Helmos Enterprises Pty Ltd v Jaylor Pty Ltd & Anor

4814/02 HELMOS ENTERPRISES PTY LIMITED v JAYLOR PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR: In 2001 the second defendant was the owner of a restaurant business called Kingsley's Australian Steak House conducted from premises in King Street Sydney. It also had an interest in another restaurant called Kingsley's Steak and Crabhouse conducted from premises at Woolloomooloo. The latter business was conducted by the first and second defendants pursuant to the terms of a joint venture agreement. On the plaintiff's case, stated shortly, it entered into two contracts, one with the first defendant and the other with the second defendant. By the first contract, the first defendant agreed to sell to the plaintiff its interest in the Woolloomooloo business. By the second contract, the plaintiff agreed with the second defendant that it would buy the city restaurant business, on terms that the first defendant sold its interest in the Woolloomooloo restaurant to the plaintiff, and that the plaintiff and the second defendant would enter into a new joint venture agreement for the conduct of the Woolloomooloo restaurant business. There is evidence to the general effect that savings might be effected by conducting the two restaurants together, and on the plaintiff's case, its entering into the contract to buy the city restaurant business was conditional upon its being able to obtain an interest in the Woolloomooloo restaurant business. 2 The joint venture agreement between the defendants is dated 5 June 2001. There were five parties to the agreement: the defendants, Kingsleys Crabhouse Pty Limited, Mr Kingsley Smith and Mr John Jeffreson. Mr Smith is the sole director and shareholder of the second defendant. Mr Jeffreson (who is known as JJ) is a director and shareholder of the first defendant, and he seems to have been in effective control of its affairs. Only two shares in the capital of Kingsleys Crabhouse Pty Limited had been issued, one to each of the defendants. 3 The joint venture agreement recited that the defendants had agreed to form a joint venture for the purpose of conducting what I will call the Woolloomooloo restaurant business, and that they had agreed to appoint Kingsleys Crabhouse Pty Limited as their agent to manage the joint venture. Clause 2 provided that the joint venturers (the defendants) agreed to have equal shares in the joint venture, and that any joint venture assets should be deemed to be owned by the joint venturers as tenants-in-common in equal shares. Clause 3 provided that each of the defendants should be entitled to appoint one director, and that the initial directors would be Messrs Smith and Jeffreson. Mr Smith was to be the managing director and responsible for the day to day management of the company and of the Business (the Woolloomooloo restaurant business). There was a list of matters not to be undertaken without the approval of both directors, and there were provisions dealing with alternate directors, and the like. Clause 4 provided that there would be only two shares issued, until otherwise determined. Clause 7 provided that the joint venture was to enter into a management agreement with a company nominated by Mr Smith for the provision of management services to the joint venture in connection with the conduct of the Business, and that the management fees payable would be $70,000 during the first year of operation and then $50,000 per year. 4 Clause 8 referred to a lease. That was the lease to Kingsleys Crabhouse Pty Limited of the premises upon which the Woolloomooloo restaurant business was conducted. The copy of the lease in evidence is undated, but the lease was for a term of ten years, commencing on 22 July 2000. The lease contained provisions requiring an amount equal to three months' rent to be the subject of an unconditional bank guarantee, in favour of the lessor. Messrs. Smith and Jeffreson guaranteed the obligations of the lessee under the lease. Clause 8 of the joint venture agreement recorded that Messrs Smith and Jeffreson had agreed to arrange for that bank guarantee, without the lessee doing so; and the company/lessee agreed to indemnify them in that regard. (Other evidence shows that they procured a bank guarantee for the lessor, by depositing money into some bank account or accounts). 5 Clause 9 prohibited each joint venturer from assigning or otherwise dealing with its interest in the joint venture, without the approval of the other, and each gave to the other a right of pre-emption, if the other wished to dispose of its interest. Clause 10 provided that the joint venture had commenced on 6 August 1999 and that it would continue until the joint venturers determined to discontinue the Business. 6 In May 2001 negotiations commenced, as between the plaintiff and Mr Smith, he representing the second defendant. The second defendant had its city restaurant business on the market for sale. On the plaintiff's case it was interested in buying that business, but only if it could also buy the first defendant's half-share interest in the Woolloomooloo restaurant business. During the course of the hearing, various objections were taken to evidence, successfully, so that evidence paints only an incomplete picture of these negotiations, but it is clear enough that there were negotiations, conducted between May 2001 and January 2002. 7 The plaintiff was represented during these negotiations by Mr Leo Varvaritis, a director, and by his son George, who was at one time another director, and by the plaintiff's solicitor, Mr Bray of Bray, Jackson & Co. The plaintiff had for some decades operated another restaurant business at Double Bay. The name Varvaritis is commonly abbreviated to Vardis. George Varvaritis gave evidence, but Leo Varvaritis did not, and there was no explanation proffered for his not being called. 8 The second defendant was represented by Mr Smith, and at times by its solicitor, Mr Michell. The first defendant took no active part at all in the negotiations, but Mr Jeffreson seems to have made whatever decisions needed to be made. The first defendant's solicitors were Diamond Piesah. Within that firm Mr Meisner generally represented the first defendant, but during his absence Mr Doumanis did so. 9 Various proposals were made and not accepted, by January 2002. During the course of these negotiations the second defendant allowed the plaintiff to inspect the financial records of both the city and the Woolloomooloo restaurant businesses, and there were discussions about the management of the Woolloomooloo restaurant. Mr Varvaritis discussed with Mr Smith the possibility that the plaintiff and the second defendant might employ a Mr Fraser-Smith to work at the two restaurants, on the basis that the costs incurred would be shared between the two restaurants, and Mr Smith agreed in principle to this. 10 On or about 14 January 2002 Mr Bray spoke to Mr Doumanis, saying: "It is essential that we receive confirmation from your client that he [Mr Jeffreson] is prepared to give our client the right to purchase the half-interest in the Woolloomooloo restaurant as they are really interested in purchasing both businesses, not just one. Could you please send me a letter confirming that your client has agreed to give our client this right before we exchange contracts for the purchase of the King Street restaurant." 11 Mr Doumanis did not dispute that words to this general effect had been said, but his account was a little different. He recounted that he said: "My client does not agree to any management agreement and any possible sale of his interest in the business is to be by exchange of letters." 12 Mr Bray responded that his client was "looking to exchange" on the purchase of the city business the next day, and that he needed something in writing before he could exchange. Mr Doumanis then said: "All I can offer you is a letter. I don't have any instructions beyond that. The parties will need to deal with the terms of any contract later." 13 This account of Mr Doumanis is supported by his diary note, although the form of that is rather abbreviated. I accept both Mr Bray and Mr Doumanis as truthful and reliable witnesses, and regard the differences between their evidence as resulting from differences in recollections. 14 In any event, on 15 January Diamond Peisah faxed to Bray Jackson & Co a letter in these terms: "JAYLOR PTY. LIMITED ("Jaylor") AND HELMOS INTERPRISES PTY. LIMITED ("Helmos") BUSINESS: KINGSLEYS STEAK AND CRAB HOUSE ("Kingsleys Crab House") We refer to recent telephone discussions between our respective offices regarding Helmos' interest in purchasing Jaylor's 50% ownership of of Kingsleys Crab House. We are instructed to confirm the following:- 1. Jaylor hereby offers Helmos the opportunity to purchase its 50% interest in Kingsleys Crab House ("offer to purchase") for $1,100,000.00 ("the purchase price"). 2. Helmos is to exercise the offer to purchase by notice in writing to our office ("exercise of offer") no later than 5.00pm, 15 April, 2002, time being of the essence ("exercise date"). 3. Upon receipt of the exercise of offer Contracts for purchase of Jaylor's 50% interest in Kingsleys Crab House ("contract of purchase") shall be sent to your office no later than five days from the exercise date. 4. Subject to Jaylor and Helmos' agreement to the terms and conditions contained in the contract of purchase, settlement thereof shall take place no later than 14 days from the exercise date. 5. The purchase price to be free of any deductions. 6. Jaylor undertakes until the exercise date not to enter into any contract, lease or any other arrangement with any other party as would prevent Jaylor from performing its obligations pursuant to the exercise of offer. Finally, we understand Helmos has made arrangements with Kingsley Smith on matters relating to Helmos' involvement in management aspects of Kingsleys Crab House." 15 After the receipt of that letter, Mr Bray spoke to Mr Michell, telling him of the receipt of the fax from Mr Doumanis. He continued: "I am aware that there is a joint venture agreement between Jaylor and your client and it is essential that if our clients exercise the option ….. Kingsley enter into a fresh joint venture agreement with our client. Prior to exchanging contracts for the purchase of the King Street restaurant would you please confirm in writing that your client will enter into the joint venture agreement….". 16 On the same day Bray Jackson & Co sent a fax to Mr Michell reading: "RE: Vardis and Kingsleys Australian Steakhouse Pty Limited We enclose herewith a copy of a letter forwarded to us by the Solicitors for Jaylor Pty Limited. The terms of this letter are acceptable to our client, subject to receipt of a letter from you on your client's behalf confirming that if our clients exercise their right to purchase the share of Jaylor Pty Limited in Kingsleys Crab House, that your client and our client will enter into a fresh joint venture arrangement through a new company. The reason for this is that our client is insistent that it wishes a new entity to conduct the business to remove any doubts relating to the past financial history of the joint venture company. We understand that exchange in this matter has been tentatively arranged for 2.00pm this afternoon at our office and we should be obliged if you confirm that you and your client will be available at that time and in the meantime furnish us with a letter as requested." 17 On the same day Mr Michell replied: "We refer to your facsimile of even date. We confirm on our client's behalf that if your client exercises its right to purchase Jaylor Pty Limited's share in Kingsleys Crabhouse that our client will enter into a fresh Joint Venture arrangement through a new company." 18 On 22 January 2002 the plaintiff and the second defendant exchanged contracts, concerning the sale of the city restaurant business from the second defendant to the plaintiff. That contract was completed on 18 February 2002. 19 On 8 April 2002 Bray Jackson & Co faxed a letter to Diamond Peisah, saying: "RE: HELMOS ENTERPRISES PTY LIMITED AND JAYLOR PTY LIMITED BUSINESS: Kingsleys Steak and Crab House Further to your letter to us of 15 January 2002, we confirm that our client, Helmos Enterprises Pty Limited, wishes to avail itself of the opportunity to purchase your client's interest in Kingsleys Crab House. We believe that it would be appropriate, therefore, that a round table conference be held with the Accountants and legal advisers for your client, the Woolloomooloo Trust and our client with a view to establishing the method of transfer of your client's interest and the structure of the entity which will conduct the business from the date of settlement. Perhaps you would be kind enough to contact our office in this regard." 20 There followed some telephone conversations between Mr Bray and Mr Doumanis. Mr Bray asked Mr Doumanis to "submit a draft agreement for the sale of the shares"; and I take this to be a reference to the share held by the first defendant in Kingsleys Crabhouse Pty Limited, or in the joint venture agreement. Mr Doumanis said that Mr Jeffreson had no particular preference about how the share was to be transferred, and that he did not want to spend money on professional fees. 21 It was not until August 2002 that anyone on behalf of either defendant said or did anything to suggest to the plaintiff that the parties were not bound by the supposed contracts formed by the exchanges I have summarised. During the period between April and August there were various discussions between Mr Smith and Mr George Varvaritis. Mr Varvaritis says, and I find, that on one such occasion he asked Mr Smith when finalisation of the purchase of the first defendant's share in the Woolloomooloo restaurant business could take place, and that Mr Smith then said: "I have a number of financial problems at the present time being tax and the settling of my divorce from my wife. I don't want the deal with JJ to go ahead at $1.1 million because that will value my share in the Woolloomooloo restaurant at $1.1 million and my wife will try to get a share of that, so I don't want the deal to go ahead at Woolloomooloo at the present time." 22 Mr Fraser-Smith did start to work at the Woolloomooloo restaurant, whilst he was an employee of the plaintiff, and the costs so incurred were shared between the two restaurants, that is between the plaintiff on the one hand, and the defendants as joint venturers on the other hand. There is a dispute about the details of what Mr Fraser-Smith did, but what does seem significant is that during the period from April 2002 onwards the plaintiff and the second defendant proceeded as if on the assumption that there were contractual arrangements in force, as the plaintiff contends for. 23 In addition, there were discussions between Mr Smith and Mr Varvaritis relating to the possibility that the plaintiff and the second defendant would, as joint venturers, acquire some interest in another business at Crows Nest, and later in respect of yet another business, at Parramatta. That is, the relationship between the two companies appears to have been a good one. 24 During August 2002 Mr Smith told Mr George Varvaritis: "JJ and I have decided not to sell you a share in the Woolloomooloo restaurant. Let's do a third venture together and see how we work together before we work together at Woolloomooloo." 25 Then, on 20 August Diamond Peisah faxed to Bray Jackson & Co a letter in these terms: "JAYLOR PTY LIMTIED AND HELMOS ENTERPRISES PTY LIMITED We refer to your letter of 16 August, 2002 and are instructed that at no time did our respective clients intend to bind themselves to any "legal and binding arrangements". No more so is this evident than by our letter to your office dated 15 January, 2002 which, with your concurrence, lacked two essential elements of a binding option agreement, namely, consideration and the terms and conditions of the contract subject of the option agreement. Your client's interest in purchase of our client's interest in the Kingsleys Crabhouse restaurant ("the Crabhouse Business") was founded on firstly its purchase of the Kingsley Australian Steakhouse business, being a business in which the co-principal, with our client, of the Crabhouse Business as the vendor, a management agreement between our respective clients and the co-principal for your client to manage the Crabhouse Business and, subject to certain conditions precedent, a grant of an option to your client to purchase the Crabhouse Business on payment of an option fee of $65,000.00 We understand that your client has settled on the purchase of the Kingsley Australia Steakhouse business. The management agreement however was not taken up by your client nor was there payment of the option fee. The reluctance of our respective clients to enter into binding agreements in either the management agreement or the option agreement is attributable to a number of factors each of which, in one way or another, did not suit either one of our clients. To therefore avoid a legally binding agreement between them our client waived payment of the option fee while your client settled for the gratuitous offer contained in our letter of 15 January, 2002 with the intention to negotiate further on those issues at a later stage. This did not occur. We respectfully suggest that, should your client wish to discuss purchase of the Crabhouse business, it should contact our client and the co-principal of that business. Our client denies that it is negotiating to sell its interest in the Crabhouse Business to an employee of that business." 26 Mr Varvaritis then spoke to Mr Jeffreson, saying: "JJ, as you understand we have an agreement to purchase your share in Woolloomooloo and would like to know when we can do it." 27 Mr Jeffreson replied: "I am sorry George but Kingsley has told me not to sell my share to you. We are keeping it." 28 The plaintiff contended that Mr Smith had wanted to delay matters in April 2002. It argued that, because Mr Smith was then attempting to negotiate a property settlement with his former wife, in proceedings in the Family Court of Australia, he perceived it to be contrary to his interests to have the first defendant sell its interest in the Woolloomooloo restaurant business for $1.1 million, because at about the same time he had represented to the Family Court and to his former wife that the value of his interest, or the value of the second defendant's interest in the Woolloomooloo restaurant business was only $300,000. 29 On 12 February 2004, before the trial commenced, I dismissed a motion brought by the second defendant, seeking to set aside a subpoena that had been served upon Mr Smith requiring him to produce various documents. Later, and in compliance with that subpoena, Mr Smith produced (perhaps amongst other documents) a copy of a Financial Statement that he had made, dated 17 April 2002, in the Family Court proceedings. On trial, he was cross-examined concerning that Financial Statement, and a copy of it (with most of the contents masked) was tendered. In that document Mr Smith said that the estimated value of his interest in the Woolloomooloo Trust was a half-share in the value of the goodwill of the business, $300,000. 30 A good deal of attention came to be paid between the discrepancy of this sum (half of $600,000 total goodwill value), and the sum of $1.1 million (half of $2.2 million), which the plaintiff had effectively offered to pay to the first defendant. Mr Smith's Financial Statement appears to record that the joint venture had no other significant assets. In substance, the plaintiff asked Mr Smith how the two half-interests in the one business could have such different values ascribed to them. The value of the business was not itself an issue in the present proceedings, and there was no formal valuation evidence. The dispute goes only to the reason that, according to the plaintiff, Mr Smith gave, in about April 2002 for not then proceeding, and to questions about credit. 31 Mr Smith's evidence on this point and on related points was quite unconvincing. He suggested that the first defendant's share in the joint venture was worth a good deal more than the second defendant's share, because the first defendant and the plaintiff might be able to take advantage from the use of his name. This was hardly persuasive. He also suggested that if the business was to be valued as at April 2002, then conventional valuation practice in respect of restaurants would result in fixing upon a value that represented three years of nett profits, looking at the history of the business, and not at its future prospects, and he referred to various expenses incurred during the starting-up of the business, which would have to be taken into account in forming such a valuation opinion. However, the plain reality seems to be that whilst he valued the second defendant's share, and therefore his own share in the joint venture, at $300,000, for the purpose of the proceedings in the Family Court, the plaintiff was content to pay $1.1 million to the first defendant for the first defendant's share in the joint venture. Mr Smith also said that in the Family Court proceedings, from some point shortly after April 2002, he negotiated with his former wife, without the intervention of lawyers on either side; and he said that he had reached a settlement with her, which was perfected by an order of the Family Court made in December 2002. If I understood him correctly, he never suggested to his former wife that his share in the joint venture might be worth more than $300,000, although he did say that he had allowed various people representing his wife to inspect the financial records in question. 32 I regret to say that I have no confidence that Mr Smith was speaking the truth about these matters. I accept that the likelihood is that in and after April 2002 he did see it as advantageous to himself to delay any settlement of the supposed contracts concerning the sale by the first defendant of its interest in the joint venture, until he had completed negotiations with his former wife. I accept that he did tell Mr Varvaritis of this circumstance. 33 Neither Mr Smith nor Mr Jeffreson gave persuasive evidence about the circumstances concerning the supposed contracts and their non-performance. It is not at all uncommon for people to look uncomfortable whilst in the witness box, but Mr Jeffreson's level of discomfort seemed unusual, and at times both he and Mr Smith seemed to be evasive. Whenever there is a conflict between the evidence of Mr Varvaritis and either Mr Smith or Mr Jeffreson, or both of them, I prefer the evidence of Mr Varvaritis. 34 The defendants contended that, in the case of each of the supposed contracts sued upon, there was no intention demonstrated by the parties to enter into a binding contractual relationship. Viewing the matter objectively, as one must (Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 25), the correspondence of 15 and 17 January and 8 April, particularly when coupled with the conversations between the solicitors, points towards the conclusion that the parties did intend to be bound. After a good deal of negotiation the solicitors for the parties spoke and wrote to each other, in terms that lawyers often use, and on serious occasions. 35 However, the defendants submitted that the contracts were not binding, because they fell into the third category described in Masters v Cameron (1954) 91 CLR 353 at 360. As between the plaintiff and the first defendant, the contract was one where the parties did not intend to be bound unless and until they executed a formal contract; and therefore the same position applied as between the plaintiff and the second defendant. 36 I do not accept this as correct. I consider that the proper view is that the parties should be taken (viewing the matter objectively) to have intended to be bound immediately, whilst contemplating that there would be a further, more formal agreement reached, possibly containing other terms: Sinclair Scott & Co Limited v Naughton (1929) 43 CLR 310, 317, G R Securities Pty Limited v Baulkham Hills Private Hospital Pty Limited (1986) 40 NSWLR 631, 634-635, and Player v Isenberg [2002] NSWCA 186, 49-52. 37 The defendants were on stronger ground in contending that, for a variety of reasons, the contracts sued upon were void for uncertainty, in the sense that essential aspects of the subject matter of the contracts had not been agreed upon. Some of the submissions on this topic overlapped with submissions that certain of the alleged terms were vague or obscure, but I put these to one side. I think that there is really no difficulty involved in working out what the parties should be taken to have intended. 38 By the Amended Statement of Claim the plaintiff pleaded that the first defendant made an offer to the plaintiff of an option to purchase the first defendant's 50% interest in Crabhouse Pty Limited, being that company's one ordinary share in the issued capital, as well as the first defendant's interest in the Woolloomooloo restaurant. The plaintiff then pleaded that the second defendant made an offer to the plaintiff, to "enter into a fresh joint venture agreement to operate the licensed restaurant premises at Woolloomooloo on the same terms and conditions as" set out in the joint venture agreement between the defendants. The plaintiff pleaded that these offers had been accepted. 39 It is in the working out of this arrangement that the parties are at issue. The plaintiff submitted that all that was left were simple matters of conveyancing machinery, whilst the defendants submitted that there was a great deal more to be worked out. It is not in dispute that, if there were binding contracts the parties were bound to do all things necessary to enable the others to have the benefit of the contracts: Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, 219, 226. 40 First, Kingsleys Crabhouse Pty Limited is the lessee of the premises from which the Woolloomooloo restaurant business is conducted. If, as the plaintiff stipulated in the facts of 17 January 2002, set out at [16], the proposed new joint venture was to be conducted, not through Kingsleys Crabhouse Pty Limited, but through another joint venture manager, something needed to be done about the lease. Probably there would need to be either an assignment of the lease from Kingsleys Crabhouse Pty Limited to the new manager, or there would need to be a surrender of that lease and the grant of a new lease. Section 41 of the Retail Leases Act 1994 effectively imports into the existing lease to Kingsleys Crabhouse Pty Limited a deeming provision containing a procedure for obtaining the consent of the lessor to an assignment of the lease, subject to the provision to the lessor of such information as the lessor might reasonably require concerning the financial standing and business experience of the proposed assignee, but the provisions of the lease now under consideration add a layer of complexity. 41 As already mentioned Messrs. Smith and Jeffreson acted as guarantors of the obligations of Kingsleys Crabhouse Pty Limited, and they had in fact deposited money into some bank or banks, so as to satisfy the obligation under the lease of Kingsleys Crabhouse Pty Limited, practically speaking, to provide a fund equivalent to three months' rent. The plaintiff's requirement that a company other than Kingsleys Crabhouse Pty Limited be the manager presented a difficulty: what might the lessor (assuming that it had an obligation to act reasonably, and that it did act reasonably) do in these circumstances? It might have been content to assign the existing lease to a new manager, the shareholders in which were the second defendant and the plaintiff; but something needed to be done about the guarantees, and the provision of the fund equivalent to three months' rent. I do not think that these matters can be categorised as procedural, or matters of detail, or the like. 42 There is an additional factor to be considered in this context. Earlier, there had been a dispute between the lessor and Kingsleys Crabhouse Pty Limited concerning certain work that the lessor had carried out. This dispute had been compromised. A consequence of the compromise was that Kingsleys Crabhouse Pty Limited thereafter undertook a responsibility in respect of any further work that might need to be carried out. Presumably the lessor would have wished to see that any assignee or any new lessee was similarly bound. 43 Secondly, the plaintiff's pleadings spoke of a contract for the purchase by the plaintiff of the first defendant's share in Kingsleys Crabhouse Pty Limited, as well as the first defendant's interests in the Woolloomooloo restaurant, but the fact is that the plaintiff did not want to purchase the first defendant's share in Kingsleys Crabhouse Pty Limited. To the contrary, it was insisting that some new company be used in lieu of Kingsleys Crabhouse Pty Limited. 44 Thirdly, there are plant rooms, located close to the restaurant premises, in respect of which there is a licence agreement allowing Kingsleys Crabhouse Pty Limited to store certain things. Something needed to be done to bring this agreement to an end, and to replace it with a new agreement, presumably granting a similar license to the new joint venture manager. By itself, this is almost certainly quite a minor matter. The licence fee under the existing license agreement is only $1 per annum, but something needed to be done. 45 Fourthly, there is in existence a "berthing facility rental agreement", permitting the "lessee" named in the agreement the right to berth boats in a particular berthing facility. Since the named lessee is "Kingsleys Steak and Crabhouse" and the parties proposed to continue using that business name in the new joint venture, it might be that the other party to the agreement, a Mr Earthrowl, might have agreed to, or simply acquiesced with the new joint venture using the berthing facility, but I doubt that this can be assumed. 46 Fifthly, Kingsleys Crabhouse Pty Limited possessed, and used in the Woolloomooloo business, a significant number of chattels that were the subject of a hire purchase agreement. Messrs. Smith and Jeffreson had guaranteed the obligations of Kingsleys Crabhouse Pty Limited to the financier, arising under that agreement. If there was to be a new joint venture manager, something needed to be done either to bring this agreement to an end, and replace it with another, or to assign it; and something needed to be done to replace the guarantee given by Mr Jeffreson with a guarantee given by someone else, presumably Leo or George Varvaritis. The financier would necessarily need to be involved. 47 Sixthly, Mr Jeffreson held the relevant license under the Liquor Act 1982. Plainly, there would need to be some new arrangement, with somebody else becoming the licensee, and this would necessitate proceedings under the Liquor Act. 48 Seventhly, the joint venture agreement contained detailed provisions concerning the management of the venture, in essence by Mr Smith's nominee, for a fee, but the plaintiff wanted to change that arrangement, substituting a different manager, and a different fee arrangement. 49 The defendants also focused a good deal of attention upon paragraph 4 of the fax of 15 January 2002, set out at [14]. They submitted that the contracts sued upon were of the kind commonly described as "subject to contract". If this fax stood by itself, I think that there would be a good deal to be said for the plaintiff's case, but what the first defendant's solicitors were to send to the plaintiff's solicitors would be no more than a formal agreement, recording the terms earlier agreed upon, or perhaps the contract was one in the so called "fourth category" (see G R Securities). However, when considered together with the circumstances outlined above, I conclude that the exchange of faxes, coupled with the conversations I have recounted, should not be regarded as having created binding contracts. There was just too much still to be worked out. 50 The defendants referred to other matters, as pointing in the same direction, but in the circumstances they do not seem to me to be of real significance. 51 The plaintiff presented an alternative case. It said that in so far as the defendants asserted that they did not intend to bind themselves contractually, or that by reason of the uncertainty of the supposed contracts there were no binding contracts, they engaged in conduct that was misleading or deceptive: in the circumstances they should have disclosed these contentions to the plaintiff. Pressed during the course of the hearing to give particulars of the damage said to have been suffered by reason of this conduct, the plaintiff said that it had lost the commercial opportunity to buy a half interest in the Woolloomooloo restaurant business on the same commercial terms as are set out in the letter of 15 January 2002, but so as to be binding; to obtain the co-operation of the second defendant to the sale of the first defendant's interest in the Woolloomooloo restaurant business; and to take advantage of the second defendant's wish to sell the city restaurant business, when negotiating to buy a half interest in the Woolloomooloo restaurant business. The damages said to be recoverable were to be assessed by reference to the expected profits from and assets of the Woolloomooloo restaurant business. 52 The defendants disputed this claim on various grounds. I consider that it fails at a simple factual level. In the period 15 to 17 January 2002, and thereabouts, the defendants did intend to be contractually bound, and no one considered that the position was otherwise before August 2002. 53 I therefore give judgment for the defendants, and order the plaintiff to pay the defendants' costs. 54 There is one other matter to be considered. On the evidence in this case, Mr Smith might have misled the Family Court of Australia and/or his former wife and/or those representing her. The evidence now does not establish that this is so, but does show cause for concern that it might be so. I consider that if, in proceedings in one court, the evidence shows that it might be that a second court has been misled, or that litigation in the second court has miscarried, in circumstances where evidence given in the first court might be described as strikingly different to and inconsistent with the evidence apparently led in the second court, to the possible disadvantage to a party to the litigation in the second court who is not a party to the proceedings in the first court, and who might not be aware of the evidence given in the first court, the first court ought not to simply do nothing. If the evidence in this case had identified Mr Smith's former wife, or her lawyers, I would have thought it was sufficient to now direct the Registrar to forward a copy of these reasons for judgment to her or to them, but the evidence does not go so far. I therefore direct the Registrar to send a copy of these reasons for judgment to the Family Court of Australia for that court to consider what action, if any, it considers to be appropriate. ***********************

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