Di Pietro & Anor v Basjo Catering Pty Ltd & Ors [2009] VSCA 223

Court of Appeal (Vic)|2009-10-02|Before: ASHLEY and MANDIE JJA, BEACH AJA

CONTRACT - Sale of businesses - Document entitled 'pre-contract agreement' not executed by or on behalf of one of two named vendors - Whether there was a binding and enforceable agreement with another entity not named as a vendor but said to be the owner of the businesses - Whether necessary constituents of equitable estoppel as to existence of binding contract established in favour of purchasers.

1 The appellants were the plaintiffs in this proceeding and their claim for specific performance of an alleged contract for the purchase of a number of businesses was dismissed. The primary question on the appeal is whether the learned trial judge was correct in deciding that there was no concluded contract. The other question relates to an alternative claim based upon equitable estoppel - the appellants attack the finding below that the first-named appellant ('Mr Di Pietro') held no belief that there was a binding contract in existence; and the further findings that, if he did hold such a belief, it was in any event unreasonable and did not induce the appellants to act to their detriment.

2 We draw the facts substantially from the reasons of the judge and from the key documents.

3 An agreement in writing dated 1 October 2003 was made between Cartley Nominees Pty Ltd (the second respondent - 'Cartley'), Zouki Catering Pty Ltd (the third respondent - 'Zouki Catering') and Basjo Catering Pty Ltd (the first respondent - 'Basjo Catering'). According to the schedule to the agreement, Cartley entered the agreement 'as Trustee for the Lakkis Family Trust as to Fifty (50) per centum of the capital and of the share of the profit and losses of the partnership'. Zouki Catering entered the agreement 'as trustee for The Zouki Family Trust' as to the other 50% of the capital and share of the profits and losses of the partnership. Basjo Catering entered the agreement as 'a bare trustee and manager for the partnership and as a manager'. The schedule to the agreement described the business of the partnership as the business of catering, conference facilities and like services at Alfred Hospital and a number of other hospitals in Melbourne.

4 The said agreement dated 1 October 2003 is headed 'PARTNERSHIP AGREEMENT' and that is what it purports to be. The Agreement provides that the business shall be carried on at the named hospitals and that the head office of the partnership shall be at 'Alf's Café, Alfred Hospital, Commercial Road, Prahran'. Clause 5 of the agreement provides that Basjo Catering 'is the bare trustee of the business operation of the partnership' and goes on to provide that '[a]s a trustee/manager Basjo Catering Pty Ltd is not entitled to receive any fee or income under the Trust and its management is under control of the Directors of the Trustee of the Zouky Family Trust'.

5 Other clauses of the partnership agreement (and at once we note that the appellants submitted that it was not in truth a partnership agreement at all) provided that the partners should be entitled to the capital and property of the business including the goodwill of the business in equal shares, that the capital of the partnership should be deemed to be the assets of the partnership, that the capital or any further capital contributed by Cartley should be deemed to be the partnership capital and contributed on behalf of both partners, that all ordinary and current outgoings and running expenses in relation to the business should be paid out of the capital or income of the partnership, that the profits and losses of the partnership should be borne by the partners in equal shares and that upon any sale of partnership assets each partner would sign all documents and do all things necessary to carry such sale into effect.

6 The partnership agreement contained express provisions as to the roles of the two partners. Cartley was to provide funds and capital to meet the wide variety of capital and other costs and Zouki Catering was to be responsible for the day-to-day management and running of the business and to account to and report to Cartley in respect thereof. The agreement further provided that the partners acknowledge that any licences, business names, leases and interest that each of the partners may individually have had in respect of businesses at the Alfred Hospital and other hospitals was now held upon behalf of the partnership and in trust for both partners as tenants in common in equal shares. The agreement was executed by each of the parties and bears the signatures of Roger Lakkis (the 8th respondent - 'Mr Lakkis') as director of Cartley and of Joseph Zouki (the 5th respondent) as director of Zouki Catering and Basjo Catering.

7 Cartley represented the interests of Mr Lakkis and Zouki Catering represented the interests of the nephews of Mr Lakkis, the three Zouki brothers (Joseph, Bassam or 'Sam' (the 6th respondent) and Faddy (the 7th respondent)). Basjo Catering was a company owned and controlled by the three Zouki brothers.

8 The principal business with which the proceeding was concerned was the business known as Alf's Café located at the Alfred Hospital. Joseph Zouki was the person principally responsible for the operations of the Alf's Café business, Sam Zouki for the operation of the café and associated businesses at St Vincent's Hospital and Faddy Zouki for general management and administration. Mr Lakkis had no operational involvement but was involved in general oversight and significant management decisions.

9 Mr Lakkis became concerned about the management of the businesses by his nephews and, in 2005, he and his nephews had a falling out and agreed to go their separate ways. As a result, they engaged Mr Zied Dabab of Klemms Business Brokers Pty Ltd to sell Alf's Café and two smaller businesses conducted by the partnership at the Alfred Hospital, 'Formation Hairdressing & Beauty Salon' and 'Alfred Blooms Florist'. A separate sale authority was signed for each of the three businesses on 5 July 2005. The sale authority in relation to Alf's Café describes Zouki Catering and Cartley as the vendor and is signed by Mr Lakkis and Joseph Zouki. The other sale authorities appear also to be signed by Mr Lakkis and Joseph Zouki but the authority for the beauty salon describes the vendor as Basjo Catering and the authority for the florist business describes the vendor as Gunderi Pty Ltd.

10 The judge found that the accounts for Basjo Catering showed that it carried on the three businesses at the Alfred Hospital, that all of the income from the businesses was received by it and that it paid the rent for the premises from which the three businesses were conducted. The premises of Alf's Café were sublet by Cartley and it was also the licensee of an outdoor area used in connection with the café. Basjo Catering sublet the premises from which the Formation Hairdressing & Beauty Salon was conducted and Gunderi Pty Ltd (the 4th respondent) sublet the premises from which the florist business was conducted.

11 Mr Di Pietro and associated entities conducted substantial café businesses in Melbourne. The 2nd appellant, Lenrock Nominees Pty Ltd, is a company representing the interest of Mr Di Pietro and was purportedly nominated by Mr Di Pietro as the purchaser under the alleged sale agreement.

12 Following the appointment of Klemms to sell Alf's Café, Mr Dabab telephoned Mr Di Pietro and told him that Alf's Café was on the market. Mr Di Pietro was immediately interested and said to Mr Dabab 'consider it sold'. Mr Dabab introduced Mr Di Pietro to Mr Lakkis and the Zouki brothers. During the initial meeting between Mr Lakkis and Mr Di Pietro, Mr Lakkis told Mr Di Pietro that he was in dispute with his nephews, that the dispute was not good for his health and that the existence of the dispute was the reason for the proposed sale of Alf's Café. After the initial meeting, Mr Di Pietro had further meetings with Mr Lakkis, Mr Dabab and some or all of the Zouki brothers. While these meetings were proceeding and on or about 15 July 2005 Mr Di Pietro provided the agent with a cheque for $200,000 payable to Klemms and instructed the agent not to bank it until he had arranged for sufficient funds to be available to meet the cheque.

13 Following these discussions, Mr Di Pietro signed a document headed 'PRE-CONTRACT AGREEMENT BETWEEN VENDOR AND PURCHASER'. The pre-contract agreement described 'the vendor' as Cartley and Zouki Catering and 'the purchaser' as 'Len Di Pietro and or nominees'. 'The business' was described as Alf's Café, Alfred Blooms Florist. The pre-contract agreement provided that the vendor owned all the equipment 'on the inventory list enclosed herein' with certain exceptions and that 'the price' was $5.75M plus stock at valuation with a deposit of $200,000. The settlement date was stated to be '60/90 days or earlier by agreement'.

14 The pre-contract agreement provided that it was subject to the vendor providing a copy of the existing lease documentation, providing the purchaser with a financial statement and any other relevant documentation necessary to facilitate the sale of the said business and was further subject to any special conditions set out on the back thereof. The pre-contract agreement provided that the purchaser 'shall execute a further prescribed and standard Contract of Sale required by the vendor to set out all the conditions of this sale'.

15 The pre-contract agreement contained special conditions that 'the offer' was 'subject to', namely, that the purchase was to include the Formation Hairdressing & Beauty Salon, that it was 'subject to the first right of refusal of any new or existing businesses within the Alfred Hospital compounds owned by the said Vendors', and that it was also subject to 'a two-week trial period at $110,000 per week', subject to completion of all proposed renovations and subject to the vendors allowing the purchaser a full due diligence prior to settlement.

16 In the pre-contract agreement, under the words 'the offer is made by the purchaser on 18th day of July 2005' appears the signature of Mr Di Pietro and under the words 'this offer is accepted by the vendor on 25th day of July 2005' and against the words 'Signature(s) of the Vendor' appears the signature of Joseph Zouki.

17 Mr Di Pietro in fact signed the document on 18 July 2005 and Joseph Zouki signed it on 25 July 2005. However Mr Lakkis refused to sign the document until he obtained legal advice and he never did sign it. The judge found that Mr Di Pietro knew that Mr Lakkis had refused to sign the document and that Mr Lakkis would not do so until he had obtained advice from his solicitor (Mr Phillips) about whether he should sign this document or not.

Mr Di Pietro gave evidence that, once he knew that Joseph Zouki had signed the pre-contract agreement, he believed that an agreement had been reached for him to purchase the three businesses on the terms set out in the pre-contract agreement. I do not accept this evidence. Mr Di Pietro well knew that the businesses were owned by Mr Lakkis and his nephews in partnership, that they were in dispute, that the signature of Mr Lakkis was necessary to bind him (Cartley Nominees) to the pre-contract agreement and that Mr Lakkis had refused to sign the pre-contract agreement until he obtained legal advice "about whether he should sign". In these circumstances, it would have been unreasonable for Mr Di Pietro, an experienced businessman who had purchased other businesses, to believe that an agreement with Mr Lakkis came into existence when Joseph Zouki signed the pre-contract agreement. I find that Mr Di Pietro had no such belief. Further, the subsequent conduct of Mr Di Pietro and his solicitor, which is referred to below, is inconsistent with Mr Di Pietro having such a belief at any relevant time.

19 The last-mentioned conduct of Mr Di Pietro and his solicitor was, in particular, constituted by a letter from his solicitor to the solicitors for the Zouki interests (Lewenberg & Lewenberg) dated 17 January 2006 in which his solicitors referred to 'negotiations for sale' but not to any alleged binding agreement.

20 Following the refusal of Mr Lakkis to sign the pre-contract agreement a meeting was held on 6 August 2005 attended by Mr Di Pietro, Mr Lakkis, the Zouki brothers and Mr Dabab. Those present discussed a number of matters including the assistance period following settlement, the proposed settlement date, dates for the proposed trial period, the provision of financial and other information, proposed renovations and other matters. Later on the same date, Mr Lakkis and the Zouki brothers met and signed a dissolution of partnership agreement. Shortly thereafter, an inventory was prepared by Mr Dabab in the presence of Mr Di Pietro and Joseph Zouki. Mr Lakkis was not a party to this. The deposit cheque was presented on 12 August 2005 and thus the deposit was paid although there was no evidence that the solicitors for the parties knew of this.

21 In late August 2005 Mr Dabab prepared draft contracts of sale for each of the three businesses and provided copies to the partners and Mr Di Pietro. Negotiations ensued between Lewenberg & Lewenberg and Mr Di Pietro's solicitors (some correspondence was received by Mr Phillips but Mr Lakkis instructed him not to respond). None of the parties, including Mr Di Pietro, provided their solicitors with a copy of the pre-contract agreement and no reference was made to it during the course of the negotiations between the solicitors.

22 Despite the dissolution agreement signed on 6 August 2005, Mr Lakkis was reconsidering the terms thereof and seeking legal advice as to whether he could sue his nephews in respect of their conduct of the businesses. On 22 October 2005 Mr Lakkis met with Mr Di Pietro. Mr Lakkis told Mr Di Pietro that because of his dispute with his nephews he was not in a position to agree to a sale of Alf's Café and that his dispute with his nephews had to be resolved before he could make a decision. In his evidence in chief, Mr Di Pietro did not deny this conversation, or qualify it in any way.

23 On 28 October 2005 Mr Di Pietro met the Zouki brothers and Mr Dabab. Mr Di Pietro was informed that Mr Lakkis had offered to buy their share in Alf's Café. Mr Di Pietro became angry and said that he intended to speak with Mr Lakkis and find out from him what his intentions were. On the same day, Mr Di Pietro and Mr Dabab met with Mr Lakkis and his solicitor, Mr Phillips, at the Flagstaff Motel in West Melbourne. Mr Lakkis told Mr Di Pietro that he had made an offer to purchase his nephews' interests in Alf's Café. Mr Lakkis told Mr Di Pietro that if he acquired his nephews' interests in Alf's Café and if he decided to sell Alf's Café he would give Mr Di Pietro the first option to buy it from him. Mr Di Pietro testified in examination in chief (but not in his witness statement) that, although he said nothing directly to Mr Lakkis, he said to Mr Phillips outside the Flagstaff Motel, 'David, why would I want to buy the business off Roger [Mr Lakkis] when I've already got a binding contract with him currently and the Zoukis now'. Mr Phillips, in his evidence, denied this conversation. The judge accepted the evidence of Mr Phillips and rejected the evidence of Mr Di Pietro in this regard. The judge noted that Mr Di Pietro had not asserted the existence of a binding agreement to Mr Lakkis nor had his solicitors asserted the existence of a binding agreement in subsequent correspondence, in particular in the letter to Lewenberg & Lewenberg of 17 January 2006 in which they referred to 'negotiations for sale'. Those solicitors replied to this letter by letter dated 19 January 2006 in which they noted that 'there is no binding agreement in respect of the sale or purchase'.

24 As a result of a second dissolution of partnership agreement, Cartley purchased the Zouki interests in the Alfred Hospital businesses and Mr Lakkis assumed full control thereof by early January 2006.

25 It was not until 6 April 2006 that Mr Di Pietro, through his solicitors, asserted for the first time that a valid and binding agreement, namely the pre-contract agreement, was in existence. After further correspondence between solicitors, the writ in the proceeding was filed on 7 December 2006.

26 His Honour said that at the forefront of the submissions made on behalf of Mr Di Pietro was the submission that Joseph Zouki was authorised to sign the pre-contract agreement on behalf of the partnership as the legal owner of the three businesses. In support of that submission it was contended that, as a matter of law, the three businesses were owned and conducted by Basjo Catering as bare trustee for the partners and that Joseph Zouki's signature on behalf of Basjo Catering was all that was required to bind both partners to a sale of the three businesses. The judge said that, in this regard, reliance was placed upon the fact that Joseph Zouki signed each of the three sale authorities on behalf of Zouki Catering and that he signed the partnership and other agreements relating to the partnership on behalf of both Zouki Catering and Basjo Catering. Accordingly, it was submitted on behalf of Mr Di Pietro that, as between the partners, it was accepted that the signature of Joseph Zouki was all that was required to bind both Zouki Catering and Basjo Catering - therefore it did not matter that Mr Lakkis had not signed the pre-contract agreement.

27 The judge did not accept these submissions and said:

I do not accept these submissions. Even if it be assumed that the legal owner of the three businesses was Basjo Catering, the proposed sale of the three businesses was, as between the partners, dealt with at the level of beneficial ownership. It was not Basjo Catering which signed the three sale authorities given to Klemms. The sale authorities were each signed by both Mr Lakkis and Joseph Zouki. In particular, the sale authority for Alf's Café, which was far and away the most substantial asset proposed to be sold, records the vendors as Zouki Catering and Cartley Nominees, and not Basjo Catering.

Further, Mr Di Pietro well knew that he was dealing with a partnership, that the partners were in dispute and that it was necessary to obtain the agreement of both partners to the proposed sale. The relevant factual findings appear above. At no stage did Mr Di Pietro intend to contract with Basjo Catering in respect of Alf's Café. The pre-contract agreement names only Cartley Nominees and Zouki Catering as the vendors of all of the three businesses. Indeed, there is no evidence that Mr Di Pietro knew of the existence of Basjo Catering until it was nominated in the draft contracts of sale as the vendor of the hairdressing and florist businesses.

When the evidence in this case is "viewed as a whole and objectively from the point of view of reasonable persons on both sides", a concluded bargain with Mr Lakkis (Cartley Nominees) on the terms of the pre-contract agreement is not demonstrated.

28 The judge mentioned a number of matters in support of these conclusions, including the following three matters:

First, as appears above, Mr Di Pietro knew that he was dealing with two partners, Zouki Catering representing the interests of Zouki brothers on the one hand and Cartley Nominees representing Mr Lakkis on the other. Further, Mr Di Pietro knew that the partners were in dispute and that, for this reason, they proposed to sell the three businesses.

Second, when Mr Di Pietro signed the pre-contract agreement on 18 July 2005, it constituted an offer to both of the partners to purchase the three businesses on the terms set out. The pre-contract agreement provided for the partners, Cartley Nominees and Zouki Catering, to accept the offer by signing the document. The document provided for the signatures of more than one person on behalf of the partners: "Signature(s) of the Vendor".

Third, Mr Di Pietro knew that Mr Lakkis had refused to sign the pre-contract agreement until he had first obtained legal advice, and that Mr Lakkis did not thereafter sign the pre-contract agreement at any time.

29 Turning to the claim based on equitable estoppel under the principles referred to in Walton's Stores (Interstate) Ltd v Maher,[1] His Honour said that no estoppel had been established for the following reasons:

In his amended statement of claim, Mr Di Pietro alleged that he assumed, on reasonable grounds, that an agreement had been entered into between him and the partners for the sale of the three businesses to him. Mr Di Pietro alleged that he made this assumption by reason of the matters alleged by him to constitute the agreement for which he contends and, in addition, the conduct of the parties at the 6 August meeting. Mr Di Pietro alleged that, in reliance upon his assumption, he incurred expenses in arranging finance, valuation fees, legal expenses and, in addition, that he sold the Hotham Street properties in circumstances where he would not have done so if he had not assumed that a binding contract was in existence.

Mr Di Pietro's estoppel case fails at the first level. He has not established that, at any relevant time, he assumed that Cartley Nominees, representing the interests of Mr Lakkis, was contractually bound to sell the three businesses to him. For the reasons given above, I reject Mr Di Pietro's evidence that, once he knew that Joseph Zouki had signed the pre-contract agreement, he believed that an agreement had been reached for him to purchase the three businesses on the terms set out in the pre-contract agreement. Further, if such a belief had been established it would not, for the reasons stated in rejecting Mr Di Pietro's evidence of that belief, have been based upon a reasonable understanding by him of the conduct of the partners or Mr Dabab.

Mr Di Pietro did not give evidence that subsequent events contributed to the formation of his belief that a contract was in existence. However, in final submissions made on his behalf, reliance was placed upon the conduct of Mr Dabab and the partners in relation to the 6 August meeting, the acceptance by Mr Dabab of the deposit and the taking of the inventory as further matters supporting the formation by Mr Di Pietro of a reasonable belief on his part that a binding contract was in existence.

I do not accept that these further matters, in combination with the fact that Joseph Zouki had signed the pre-contract agreement, support a finding that Mr Di Pietro believed that a binding contract was in existence. When the evidence is taken as a whole, it is clear that Mr Di Pietro knew at all times that Mr Lakkis had not signed the pre-contract agreement; knew that the solicitors were negotiating formal contracts which included terms beyond those contained in the pre-contract agreement (and gave instructions to his solicitors in that regard); knew that Mr Lakkis was unwilling to provide documents necessary to enable the proposed sale to proceed; knew that the negotiations had stalled by late October 2005; and knew from late October 2005 that Mr Lakkis wished to defer any decision as to whether he would sell the three businesses to Mr Di Pietro until after he had resolved his dispute with his nephews, if possible on terms involving Mr Lakkis purchasing the three businesses from them.

30 His Honour did not deal specifically with the issue of detriment in the context of the appellants' reliance upon equitable estoppel. But earlier in his reasons he addressed the appellants' argument that moneys had been expended in consequence of Mr Di Pietro's asserted belief that the pre-contract agreement bound the pertinent parties. Having referred to various re-financing applications made by Mr Di Pietro, and to moneys expended in accounting and valuation fees in that connection, His Honour made this finding:

It was submitted on behalf of Mr Di Pietro that he incurred the accounting and valuation fees, and also his legal fees in connection with the negotiations for the formal contracts of sale, in reliance upon his belief at all relevant times that an agreement for the sale to him of Alf's Café existed. For the reasons stated above, I do not accept that Mr Di Pietro had such a belief. Accordingly, I do not accept that he incurred the accounting, valuation and legal fees in reliance upon such a belief. Further, taking the evidence as a whole, including Mr Di Pietro's fervent desire to purchase Alf's Café, I find that Mr Di Pietro would have incurred the expenses whether or not be believed that an agreement existed. I find that Mr Di Pietro would have incurred the expenses in any event as part of his overall endeavours to refinance existing debt, in order to place himself in the position to purchase Alf's Café if an agreement was concluded and as part of his due diligence in confirming that the purchase of Alf's Café was a commercially prudent thing for him to do.

31 His Honour also referred to arrangements which Mr Di Pietro put in hand in mid-October 2005 to sell a number of properties in Mont Albert which were owned by a corporate alter ego. Mr Di Pietro deposed that he would not have done this 'if [he] had not thought that [he] had a legally binding contract to buy Alf's Café'. The judge rejected this averment, saying:

For the reasons stated above, I do not accept that Mr Di Pietro believed in October 2005 that an agreement for the sale to him of Alf's Café existed. Accordingly, I do not accept that such a belief was the cause of his decision to sell the Hotham Street properties from October 2005. This finding is supported by Mr Di Pietro's evidence in cross-examination that, in his finance proposals, he proposed the sale of properties, including the Hotham Street properties, and that this was part of his overall strategy for debt reduction. Furthermore, as appears above, in January 2006, Lewenberg & Lewenberg, on behalf of the vendors, denied the existence of any binding contract for the sale and purchase of the three businesses. At this time, only one of the Hotham Street properties had been sold. However, notwithstanding the denial of any concluded agreement, Mr Di Pietro proceeded with the sale of the remaining Hotham Street properties.

32 The appellants relied upon the following grounds of appeal:

a) The learned judge erred in finding at paragraph 157 of his Reasons for Judgment that [Mr Di Pietro] was dealing with a partnership but ought to have found that [Mr Di Pietro] was dealing with whatever entity among the Respondents was the legal owner of the three businesses.

b) The learned Judge ought to have found that the three businesses were owned and conducted by [Basjo Catering] and that [Basjo Catering] was the owner of the sub-leases and the licences referable to those businesses.

c) The learned Judge ought to have found that on its proper construction the pre-contract agreement of 18 July 2005 when signed by [Mr Di Pietro] constituted an offer by [Mr Di Pietro] to buy the three businesses on the terms set out therein from whichever entity owned and conducted them, namely, from [Basjo Catering].

d) The learned Judge ought to have found that the signature of [Joseph Zouki] on the pre-contract agreement of 18 July 2005 constituted an acceptance by [Basjo Catering] of [Mr Di Pietro's] offer and that a contract for the sale of the three businesses to [Mr Di Pietro] was thereby made between [Mr Di Pietro] and [Basjo Catering].

e) The learned Judge erred in finding at paragraph 148 of his Reasons for Judgment that [Mr Di Pietro] had no belief between August 2005 and June 2006 that an agreement for the sale to him of the three businesses existed.

f) The learned Judge ought to have found that [Mr Di Pietro], as the Respondents knew, incurred expenditure and sold real property in reliance on a reasonable belief, induced by the Respondents, that an agreement for the sale to him of the three businesses existed from August 2005.

g) The learned Judge ought to have found that the Respondents were, in consequence, estopped from disputing the existence of an agreement for the sale of the three businesses to [Mr Di Pietro].

33 These grounds all involve the same contention, namely, that the pre-contract agreement constituted a binding contract between Mr Di Pietro as purchaser and Basjo Catering as vendor and that Joseph Zouki signed the pre-contract agreement on behalf of Basjo Catering and not on behalf of Zouki Catering. In support of that contention, the appellants submitted that the businesses were not owned or operated by a partnership of Cartley and Zouki Catering but were owned and operated by Basjo Catering as trustee (but not bare trustee) for those two entities.

34 In our opinion, these submissions fail at a number of levels.

35 First, the pre-contract agreement evinces the objective intention of the parties that the parties to be bound as vendors are the entities expressly named as such, Cartley and Zouki Catering. There was no intention evinced that Basjo Catering should be a party to the contract.

36 Second, there was no evidence that Joseph Zouki was signing on behalf of Basjo Catering rather than Zouki Catering.

37 Third, there was no evidence from the surrounding circumstances or otherwise that any of the parties expected or intended Basjo Catering to be a party to the pre-contract agreement.

38 Fourth, it is abundantly clear that the parties to the so-called partnership agreement intended to create a partnership between Cartley and Zouki Catering and to own and operate the businesses in that partnership. The partnership agreement makes express provision to that effect and also empowers the partners to sell the businesses. The better view probably is that Basjo Catering was not a 'trustee' but simply the agent of the partnership for the purpose of managing and operating the businesses. However, even if that be incorrect, the partners had the capacity as beneficial owners to sell the business and to procure any documentation from Basjo Catering to complete the sale, if that were necessary. The judge so found.[2]

39 Fifth, it was never explained how relief could be obtained against Cartley, the present owner of the businesses, if Basjo Catering was the sole vendor party to the contract.

40 The appellants relied on two authorities to support their submissions.

41 The first was Qintex Australia Finance Ltd v Schroders Australia Ltd[3] but in that case the problem was to identify the particular member of the Qintex group of companies on whose behalf a futures exchange contract had been purchased by the defendant. There was clearly a transaction. The difficulty was to identify the principal. The Court held that the decision as to which was the contracting party had to be made in light of the objective facts and surrounding circumstances. By contrast, in the present case, there is no difficulty in identifying the parties and no ambiguity in the contract document. The parties on both sides of the transaction are identified.

42 The second case was Pico Holdings Inc v Wave Vistas Pty Ltd.[4] In that case Pico Holdings Inc lent moneys to a borrower ('Dominion') and Dominion's representative, Mr Voss, subsequently offered a piece of real estate as security for repayment of the loan. The owner of the real estate was Turf Club Australia Pty Ltd (the name of which was later changed to Wave Vistas Pty Ltd). In the oral and written representations by Mr Voss said to constitute the promise to provide security, the owner of the real estate was not identified and the trial judge held, and the Queensland Court of Appeal agreed, that the owner of the real estate was not a party to the purported contract to provide the security. The High Court overturned the decision below on the basis that, as Mr Voss was the sole director of the company that owned the real estate, the proper interpretation in all the circumstances was that his promises were made on behalf of that entity. Thus, in that case, if Turf Club Australia Pty Ltd was not a party to the contract for the provision of security, there was no effective contract at all. In the present case, no such problem arises because the parties named as vendors (Cartley and Zouki Catering) had the capacity to sell the businesses and a decree of specific performance against them would have been effective.

43 For the foregoing reasons, we are of the view that these grounds of appeal fail. It is therefore unnecessary to consider the respondents' arguments that the pre-contract agreement was not in any event a binding contract, was void for uncertainty, or had been mutually abandoned.[5]

44 These grounds challenge the judge's finding of fact that Mr Di Pietro did not believe that a binding contract was in existence or that, if he did, it was not a reasonable belief because he knew that it was necessary for Mr Lakkis to sign the pre-contract agreement on behalf of Cartley; and that, if he did hold a belief which was reasonable, the appellants had nonetheless not acted to their detriment.

45 In our opinion, the judge's finding as to Mr Di Pietro's belief was well open on the evidence but, further, the judge was in any event entitled not to be satisfied that Mr Di Pietro held such a belief because, as the judge found, Mr Di Pietro knew that Cartley was intended to be one of the vendors and that Mr Lakkis had to sign on behalf of Cartley. The judge also noted that there was no evidence from Mr Di Pietro that subsequent events had contributed to the formation of any such belief. For the same reasons, such a belief would have been unreasonable.

46 There is an additional difficulty about this whole argument. There was no evidence from Mr Di Pietro that Cartley or Mr Lakkis did anything by words or conduct to encourage him in the belief that Joseph Zouki could, by signing the pre-contract agreement, bind Cartley. Indeed, as we understood it, the submission on behalf of the appellants was that the respondents were estopped from denying that a contract of sale of the businesses had been concluded with Basjo Catering - but there was no evidence of any representation or conduct that had or would have led Mr Di Pietro to believe that Basjo Catering was even a party to the alleged contract.

47 Finally, if Mr Di Pietro had held a relevant belief, and if it had been reasonably held, we consider that, for the reasons which the judge gave, it was not demonstrated that the appellants had suffered any detriment in consequence of that belief.

48 For the foregoing reasons, in our opinion, the appeal should be dismissed.

[1] [1988] HCA 7; (1998) 164 CLR 387, 428-9 per Brennan J.

[3] (1990) 3 ACSR 267 (Rogers CJ in Comm Div, Supreme Court NSW).

[5] This was the analysis preferred by counsel for the Zouki interests. But he also relied upon waiver and election.

At a glance

Court

Decision date

Before

Source

Judgment (67 paragraphs)

Parties

Cases Cited (2)