Kelly v Mina

Court of Appeal (NSW)|2013-11-26|Before: Barrett JA, Ward JA, Leeming JA, Adam P

Paladin Law Pty Limited (Respondent) File Number(s): 2012/296910 Decision under appeal Date of Decision: 2012-08-29 00:00:00 Before: Kearns DCJ File Number(s): 2011/359354

Judgment 1BARRETT JA: The appellant and the respondent are accountants. They conducted a public accountancy practice together from 2007 to 2011. They agree that their association came to an end in 2011 but they disagree about the consequences of its termination. 2That disagreement became the subject of mediation in June 2011. Following the mediation, the parties signed a handwritten document (dated 16 June 2011) headed "Heads of Agreement + Non-Binding Agreement". It will be convenient to refer to this document as "the June 2011 document". As will be seen, it consists of two distinct sections or parts, one designated "Heads of Agreement" and the other "Non-binding Agreement: Subject to Due Diligence by Both Parties". It will be convenient to refer to these as the "first part" and the "second part" respectively.

The District Court proceedings 3In November 2011, the respondent (as plaintiff) brought an action in the District Court against the appellant (as defendant) to recover sums said by the respondent to be owing, due and payable by the appellant under a contract recorded by the June 2011 document or, perhaps, damages for breach of such a contract. 4The issues raised by the appellant as defendant at trial included that the contract on which the respondent relied was unenforceable for want of consideration and that there were unsatisfied conditions precedent. She filed a cross-claim alleging that the respondent had repudiated the contract which was no longer binding, that the respondent was, in any event, indebted to her and that he was guilty of misleading or deceptive conduct towards her. 5The primary judge (Kearns DCJ) held that the respondent was entitled to $127,371.39 in respect of his claim and that the appellant was entitled to $8,156.15 in respect of her cross-claim. He entered judgments accordingly. 6Central to the judge's conclusions were findings that an unpaid balance of $193,500 (being "$203,500 (less $7,000 paid)") referred to in the first part of the June 2011 document was owed by the appellant to the respondent, that that balance was required to be paid within a reasonable time, that a reasonable time had elapsed, that the "non-binding" second part of the June 2011 document lacked contractual force and that the appellant could therefore not rely on provisions in the second part to resist the obligation to pay the unpaid balance.

The appeal 7The appellant appeals on a number of grounds which, as written submissions of her counsel acknowledge, rely on the following central propositions:

The contract embodied in the June 2011 document was not capable of effective performance because neither party had the ability to perform the terms expressed to be binding on that party, so that there was, in respect of the promises upon which the respondent sued, no consideration supporting those promises.
The second part of the document expressed by the parties to be "non-binding" (and found by the judge not to have contractual force) was in truth a legally binding contract the terms of which justified non-payment by the appellant contemplated because (a) specified conditions precedent in the second part had not been performed so that the time for performance had not arrived; or (b) a reasonable time for performance of the conditions precedent had not elapsed. 8The appellant also seeks to challenge a decision of the primary judge, made on the second day of the trial after argument that occupied most of the first two days, refusing leave to amend the defence and cross-claim to allege common mistake of the parties. 9One of the grounds of appeal is to the effect that the primary judge erred "by failing to find" that the contract embodied in the June 2011 document "was in fact a sale of business and not an agreement to give effect to a dissolution of partnership". That proposition, it seems to me, need not be explored. The judge construed the contract as he found it. The fact that it was labelled in one way rather than another is of no moment if the construction adopted is correct. 10The questions before this Court are therefore, in essence: (a) whether the contract embodied in the first part of the June 2011 document was unenforceable for want of consideration; (b) whether the second part of the document was the source of legally enforceable rights and obligations and, if so, whether particular provisions within it justified non-payment by the appellant; and (c) whether the discretion with respect to the amendment application miscarried and, if so, what the consequences of that error are for the judge's substantive decision.

The start of the parties' relationship 11The appellant and the respondent signed a written agreement on 9 August 2007. It was described at its conclusion as "Partnership Agreement between Akis G Mina and Karen E Kelly" and was expressed to have a "date of effect" of 1 April 2007. It will be convenient to refer to this agreement as "the April 2007 agreement". 12The following appeared in clause 2 of the April 2007 agreement under a heading "Structure": "a) Akis Mina and Karen Kelly agree to trade each of their respective accounting practices from a new entity, to be styled the Kelly and Mina Unit Trust. ABN 86 031 055 152 ('The Unit Trust'). The unit trust has 10,000 issued units. 6,000 are to be held by Karen Kelly, and 4,000 by Akis Mina b) Karen Kelly is to hold her entitlement through the company Eastern Suburbs Accounting Services Pty Ltd A.C.N. 100 723 055 (Eastern) c) Akis Mina is to hold his entitlement through the Mina Family Trust d) Akis Mina may, during the first 12 months of the agreement increase his entitlement to 50% at his discretion." 13The reference to "their respective accounting practices" was a reference to, first, a practice known as "Churton Kelly" acquired in 2002 by Eastern Suburbs Accounting Services Pty Ltd (of which the appellant was the sole director and shareholder) and thereafter conducted by that company and, second, a practice known as "Ezy Accounting" conducted by Mina Enterprises Pty Ltd, as trustee of the Mina Family Trust (controlled by the respondent). 14It is relevant to set out in full clauses 3, 4 and 5 of the April 2007 agreement: "3) Name & Designation of Unit-holders a) The practise [sic] is to operate under the name 'Churton Kelly' b) Akis Mina and Karen Kelly to be styled 'Partner' c) At some future point (not less than 3 years) the name of the practise [sic] may be changed to a new name which is mutually acceptable to the partners. 4) Unit Holdings a) Unit holdings proportion to be based on 1:1 of actual fees produced between 1 April 2007 and 31 March 2008 from client bases that each partner brings to the new business. See appendix 1 for example. b) Fees produced that are obtained by way of tender are to be disregarded in this calculation. 5) Partner Remuneration a) At the time of the agreement it is agreed that KK will work 5 days for the Unit Trust and AM will work 3 days for the Unit Trust. b) Notional partner remuneration to be set at $120,000 per annum for a FTE partner. c) Actual remuneration to be pro-rated for time worked. This means KK will have entitlement to $120,000 and AM to $72,000. d) Further remuneration will be based on share of profit as per unit entitlement. e) Base remuneration to be invoiced, and paid as a normal creditor. f) Partner remuneration may be varied by mutual agreement." 15Clause 7 dealt with "Dissolution of Partnership", as follows: "7) Dissolution of Partnership a) Either partner may withdraw from the partnership within 30 days of 1 April 2007 without penalty. b) Either partner may withdraw from the partnership for a further 60 days from 30 April 2007, but they will bear any costs of the dissolution. c) If the partnership is dissolved in the first 30 days each partner is entitled to withdraw any funds he or she has contributed at that point. d) If the partnership is dissolved due to death or incapacity of one of the partners, the payment for the partners unit entitlement is to be calculated by the calculation in Appendix 2." 16Appendix 2 set out provisions that were to apply where "the partnership ends due to death or total and permanent disablement of one of the partners". The main provision was: "The surviving partner has right of refusal to buy out the remaining units." 17Certain bases of calculation were then set out. 18The concluding provision in Appendix 2 was: "If the surviving partner decides not to exercise their right, then the practise [sic] must either be sold, or a new partner introduced to purchase the departing partners [sic] equity." 19It was made clear by clause 4(a) of the April 2007 agreement that "each partner" was bringing "client bases" to "the new business". 20In May 2010, premises in which the accounting practice was conducted were purchased for $410,000 by the respondent and his wife (as joint tenants) as to one undivided half share and by Kazbah Holdings Pty Ltd (a company associated with the appellant) as to one undivided half share.

The parting of the ways 21On 29 March 2011, the appellant sent the respondent an email that began: "I wish to give formal notice of my intention to dissolve the partnership effective immediately." 22Correspondence ensued, solicitors became involved and the mediation took place on 16 June 2011. The handwritten document produced and signed by each party at its conclusion (referred to above as "the June 2011 document") was as follows: " 16/6/2011 HEADS OF AGREEMENT + NON BINDING AGREEMENT BETWEEN: KAREN KELLY AND AKIS MINA HEADS OF AGREEMENT KAREN + AKIS AGREE AS FOLLOWS: 1. KAREN WILL PAY AKIS $203,500-00 (LESS $7000 PAID) IN CONSIDERATION FOR AKIS INTEREST IN THE CHURTON KELLY BUSINESS ("THE SETTLEMENT SUM") 2. KAREN KELLY WILL CAUSE KAZBAH HOLDINGS P/L ATF KAZBAH SUPERANNUATION FUND TO PURCHASE AKIS MINAS 12.5% INTEREST AS TENANT IN COMMON IN THE PROPERTY 2/414 GARDENERS ROAD ROSEBERRY FOLIO: 10/SP62353 FOR THE SUM OF $53,750-00 SETTLEMENT TO BE COMPLETED BY 30 JUNE 2011. 3. THE SETTLEMENT SUM SHALL BE PAID IN PART AS FOLLOWS: a) $8,000-00 ON 17 JUNE 2011 b) $2,500-00 ON 16 JUNE 2011 by authority to debit to business bank account a total of $5,000-00 c) $40,000-00 ON OR BEFORE 31 JULY 2011 4. AKIS MAY REMOVE FROM THE BUSINESS PREMISES HIS CHAIR, PC + A SERVER (IF SERVER IS REPLACED WITH NEW) 2 5. KAREN WILL MAINTAIN THE BUSINESS PI INSURANCE POLICY + SHALL PROVIDE A COPY OF THE POLICY ANNUALLY TO AKIS. 6. AKIS WILL AGREE TO A LEASE OF THE BUSINESS PREMISES TO KAREN FOR A TERM OF 2 YEARS COMMENCING ON 30 JUNE 2011 AT A RENTAL OF $44,000 - P/A INCL GST + OUTGOINGS (EXCLUDING SPECIAL LEVIES) + SUBJECT TO USUAL COMMERCIAL LEASE TERMS. AKIS SHALL VACATE THE PREMISES PRIOR TO 30 JUNE 2011. 7. KAREN + AKIS AGREE ALL TRANSACTIONS ARE A SALE OF GOING CONCERN + NO GST APPLIES. 3 NON BINDING AGREEMENT: SUBJECT TO DUE DILIGENCE BY BOTH PARTIES: 1. KAREN WILL PAY THE BALANCE OF THE SETTLEMENT SUM BY: a) ASSUMING ALL LIABILITY FOR THE BUSINESS DEBTS/LIABILITY TO INVESTEC IN THE SUM OF APPROX $38,000 - AND ENSURING AKIS IS RELEASED + INDEMNIFIED FOR THE INVESTEC DEBT. b) AKIS WILL ASSUME ALL LIABILITY OF THE BUSINESS FOR DEBT/LIABILITY TO THE ATO + RELEASE + INDEMNIFY KAREN FOR THE ATO DEBT. c) KAREN SHALL RESIGN AS DIRECTOR OF EZY ACCOUNTING P/L AS AT 15 JUNE 2011 IN THE SUM OF ABOUT $76,800. d) KAREN SHALL ASSIGN TO AKIS ALL HER RIGHT + INTEREST IN DEBTORS AND WIP OF THE BUSINESS THEN: e) KAREN SHALL PAY THE BALANCE OF THE SETTLEMENT SUM OF ABOUT $130,000.00 $129,500-00 BY INSTALMENTS OF $10,000 7,500-00 P/MONTH COMMENCING ON 31 AUGUST 2011 WITH SECOND UNREGISTERED MORTGAGE + CAVEAT SECURITY OVER PROPERTY AT 10/55 TOBRUK AVE PORT KEMBLA AND INTEREST ACCRUING ON UNPAID AMOUNT AT 8% P/ANNUM. WITH INTEREST OFFSET TO KAREN. DETAILS TO BE SUPPLIED 2. KAREN + AKIS SHALL NEGOTIATE THE SALE OF AKIS SUPER FUND INTEREST IN 2/414 GARDENERS RD. ROSEBERRY TO SETTLE WITHIN 1 YEAR." 23Some time in the period of fourteen days after the signing of the June 2011 document, the respondent and his wife signed a transfer in favour of Kazbah Holdings Pty Ltd of part of their undivided half share in the business premises and that transfer was delivered in return for payment of $53,750. This was obviously done as contemplated by clause 2 of the first part of the June 2011 document.

The pleadings in the District Court 24The District Court proceedings were commenced by a statement of claim filed on 10 November 2011 by which the respondent, as plaintiff, pleaded the agreement in the June 2011 document, characterising it as an agreement by which the appellant "agreed she was indebted to the plaintiff in the sum of $203,500.00" and that that sum was to be paid by monthly instalments of $7,500 commencing on 31 August 2011. The respondent then pleaded breach of the agreement by failure to pay the agreed instalments for September and October 2011; and: "As a result of the Defendants [sic] breach of the Agreement the plaintiff has suffered loss and damage Particulars Unpaid debt $134,200." 25By defence filed on 4 January 2012, the appellant, as defendant, admitted the making of the agreement but denied her indebtedness in the sum of $203,500 and any agreement to pay monthly instalments of $7,500. She also denied liability to pay the sum claimed. In addition, the appellant alleged breach of the agreement by the respondent "rendering the Agreement void and/or unenforceable" by failing to vacate the business premises before 30 June 2011 and by removing the computer server and failing to install a new one. 26On 29 May 2012, the respondent filed an amended statement of claim which substantially altered his case. In the amended statement of claim, the agreement of 16 June 2011 was characterised as an agreement by the appellant to pay $203,500, less $7,000 already paid (leaving a balance of $196,500) "in consideration for the plaintiff's interest in an accounting practice known as Churton Kelly". A term for the payment of instalments was then pleaded, the instalments being $8,000 on 17 June 2011, $2,500 on the immediately preceding day (16 June 2011) and $40,000 "on or before 31 July 2011". It was then alleged that, in the absence of any express provision as to the time for payment of the balance, it was, by implication, "to be paid within a reasonable time". Breach of such an implied term was alleged, by which the respondent had suffered loss and damage to the extent of the $134,200 unpaid. 27The amended statement of claim pleaded an alternative case based on the part of the June 2011 document embodying the so-called "non-binding agreement". It was alleged that, if that agreement had "become operative" (something that the respondent did not admit), the balance of $196,500 was to be paid by monthly instalments of $7,500 commencing on 31 August 2011 but only $11,800 was paid; and the respondent relying on the breach of contract constituted by non-payment terminated the agreement and claimed, as damages for breach of contract, unpaid instalments of $10,700 up to the date of termination and $134,200 which "became due and payable" as "a result of" the termination of the agreement. 28The appellant, by her defence to the amended statement of claim, admitted that she and the respondent had entered into an agreement on 16 June 2011 and that she had agreed to pay the respondent the sum of $203,500 less $7,000 in consideration for the respondent's interest in the accounting practice known as Churton Kelly. However, the appellant denied that the amount owing by her to the respondent pursuant to the agreement as at 16 June 2011 was $196,500. She also denied the term requiring payment of instalments on 17 June 2011, 16 June 2011 and on or before 31 July 2011. She said that she agreed to pay part of the sum of $196,500 (being $203,500 less $7,000 paid) in part before due diligence and ascertaining the value of the business but did so "as a gesture of good faith in an attempt to resolve the partnership dispute between her and the Plaintiff". The respondent also denied the existence of the implied term pleaded by the appellant as to the time for payment of the residue of $134,200. She pleaded a quite different "intention of the parties" in that respect. In addition, the respondent denied that the "non-binding agreement" had contractual force, her view being that it merely "provided an outline in which [sic] the accounting partnership would be dissolved". In any event, she said, that part was predicated on completion of "due diligence", something that had never occurred. 29On 26 June 2012, the appellant filed a cross-claim the pleading and particulars in which commenced: "1. Prior to June 2011, the Cross Claimant and Cross Defendant was [sic] in partnership whose primary business was to provide financial and accountancy services to the public ('the Business'). 2. Prior to June 2011, the Cross Claimant and the Cross Defendant dissolved their partnership. 3. On 16 June 2011, the Cross Claimant and the Cross Defendant attended mediation in which the parties documented their agreement with respect to the dissolution of the partnership." 30The cross-claim continued: "7. The Heads of Agreement, inter alia, indicated that: a. The Cross Claimant was to pay the Cross Defendant the amount of $203,500.00 ('the Settlement Sum') b. That the Settlement Sum was to be paid in part as follows: i. $8,000.00 on 17 June 2011; ii. $2,500.00 on 16 June 2011; iii. $40,000.00 on or before 31 July 2011. c. The amount of $7,000.00 was to be deducted from the Settlement Sum as this amount had been paid by the Cross Claimant; d. The Cross Defendant was to remove from the Business his chair, PC and a server provided that the Cross Defendant would replace the server he took with a new server. e. The Cross Defendant would vacate the premises of the Business prior to 30 June 2011. 31The appellant as cross-claimant then pleaded various breaches of contract by the respondent; and that, by reason of those breaches, "the Heads of Agreement is void and the [respondent] is to return all moneys that he has received from the [appellant] which has been allocated and formed part of the Settlement Sum". There followed further allegations concerning the non-binding part of the June 2011 document and of misleading and deceptive conduct by the respondent. 32In his defence to cross-claim filed on 11 July 2012, the respondent admitted paragraphs 1 and 3 set out above and dealt with the other aspects in ways that it is not necessary to mention. 33On 12 July 2012, the respondent filed a reply to the defence to the amended statement of claim by which, among other things, he relied upon and repeated the matters set out in his defence to the cross-claim.

The hearing and determination of the application for leave to amend 34The trial of the District Court proceedings commenced on 8 August 2012, with three days allocated. At the start of the trial, counsel for the respondent opened his client's case by reference to a bundle of documents. Those documents were tendered and, except as to ten pages, admitted into evidence. At that point (which, it may be inferred from the transcript, was well before the short mid-morning adjournment), counsel for the appellant moved on a notice of motion which had apparently been filed in court on 2 August 2012 in the course of the Friday motions list and stood over to the then impending trial. By that motion, the appellant sought leave to amend her defence and, as a consequential matter, dismissal of the proceedings. The notice of motion contained no application for leave to amend the cross-claim. 35In support of the application to amend the defence, counsel for the appellant relied on two affidavits of the appellant, an affidavit of her solicitor and an affidavit of service. Several documents were tendered. Parts of the affidavits were ruled inadmissible. Counsel for the appellant was then given leave to call her client who was examined in chief on the matters relevant to the notice of motion. The appellant was then cross-examined by counsel for the respondent. No evidence was given by the respondent but his solicitor, Mr Davidson, gave evidence in chief and was cross-examined. 36The gist of the case sought to be made in support of the amendment application (and the related application for summary disposal) was that there had been, in the words of counsel for the appellant, "a simple case of mistaken identity" - that the June 2011 document "could not possibly have been binding because what it did was purportedly impose obligations on the wrong entities", that is, "on Ms Kelly and Mr Mina personally, whereas none of their liabilities or assets within the partnership so called were held by them personally". That basic proposition was reflected in the parts of the proposed further amended defence which (a)changed references to a partnership between the appellant and the respondent to references to a partnership between Eastern Suburbs Accounting Services Pty Ltd and the Mina Family Trust; (b)pleaded that the June 2011 document was "not executed nor was it between the correct parties with the relevant obligations and liabilities incumbent upon them"; and (c)pleaded that, if a binding contract was otherwise embodied in the June 2011 document it was "entered into by mistake" and was therefore "null and void"; and that "at no time were [the appellant and the respondent] capable of entering in to [sic] the agreements in their personal capacities". 37The proposed amendment referred to at (a) above involved withdrawal of admissions by the appellant, in her then operative defence, that a partnership had been formed between the individuals. The proposed amendments referred to at (b) and (c) sought to introduce an entirely new subject matter, although its precise scope and meaning were not stated with any particularity. 38The proposed amended pleading did not seek, in any explicit way, to characterise the alleged mistake as common, mutual or unilateral. It was said, however, that the consequence of the alleged mistake was that any contract was "null and void". This tends to suggest that the foreshadowed case was that the alleged mistake negatived contractual assent, so that there was never any contract. Viewed in that way, the defence drew on purely common law principles. On the other hand, counsel for the appellant, in the course of submissions on the amendment application, referred explicitly to the power of a court to set aside or rectify a contract in consequence of a mistake made by both parties or by one party with the knowledge of the other. This suggested that the basal proposition was not that the contract was void but rather that there were grounds for the grant of equitable relief. That was confirmed by discussion between counsel and the judge as to the scope and meaning of s 134(1)(d) of the District Court Act 1973 which confers "the same jurisdiction as the Supreme Court" in proceedings for "relief against fraud or mistake" subject, however, to limits. It was submitted on behalf of the appellant that s 134(1)(d) enabled the District Court to deal with the issues of mistake sought to be agitated. 39The hearing of the amendment application lasted from the morning of the first day of the trial to almost the end of the second day. The appellant gave evidence in chief and was cross-examined. The primary judge delivered judgment at the conclusion of the hearing. 40His Honour began by tracing briefly the history of the relationship. He referred to the mediation and set out in full the June 2011 document. Reference was made to an explanation by Mr Davidson for the division of the document into two parts, one labelled "non-binding". The judge then recorded findings to the following effect:

The appellant was present throughout the mediation and was aware of and alert to everything that was happening; she was also aware of the content of the June 2011 document drawn up at its conclusion.
Even if the appellant had been mistaken about what happened at the mediation, her misunderstanding had been brought home to her when she was served with the statement of claim. She knew full well, at that point, that it was she, as an individual, who was sued. There was no explanation of why she did not immediately raise with her solicitor the point that it was not she but her company that should have been the defendant.
Although the appellant suffered impairment of her sight, she was a capable professional person and presented as such at the mediation. She was, the judge said, "a person who knew exactly what she was doing".
Whereas the appellant said that she had changed solicitors because of the first solicitor's failure to pick up the point that she was being sued personally in circumstances where she was not the correct party, she did not tell the new solicitor about that issue. (I interpolate here that the change of solicitors occurred in about February 2012 and that the original solicitor handed over his file to the new solicitor on 24 July 2012.) The judge did not accept this explanation.
The judge said that the issue of the correct parties was first aired in the course of a conference that the appellant had with her counsel about ten days before his Honour gave judgment; and that it was not until 2 August 2012, that is, six days before the date fixed for the hearing, that the respondent was put on notice that the question of further amendment of the defence was to be raised. (This is not quite correct: the appellant's solicitor said to the respondent's solicitor in a letter dated 24 July 2012, received on 26 July 2012, that the June 2011 document was "non-binding and has no legal effect" because it was "drafted with respect to the wrong entities" and that the defence was to be amended accordingly; and it was, it seems, on the date that the letter bore, 24 July 2012, that the conference with counsel took place).
The appellant had, at various times, embraced the position as to parties from which she sought to resile by means of the amendment application. It is pertinent to quote from his Honour's judgment: "In the meantime a number of things had happened contrary to the plaintiff's stated position. The first I think is an affidavit of the defendant sworn on 15 May 2012. I need not set out the detail of that affidavit. It is replete with statements by the defendant acknowledging the partnership that she had with the plaintiff and also acknowledging her responsibility under the settlement agreement. I have got these matters out of order but the next item is a defence that was filed by the defendant on 4 January 2012. In that defence she admitted that she and the plaintiff had entered into heads of agreement on 16 June 2011. On 15 June 2012 an amended defence was filed. In that defence the defendant admitted that she and the plaintiff had entered into the agreement of 16 June 2011. She admitted that she agreed to pay the plaintiff $203,500 less $7,000. Both these defences and the affidavit were prepared by her current solicitors." 41The judge expressed reluctance to "see a party go to Court and potentially lose a case without having had the benefit of putting the whole of the case that party wishes to before the Court". He was of the opinion, however, that the case before him was one where that should occur. His Honour's reasons were, in essence, as follows:

The approach to the amendment question 44The appellant says that the judge's decision to refuse leave to amend affected the result of the trial in a fundamentally adverse way entailing miscarriage of justice that requires correction of the interlocutory decision: Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478 at [4] - [8]. 45The amendment application was governed by s 64 of the Civil Procedure Act 2005 which, in subsection (1), provides that, at any stage of proceedings, the court may order that any document in the proceedings be amended, or that leave be granted to a party to amend any document in the proceedings. Section 64(2) then provides: "Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. 46The judge's decision was obviously discretionary, so that appellate intervention will be warranted only upon the principles stated in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505. The fact that the decision was a decision on a matter of practice and procedure means that this Court should be slow to interfere and ought not to reverse the judge's decision unless convinced that it is plainly erroneous: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170. As Bryson JA said in State of New South Wales v Mulcahy [2006] NSWCA 303 at [3], "such appeals are, appropriately, kept on a tight rein". 47Particularly in light of the opening words of s 64(2), it is not controversial that the provisions in Part 6 Division 1 of the Civil Procedure Act were binding on the primary judge and that, in accordance with s 58, his Honour was bound to seek to act in accordance with the dictates of justice and, in so doing, to have regard to s 56 concerning the "overriding purpose" of the Act and rules of court in their application to civil proceedings; also that, in addressing the amendment application in the particular statutory context, his Honour was required to take into account a combination of factors identified by the High Court in Aon Risk Services Pty Ltd v Australian National University (2009) HCA 29: (2009) 239 CLR 175 and usefully summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 (at [38]) as follows: "(a) Whether there will be substantial delay caused by the amendment; (b) The extent of wasted costs that will be incurred; (c) Whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded; (d) Concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource, and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of trials; (e) Whether the grant of the amendment will lessen public confidence in the judicial system; and (f) Whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought." 48As this Court has emphasised more than once, Part 6 Division 1 of the Civil Procedure Act made substantive and important changes to the law so that considerations of promptness and efficiency in the conduct of civil litigation are afforded a new and special importance which may sometimes provoke a sense of injustice in a party who has failed to proceed with despatch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010] NSWCA 17; Richards v Cornford (No 3) [2010] NSWCA 134.

Submissions on the amendment question 49The appellant puts forward several matters in support of the proposition that the discretion to allow amendment was incorrectly exercised in this case:

The primary judge wrongly made a final determination of substantive questions concerning the issue of mistake.
His Honour acted unreasonably in rejecting the appellant's explanation for delay.
The judge failed to take into account the potential for mutual prejudice if the proceedings were allowed to continue on the basis of an agreement between the individuals since there was, in those circumstances, potential for multiplicity of actions.
Failure to allow the amendment meant that the real issues were not before the court. 50In submitting that the discretion was correctly exercised, the respondent relies on the following matters:
If the amendment had been allowed, it would have been necessary for the respondent (as plaintiff) to re-shape his case by pleading estoppel and to seek particulars of the inadequately drafted defence which did not plead material facts concerning the alleged mistake. There would also have been a need for further evidence.
Allowance of the amendment would have necessitated a transfer of the proceedings to the Supreme Court.
The judge, having seen the appellant in the witness box, had a firm basis on which to assess (and reject as inadequate) her explanation of the delay.
The amendment, as sought, entailed the withdrawal of admissions as to the contractual relationships between the individuals yet the appellant made no attempt to deal with issues specific to that aspect, being issues identified in cases such as Celestino v Celestino [1990] FCA 299 (at [12] - [14]) and Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 at 745 and 748.
The appellant had already amended her defence after retaining new solicitors.
If the amendment had been allowed, the respondent's solicitor, Mr Davidson, would have become a material witness of fact (having been involved in the preparation of the June 2011 document) so that he could no longer continue to act; and that is something that would be the source of real prejudice to the respondent.
The proposed amendments were bad in form and futile because they did not set out particulars of the alleged mistake or particulars of why the agreement was "null and void".

Assessment 51The judge's decision to dismiss the application for leave to amend did not involve an erroneous exercise of discretion. 52The appellant's explanation for the delay was entirely unsatisfactory. She did not say that the issue of the correct parties had first been drawn to her attention by her lawyers at the conference with counsel on 24 July 2012. Evidence to that effect would have gone a long way towards satisfactory explanation. On the contrary, the appellant said in the witness box that she had been aware of the issue concerning incorrect parties from a point that pre-dated the change of solicitors in about February 2012. She also said that the original solicitor's failure to explain to her why she was being sued personally had been a factor in her loss of confidence in that solicitor and had played a part in her decision to change solicitors - yet, having retained a new solicitor, she did not raise with that solicitor that very matter of concern until a conference she had, according to her evidence given on 8 August 2012, "10 days ago, two weeks ago". In response to a specific question, "When did you tell your current solicitors that it shouldn't be you?" - that is, that it should not have been she herself who was sued - the appellant replied: "It was when I met with counsel in chambers about a note [sic] 10 days ago, two weeks ago." 53These questions and answers followed: "Q. Is that the first time since you went to your current solicitors that you suggested either to your current solicitors or barrister that you personally should not be the subject of the proceedings? A. I said to my barrister I didn't understand why this was happening and I outlined to her the circumstances around us coming to be in business together. Q. Had you told your solicitors that before or not? A. I can't recall. I don't think so." 54And later: "Q. So you personally have known since November and you've defended the proceedings on a particular basis without seeking to alter that basis until last Thursday, is that what you tell the Court? A. Well I don't know when I met with counsel, but it was on that day that that I brought it to her attention and she said to me, immediately, that- Q. Don't say what your counsel said, or we'll get in trouble- A. That basically- Q. No, don't even paraphrase what your counsel said at all. I suggest to you that notwithstanding what your counsel said, you knew from the case that you were putting forward that you say there's been a mistake and you'd known about it since November? A. Yes, but I haven't put it into my evidence and that was a mistake too." 55It was thus perfectly clear that the appellant, despite a belief that it was incorrect, had been, for a period of some nine months until 24 July 2012, quite content to accept the contractual characterisation (as to parties) put forward by the respondent at all times from the inception of the litigation by the filing of the statement of claim on 10 November 2011. She chose to alert her legal advisers to the matter of ongoing concern only on 24 July 2012 in the course of conferring with counsel in preparation for a trial due to commence on 8 August 2012. And astonishingly, one might think, the attempt she then made to obtain leave to amend her defence was made in a context where she apparently intended to leave in unamended form a cross-claim filed less than a month earlier by which she pleaded contractual relationships consistent with those that she sought, by the proposed amended defence, to characterise as fatally affected by mistake. 56There was ample justification for a view that the appellant had been deliberately opportunistic in her attempt to make a substantial change to the nature and scope of the proceedings a very short time before the scheduled commencement of the hearing. There was evidence that the appellant had health problems and was visually impaired. She also referred to the stress that she had been under because of the litigation. There was, however, a sound basis for a finding that, despite those matters, the appellant was a knowledgeable professional person who fully comprehended the differences between natural persons and other entities. She, to a greater extent than most in the community, would have appreciated at all material times - both before and after the initiation of proceedings against her in November 2011 - the significance of the point of which she was well aware but chose not to raise with her legal advisers until 24 July 2012. 57The judge's assessment on the issue of adequacy of explanation for delay was soundly based. 58There is then the issue of the District Court's ability to determine the proceedings if re-cast in the way the appellant sought. Junior counsel for the appellant, as defendant in the District Court, made unequivocal submissions that the case could continue in that court even though a defence of mistake was introduced through the amendment. The effect and operation of s 134(1)(d) of the District Court Act were aired in exchanges between bench and bar. Counsel for the appellant accepted that the section governed the matter but said that circumstances were such that the case could continue in the District Court, so that there would be no delay or disruption through a need to seek transfer to the Supreme Court. The judge expressed a prima facie view that transfer would be necessary and took into account resultant prejudice to the respondent as plaintiff. 59Section 134(1)(d) of the District Court Act is in these terms: "The Court shall have the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in proceedings for: . . . (d) relief against fraud or mistake where the damage sustained or the estate or fund in respect of which relief is sought does not exceed $20,000 in amount or value, as determined by the Court." 60There is a question whether the District Court proceedings, as they would have been constituted had amendment of the defence been allowed, would properly have been characterised as "proceedings for . . . relief against . . . mistake . . .". If, as may be the case, the appellant's contention is that the alleged mistake negatived contractual assent, so that there was never any contract, what is put forward is simply a common law defence to a common law claim. If, on the other hand, the contention is that the contract is liable to be set aside because of mistake operative at the time of its formation, the contention is one that goes beyond mere defence and implies an application for equitable relief by way of rescission. Such an application would normally be made by way of cross-claim rather than defence as such, since it entails the making of a positive determination and order by the court. 61This highlights a particular problem to which reference has already been made. The appellant, in advancing her application for leave to amend, made no attempt to amend the cross-claim filed on 26 June 2012 and therefore sought to propound a positive case quite at odds with the contention that the individuals had never become parties to the relevant contract or, if they had, that that contract was liable to be rescinded on account of mistake. That is a powerful consideration against the proposition that amendment of the defence alone should have been permitted; and if the appellant had sought to amend the cross-claim as well, the case would clearly have been one in which "relief against . . . mistake" was sought but the relevant amount exceeded the s 134(1)(d) limit of $20,000, so that transfer to the Supreme Court would have been necessary. 62In any event, counsel appearing for the appellant in this Court expressly conceded that a consequence of the amendment actually sought was that transfer to the Supreme Court was necessary. Such transfer could occur by order of the District Court under s 144 of the Civil Procedure Act or by order of the Supreme Court under s 140(1). That matter was therefore correctly taken into account by the judge as a source of prejudice to the respondent as plaintiff. 63I consider next the submission of counsel for the appellant that the judge wrongly made a final determination of substantive questions concerning the issue of mistake. It is sufficient to say simply that his Honour did not do so. His Honour was bound to pay attention to the question whether there was substance to the case sought to be advanced through the amendment. In that way and to that extent, he was required to assess the viability of the defence the appellant sought to raise - something that was in no way facilitated by the sparse way in which the mistake issue was pleaded. The judge did not express any concluded views. Rather, he expressed significant scepticism as to the viability of the arguments that had been outlined to him. 64This leads to another point. Counsel for the respondent says that the basis for advancing the defence of mistake was not adequately articulated and that the pleading was, in that sense, embarrassing. The submission relies on a principle succinctly stated by Hasluck J in Chandler v Water Corporation [2001] WASC 166 at [41]: "A party to civil litigation is entitled to a statement of the opponent's case in sufficiently clear terms to allow the opposing party the fair opportunity to meet the case being advanced. An action may not be pleaded in general terms and must be pleaded with particularity: Bruce v Odhams Press Ltd [1936] 1 KB 697 at 705. The purpose of pleadings and particulars is to concentrate the issues of fact and to prevent surprise and consequent delay: Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 221." 65I have already alluded to the uncertainty that necessarily attends the proposition that the June 2011 document was "entered into by mistake" and was therefore "null and void"; and that "at no time were [the appellant and the respondent] capable of entering in to [sic] the agreements in their personal capacities", coupled with the submissions made on the hearing of the motion as to the power of a court to set aside or rectify a contract in consequence of a mistake made by both parties or by one party with the knowledge of the other. 66Whatever may have been the intended meaning of the new pleading, it would have produced a need on both sides to prepare for an inquiry into events surrounding the creation of the June 2011 document significantly wider than that made necessary by the claim and defence as advanced in unamended form. Potentially arising for consideration would be issues as to the assumptions on which each party proceeded in entering into the contract, whether each party actually assented to the written terms, whether one or both parties misunderstood the real meaning and effect of the contract, whether one party had induced misunderstanding in the other, and whether one party knew of the other's misunderstanding. Even wider investigation might be required. 67It should also be mentioned that, in the course of submissions on the application for leave to amend, counsel for the appellant made no attempt at all to deal with matters essential to one important aspect of the application, that is, withdrawal of the admissions which strangely were apparently to continue to occupy a central place in the cross-claim. The conclusion is inescapable that the appellant intended to maintain inconsistent stances simultaneously in contravention of fundamental principles preventing her doing so: see the recent discussion in Apotex Pty Ltd v Sanfoni [2013] FCA 1425 at [11] - [27]. 68The application for leave to amend was made a very short time before the scheduled hearing. It was not surprising that the judge before whom it came in the motions list on 2 August 2012 stood it over for attention by the trial judge at the hearing. At that point, the appellant took the line that the court should determine the amendment application (and the related application for summary disposal) at once and that there would be no occasion for an adjournment if leave to the amend was granted since dismissal of the proceedings would inevitably follow. 69The appellant says that refusal of the amendment application has given rise to an undesirable multiplicity of actions that would be avoided if the application were now allowed and the matter transferred to the Supreme Court. The first piece of "satellite litigation" was commenced by the appellant in the course of the District Court hearing when she sued in this Court for relief in the nature of prohibition to prevent adjudication by the primary judge. That proceeding was discontinued. The appellant later sued in the Supreme Court seeking to set aside the June 2011 agreement. That action has been stayed pending the outcome of the present appeal. The appellant refers also to proceedings brought by the respondent against Kazbah Holdings Pty Ltd for termination of the co-ownership of the business premises and to service by the respondent of a bankruptcy notice founded on the judgment debt arising from the proceedings under appeal. 70No doubt some or all of these actions might have been avoided had the amendment been granted. But the appellant did not rely on any such proposition before the primary judge. 71For all these reasons, the judge's decision to dismiss the application for leave to amend did not entail an erroneous exercise of discretion susceptible to correction by this Court in accordance with the principles referred to at [46] above as affected by the provisions in Part 6 Division 1 of the Civil Procedure Act.

The "consideration" and related arguments 72I turn now to the first of the grounds of appeal referred to at [7] above. The appellant's contention as to want of consideration is, in essence, that because the accounting practice was, according to the April 2007 agreement, conducted by the "Kelly and Mina Unit Trust", with interests in or under that trust being held in the way described in paragraphs (b) and (c) under the "Structure" heading (see [12] above), the individuals did not carry on business in common (or at all) and did not have interests in any partnership, so that, despite what was said in clause 1 of the first part of the June 2011 document, the respondent, as an individual, had no "interest in the Churton Kelly business". That being so, the argument runs, the appellant's promise in clause 1 to pay a net sum of $196,500 "in consideration for" the respondent's "interest in the Churton Kelly business" was a promise to make a payment for a "consideration" that was illusory in the sense that it was legally non-existent. 73The primary judge rejected this contention. It is relevant to set out the following part of his Honour's judgment: "[37] The plaintiff and defendant operated an accounting business in partnership. Even if the whole operation was conducted through corporate structures, the business could not have operated without the personal input of the plaintiff and the defendant. The personal input is what generated the work and resulted in fees to the business with benefits flowing directly or indirectly to the parties. The corporate structures may have been the recipient of the fees, but those corporate structures were corporate structures of the parties. To the extent that the business was successful, the parties benefited by receiving monies from their corporate structures and/or by having their interests in their corporate structures increase in value. The defendant's case, at its highest, cannot deny benefits to both parties from the operation of the partnership. For one of the parties to acquire, either personally or through his or her corporate structures, the whole of the interest in the partnership business would be a matter of some commercial benefit. That is what the defendant was promised and got under clause 1 of the Heads of Agreement. The plaintiff was in a position to deliver to the defendant what the defendant expected to get and what she got and that was the partnership interest that was not hers or her company's. [38] Further, this agreement should be construed to give it business efficacy. This was, after all, a settlement agreement. It was an agreement to settle a dispute which both these parties wanted resolved. The Court should not lightly put at nought the resolution of a dispute where the parties have ostensibly agreed on a resolution and that resolution can, in a practical way be put into effect in conformity with that agreement. [39] Further, the partnership agreement acknowledges personal interests by the parties in the partnership. Clauses 2 and 5 in particular recognise holdings "through" a company or a trust, but they recognise "her" and "his" entitlement. The clauses recognise entitlement to personal remuneration." 74Written submissions of counsel for the appellant begin their treatment of this aspect of the appeal as follows: "His Honour erred in finding that the contract was to be construed to give it business efficacy." 75It is said that "business efficacy" is a matter relevant to questions as to implied terms as distinct from matters of construction. The submissions go on to say that what the judge did was to imply "a third party benefit clause or clauses, variously, throughout the agreement" - a course that was said to be impermissible because "the well-known tests for implication of terms" were not met. 76Furthermore, counsel for the appellant say, "the doctrine of privity of contract" presents problems for the defendant because "it is only a party to a contract who can sue for breach of the contract" and "only a party who has provided consideration for the contract can enforce it". 77The appellant thus calls in aid fundamental principles of contract law and challenges the correctness of the judge's approach to the construction of the contract. 78The first part of the June 2011 document embodied promises of the appellant and the respondent. They were mutual promises and were obviously intended to be legally binding. Neither party suggests otherwise. In order to be a contractual promise, each had to be given in return for something of value - in the sense that, in exchange for the promise, the promisor received a benefit or the promisee incurred a detriment. If it can be seen that there was a bargain involving such quid pro quo, the promise will be an enforceable contractual promise. 79As the primary judge recognised, the respondent occupied a position from which he could do and cause to be done all such things as were necessary to bring about the withdrawal of himself and his entities from the activities that made up "the Churton Kelly business", thereby leaving the business in such a state that the appellant and her entities could conduct it themselves and for their exclusive benefit, without either interference from the respondent or any need to pay attention to rights and interests of the respondent and his entities. The judge was right to regard the appellant's promise to pay in clause 1 of the first part of the June 2011 document as given in exchange for the respondent's promise to do and cause to be done all such things as were necessary to bring about that withdrawal. The fact that performance of the respondent's promise entailed his procuring actions of entities under his control did not mean that there was some lack of privity of contract or want of consideration. 80It is true that the judge gave to the expression "Akis [sic] interest in the Churton Kelly business" a meaning that extended to include property and rights owned by entities other than the respondent himself being, however, entities owned and controlled by him. It is also true that his Honour regarded the respondent's promise to deliver that "interest" in return for money paid by the appellant as a promise to procure relevant actions by those other entities. Such a construction was both open and required by the circumstances. The parties knew how the ownership of the business and the business assets had been structured under and pursuant to the April 2007 agreement. They had there adopted language of partnership, styled themselves "partners" and made provision for what was to happen "when the partnership ends due to death or total and permanent disablement of one of the partners", albeit in circumstances where they chose, at a technical level, to create legal relationships between entities under their respective control as to the holding of assets. The parties must be taken to have contracted in June 2011 on the basis of their knowledge of the structure they had consciously and deliberately put in place and in a way that caused their promises to have meaning and effect within the established legal context they had created. And, it may be noted, a vital aspect of the structure was the agreement that each of the individuals was to service clients and deploy professional skills with a view to profitable operation of the business. 81The judge was right to construe the contract in a way that gave it business efficacy. In Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [43], Gleeson CJ, Gummow J and Hayne J approved the observation of Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 that "if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense". Here, it would flout business commonsense to regard individuals who had purposely housed the "Churton Kelly business" within a structure that entailed personal exertion but only indirect property ownership by themselves as having entered into a contract under which one was to pay a substantial sum to the other in return for nothing or virtually nothing - rather than in return for everything, by way of "interest" in the business, that that other's powers as indirect owner made him capable of causing to be delivered. 82In short, the judge was correct, for the reasons he gave, to reject this part of the appellant's case at trial. 83There is another point. Counsel for the respondent pointed out in submissions to this Court, that the appellant's "want of consideration" defence had not been pleaded in the District Court proceedings. The judge recognised this but because there had been "extensive argument" on it, "at least from the defendant", his Honour thought it "appropriate that he should deal with it". His Honour acted appropriately in that respect and the matter was also appropriately before this Court.

The status of the "non-binding" part of the June 2011 document 84The second or "non-binding" part of the June 2011 document dealt almost exclusively with the matter of payment of the balance of the sum of $196,500 remaining after the payment of the instalments provided for in clause 3 of the first part of the document. Those instalments totalled $50,500. There was thus a balance of $146,000 (referred to in clause 1 of the second part as "the balance of the Settlement Sum") as to which the first part said nothing regarding the time of payment. 85Clause 1 of the second part of the document began by referring, in paragraphs (a) to (d), to several steps which the appellant might take to the financial advantage of the respondent (such as assumption of liabilities for which the respondent was responsible, thereby financially benefiting him; and assigning client debts to him), as well as steps that the respondent might take to the financial benefit of the appellant (assumption of the business's tax liabilities). Thus in contemplation was the possibility that some net financial benefit might be given to the respondent otherwise than by simple payment of money and that that benefit would count towards satisfaction of the appellant's obligation to pay "the balance of the Settlement Sum" owing under the first part as to which that first part made no stipulation regarding time for payment. 86The second part went on, in paragraph (e), to deal with so much of the "balance of the Settlement Sum" as was not covered by the financial benefits contemplated by paragraphs (a) to (d). The status of paragraph (e) as something that was to become relevant only after the paragraph (a) to (d) benefits had been quantified and given was made clear by the word "then" appearing immediately before paragraph (e). The residual provision in paragraph (e) was framed in terms of monthly instalments of fixed amount. 87Significantly, the whole of the second part was headed ""Non-Binding Agreement: Subject to Due Diligence by Both Parties" and its clause 1 ended with the words "Details to be supplied". 88The judge concluded that the second part of the June 2011 document did not record contractual promises. His Honour noted that the description "non-binding" was not conclusive but considered that a number of other factors, viewed in conjunction with that description, warranted the conclusion. The June 2011 document was divided into two parts the first of which was obviously intended to be legally binding. The physical separation of the second part from the first indicated an intention of the parties to distinguish between them. The judge also referred to the fact that the mediation had continued for a whole day and said it was "not surprising that the parties had been able to resolve some but not all of the issues between them". He also said: "In that situation, it is not surprising that they recorded as binding that which they agreed on. As to the remainder, they recorded a path that it was hoped would take them to a complete resolution, but a path to which neither wished to be tied." 89The judge also referred to the fact that the appellant, in her defence filed on 15 June 2012, had on several occasions referred to her intention and understanding that the second part was not to be legally binding or operative. His Honour also made explicit reference to the following part of the appellant's cross-claim filed on 26 June 2012: "It was the intention of the parties that this agreement [ie, the second part of the June 2011 document] was to have no legal effect, and provided for the mechanism in [sic] which the parties would resolve outstanding issues relating to the Settlement Sum and dissolution of the partnership." 90The appellant says that the judge fell into error by characterising the provisions in the second part of the June 2011 agreement as lacking contractual force. She refers, in particular, to subsequent conduct of the parties that may be considered consistent with performance of those provisions or otherwise as accepting them as having had legal effect. For example, the appellant apparently commissioned another accountant to determine "the fair market value of the Goodwill of the practice as at 31 March 2011 for the purpose of a Due Diligence examination of the fee parcel acquired on the Partnership Dissolution of the Accounting Practice . . . and subject to the Heads of Agreement entered into on 16 June 2011" (these words are taken from that other accountant's report). Also, the respondent, on 15 November 2011, gave the appellant written notice that she was "in breach of the Non Binding Agreement made on 16 June 2011" and that he thereby terminated that "Non Binding Agreement". In addition, the appellant paid $7,500 on 31 August 2011 and $4,300 on 30 September 2011. These were, she said, one of the instalments contemplated by paragraph (e) of the second part of the June 2011 document and part of another such instalment. 91The respondent says that these things done by the parties after the signing of the June 2011 document are irrelevant to the question whether the provisions in the second part have contractual force and effect. 92The question for decision is as to existence or non-existence, at the time the June 2011 document was signed, of an intention of the parties that the second part should be the source of legal relations between them. As Allsop P pointed out in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [4]: "There can be no doubt that until the High Court of Australia says otherwise the underpinning legal theory in the law concerning the formation, construction and interpretation of contracts is the so-called objective theory of contract." 93The part of that statement concerning the formation of contracts is relevant to this case. 94Allsop P referred to the observation of Mason ACJ, Murphy J and Deane J in Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 at 429 that: "the clear trend in decided cases and academic writings has been to leave the objective theory in command of the field". 95Reference may also be made to Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 where Gaudron J, McHugh J, Hayne J and Callinan J (at [25]) stated clearly that contract formation is to be objectively assessed. In Air Great Lakes Pty Ltd and KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 330, Mahoney JA said that the existence of a contract is "a consequence which the law imposes upon, or sees as the result of, what the parties have said and done". 96But the objective theory of contract formation pays attention only to what the parties said and did before and at the point at which a contract allegedly came into existence. The question is as to intentions as they existed at that point. Those intentions are to be ascertained by reference to antecedent and contemporaneous words and actions. The fact that, after the relevant point, either or both parties act consistently with what one then alleges to be a contractually binding term is no indication that the term is of that quality; and, in the same way, inconsistent conduct of one or both parties does not indicate that the term is not binding. 97On that basis, the several matters to which counsel for the appellant referred (see [90] above) were, with one exception, irrelevant to the question of contract formation that confronted the judge in relation to the second part of the June 2011 document. The exception relates to the content of the appellant's pleadings. To the extent that the appellant there accepted the non-binding quality of the second part, it may well be that she made admissions which, apart altogether from principles of contract law, disentitled her from contending that the provisions in question had contractual force. 98It is sufficient, in my view, to say that the several matters to which the judge had regard by reference to the language the parties employed and the circumstances leading up to the formulation and adoption of the June 2011 document fully justified his assessment that, according to the objective theory of contract formation, the shared intention with respect to the second part was not to give and receive contractual promises but to record a possible approach to future determination of matters on which it was, at the time, not possible to reach consensus - matters the then uncertain status of which was recognised by the words "non-binding agreement", "subject to due diligence by both parties" and "details to be supplied".

Orders 99In my opinion, the following orders should be made:

Appeal dismissed.
That the appellant pay the respondent's costs. 100WARD JA: I have had the benefit of reading in draft the judgments of Barrett JA and Leeming JA. I agree with the reasons of Barrett JA and the additional observations of Leeming JA. The appeal must be dismissed with costs. 101LEEMING JA: I agree with Barrett JA's judgment, which I have read in draft, that this appeal must be dismissed. I also agree with his Honour's reasons, but wish to add the following. 102First, considerable deference must be given to the trial judge's decision on the second day of a hearing to refuse an amendment which involved the withdrawal of admissions, an adjournment and, on one view, dismissal of the proceedings. The amendment application turned on the appellant's explanations for (a) the way in which her defence, cross-claim and affidavit had been drafted inconsistently with the case belatedly sought to be put, and (b) the failure to notify the respondent until shortly before the hearing. His Honour's discretionary decision is only reviewable in accordance with House v R (1936) 55 CLR 499, and it was in large measure based upon his rejection of Ms Kelly's evidence following her cross-examination. The cross-examination, relevantly as extracted in Barrett JA's reasons, amply supported the primary judge's finding that the application be refused. But in my opinion this is not merely a case where no appellable error has been established. Nothing to which this Court was taken in writing or orally suggests to me that any other course was properly open to his Honour. 103Secondly, it may readily be inferred that neither party had a correct understanding of the legal nature of a trust, despite their academic and professional qualifications, and despite the fact that the accountancy practice was conducted by the trustee of a unit trust. A trust is not a legal person; a private trust is a relationship comprising various rights and obligations, personal and proprietary, between trustee, beneficiaries and trust property. The incorrect but prevalent notion that a trust is a legal person was reflected throughout the trial. It was seen not merely in the "Structure" contained in the parties' "Partnership Agreement". It was also seen in the appellant's principal affidavit (she had sworn that "the Mina Family Trust [sic] and Eastern Suburbs Accounting entered into an agreement to form an entity partnership [sic] called the Kelly and Mina Unit Trust"). Indeed, the proposed pleading the subject of the amendment application alleged a partnership between "Eastern Suburbs Accounting Services Pty Limited and The Mina Family Trust". 104The fact that inaccurate language (which is encouraged by some tax legislation) has been used to describe the legal structures by which a business is operated does not of itself mean that the transactional documents, or indeed documents filed in a court, lack legal efficacy: cf HP Mercantile Pty Ltd v Commissioner of Taxation [2005] FCAFC 126; (2005) 143 FCR 553 at [2]). It was not suggested, for example, that the term "Akis Mina is to hold his entitlement through the Mina Family Trust" in the April 2007 agreement was devoid of legal meaning. 105And yet, the appellant seeks to take a very strict approach, denying all efficacy to the first part of the June 2011 document because, so it is said, she and the respondent did not personally have the capacity to perform its terms, and the "relevant entities" were not party to it. 106Just as a court will readily conclude that the structure created by the April 2007 agreement was that the accounting practice was to be conducted by the trustee of a unit trust, the legally inaccurate drafting notwithstanding, so too it is no large step for the promises in the first part of the June 2011 document to be construed to extend to property and rights owned or controlled by the natural persons who were party to it. In a context where it is plain that the parties have used legally loose language throughout their commercial relationship, there is no foundation for an unduly technical construction to be given to the June 2011 agreement bringing the relationship to an end. In particular, "AKIS INTEREST IN THE CHURTON KELLY BUSINESS" for which the appellant promised to pay $196,500 is readily to be construed as a reference to the units of the trust held by the trustee of the Mina Family Trust which was controlled by him, to be acquired by the company whose sole shareholder and director was the appellant. 107The parties described themselves as "partners" and executed a "partnership agreement", and created a structure operating through entities which they controlled. Why would not a document of the same character be effective to dissolve that relationship and deal with the adjustment of the parties' rights? The alternative construction, for which the appellant contends, is that the June 2011 agreement gives rise to no legal consequences at all because of the misdescription of parties. That construction is one which signally "flouts business commonsense", to use the language of Lord Diplock. Moreover, the submission that there was no valuable consideration because it was essential that "the party making the promise is capable of giving effect to the promise", which was not the case because only the natural persons were parties, is impossible to reconcile with the conventionally implied obligation in a contract to do all that is reasonably necessary to secure its performance: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607. On any view, that implied obligation extends in the present case to actions by corporations owned and controlled by the parties. 108Thirdly, the primary judge gave considerable, albeit not decisive, weight to the fact that the parties had in terms labelled the second part of the handwritten June 2011 agreement as "NON BINDING AGREEMENT: SUBJECT TO DUE DILIGENCE BY BOTH PARTIES". His Honour was entirely correct to do so. Those words are not decisive; the document is to be construed as a whole and it is theoretically possible for it not to bear that character. But that description is the only language in the document which is directed to whether the words in that part have contractual force, and is not readily displaced. Weight is also to be given to the fact that the words form the title of that part, and are in contradistinction to the title of the first part. All those considerations confirm that his Honour's construction was correct. 109It follows quite plainly that the first two pages of the "Heads of Agreement" were binding, that they gave rise to an obligation in the nature of debt, that part of the debt was to be discharged by three payments in June and July 2011, that the balance (for which no time was specified) was payable a reasonable time thereafter, and that a reasonable time had elapsed by November 2011 when proceedings were commenced. 110Finally, as Barrett JA has mentioned, on the day following the refusal of the amendment application, during the appellant's cross-examination and the parties' final addresses, an application was made for prerogative relief against the primary judge in the supervisory jurisdiction of this Court (the application was refused, although short service was ordered; the proceedings were discontinued shortly thereafter). That application should not have been made - first, because of the availability of a interlocutory appeal, but also, and most importantly, because of the impropriety of moving for ex parte relief in those circumstances. As presently advised, I cannot conceive of an occasion when it could be proper for an ex parte approach by one party to a court exercising supervisory or appellate jurisdiction during an actual inter partes hearing.

Amendments 11 February 2014 - Typo Amended paragraphs: Counsel's initials on coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 February 2014

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