Supreme Court of WA|2000-06-02|Before: Hasluck J

Hoylevans Pty Ltd v Weir [2000] WASC 144 (2 June 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HOYLEVANS PTY LTD -v- WEIR [2000] WASC 144

Contract - Parties to contract - Estoppel - Sale of business - Tavern sold subject to restraint of trade clause - Director of vendor company personally bound by estoppel and/or collateral condition - Injunction granted to enforce clause

Grant of injunction to restrain breach of restraint of trade clause

Farrand v Armstrong (1911) 11 SR(NSW) 193

Gophir Diamond Co v Wood [1902] 1 Ch D 950

Hunt v Pascoe (1990) 21 NSWLR 10

Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607

1 HASLUCK J: In these proceedings the plaintiff company, Hoylevans Pty Ltd, seeks an injunction restraining the defendant, John Weir, from carrying on or being engaged in or interested in the business of a tavern and bottle shop within a 10-kilometre radius of the Whitford Tavern, except for the liquor store in the Whitford City Shopping Centre. The claim arises out of an offer to purchase the Whitford Tavern made on 5 March 1997. It will be useful to begin by looking at the circumstances leading up to the making of the offer.

2 For many years, the Whitford Tavern was owned and managed by a Mr Edwards. In 1995, the defendant and another businessman, Lindsay Archer, who were known to each other because of their mutual interest in greyhound racing, decided to purchase the Whitford Tavern. The purchase was effected by a company called K9 Pty Ltd, the company being incorporated for that purpose in or about 13 October 1995. At all material times, the three directors of the company were Mr Weir, Mr Archer and a third person, Mr Michael Abbott, the latter director being resident in Sydney. The business broker handling the transaction was a Mr Ray Pitcher, an employee of a well-known estate agency, Joseph Charles Learmonth Duffy. It is an undisputed fact that as at early 1997 K9 Pty Ltd held the lease of the licensed premises, stock was purchased in the name of the company and the business was owned by the company as a trustee company for family trusts associated with the three directors. As required by the provisions of the Liquor Licensing Act 1988, Mr Weir was nominated as the approved manager of the licensed premises in question. The premises consisted of a tavern and attached bottle shop, with a restaurant being situated within the tavern area.

3 In the meantime, the directors of K9 Pty Ltd had taken steps to establish a liquor store nearby in the Whitford City Shopping Centre, to be known as Whitfords City Cellars. These premises were about 500 metres away from the tavern, with the result that the liquor shop could be regarded as an outlet operating in competition with the tavern's bottle shop. This, of course, was immaterial so long as both outlets formed part of a common ownership. Indeed, Mr Weir, more so than Mr Archer, was conscious of a need to retain the tavern until the liquor store was viable, for, to begin with, the company's income stream was largely sustained by earnings from the tavern. It seems that, unlike Mr Weir, Mr Archer's experience was principally with liquor stores. This meant that not only was he more confident of the liquor store's potential, but also, in due course, he devoted the greater part of his time to managing the liquor store. His office was situated at those premises.

4 Mr Archer said in evidence that after some time, he began to have misgivings about the potential of taverns in general because of the government's decision not to allow poker machines into hotels and taverns. He came to the view over a period of time that the tavern owned by K9 Pty Ltd should be disposed of. He had various discussions with Mr Weir and Mr Abbott about this. According to Mr Weir, he was reluctant to sell the tavern because in his capacity as the approved manager he had worked hard to boost net profits by increasing custom, cutting costs and generally paying more attention to the cash flows of the business. Nonetheless, the upshot of the various discussions was that the three directors of the Whitford Tavern decided to sell the business. Mr Archer proceeded to instruct Mr Pitcher, the business broker he had dealt with at the time the tavern was acquired, to offer the business for sale by private negotiation.

5 Mr Pitcher said in evidence that in dealing with a partnership it was his practice to take instructions from one person. He formed the view at an early stage that Mr Archer was the appropriate point of reference in regard to decisions about the future of the tavern and, to the best of his recollection, it was Mr Archer who approached him with instructions to sell the business. It was Mr Pitcher's practice also to obtain a written authority to sell. He said in evidence that he obtained such an authority on this occasion. The document in question was not produced, but, according to the testimony of Mr Pitcher, the authority was "from Mr Archer and signed by Mr Weir".

6 Mr Pitcher prepared what he called in evidence a "profile" of the business. This included reference to trading details and turnover derived from the financial statements of the previous owner, Mr Edwards. Again, this document was not adduced in evidence and there is, therefore, a degree of ambiguity as to whether the document contained any explicit reference to K9 Pty Ltd as the vendor of the business. Likewise, copies of the financial statements underlying the figures in the "profile" were not adduced in evidence. Thus, it is not entirely clear from the evidence, in the absence of documentation, whether the books of account relating to the Archer, Weir and Abbott period of management were laid out as figures pertaining to business operations conducted by K9 Pty Ltd or to some other body or group of individuals. However, having regard to the uncontested evidence adduced on behalf of the defendant, that the lease of the premises was held by the company, orders for stock were made in its name and outgoings were drawn from a bank account maintained by the company, I pause to say that I am prepared to draw an inference that the books of account in respect of the period subsequent to the acquisition of the business by K9 Pty Ltd showed that the business was being conducted by the company.

7 In due course, Mr Pitcher brought the business to the attention of two prospective purchasers, Mr Chris Hoyle and Mr Glyn Evans, the directors of the plaintiff company in these proceedings. Mr Hoyle and Mr Weir did not have any previous experience in the hospitality industry. Immediately prior to the events giving rise to these proceedings, Mr Hoyle had been the manager of a car yard involved in the selling, financing and insurance of motor vehicles. Mr Evans had worked in sales and marketing positions in a variety of industries. In early 1997, Mr Evans was engaged in selling insurance, as a consequence of which he was in contact with Mr Hoyle as one of his clients. In January of that year, Mr Hoyle mentioned to Mr Evans an idea of his of getting into the tavern business. Mr Hoyle had already been in contact with Mr Pitcher about the Whitford Tavern and was able to show Mr Evans figures relating to the business. It seems that these figures were those appearing in the "profile" and probably related to the three-year period 1992 to 1995 when Mr Edwards was the proprietor of the business. Mr Pitcher had told Mr Hoyle that the present proprietors had decided to sell because they were not getting along with each other and the price being sought for the business was in the order of $1,000,000, plus stock at valuation. Mr Hoyle passed this information on to Mr Evans. Although Mr Hoyle was the first to approach Mr Pitcher, the latter eventually concluded that, of the two men, Mr Evans was the leading figure and the appropriate point of reference should any matters arise for discussion.

8 On a Sunday morning towards the end of February 1997, the prospective purchasers visited the premises with a view to satisfying themselves that the tavern was a good prospect. They had their wives with them. They were shown around the premises by Mr Pitcher and Mr Weir. Mr Archer said in evidence that he was in attendance also. The idea was that the inspection would be completed before the bar staff arrived. The prospective purchasers were told that Mr Archer and Mr Weir were the directors of a company called K9 Pty Ltd which held the licence for the running of the Whitford Tavern. According to Mr Evans, towards 10 am, Mr Weir became noticeably impatient to see the prospective purchasers leave the premises because the arrival of the staff was imminent. Mr Weir also made it clear that he personally was reluctant to sell because he thought it was a good business.

9 A few days later, Mr Evans and Mr Hoyle called on Mr Pitcher. They told him they wanted further information about the business, but Mr Pitcher made it clear that they would have to put in a written offer before their accountant would be permitted to look at the books. Arrangements were made for a written offer to be prepared at a price of $1,000,000, with a provisional figure of $150,000 being placed on stock, but with the offer containing certain safeguards for the purchasers - the offer would be subject to approval of finance and would contain what Mr Pitcher called a "due diligence" clause. This meant that the offer would be made subject to the vendor providing the current accounts and the purchasers and/or their accountant notifying satisfaction with the same within 14 days of receipt of the accounts.

10 I pause to note that the evidence led on behalf of the plaintiff did not suggest that either Mr Evans or Mr Hoyle made any thorough or purposeful inquiry at this stage as to who exactly was the vendor of the business. They simply left it to Mr Pitcher, as agent for the party selling the business, to prepare the appropriate papers. This he did, and, as appears later, the description of the vendor gives rise to one of the matters in dispute.

11 In due course, in accordance with his usual practice, Mr Pitcher drew together the details of his various discussions with the parties to the proposed transaction, as he saw the matter, and arranged for his secretary to type up on a standard printed form approved by the Real Estate Institute of WA (Inc) an agreement to purchase a business. The form makes provision for the prospective purchasers to address an offer to the nominated real estate agent "as agents for the vendor(s)" to the intent that the offer can then be accepted by the party described on the form as "vendor" The printed form allows for a description of the business, details of the price, manner of payment, encumbrances, finance, assignment of lease, settling-in period and any special conditions. Importantly, for present purposes, section E also contains provision for any details concerning "Trade Restraints". The agreement for sale constituted by acceptance of the offer will be "at the price and on the terms set out in the particulars and subject to the conditions and the special conditions." The printed conditions consist of 26 clauses devoted to a range of matters, including deposit, settlement and, by cl 4, "Trade Restraints" and, by cl 5 "finance".

12 The printed conditions concerning trade restraints and finance are of particular importance in the circumstances of the present case and it will, therefore, be useful to set out those clauses in full.

(a) The vendor will not directly or indirectly and whether solely or jointly with or as a director, manager, agent or servant of any person or corporation carry on, or be engaged or interested in, any business of the nature of the business hereby sold, or any significant component thereof, or permit the vendor's name or the names of any of them to be used in connection with such business:

(i) within the area set out in E of the particulars, and

(ii) for the period set out in E of the particulars.

(b) Except to the extent otherwise agreed, the vendor shall not after completion of this agreement during the period referred to in subclause (a)(ii) engage in conduct derogating from the purchasers' right to obtain the full benefit of the goodwill of the business.

(c) The area and period of restraint are acknowledged by the vendor to be no greater than reasonably required to protect the goodwill sold to the purchaser.

(d) The vendor will upon completion deliver to the purchaser a deed whereby the person(s) named in E of the particulars will covenant and if more than one, jointly and severally, with the purchaser, to accept the same restrictions on competition as are accepted by the vendor in clause 4(a) hereof. Such deed will be prepared and tendered by the purchaser to the vendor within a reasonable time before the date of settlement."

13 The printed condition concerning finance also needs to be considered in its entirety. It is in these terms:

This contract is conditional upon the purchaser advising the vendor or his agent in writing of approval of finance on or before the latest date for approval specified in paragraph (f) of the particulars, to a loan of not less than the amount of the loan (if any) stated in paragraph (f) of the particulars, but this contract is deemed to be in force pending the fulfilment of that condition. The purchaser shall make application for the loan not later than seven (7) days after the date of the contract and shall use his best endeavours and so far as is reasonably practicable do all things necessary to obtain the loan. If this condition shall not be fully satisfied within the time appointed then unless the purchaser shall have waived this condition and communicated such waiver in writing to the vendor or his agent, prior to the latest date for approval, then this contract shall be deemed to have come to an end without the necessity for either party giving notice to that effect, whereupon the deposit and all other moneys (if any) paid to the vendor shall be forthwith refunded to the purchaser, and there shall be no further claim under this contract by either the vendor of the purchaser against the other either at law or in equity. This clause shall operate for the benefit of both the vendor and the purchaser."

14 The offer prepared by Mr Pitcher was signed by Mr Hoyle and by Mr Evans on 5 March 1997. In its original typewritten form, the offer to purchase was made by "Christopher Mark Hoyle and Glyn Evans or as proposers of a company yet to be incorporated of 19 Marine Terrace, Sorrento, WA, 6020." The description of the business and assets to be purchased is given as the goodwill of the tavern and bottle shop now carried on by the vendor at Whitford City shopping centre under the name of Whitford Tavern, including the plant, furniture, fixtures, fittings and chattels specified in the schedule, the stock-in-trade of the business and all licences/franchises connected with the premises or business. The gross purchase price was given as $1,150,000, with $800,000 allocated to goodwill, $200,000 to other plant and $150,000 to stock-in-trade (to be adjusted as provided in condition 3).

15 The effect of the typewritten adjustments to the printed form was that the purchase price was to be paid by a deposit of $100,000, of which $1,000 was to be paid forthwith, and $99,000 to be paid 14 days after acceptance. The balance of the purchase price was to be paid on 2 May 1997, with possession on completion of stocktaking on 3 May 1997. Importantly, when one turns to that portion of the form denoted "E" (which is to be read in conjunction with printed condition 4) one finds that the restraint is to be for a period of five years within a radius of 10 kilometres, and with the restrained persons being described as "the directors and family of K9 Pty Ltd". Significantly, that part of the form designated "F", dealing with finance, was left blank, possibly because, as appears below, some reference was made to this aspect of the matter in special conditions. I pause to note, however, that the failure to complete section F of the form, having regard to the terms of condition 5 mentioned above, gives rise to certain difficulties of interpretation. I will return to this point later.

16 Section G concerning the assignment of lease of premises identifies Permanent Trustees as the landlord and specifies an annual rent of $400,000. The date of expiry of the lease is given as 18 December 2001, with various options thereafter. In section H, the settling-in period is given as 30 trading days after date of possession. In section I, one finds that the special conditions are to be in accordance with annexure A and B attached.

17 It is apparent from the form that Mr Hoyle and Mr Evans signed the offer in the presence as Mr Pitcher as witness on 5 March 1997. The section of the form allowed for acceptance of the offer by the vendor was filled out to read as follows, the final description being a combination of typewritten and printed words:

"I/We the directors of K9 Pty Ltd ACN: 071 445 700 of suite 31/163 Canning Highway, East Fremantle ('the vendor') hereby accepts the above offer and acknowledges that the selling fee payable to the vendor's agent is my/our responsibility."

18 Beneath that description appears a dotted line opposite the word "vendor" with provision in an immediately adjoining space for the signature of the witness. This is replicated immediately below to cover circumstances where there are two vendors. I will return to the circumstances in which signatures were added to this portion of the form later, but, for the moment, it will be useful to note that, in the area of the form just mentioned, Mr Archer eventually placed his signature on the dotted line, directly opposite the word "vendor" and Mr Weir did the same in the space below. In each case, Mr Pitcher was the witness to these signatures. The imprint of the common seal of K9 Pty Ltd appears opposite the signatures. It is a matter in controversy between the parties as to whether Mr Archer and Mr Weir purported to sign the printed form as vendor - with the result that they might be arguably bound to the contract as vendors - or whether they signed the form on the basis that they were simply acting as directors for and on behalf of K9 Pty Ltd as the true vendor. I will return to this aspect of the matter in due course.

19 When one turns to the special conditions, the separate sheet of paper comprising annexure A commences:

K9 Pty Ltd ACN 071 445 700 as trustee for the LJM Unit Trust."

20 Various unnumbered clauses are then set out, commencing with the so-called "due diligence" clause mentioned earlier, a requirement to supply a list of plant and equipment, warranties as to the good order of the equipment, an acknowledgment by "the vendor" of its responsibility for all wages to the date of settlement, an obligation upon the "vendor" to provide copies of the relevant lease documents (with the offer being made subject to the assignment of the existing lease), provision for transfer of the tavern licence, a provision as to confidentiality and compliance with all outstanding orders or requisitions, the vendor to provide vendor finance for stock for a 180-day period from settlement on the basis that the sum in question should be interest-free. Finally, by the last clause of the annexure, the agreement is said to be "subject to acceptable finance being arranged by the purchaser." For ease of reference, I will call this document, as it was when signed by Mr Evans and Mr Hoyle, "the original offer".

21 I digress briefly to note that Mr Evans said in evidence that both the due diligence clause and the trade restraint clause were of considerable importance to the purchasers, especially the latter because $800,000 of the purchase price was being allocated to goodwill. He said that he took particular note of the fact that the former clause was to operate for a period of five years and embraced a radius of 10 kilometres. By that time, as a consequence of the Sunday morning inspection, it seems, he understood that Mr Weir and Mr Archer had other interests in the liquor industry and it was, therefore, important that the possibility of competition be removed for a reasonable period.

22 The original offer purports to have been signed by Mr Archer and Mr Weir, and thus accepted by "the vendor", on 5 March 1997. Mr Archer did not make any contention to the contrary, but was uncertain as to when and in what circumstances the company seal of K9 Pty Ltd was affixed to the document in proximity to the signatures of the two directors. Mr Weir said in evidence that he could not precisely recall when he first saw the document comprising the original offer, but thought it was in his office at the Whitford Tavern. It was presented to him by either Mr Archer or Mr Pitcher.

23 According to Mr Weir, it was his habit to pay particular attention to the fine print of such a document. He read the provisions containing the trade restraint clause, which, at that time, consisted of the typewritten details in par E (to be read in conjunction with printed condition 4 quoted above), the effect of which, on its face, was to restrain "the directors and family of K9 Pty Ltd" for a period of five years within a 10-kilometre radius from engaging in any business in the nature of the business being sold. He said in evidence that he was concerned by this and, according to him, he then telephoned Mr Evans to discuss the matter.

24 His account of the relevant telephone conversation is set out in his written statement (received in evidence as an exhibit pursuant to the relevant practice direction of the Supreme Court Rules) in these terms:

"I told him that I had an interest in the Whitfords City Cellars which was 500 yards from the tavern. From his words I understood that he already knew that. I also told him that I had an interest in the Ballajura Tavern which, at that time, I thought was within the 10 km radius. I subsequently learned that Ballajura Tavern is not inside the 10 km radius. At the time of my conversation I thought that it could have been affected by clause E. I told Evans that I was not going to sign this document if the restraint of trade clause was going to be an issue. I told him that he might as well forget about presenting the deed of restraint which was mentioned in the fine print to me because I definitely was not going to sign it. Evans told me that the restraint of trade clause was not an issue, he said he was not concerned about it.

I have the recollection that Evans and Hoyle had been through the tavern to inspect it a couple of time by the time the offer was presented. They had inspected the tavern many times before settlement. One thing that I am sure of is that at the time the offer was presented I knew Evans and I knew that he was the one to speak to about the offer. I said words to the effect to Evans that 'Don't even bother sending the deed of restraint of trade because I'm not going to sign it. If that's going to affect the deal then we won't proceed any further and I won't sign the agreement.' Evans said words to the effect 'The restraint of trade isn't an issue.' I think he may have said 'Don't worry about it'."

25 Mr Weir's evidence-in-chief and cross-examination had the effect of bringing out some additional points for consideration concerning the above matter. When asked in cross-examination why he did not simply insist that par E and condition 4 be crossed out if he were so concerned about its possible effect on his other existing or future interests he said that this was not really open to him because, as both Mr Archer and the third director, Mr Abbott, had decided to sell, they could effect the sale in any event without reference to him. He agreed that he did not speak to Mr Pitcher or to Mr Archer about his concern or about the trade restraint clause. He agreed that after the telephone conversation, and as a consequence of his discussion with Mr Evans, he did in fact sign the original offer in its typewritten form, subject only to initialling a small amendment to the penultimate clause of the annexure the effect of which was to reduce the 180-day period for the provision of finance for stock to 90 days. He then returned the form to Mr Pitcher.

26 Mr Weir was adamant in his evidence that he did not place the company seal of K9 Pty Ltd on the form and that the seal was not on the form when he signed. The tenor of his evidence was that the form had been signed by Mr Archer at the time he signed. He presumed that the common seal, as it now appears on the stamped copy of the agreement, must have been affixed to the form by Mr Archer. It follows from the above, that, even on the defendant's case, an issue arises as to whether something was said in the telephone conversation between Mr Weir and Mr Evans which had some bearing upon the application of the trade restraint clause to the transaction.

27 Mr Hoyle and Mr Evans made no reference in their written statements to any such conversation with Mr Weir about the application of the trade restraint clause prior to the offer being accepted. Their evidence-in-chief, and their written statements, were to the effect that, after signing the offer on 5 March 1997, they were subsequently informed that the offer had been accepted. This led to another meeting at the premises arranged so that their accountant could inspect the books of account in the manner contemplated by the due diligence clause. I will come to this meeting in a moment. However, before leaving the issue raised by Mr Weir's telephone conversation, I pause to note that when Mr Weir's evidence on this point was put to Mr Evans for comment in the course of Mr Evans' cross-examination, he confirmed that such a call did take place. He was uncertain as to whether this occurred before he had signed the offer, and nor could he recall exactly whether mention was made of a deed of the kind contemplated by condition 4. His recollection was that, at some stage, Mr Weir, as a personal matter, raised a concern about having an interest in the liquor store known as Whitfords City Cellars and about another interest in Ballajura Tavern. Mr Evans' recollection was that, at all stages of the negotiations, his stance on behalf of Mr Hoyle and himself was that they were not concerned about the Ballajura Tavern (because Mr Evans had little doubt that it lay outside the prescribed radius) and nor were they concerned about the Whitfords City Cellars, because this liquor shop was a going concern. They were, therefore, able to take account of its impact, if any, upon the Whitford Tavern before making their decision to buy. To the best of his recollection, he put this view to Mr Weir during the telephone call in question and this appeared to satisfy Mr Weir.

28 Throughout the hearing both plaintiffs disputed any suggestion that they had ever agreed to waive the trade restraint clause or to allow it to be regarded as a dead letter. As far as they were concerned, the contract and the surrounding discussions had made it perfectly clear that the people they had been dealing with, Mr Archer and Mr Weir, were not at liberty to compete with the purchasers for a prescribed time, within a prescribed radius. Both plaintiffs agreed that they did not prepare and send to the vendor a deed of the kind contemplated by condition 4 with a view to underpinning the trade restraint clause. Mr Evans said that he left the necessary paperwork to Mr Pitcher and simply presumed that whatever was thought necessary to carry into effect the agreement made between the parties had been attended to. I pause to note that, in the manner allowed for by the printed form, the purchasers had nominated a "conveyancer", namely, MAS Ronson Settlements, to act on their behalf at settlement, but the purchasers were not, at any time, represented by solicitors. Certainly, it was an undisputed fact that no deed was ever executed by the parties.

29 It was common ground at the trial that as from 5 March 1997 or very shortly afterwards all those with an interest in the transaction, including the agent Mr Pitcher, presumed that a binding contract was in existence, albeit subject to the due diligence clause and approval of finance. The purchasers paid the initial deposit of $1,000, but thereafter the parties, and Mr Pitcher, seemed to assume that the balance of the deposit, namely, the sum of $99,0000, did not have to be paid unless the purchasers were able to obtain finance. Certainly, it was never, in fact, paid save to the extent that it was included in the overall balance paid by the purchasers eventually upon settlement.

30 Against this background, Mr Evans and Mr Hoyle attended at the Whitford Tavern with their accountant, Mr Cummings, a few days after 5 March 1997, with a view to inspecting the books in the manner allowed for by the due diligence clause. They say that this visit to the premises occurred on a Tuesday evening. Mr Cummings went through the books with the K9 Pty Ltd bookkeeper, Sandra Wolson-Crofts. Mr Cummings was satisfied with the books, as were the purchasers, although by now the purchasers were apparently aware that the business might be thought to be slightly over-priced. Nonetheless, they were determined to proceed.

31 Mr Evans said in his written statement that, towards the end of their visit to the premises on the evening in question, Mr Weir mentioned that he had an interest in the Ballajura Tavern and also in a pub or nightclub in Northbridge. He also referred to the fact that he owned a share in the liquor store in the Whitford City Shopping Centre, this being something that had been previously mentioned to the purchasers by Mr Pitcher. Although, as already indicated, Mr Evans was prepared to concede that this matter may have been first raised in the telephone call made by Mr Weir mentioned earlier, the tenor of his evidence was that it was on this Tuesday evening, to the best of his recollection, that the matter was specifically addressed. In dealing with it, he spoke on behalf of Mr Hoyle and himself in saying that the purchasers had no objection to Mr Weir holding interests of the kind he had referred to. Mr Evans' thought was that the Ballajura Tavern was outside the prescribed radius and the liquor store was an established business that they had already been informed about. The purchasers did not see these particular interests as being objectionable because they were not truly competitive outlets.

32 According to Mr Evans, the purchasers made it plain on the Tuesday evening that, subject to exceptions concerning Ballajura and the liquor store, the trade restraint clause was to apply. Mr Weir did not say or do anything to suggest that the clause was not still operative as a consequence of their discussion on that evening. Mr Evans said in evidence that he recalled Mr Hoyle saying something to the effect that the purchasers were the new kids on the block, without any experience running pubs, whereas the vendors had a lot of experience in the business and the purchasers would certainly not want the vendors to go into a competitive business in close proximity after selling the Whitford Tavern. Mr Hoyle gave evidence to a similar effect. He said that when the point just mentioned was raised, Mr Weir nodded.

33 The purchasers were unable to obtain finance because the lending institutions they approached seemed to think that the agreed price was too high. Nonetheless, they were still keen to proceed and acquainted Mr Pitcher with their dilemma. It does not seem to have been suggested by anyone at that time that the contract between the parties had come to an end or that the purchasers were in default in not having paid the balance of the deposit or in having failed to take any prescribed step. Rather, a meeting was arranged at a coffee shop near the liquor store to talk about alternatives.

34 The meeting was attended by Mr Pitcher and Mr Archer on behalf of the vendor (or vendors) and by Mr Evans and by Mr Hoyle as the purchasers. It seems that, at this meeting, the terms of the agreement were renegotiated. Mr Archer agreed that the price should be reduced to $1,000,000, of which $650,000 would now be allocated to goodwill. He also asked that the original offer be amended to exempt specifically the Whitfords City Cellars liquor store from the operation of the trade restraint clause. In the context of these discussions, the purchasers asked for a right of first refusal to purchase the liquor store if it was ever put up for sale and this was agreed to by Mr Archer.

35 At some time after this discussion, and certainly many weeks after 5 March 1997, various amendments were made to the original offer, most of which are consistent with the discussions at the coffee shop just mentioned, a factor which strongly suggests that these amendments arose from a renegotiation of the contract. I pause to note that Mr Weir was not directly involved in these negotiations. He said he knew little of what was happening and, in any event, given the determination of his fellow directors, Mr Archer and Mr Abbott, to sell, any objection he raised could have been overruled. It seemed to him that his further participation in the transaction had become superfluous. Balanced against this evidence, however, is the testimony of Mr Archer that he kept Mr Weir informed. I also take account of various other indications that Mr Weir was likely to have kept himself informed of what was going on, including his own account, mentioned earlier, of his habits and of his keen interest in the future of the business. I am, therefore, able to find that, when Mr Archer participated in the renegotiation of the contract just mentioned, he was doing so with the approval, and consistently with the wishes, of his fellow directors, and was authorised to speak on behalf of K9 Pty Ltd. This is not to say, however, that he was authorised to speak on behalf of Mr Weir, viewed not as a director, but simply as an individual with various business interests. I accept that Mr Weir did not sign or place his initials upon the revision of the original offer. The only occasion on which he initialled the relevant document was that described earlier when the period of 180 days concerning the financing of stock was reduced to 90 days.

36 Against this background, I find as a fact that various written amendments were made to the original offer after the coffee shop discussion and at some time between 5 March 1997 and 2 May 1997, the latter date being a handwritten date that was placed upon the printed form in proximity to the reduction of the typed figure of $1,150,000 to the adjusted price of $1,000,000. These amendments were initialled by the parties, other than Mr Weir. It follows from earlier discussion that I also find that the various amendments, which I am about to describe in detail, were made with the approval of the directors of K9 Pty Ltd through the agency of Mr Archer as a director acting on behalf of the company.

37 The relevant amendments were as follows. In par B the gross purchase price was changed to $1,000,000, with the date "2nd May 1997" appearing immediately above the change. The typewritten words "14 days after acceptance" were deleted and in their place was substituted the phrase "on finance approval by May 9th". Provision was made for the balance of the purchase price to be paid on 6 June 1997, with possession on completion of stocktaking on the same date. Importantly, in par E, the typewritten description of restrained persons "the directors and family of K9 Pty Ltd" is now qualified by the handwritten phrase "the liquor store in Whitford City Shopping Centre is exempt from above clause." The common seal of K9 Pty Ltd was also affixed to the first page of the form in two places in proximity to the above amendments. There was some controversy at the hearing as to whether the common seal on the second page of the form, close to where the vendors were to sign, was also affixed when the amendments were made. However, on balance, as I have already noted, I incline to the view, and so find, that it was affixed to the document on or about 5 March 1997 when Mr Archer signed the original offer.

38 When one turns to annexure A various amendments are visible on the form the details of which are as follows. The first paragraph of the annexure, concerning the due diligence obligation, is scored through. The fifth paragraph of the annexure, concerning the provision of lease documents, is also scored through. A penultimate paragraph has been added in handwriting as follows:

"The purchaser wants first right of refusal if the Whitfords City Cellars ever comes up for sale."

39 The final paragraph of the annexure has been partly amended in hand to read:

"Subject to acceptable finance being arranged by the purchasers. By May 9th."

40 I note in passing, that the printed form was also amended, mid-page, to include a provision to the effect that the purchasers' nominee was to be "Hoylevans Pty Ltd" and this was signed for by Mr Evans. The evidence is clear that this amendment was made at a later stage, after the amendments I have just discussed, and no issue has been raised on the pleadings as to whether the introduction of such a nominee had any bearing upon the contractual rights of the parties. Accordingly, I will put that aspect of the matter entirely to one side. For ease of reference, I will henceforth refer to the agreement constituted by the offer and acceptance in its amended form, such amendments, save for the reference to Hoylevans Pty Ltd, having been effected in the manner I have alluded to on or about 2 May 1997, but certainly before that date, as "the amended offer".

41 The amended offer required that the purchasers or their nominee company pay the reduced price of $1,000,000 by 6 June 1997, this being the prescribed settlement date. It seems that the purchasers took the necessary steps to have their nominee company, Hoylevans Pty Ltd incorporated - such company being the plaintiff in these proceedings - and finalised arrangements whereby finance of $1.25 million was obtained through a mortgage broker, Graeme Grubb. Of this amount, $250,000 was needed to pay off the purchasers' existing mortgages and the balance, being secured by a fresh mortgage, was used to purchase the business including stock.

42 In the event, as I have already indicated, it seems that the purchasers' nominee company was not incorporated until after the prescribed settlement date. Certainly, settlement was not effected until early August 1997, but this was clearly consistent with the mutual wishes of the parties. There was no suggestion that either party took any step to bring the contract to an end for lack of compliance with the prescribed time limits. Mr Archer said in evidence that the proceeds of the sale were paid into a bank account under the control of K9 Pty Ltd on the basis that these were funds due to the company in its capacity as vendor of the business. Arrangements had been made before settlement for Mr Weir to stay on to assist the incoming proprietors for a period, but in the event he remained for a few days only. According to him, managerial decisions were taken by the new proprietors that made his position untenable. This was disputed by Mr Evans. He alleged that Mr Weir simply absented himself from the premises without any adequate explanation.

43 Mr Evans and Mr Hoyle contended that at no time prior to settlement were they told that Mr Weir, or indeed any of the directors of K9 Pty Ltd, did not regard themselves as bound by the trade restraint clause, or regarded themselves as free to set up in competition to the Whitford Tavern in a manner inconsistent with the restraint clause. Both men said further that if they had been informed that the restraints were not thought to be applicable, they would not have been prepared to go along with the deal and pay $650,000 for goodwill. Apart from his testimony concerning his telephone call to Mr Evans prior to signing the original offer, Mr Weir did not lead or rely on any evidence to the contrary in regard to this aspect of the matter. Put shortly, apart from the telephone call just mentioned, there was no evidence brought before me to suggest that the directors of K9 Pty Ltd did not regard themselves as bound by the restrictions set out in both the original offer and the amended offer, which restrictions purported to apply to "the directors and family of K9 Pty Ltd". There was certainly no evidence to that effect in respect of the period between renegotiation of the contract in the coffee lounge and settlement. It is significant that no attempt was made to delete the restraint clause during the renegotiation of the contract. The clause was simply amended, which strongly suggests that the clause was intended to remain in force. It remains a live issue, however, as to whether the nature of the contract made between the parties and/or surrounding circumstances were sufficient to impose a binding obligation upon Mr Weir in law or in equity to observe the restraints.

44 The plaintiff by its witnesses then referred to an incident that took place nearly 12 months after settlement. According to Mr Evans, on a Wednesday morning in July 1998 at about 10 am, Mr Weir came out to the Whitford Tavern. He informed Mr Evans that he intended to take over the Beldon Tavern, which was only three kilometres distant. He was told by Mr Evans that he could not do this because there was a trade restraint clause in operation, but Mr Weir took no notice of that assertion.

45 Mr Weir disputed this version of the relevant events. He said that about 12 months after the sale of the Whitford Tavern, as a result of some discussions with Tony Forte, the owner of the Beldon Tavern, he decided to become involved in the purchase of the Beldon Tavern to the intent that he would be the manager, whether he owned or was interested in it or not. He heard that Mr Evans and Mr Hoyle intended to hold him to the trade restraint clause, so he arranged a meeting at the Whitford Tavern to discuss the issue. According to him, he told Mr Evans that he was not restrained and Mr Evans knew it. According to Mr Weir's written statement (at par 25 and 26):

"25. I was referring back to our early conversation on the telephone that I had had when I originally signed the Agreement to Purchase a Business document. I told him that I had not signed a Deed of Restraint and that I had already told him that I would not be bound by the clause of the Agreement. I told him to produce the Deed of Restraint. He did not say anything in response.

26. At that meeting EVANS said that he would have a talk to his lawyer and would get back to me. He never got back to me face-to-face or on the phone. I did receive a letter from him some weeks, if not a month or so later."

46 Mr Weir's further evidence, both in-chief and under cross-examination, was generally consistent with this statement. It is significant that he pointed to no facts or matters other than the telephone call or the absence of a deed as a basis for his stance. I note in passing that in the course of his testimony at the trial Mr Weir conceded that he had made verbal arrangements with Mr Forte whereby he could acquire an interest in the Beldon Tavern at market value.

47 The parties filed and served various affidavits early on in these proceedings, bearing upon the question of whether an interim injunction should be granted to the plaintiff. These affidavits and the various annexures were subsequently received as exhibits at the trial. They become a convenient point of reference in seeking to understand the difference of opinion concerning the Beldon Tavern.

48 In an affidavit sworn by Mr Weir on 19 November 1998, Mr Weir said this:

"8. When the Contract was presented to me for signing I read it and noticed that it contained a trade restraint clause. Before I witnessed the affixing of the Common Seal to the Contract I rang Glyn Wyndham Evans and told him that I had read the Contract and that I would not sign any deed that restrained me personally because of my involvement in the Whitford Liquor Store and my involvement in the Ballajura Tavern, which at the time I mistakenly thought was within a 10 kilometre radius of the Whitford Tavern. He told me in that call words to the effect that he was not too concerned about it. I was adamant in that call that I would not sign any such deed of personal restraint."

"9. I have no proprietary interest, right or title in the Beldon Tavern or the company that owns the Beldon Tavern.

10. The settlement of the sale under the Contract took place in or about August 1997. I had been the manager of the Whitfords Tavern and after settlement I was essentially unemployed. I did not however have to work as I was able to support myself from savings. I then had and continue to have net assets in excess of $1 million. I had separated from my wife and I decided to travel to England. In fact I went to England 3 times. On my return to Perth after my third trip on 1 May 1998 I looked for something to keep me busy. An opportunity came up to purchase the Beldon Tavern. At the time the opportunity arose I did not want to commence any business venture because of my concern that if it was successful my wife may claim an interest therein in any property settlement under the Family Law Act.

11. I agreed however with the present proprietor of the Beldon Tavern that if he purchased that Tavern I would manage it for him.

12. I refer to paragraph 7 of Glyn's affidavit and agree that I visited him in about June or early July 1998 and advised him that I would be 'running the Beldon Tavern'. I agree that I would not acknowledge that I was bound by the trade restraint clause. ..."

50 The events just described were accompanied by correspondence between the parties. By letter dated 31 August 1998, the plaintiff company, on its own behalf and by its solicitors, Kott Gunning, confirmed its objection to Mr Weir acquiring an interest in or having any involvement in the running of the Beldon Tavern. Mr Weir, by his solicitors, Corser & Corser, contested the point in a letter to Kott Gunning dated 5 November 1998. It was common ground in these exchanges and at the hearing that Beldon Tavern did lie within a radius of five kilometres from the Whitford Tavern. The letter from Corser & Corser to Kott Gunning included this passage:

"We understand there are various versions of the Contract and accordingly we should be pleased if you would forward to us a fully executed and stamped copy of the Contract upon which your client relies. Our client did not sign any Contract relating to the sale of the Whitford Tavern other than as a witness to the affixing of the Common Seal of K9 Pty Ltd, and in relation to some amendments not at all. Suffice it to say that the written document that your client now appears to base its claim upon provides that your client was to deliver to the vendor a Deed to be executed that would restrain our client as alleged. We are instructed that it did not do so - our client signed no such Deed. Accordingly, liability is denied and the undertaking sought by you will not be provided by our client."

51 Related materials establish that in July 1998 an application was made under the Liquor Licensing Act to have Mr Weir approved as the manager of the Beldon Tavern. The plaintiff company objected to this and placed some reliance upon the amended offer. On 30 September 1998, the Deputy Director of Liquor Licensing determined that Mr Weir was a fit and proper person and approved him to manage the Beldon Tavern. The Deputy Director addressed the point raised by Mr Evans and Mr Hoyle, but concluded that the trade restraint clause in the contract in issue in these proceedings should be disregarded by him, as the matter in issue was a civil dispute that lay beyond his jurisdiction. During the course of the hearing Mr Evans handed to the Deputy Director the version of the original offer now identified as exhibit B, which does not bear the common seal of K9 Pty Ltd or, on the first page, the amended date "2nd May 1997". This copy of the contract document eventually found its way to the solicitor representing Mr Weir, namely, Mr Kavenagh. It is, therefore, not surprising that the subsequent exchange of correspondence mentioned earlier, refers to several versions of the contract. I again affirm, with a view to avoiding any confusion, that on my finding the contract between the parties is evidenced by the document I have described as the amended offer.

52 In support of the plaintiff's application for a interim injunction, Mr Evans swore three affidavits on 4 November 1998, 1 December 1998 and 23 December 1998. The contents of these affidavits are generally consistent with the evidence he gave at the hearing. In those affidavits and at the hearing, Mr Evans alleged that since Mr Weir commenced his association with the Beldon Tavern, after approval of the transfer of the relevant licence on 30 September 1998, he has been actively engaged in encouraging patrons of the Whitford Tavern to patronise the Beldon Tavern and there has been a noticeable deterioration in the number of patrons frequenting the Whitford Tavern and in the plaintiff's trade at the Whitford Tavern. Mr Evans also referred to an occasion on a Friday night in November 1998, when his bar was empty. He then visited the Beldon Tavern and found some of his customers in that bar. In the absence of any acknowledgment of liability, the plaintiff company commenced proceedings for an injunction in December 1998. The plaintiff, by its witnesses, has not sought or been able to demonstrate any specific financial loss. Accordingly, although its claim for relief on the pleadings included a claim for damages, the plaintiff conveyed to me by counsel that this is a claim for nominal damages only and the plaintiff essentially seeks relief by way of injunction; that is to say, an injunction restraining the defendant from engaging in conduct derogating from the plaintiff's right to obtain the full benefit of the goodwill of the Whitford Tavern.

53 By its statement of claim, the plaintiff contends that the effect of the various negotiations was to bring into existence a contract in writing between "the plaintiff as purchaser and K9 Pty Ltd and its directors as vendor" (emphasis added) dated 5 March 1997 for the purchase of the Whitford Tavern "in consideration of payment of the sum of $1,000,000 to K9 Pty Ltd." The claim includes reference to the trade restraint clause and asserts that the persons restrained are defined in the contract as being "the directors and family of K9 Pty Ltd." Mr Weir's involvement with the Beldon Tavern is said to constitute a breach of the relevant clause, with the result that the plaintiff is entitled to relief.

54 In essence, then, the plaintiff contends that Mr Weir is a party to the contract, and is, therefore, bound by the same, because, in signing the contract, he signed both as an individual undertaking a personal responsibility, and as a director of K9 Pty Ltd, with the result, as pleaded, that the vendor was both K9 Pty Ltd and the individuals who are the directors of that company. On that view of the matter, a deed of the kind contemplated by condition 4 would be superfluous, for if Mr Weir is truly to be regarded as one of the vendors, or at least a party obliged to effect a conveyance of title, then, independently of any obligation to be created by the deed, he is bound by the explicit language of par E and the opening words of condition 4, not to be engaged or interested in any business of the nature sold.

55 The defendant pleaded in answer to this line of argument that the operative agreement was made 2 May 1997. The defendant goes on to say that he was not a party to the agreement formed on or about 5 March 1997 or the agreement formed on or about 2 May 1997.

56 It became clear during the course of argument that it will be necessary for me to determine who exactly were the parties to the original offer. I will then have to determine whether the agreement constituted by acceptance of the original offer was brought to an end by the operation of condition 5, whereby the contract is deemed to have come to an end if the condition as to finance is not satisfied within the prescribed time, with the result that the amended offer dated 2 May 1997 should be characterised as a second and discrete transaction, being the transaction which ultimately effected the sale of the business. If it were to be regarded as a separate transaction, counsel for the defendant submitted, then Mr Weir was not bound because the only party to that transaction was K9 Pty Ltd and, further, and in any event, Mr Weir had not signed or initialled the second contract or authorised the company or any of his fellow directors to sign or ratify the contract on his behalf. He was not involved in the negotiations at the coffee shop and did not authorise Mr Archer or anyone else to speak on his behalf.

57 The decided cases suggest that, in order to make out its plea that the defendant was a party to the contract, the plaintiff must establish that Mr Weir signed the document in his personal capacity. This involves an investigation by the court as to whether he signed the document with the intention that he was to be personally bound or whether, in the circumstances, such an intention should be imputed to him: National Commercial Banking Corporation of Australia Ltd v Cheung (1983) 1 ACLC 1326; Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLCR 909; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWR 160; Deeks v Little Moreton Trading Pty Ltd (1995) 14 WAR 58; James Thane Pty Ltd v Conrad International Hotels Corp (1999) QCA 516; Pawley & Ors v Kraus & Anor, unreported; SCt of WA; Library No 970629; 30 October 1997. In Placer Development Ltd v Commonwealth [1969] HCA 29; (1969) 121 CLR 353 the High Court indicated that whether there has been a voluntary assumption of a legally enforceable contractual duty in a particular case is not to be decided by asking whether or not the parties had expressed or exhibited an actual and positive intention that their agreement was to result in legal obligations. It is an inference to be drawn objectively.

58 In the circumstances of the present case, I am unable to make a finding of the kind sought in favour of the plaintiff. The business known as the Whitford Tavern was clearly being conducted by K9 Pty Ltd at all material times prior to the sale and the evidence is clear that the revenue and outgoings of the business were being handled accordingly. The purchase price was eventually received by and on behalf of the company. Mr Pitcher understood that his authority to sell and instructions came from the company and he prepared the original offer accordingly.

59 The prospective purchasers left it to the business broker to prepare the necessary paperwork and did not ask any question or obtain any answer adduced in evidence suggesting that Mr Weir saw himself as being personally bound to convey the assets comprising the business to them. The crucial words placed on the printed form under Mr Pitcher's direction being, in effect, that the directors of K9 Pty Ltd accepted the offer, arguably contained some degree of ambiguity as to the identity of the party to be bound, but against the background I have described, the proper interpretation of the words is, in my view, that the offer was to be accepted by the company on the basis that the directors were the instrument of its corporate will, and the weight of the evidence establishes that Mr Weir placed his signature on the printed form upon that basis.

60 The surrounding circumstances do not suggest that any other intention should be imputed to Mr Weir. He, himself, was reluctant to sell, but was eventually persuaded to a contrary view by his fellow directors. This part of the evidence is consistent with the notion that, in signing the document, he saw himself as forming part of a consensus that had evolved after a period of debate, such consensus representing the vendor's corporate will. I also take account of the fact that the annexure to the original offer clearly stated that the contract was "between" Mr Hoyle and Mr Evans "and K9 Pty Ltd". Further, I take account of the fact that the words in part E of the form would be superfluous and unnecessary if the directors had directly bound themselves to observe the restraint clause as vendors. See Pawley & Ors v Kraus & Anor (supra). This finding, that the company K9 Pty Ltd should be characterised as the vendor, or, putting it another way, was the only party to the contract on the vendor's side, governs my approach to a number of related issues arising from the pleadings.

61 In particular, it follows from the finding that the only party on the vendor's side was the corporate personality, K9 Pty Ltd, that it was open to Mr Archer to conduct the negotiations at the coffee shop for and on behalf of the company and to initial the consequential amendments to the original offer. I find that he did so with the approval of his fellow directors. It is immaterial that Mr Weir did not personally initial the amendments. The pleadings do not raise any issue as to the regularity of the company's internal procedures, including use of the company seal. Further, in any event, as the contract was eventually carried into effect by settlement, it appears that the parties were prepared to waive any issue or lack of compliance in that regard. This analysis reinforces my earlier view that the vendor was simply K9 Pty Ltd, rather than K9 Pty Ltd and its directors, and that there was a general acceptance of the plaintiff's role as purchaser, notwithstanding that the plaintiff company was not incorporated until after the amended offer was finalised. The case was fought on the basis that the plaintiff company was at liberty to rely upon and seek to enforce representations made to and negotiations undertaken by Mr Hoyle and Mr Evans on behalf of their nominee company, and the pleadings filed by the parties are consistent with this view of the matter.

62 I must now turn to the question of whether the contract made by K9 Pty Ltd to sell the business to Mr Hoyle and Mr Evans or their corporate nominee constituted by the original offer came to an end owing to the inability of the purchaser to obtain finance. Here, as I have already noticed, counsel for the defendant placed considerable reliance on the express terms of condition 5. The language of this part of the printed form was said to reverse, or at least modify, the position at common law whereby a contract made subject to finance is thought to contain a condition included for the benefit of the purchaser, with the result that if the finance be not obtained, the contract is thought to be voidable at the option of the purchaser or otherwise at the option of the party not in default. In such a case, if no decisive step is taken to terminate the contract, then it will be treated as continuing in force: Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418; Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418. Counsel also placed reliance on allegations forming part of the evidence that the purchasers spoke of the contract as being a "dead duck" after the initial applications for finance had failed.

63 I am not persuaded to this view. It is apparent from the original offer that part F of the original offer was not completed, with the result that details and time limits of the kind required to trigger condition 5 formed no part of the contract. The reference to finance in the final paragraph of the annexure to the contract, at least, as that paragraph stood immediately after the original offer was made and accepted - "subject to acceptable finance being arranged by the purchaser" - was not sufficient to repair the deficiency. I therefore hold that when the initial applications for finance proved unsuccessful, the position at common law applied, as I have summarised it earlier, with the result that, absent any decisive step on either side to bring the contract to an end, the contract remained in force and the rights of the parties should be viewed as being in abeyance pending further negotiations. The further negotiations that then occurred, principally undertaken at the meeting in the coffee shop, led not to the making of a new and discrete, or second, contract dated 2 May 1997 as contended for by the defendant, but simply to a variation of the existing contract. See Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 at 144. There was one contract only, albeit varied, with the vendor throughout, being K9 Pty Ltd, for the reasons I have previously given. Mr Archer effected the variation on behalf of the company with the consent of his fellow directors. This is corroborated by the fact that Mr Weir never raised any objection to what had occurred and allowed the sale to proceed to settlement, albeit at a price less than the figure appearing on the original offer.

64 This brings me to the question of whether the contract in its final written form (which I have previously called the amended offer), or the surrounding circumstances, imposed any personal obligation upon Mr Weir concerning the restraint clause.

65 At first sight, against the background of the findings I have made, thus far, it would appear that Mr Weir is not bound by the trade restraint clause. On my findings, he was not a party to the contract for sale of the business and, therefore, was not affected by the undertaking given by the vendor company, K9 Pty Ltd, reflected in part E and condition 4, not to be engaged in or interested in any business of the same nature as the business sold. It is for this very reason, presumably, that provision is made by condition 4, subpar (d) for the purchaser to tender to the vendor a deed of restraint whereby the individual or individuals named in part E of the printed form - in this case "the directors and family of K9 Pty Ltd" - covenant to accept the same restrictions as are accepted by the vendor, to the intent that the vendor will deliver an executed copy of the deed to the purchaser on settlement. In that way, individuals on the vendor's side with a capacity to subvert the sale of goodwill, because of their familiarity with the vendor's business, will be brought into a direct contractual relationship with the purchaser and be bound by any agreed restrictions. It is apparent from the narrative, however, that in the present case no such deed was prepared or delivered upon completion in the manner contemplated by condition 4.

66 Nevertheless, the plaintiff, by its statement of claim, raises a number of pleas in the alternative. First, the plaintiff says that if the defendant is held not to be a party to the contract (as indeed I have held), the defendant is allegedly estopped by conduct on his part from denying that he is bound by the trade restraint clause. Particulars of the conduct relied on in support of this plea include reference to Mr Weir placing his signature on the original offer opposite the word "vendor", the request made by Mr Weir and the other directors to Mr Evans, on behalf of the plaintiff, to agree that the trade restraint clause be modified so as to exempt the liquor store in the Whitford City Shopping Centre, the plaintiff's agreement to the request, and the subsequent amendment of the original offer to effect the agreed exemption. The plaintiff also refers to the personal element in the goodwill being, to the knowledge of the plaintiff and the defendant, applicable to the defendant and not to the other directors of K9 Pty Ltd who had no involvement on a day-to-day basis in the Whitford Tavern. Further, it is pleaded that the plaintiff, to the knowledge of the defendant, acted to its detriment upon the express and implied representations of the defendant to the plaintiff that he would be bound by the restraint of trade clause in that the plaintiff entered into and proceeded with the contract and went to settlement, paying out the sum of $650,000 to K9 Pty Ltd for goodwill, together with other payments for other aspects of the business. It is also said that the defendant, by his actions, created a false belief on the part of the plaintiff that the defendant would abide by the trade restraint clause.

67 The defendant, by his statement of defence, denied that he was or is estopped as alleged and says further that he did not request Mr Evans to modify the trade restraint clause, that he did not sign or otherwise consent to modification of the original offer and that, to the best of the defendant's knowledge and belief, the relevant document was amended by Mr Archer. In the course of argument, counsel for the defendant also submitted that the defendant could not be said to have acted unconscionably, or otherwise acted so as to be bound by any rule of estoppel in equity, in circumstances where the plaintiff had an opportunity to secure its position concerning the trade restraint clause by requiring the vendor to execute a deed of the kind contemplated by condition 4, which would bring Mr Weir into a direct contractual relationship with the plaintiff.

68 In Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, Mason CJ and Wilson J noted that for many years there was a reluctance to allow promissory estoppel to become a vehicle for the positive enforcement of a representation by a party that he would do something in the future. It was thought to be a defensive equity. Generally speaking, they said, a plaintiff cannot enforce a voluntary promise because the promisee may be expected to appreciate that, to render it binding, it must form part of a binding contract. They went on to accept, however, that in some circumstances promissory estoppel may extend to the enforcement of a right not previously in existence when the defendant has encouraged in the plaintiff a belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief. What gave rise to the need for the court to intervene was the defendant's unconscionable attempt to go back on the assumptions which were the foundation of their dealings.

69 Mason CJ and Wilson J, espousing the majority view, summarised their reasoning in this way at 404:

"One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it': per Dixon J in Grundt v Great Boulder Pty Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

70 It is apparent from this passage and the reasoning of other members of the High Court in Walton's case that the purpose of the doctrine of estoppel is to preclude parties relying on strict rights where to do so would be unconscionable. It is also apparent from later decisions of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 and Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 that the assumption being referred to in this line of reasoning may be one as to a legal as well as to a factual state of affairs. In other words, a representation as to the effect of a legal agreement or the adequacy of arrangements made between the parties can give rise to an estoppel.

71 This last point is important in the circumstances of the present case. I have already held that the parties to the principal transaction for the sale of the business were K9 Pty Ltd as vendor and the plaintiff as purchaser, through the agency of Mr Evans and Mr Hoyle. Most cases concerning estoppel arise out of circumstances where a party to an existing or a proposed contract is, by its conduct, precluded from insisting upon its strict legal rights. If Mr Weir represented to Mr Evans that a deed was superfluous because he was prepared to abide by the restraint clause so long as the Ballajura Tavern and the liquor store were excepted, he was arguably making a representation as to the effect of a legal agreement. But how is this to be regarded? Was he speaking on behalf of the vendor company as a party to the principal transaction or was he speaking on his own behalf as a prospective party to a collateral transaction, namely, as an individual associated with K9 Pty Ltd who might in due course be signing a deed of the kind contemplated by condition 4, that is to say, a deed that would impose a personal liability upon him? There is much to suggest he was speaking in the latter capacity with the result that any representation made, if sufficient to bring the case within the principles enunciated by the High Court, would serve to impose a personal liability upon the defendant, Mr Weir.

72 Let me now apply these considerations to the circumstances of the present case. I accept that Mr Evans and Mr Hoyle, as the prospective purchasers, took account of the trade restraint clause before signing the original offer and regarded it as a matter of importance. I find that they would not have proceeded further if it had been suggested to them that, notwithstanding the apparent effect of part E, the directors and family of the vendor company would be at liberty to carry on a tavern in competition to the Whitford Tavern within the stipulated term and radius. It is apparent, however, having left the paperwork to Mr Pitcher, that initially they did not apply their minds to the question of preparing and obtaining a deed signed by the directors of the vendor company. The question is whether Mr Weir by his words and actions created an assumption that all was in order and that no further paperwork was necessary. That he and Mr Archer had personally committed themselves to observing the terms of the restraint clause provided the Ballajura Tavern and the liquor store were excepted.

73 Mr Weir says that the offer was delivered to him for signature on or shortly after 5 March 1997, whereupon he immediately telephoned Mr Evans to discuss the effect of the trade restraint clause. Mr Evans concedes that such a call was made. I am satisfied that this call was made prior to Mr Weir signing the document, from which it follows that the offerors, at that stage Mr Evans and Mr Hoyle, were not yet parties to a binding contract prior to acceptance. It remained open to them to withdraw their offer if a point of difficulty arose. Accordingly, if anything was said in the course of the conversation initiated by Mr Weir that had the effect of creating an assumption on the part of the prospective purchasers that the safeguards they were looking for had been secured, then this could become a basis for application of the equitable principles concerning estoppel summarised by Mason CJ and Wilson J Walton's case (supra) if the person creating the assumption later acted unconscionably.

74 When I turn to the contents of the relevant telephone call, various differences between the parties become evident. Mr Weir says he made it clear at the outset that he was not prepared to sign a deed, because of his interest in the Ballajura Tavern and the Whitford liquor store. His understanding was, after the conversation, that Mr Evans had conveyed to him that the purchasers would not be inclined to enforce or rely upon the trade restraint clause generally. It was on that basis, according to Mr Weir, that he signed the offer to indicate his acceptance on behalf of K9 Pty Ltd.

75 Mr Weir's account of the call seemed inconsistent with the previous description he had given of his supposedly punctilious habits and his deep concern about the possible effect of the trade restraint clause. It seems surprising that he should sign a document apparently committing him to various restrictions bearing upon business interests of importance to him on a verbal assurance by Mr Evans, a newcomer to the hospitality industry, that the clause could be disregarded in its entirety. It is also significant that, in the description of what took place in that portion of his affidavit mentioned earlier, Mr Weir spoke of raising his interest in the Ballajura Tavern and the Whitford liquor store with Mr Evans, to which Mr Evans replied that "he was not too concerned about it", a reply which could mean that Mr Evans was not concerned about the clause in general or, alternatively, was not concerned about the application of the trade restraint clause to the particular interests of concern to Mr Weir. This latter interpretation was consistent with the tenor of the evidence given by Mr Evans.

76 I generally found Mr Evans to be a more believable and convincing witness than Mr Weir and I incline to the view that, at all material times, including the telephone call in question, Mr Evans consistently maintained that he was insistent upon the trade restraint clause continuing in force, although he made it clear that he had no objection to the Ballajura Tavern and the Whitford liquor store being treated as exempt. I also find that, at the conclusion of the crucial telephone call, Mr Evans on behalf of the offerors, in the manner pleaded in the statement of claim, was left with an assumption created by Mr Weir - the person actively involved in managing the Whitford Tavern - that there was no point in submitting to the vendors a deed corresponding to the trade restraint clause as it then stood in the original offer because such a deed would not be signed by Mr Weir. The purchasers could, however, rely upon Mr Weir's personal undertaking to abide by the clause so long as it did not apply to the Ballajura Tavern and the liquor store.

77 I find that on a Tuesday evening, shortly after the original offer had been signed by all parties, while at the Whitford Tavern, Mr Weir confirmed to Mr Evans and Mr Hoyle that he was personally bound by the restraint clause so long as it did not apply to the Ballajura Tavern or the liquor store. It follows that Mr Weir, by his call and by his subsequent conduct, including especially his conduct on the Tuesday evening, was instrumental in creating an assumption on the part of the offerors that he personally, and as one of the directors of K9 Pty Ltd, would abide by the terms of the trade restraint clause, notwithstanding the absence of a formal deed, provided both parties were agreed that the clause had no application to the Ballajura Tavern or to the Whitford liquor store. The effect of Mr Weir's conduct in negotiating an agreement of that kind and by then signing and purporting to abide by the original offer was to represent that he was bound personally to observe the requirements of the clause. In other words, the effect of the representation contained in his call was to substitute his personal undertaking by these verbal arrangements for the personal obligation that would otherwise have been imposed upon him by the formal deed. This created an assumption of the kind described by Mason CJ and Wilson J in Walton's case. Mr Archer accepted in evidence that he knew the restraint clause bound him personally and it is apparent that he acted accordingly throughout the negotiations, and afterwards.

78 A further question then arises as to whether Mr Weir later acted in breach of the clause. He, as one of the directors of the vendor K9 Pty Ltd, was precluded by the language used in the original offer, and in the amended offer, from carrying on or being engaged or interested in any business of the nature of the business sold. He was also required not to engage in conduct derogating from the purchaser's right to obtain the full benefit of the goodwill of the business. I note that a provision of this kind was considered in Pioneer Concrete Services Ltd & Anor v Galli & Anor [1985] VicRp 68; [1985] VR 675. The court concluded that goodwill means the customer connection of the business but a covenant against competition was not confined to existing customers. The court cited with approval a number of previously-decided cases suggesting that to be "engaged in" a competing business is a concept wider than conducting or carrying on the business and probably extends to having something to do with a business. On the other hand, being "interested in" a business is a little more precise, connoting a proprietary or pecuniary interest in a business: see Smith v Hancock [1894] 2 Ch 377.

79 In my view, Mr Weir's option to acquire an interest in the Beldon Tavern at market value can be characterised as being interested in a business of the kind prohibited. He was, in any event, as an approved manager, engaged in such a business.

80 It follows from the preceding analysis that within the principles reflected in Walton's case (supra) that Mr Weir acted unconscionably in allowing Mr Evans and Mr Hoyle, and thus the plaintiff, to proceed with their purchase on the assumption that the trade restraint clause would be complied with, not only by K9 Pty Ltd, but also by its directors and then, at a later stage, acting inconsistently with the representation that had given rise to the assumption. It is not a sufficient answer to this plea that equity should not assist the purchasers in circumstances where they could have insisted on their common law contractual rights to have a deed of restraint signed by the K9 Pty Ltd directors, because the effect of Mr Weir's actions was to create an assumption that a deed of that kind was no longer appropriate or necessary. The plaintiff acted to its detriment in that it paid a substantial amount for goodwill pursuant to a belief created by Mr Weir that the trade restraint clause would be honoured. I find in favour of the plaintiff on this issue.

81 For the sake of completeness, and in case I be wrong in the conclusion I have just expressed, I turn now to another plea relied on by the plaintiff, namely, that the renegotiation of the original offer, including a variation of the written agreement to exempt the defendant's interest in the Whitford liquor store, amounted to a collateral contract. Mr Weir's conduct implied, it is contended, an offer to the plaintiff from the defendant that he would be bound by the provisions of the trade restraint clause as modified in consideration of the plaintiff entering into the contract to purchase the Whitford Tavern.

82 In Hoyts Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133, various members of the High Court made some useful observations about the nature of collateral contracts. In that case, a lease allowed for termination by four months' notice of intention to terminate. The lessee sought to enforce an alleged collateral contract whereby the lessor, in consideration of the lessee entering into the lease, allegedly undertook not to give any such notice unless required to do so by the head lessor. Knox CJ had this to say at 138:

"From the authorities referred to during the argument the following propositions may be deduced, viz: - (a) when parties negotiate an agreement by parol and subsequently reduce it to writing, the writing constitutes the contract (Knight v Barber [1846] EngR 1010; 16 M & W 66), or at any rate is conclusive evidence of its terms (Wake v Harrop [1861] EngR 538; 1 H & C 202), subject, of course, to the right of either party to proceed for its rectification or rescission on sufficient grounds. (b) A distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is valid and enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement."

83 Another member of the court, Isaacs J, had this to say at 147:

"The truth is that a collateral contract, which may be either antecedent or contemporaneous (per Erle CJ and Byles J in Lindley v Lacey 17 CB (NS) 586 and per Cockburn CJ in Angell v Duke (LR 10 QB 174), being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it; consequently, where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract, it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made; and the appellant's first contention is therefore unsound. If in any case the court finds two enforceable agreements executed in such circumstances that one is intended to affect the other, no doubts such effect will be given to them as the superimposing operation of the governing contract requires; but in that case it is not collateral, but dominant."

84 I was also referred to Jutland Nominees Pty Ltd v Nelson & Anor, unreported; SCt of WA; Library No 920402; 26 June 1992. In that case, the defendants alleged that, prior to their executing a mortgage and loan agreement, a spokesman for the other party represented that the loan would not have to be repaid until the property was sold. Owen J considered that the circumstances of the case presented a clear illustration of the rule cited by Knox CJ in Hoyts Pty Ltd v Spencer (supra). He said, at 21:

"The circumstances of this case present a clear illustration of the rule. Clause 9 provides for the loan to be repayable on 30 days notice. That which is said to be a collateral contract provides for repayment on the sale of the property. The two cannot stand together. To admit the latter would mean that the former would no longer be of full force and effect. Even had the issue been alive in the pleadings I doubt whether it could have been sustained on the evidence."

85 In the present case, the matters principally relied upon by the plaintiff in support of its plea were the conversations between Mr Weir and Mr Evans concerning the restraint clause. Once the original offer was accepted, then it follows from the authorities I have cited, putting the issue of promissory estoppel to one side for the moment, that the written contract should be regarded as the sole point of reference in regard to the bargain made by the parties. The vendor of the property sold, on my earlier finding, was the company, K9 Pty Ltd, and condition 4 of the contract contemplated that any personal obligation undertaken by the directors was to be imposed by a deed of restraint. A collateral contract whereby one of the directors, Mr Weir, purported to assume a personal liability in consideration of the purchaser entering into the written contract might, arguably, not be thought to be consistent with the terms of the written contract, for, as in Hoyts v Spencer (supra) and Jutland Nominees Pty Ltd v Nelson (supra), it might seem that the collateral contract went beyond the terms of the main contract. On that view of the matter, the verbal collateral contract might be thought to vary or to purport to modify the effect of condition 4 concerning the deed, and thus be inconsistent. It is apparent from the narrative, however, and from my earlier findings, that, at a later stage, the terms of the written contract were varied, in writing, by Mr Archer, acting on behalf of K9 Pty Ltd. This meant that the contract in its final written form was consistent with the arrangements made by Mr Weir in the earlier telephone conversation as I have found them to be, namely, that the trade restraint clause was not to apply to the Whitford liquor store by express agreement or to the Ballajura Tavern, as the latter premises did not lie within the prescribed radius. Thus, if the parties had proceeded to prepare and execute a deed of restraint before settlement, then such a deed, to be consistent with the written contract in its final form, would have had to exclude the Whitford liquor store. It follows that the personal representation made by Mr Weir in the earlier telephone conversation proved to be entirely consistent with the written contract in its final form, and therefore, in the circumstances of the present case, the collateral contract contended for conforms to the principles reflected in the decided cases.

86 Can it be said that the purchasers agreed to enter into the main contract in consideration of a personal promise by Mr Weir to be bound by the trade restraint clause as defined by the main contract, save for the exemption he had negotiated concerning the Ballajura Tavern and the Whitford liquor store in circumstances where Mr Hoyle and Mr Evans, on behalf of the plaintiff, had already signed a written offer, and thus, ostensibly, had already made their decision to purchase? I have already noted that, on my finding, the crucial telephone call took place before acceptance of their offer. Mr Weir was raising a point of significant concern to him and it is quite apparent from the evidence that if the prospective purchasers were not prepared to accommodate his requirements, the transaction would not have proceeded. The point being raised by Mr Weir was not of great concern to Mr Evans, with the result that the discussion was brief and apparently non-contentious. Nonetheless, both parties to the conversation were satisfied, eventually, that they had each gained something of value. Mr Evans, on his side, was satisfied, on my finding, that Mr Weir, in spite of his initial protest, would now observe the trade restraint clause, provided it was not thought to apply to the Ballajura Tavern or the Whitford liquor store. Mr Weir, on his side, was satisfied that his business activities were not curtailed as to those premises. Accordingly, upon analysis, it emerges that there was an intention to contract with consideration being provided in the form of mutual undertakings to proceed with the written offer in its existing form, subject to the matters agreed during the course of the telephone call. I am, therefore, satisfied, and so find, that a collateral contract was entered into between the plaintiff and Mr Weir of the kind contended for by the plaintiff at par 12 to par 15 of its statement of claim. This meant that Mr Weir was obliged to conform to the requirements of the trade restraint clause in its final form and not be engaged or interested in a business of the same nature as the business sold, other than the specially exempted Whitford liquor store. It follows from my earlier findings that his later associations with the Beldon Tavern eventually led to a breach of the collateral contract, bearing in mind that the trade restraint clause was a central constituent of the collateral contract.

87 I now turn to an issue raised by par 4 of the statement of defence. The defendant says that, if (which is denied) the defendant was a party to an agreement for the sale of the business known as Whitford Tavern, the trade restraint clause was an unreasonable restraint of trade and, accordingly, unenforceable against the defendant. Alternatively, it is pleaded, the trade restraint clause is an "exclusionary provision" (within the meaning given to those words by s 4D of the Trade Practices Act 1974 (as amended)) and, accordingly, by virtue of s 45(1) of that Act is unenforceable as against the defendant. In the further alternative, the defendant pleaded, the trade restraint clause has the purpose, or has or is likely to have the effect, of substantially lessening competition in the market and, accordingly, by virtue of s 45(1) of the Trade Practices Act is unenforceable as against the defendant.

88 By its reply, the plaintiff pleads in answer to this that the trade restraint clause is a reasonable restraint of trade as to the area, duration and manner of restraint and is necessary to protect the goodwill of the business known as "Whitford Tavern" sold to the plaintiff. The plaintiff goes on to refer to s 51(2)(e) of the Trade Practices Act, whereby in determining whether a contravention of a provision of Part V (including for this purpose s 45) has been committed, regard shall not be had in the case of a contract for the sale of a business to any provision of the contract that is solely for the protection of the purchaser in respect of the goodwill of the business. The plaintiff contended that the trade restraint clause was a provision of the contract for sale of the business which was solely for the protection of the purchaser in respect of the goodwill of the business.

89 It follows from earlier discussion that, on my finding, the defendant in his own right was not a party to the main contract, and there is, therefore, no immediate need to resolve the issue raised by the defence plea in the manner presented in the statement of defence. That plea was notionally directed to the possibility of the court holding that Mr Weir and his fellow directors were parties to the contract. Nonetheless, the issues concerning the reasonableness of the restraint and the application of the Trade Practices Act have to be addressed. These issues may have a bearing upon the plaintiff's ability to enforce the collateral contract that I have found to exist and to the grant of relief by way of injunction in respect of the promissory estoppel that I have held is binding upon the defendant. Relief should not be granted in circumstances where the effect of any orders made would be to condone or allow enforcement of activities that are contrary to public policy or proscribed by legislation such as the Trade Practices Act.

90 The principles relevant to an issue of this kind are reflected in the recently-decided case of Petersville Ltd & Anor v Peters (WA) Ltd [1999] FCA 5; (1999) ATPR 41-674. The court noted that the reasonableness of the restraint was to be determined at the time it was entered into and it had to be reasonable in the interests of both parties. It had to do no more than give adequate protection to an interest which the respondent was entitled to have protected. The reasoning of the court seemed to accept that the exception provided for by s 51(2)(e) encapsulates the common law position, although on the facts of that case it was held not to apply because the restraint in question was not solely for the protection of the respondent in respect of the goodwill of the business.

91 In the present case, however, it is apparent from the evidence that the trade restraint clause was introduced solely for the protection of the purchaser in respect of the goodwill of the business. Mr Evans gave clear evidence to this effect and I have already noted that I found him to be a credible and convincing witness. The nature of a tavern business makes it probable that a prospective purchaser would give careful attention to arrangements designed to ensure preservation of the existing clientele. I am satisfied that the trade restraint clause in the present case falls within the exception allowed by s 51(2)(e) of the Trade Practices Act and does not contravene the provisions of that Act. The restraint represented a reasonable protection of goodwill.

92 I turn, finally, to the question of relief. Section 25(10) of the Supreme Court Act 1935 provides that the court may award damages in addition to the grant of an injunction. On some occasions an award of nominal damages may be appropriate as a means of demonstrating the inadequacy of a legal remedy: Coulls v Bagot's Executor and Trustee Co [1967] HCA 3; (1967) 119 CLR 460. I have already noted that in the present case the plaintiff did not seek to establish any significant loss and its claim was for nominal damages only. I will allow to the plaintiff, by way of nominal damages, the sum of $100 as a reflection of the court's determination that there was a breach of the collateral contract.

93 The grant of an injunction lies within the discretion of the court, but the discretion is often exercised in favour of a claimant where damages are thought to be an inadequate remedy and an entitlement to relief has been established pursuant to equitable principles. Counsel for the defendant argued that the plaintiff should be denied relief in equity, because of the equitable doctrines of acquiescence or waiver. I am not persuaded to this view. The plaintiff raised an objection to Mr Weir's proposed involvement in the Beldon Tavern at an early stage and pursued its objection before the Deputy Director of Liquor Licensing and, ultimately, by commencing these proceedings after an exchange of correspondence between the solicitors for the respective parties in which the solicitors for Mr Weir refused to acknowledge any liability. Accordingly, as a means of enforcing the promissory estoppel and, additionally, as a means of restraining any further breach of the collateral contract, an injunction will be granted in the terms sought by the plaintiff, but with liberty to apply for any variation that might be required as a consequence of events that may have occurred in the meantime. The effect of the order is that the defendant will be restrained from carrying on, or being engaged or interested in, the business of a tavern and bottle shop within a 10-kilometre radius of the Whitford Tavern, except for the liquor store in the Whitford City Shopping Centre. He will also be restrained from continuing to operate as the approved manager of the Beldon Tavern. Further, he will be restrained from engaging in conduct derogating from the plaintiff's right to obtain the full benefit of the goodwill of the Whitford Tavern.

94 I will hear the parties as to the precise form of the orders to be made and as to any further orders that may be required, including costs.

Hoylevans Pty Ltd v Weir [2000] WASC 144

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Judgment (130 paragraphs)

Hoylevans Pty Ltd v Weir [2000] WASC 144 (2 June 2000)

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Cases Cited (14)