither did Mr Thurley. A Boat Registration Certificate issued by DOTWA, exhibited to the First Burrows Affidavit, records the registration of The Merlion as valid until 15 December 2023. It is still registered in Mr Burrows' name. Again, this does not take the matter much further. The Western Australian recreational ship register maintained by DOTWA does not create a "Torrens-type" system of title by registration. There is no evidence that The Merlion has been registered in any other state, or in any other name.
102 The construction of the Agreement is central to the dispute. On the evidence currently before the Court, Mr Burrows' claim that The Merlion was to be held on trust under cl 2.1 of the Agreement could not be described as improbable or implausible.