(7) KNG continued to offer to the other participants the opportunity to share in the acquisition and on-sale of the Land, in return for some financial contribution.
268 In the circumstances, the appellants submit that the suggestion by COTC that KNG was seeking to obtain a windfall was particularly ironic. The appellants submitted that there was no improper purpose and no lack of bona fides in making the amendments, even if the amendments effected a fundamental restructuring of the participants' rights.
269 The respondents also relied upon Harry Stamoulis' admission that the purpose of the OSJVA was "simply to protect KNG's interest" because it was "safer" to provide the $10 million with the protection of the OSJVA (T234-235). The respondents submitted that this was "naked majority aggrandisement".
270 Had it been necessary for her to do so, the learned primary judge would have held that the doctrine applied and that for this reason also, the resolutions of 12 October were not for a proper purpose and therefore void.
271 The appellants say that the point of their submissions set out in [267] above was to indicate that KNG was conferring a tangible benefit on the other participants in relieving them of liabilities which the primary judge found they lacked the ability or willingness to meet.
272 Furthermore, her Honour's finding, which I have already explored, that the Arts vote was bought through the $1,500,000 fake invoice, a matter which caused her to dismiss the appellants' point 6, overlooks the fact that Mr Dalglish's friend, Mr Shannon (Jandawn) voted in favour of the resolutions.
273 It seems to me that the second of the points made by the appellants which the primary judge accepted and the third point (about which she said was not clear) are extremely telling. That is that (2) KNG was the only participant with the ability and willingness to meet those liabilities, and to provide the guarantees and the purchase money necessary to acquire the Cudgen Land and that (3) the "Club of the Clubs" concept was no longer feasible or realistic.
274 Although the learned primary judge said that (3) was not clear, she seems to have based this on the fact that Mr Dalglish was still arguing about the point. Well he might as his so-called "intellectual property" depended on the concept having some relevance and some value. However, we know that as at 1 August 2000, despite the activities of KPMG, not one pre-sale was made.
275 The scenario presented was clearly that no one was willing to put up any money to save the Project other than the Stamoulis interests. In particular, Mr Daglish had not put up one cent. A lot of money could be lost if the Project was not salvaged. KNG was the only offeror of salvage and, even then, it offered other participants the opportunity to continue their involvement, if they too were prepared to put up funding.
276 The appellants complain that her Honour repeats on a number of occasions a statement which they say is quite erroneous.
277 An instance is in [230] of the judgment where her Honour says:
""It is true that KNG was relieving the other participants of the liabilities to Lenen, but that is what it agreed to do by reason of its election on 18 September 2000 for the Land Play."
278 The appellants say correctly that this statement fails to recognise that the election of 18 September 2000 involved all participants contributing their respective proportions to the bank guarantee by 29 September 2000. The quid pro quo for the participants sharing in the gain (if any) from the Land Play was that they discharge their proportionate financial responsibilities.
279 In my view, the suggestion that the resolutions of 12 October 2000 should be set aside as a fraud on the power, fail.
280 Accordingly, I would uphold the appellants' contention that the OSJVA was valid.
281 (C) The next grounds of appeal focus on whether KNG achieved a fair or market value for the Cudgen Land by selling it to the Macquarie Joint Venture for $25 million.
282 The primary judge summed up the valuation evidence at [332]-[334]. She said that the respondents' final submissions did not contest the valuation made by Mr Love, the appellants' valuer, of $27.1 million (being the $28.5 million less the 5% discount of $1.4 million) subject to three qualifications.
283 The first qualification related to the amount of discount for the "town planning risk". The respondents accepted that any quantum of reduction is difficult and endorsed Mr Love's suggestion that it is very much "opinion based". Both experts agreed that some discount should be applied. The respondents submitted that an appropriate risk would be no more than half of what was allowed by Mr Love being $1.5 million resulting in a figure of $750,000. The primary judge accepted that as an appropriate figure by which to adjust the amount.
284 The second qualification related to the alleged erroneous assumptions by Mr Love in relation to projected sales rates. Mr Love assumed a sales rate of 8 per month and agreed that if such rate were doubled, it would have a very significant impact on the overall discounted value. Mr Cox, the respondents' expert valuer reviewed the Casuarina sales schedules and concluded that the rates of sale within the relevant periods were in the order of 16-20 per month. The judge notes that the respondents' submission was that a reasonable adjustment would be in the order of $1 million. She made an adjustment of what she held was a reasonable amount in the circumstances is $850,000.
285 The third qualification was that there should be an adjustment to the value of $27.1 million to reflect the "Put and Call Price".
286 The primary judge accepted that there should be an adjustment in this regard and that an appropriate premium is 5%.
287 The primary judge's valuation with the adjustments of $750,000 and $850,000 results in a figure of $28,700,000. Adjusting that figure by 5%, $1,435,000, results in a final figure of $30,135,000.
288 The appellants accept this finding. However, it must be realised that this is the value of the land as at January 2002.
289 The primary judge said more than once, see [253] and [335] that KNG's best endeavours were compromised by the desire to facilitate Spiros Stamoulis' entry into the Macquarie Joint Venture. He calculated that it was better to sell to the new joint venture at a discount and make up the sum discounted from profit from the joint venture.
290 Thus, she held, KNG did not use its best endeavours to sell the Land at fair or market value. It knew that the Ray Group was interested as early as January 2001. It was steered on a course by its director who, the judge was sure, felt constrained in the way that he marketed the Land because of his concern over the "contractual situation". KNG promised in the MOU that it would not seek to negotiate with any other parties once the figure of $25 million was struck in June 2001. It ceased any further efforts to market the Land in July 2001.
291 The primary judge noted that KNG/Stamoulis had little difficulty persuading the prospective Macquarie Joint Venturers to pay $25 million and she had little doubt that if Spiros Stamoulis had not stepped in and ended the negotiations by stating that he was comfortable with $25 million and a part of the joint venture, the market value could have been achieved.
292 Thus the primary judge was satisfied that KNG breached cl 5 of the Supplemental Agreement by failing to sell at fair or market value of $30.135 million and failing to share the gains on a pari passu basis with COTC.
293 The appellants say that Spiros Stamoulis' asking price was $28,000,000, but this is really of no moment. The judge accepted that he had used his best endeavours to get the best price. His last valuation, which was in 2000 valued the land at $20,000,000. He negotiated with Mr Ray at figures between $23 and $28 million and, ultimately there was agreement on $25 million.
294 Mr Jackman put that, bearing in mind the valuation of $20,000,000, it was appropriate to do a deal for $25,000,000. He put that it is wrong to reason back from a valuation as of January 2002 to consider the fair value in June 2001.
295 The price of $25,000,000 was agreed in principle on 21 June 2001. The final binding agreement was reached on 23 January 2002. In that six month period, it is clear that the value of the Land was rising: all the experts agreed on this.
296 The appellants say that the vital date is the date of the Memorandum of Understanding of 21 June 2001.
297 I have already set out a summary of the Memorandum of Understanding. It will be remembered that, although the document was explicitly said not to be a binding contract, it did contain an agreement that KNG would not during the due diligence investigation period grant to any other party a legal or equitable interest in the Land or undertake any negotiations with any other party to grant such an interest in the Land.
298 The appellants say that it is implicit in that Memorandum of Understanding and the agreement within it that the price at which the Land would be sold to the new joint venture was fixed.
299 The proposition was akin to saying that an agreement to negotiate in good faith on an understanding that one is selling land at $25,000,000 involves the proposition that it would be a breach to sell at a higher price even if the value of the land increases.
300 There is no authority which was cited to us which would support this proposition. However, the concepts of non contractual Memoranda of Understanding and Obligations to deal in good faith are still in the infancy of their development.
301 The concept of an agreement to negotiate has been touched upon by a number of cases in the past twenty years.
302 The Court of Appeal considered the law in Coal Cliff Collieries Pty Ltd v Sijehama (1991) 24 NSWLR 1. Broadly speaking the court held that such an arrangement normally was too illusory to be enforceable, but that a particular arrangement might, on its true construction show that one or more matters constituted enforceable obligations.
303 In England, a similar view has been taken, see Walford v Miles [1992] 2 AC 128 and Little v Courage Ltd (1994) 70 P & CR 469.
304 In Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 at 491 [14], Tipping J giving the reasons of the New Zealand Court of Appeal said:
"A contract purporting to bind the parties to negotiate, whether expressed in terms of good faith, best endeavours or otherwise, is in substance a contract to try and agree. Breach lies in failure to try, either at all or according to what may be required. Breach does not lie in failure to agree."
305 The principles have recently been again considered in New Zealand in Porter v Gullivers Travel Group Ltd [2007] NZCA 345 (noted in 13 BCB 15).
306 Thus, the prevailing view is that, whilst it may be a breach of a collateral contract, sometimes referred to as a "process contract", to withdraw from negotiations without cause, there is no obligation to conclude the deal, let alone conclude the deal at the price suggested. A person who has agreed to negotiate in good faith is not prevented from taking the position that as the market is rising so should the price.
307 Accordingly, I must accept that the vital date is January 2002 rather than June 2001 and, at that date the value of the land was over 30 million dollars.
308 Does that fact, if it be the fact, that the Stamoulis interests believed that they were bound to sell at $25 million alters the situation. I cannot see why it should.
309 Likewise, if the Stamoulis interests thought it was prudent not to rock the boat with the prospective Macquarie Bank Joint Venture, then the same comments would flow as were made by the learned primary judge about the motives of the sale at a discount.
310 Thus, I would not uphold this part of the appeal.
311 (D) The appellants say that questions of breach of fiduciary duty only arise if the judge's finding that the OSJVA was invalid is itself wrong.
312 This must be correct.
313 (E)-(G) For similar reasons, these aspects of the appeal have fallen away.
314 (H) For the above reasons and those of Hodgson JA, the cross-appeal should be dismissed.
315 It follows from what I have said that the appeal must be allowed.
316 Various orders were paid for payment of monies pending the appeal: these must now be reversed.
317 As to costs, I agree with Hodgson JA.
318 I agree that the orders stated by Hodgson JA are appropriate.