Kevin Annakin
Witness
(sgd)"
13 The amended originating process seeks specific performance of both agreements in their entirety. However, Mr Fernon of counsel, who appeared for Mr Maher, indicated in opening that, as at the date of the hearing, almost all of the obligations contained in both agreements had in fact already been performed, or else had ceased to be relevant. The only outstanding issue pressed by Mr Maher is that concerning the transfer of certain motor vehicles from the ownership of HME to Demaher, this being an obligation said to be contained in clause 8 of the 20 November 2003 document and clause 2 of the 15 December 2003 document.
14 The vehicles the subject of dispute are only those three listed in the first paragraph of clause 2 of the December document as having vehicle registration numbers VXL 920, XVZ 341 and XTA 696. The remaining two vehicles were used in a personal capacity by Mr Maher and Mr Honeysett in the course of HME's active trading. It appears that by consent of the parties reached before commencement of these proceedings in apparent pursuance of that clause, ownership of the vehicles registered as VTS 074 and WVA 375 has passed to Mr Honeysett and Mr Maher respectively.
15 The evidence before the court is that the disputed vehicles have been in the possession of Mr Maher or Demaher since 19 December 2003. In addition, I am satisfied, for reasons appearing at pp.436 to 438 of the transcript (which need not be repeated here) that Mr Maher paid $40,000 to HME which in turn paid an equivalent amount to the lessor of the vehicles, with the result that Mr Maher (or Demaher) provided consideration for the transfer of the vehicles.
16 It is clear that clause 2 of the December document covers in greater detail and with more particularity the matter reflected in clause 8 of the November document. It follows that specific performance of the provision of the later agreement would put Mr Maher in the position he seeks. I proceed nevertheless to consider the effect of both documents.
17 Mr Sirtes of counsel, who appeared for the Honeysett interests (including Mr Honeysett as derivative claimant on behalf of HME), submitted that the November document should be held, in a contractual sense, to be void for want of certainty, being "entirely constituted by clauses which are deficient of essential terms" and should instead be characterised, at its highest, as a "to-do list". He criticised each clause on several bases. With regard to clause 8, he observed that it does not specify which leases are to be paid out, who is to pay them out, a timetable for any such payments, the party to whom the payments are to be made or upon what other terms the payments are to be made; nor does it specify who is to "talk to Westpac", by when, or what the subject matter of that conversation is to be. It also does not specify what is to happen to the subjects of the lease upon their having been paid out. These deficiencies, it is said, render the clause "incapable of comprehension" and therefore incapable of specific performance.
18 Mr Fernon submitted that the document had been prepared by the two shareholders and directors of HME and its office manager of nine years' standing (Mr Kevin Annakin) and that it must be accepted that the two principals had identified with sufficient precision for their own purposes the essential matters requiring attention. He pointed out that there had been no complaint by Mr Honeysett about any essential matter that had not been dealt with by that agreement or any notice given by him of any perceived uncertainty in its terms.
19 There is force in Mr Sirtes' submission, so far as the precise words are concerned, but I would not consider those factors to deprive the clause of all meaning whatsoever, as he contends. The long-settled approach of the courts, following what was said by Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at p.514, is to interpret the language used broadly and fairly, particularly when the document in question is drafted by lay persons or business persons in the course of their dealings in relation to matters with which both (or all) are familiar. What may, to an outsider, appear to lack precision may very well be perfectly intelligible and comprehensively complete to the particular insiders whose subject matter is in issue. In Hammond v Vam Ltd [1972] 2 NSWLR 16, Sugerman P observed (at p.18) that it is the duty of the courts to put a "fair meaning" on the words unless it is "utterly impossible" to do so. His Honour there followed the well-known statement of Barwick CJ in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at p.437 that
"… a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which [the court]… decides is its proper construction: and the court… will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it… So long as the language employed by the parties… is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or intention, be resolved."
20 This is not a situation in which the court is unable to ascertain the intention of the parties. Although the language employed is cursory, it is still possible to place a meaningful construction on it in the particular context. The clause really contains one primary operative obligation, that is, an obligation on some person, natural or corporate, to pay out certain leases. The factors said to be lacking are the specification of the leases in question, the identity of the payor and payee, and the time by which payment had to be effected.
21 It may, in the particular context, be safely be inferred that the very fact that the clause does not specify which leases are to be paid out meant that the parties were in agreement about which leases were being referred to. On the facts, there are no leases in question other than those relating to vehicles - for example, leases over plant, premises or any other equipment - to which the reference could pertain. The words "Talk to Westpac" appearing immediately afterwards identify the subject matter with further specificity. The evidence before the court is that three vehicles owned by HME were encumbered by financial arrangements with Westpac and one was encumbered by an arrangement with AGC, a wholly-owned subsidiary of Westpac at the particular time. There can be no doubt that it is only, and all of, the three vehicles leased from the Westpac group to which the clause pertains. That the subject matter is not some subset of those three vehicles is, again, evident from the absence of mention of some more specific arrangement.
22 The identification of the leases necessarily carries with it the identification of the payee, that is, Westpac (or the Westpac group). The identity of the payor must be HME in the first instance since it was the lessee and the party in a contractual relationship with each lessor giving it the standing or ability to "pay out".
23 Insofar as the words "Talk to Westpac" also appear as an imperative term in the clause, it is obvious from the context that the intended substance of that conversation with Westpac could only relate to the paying out of those leases and was regarded by the parties as being simply a necessary or adjunct step towards that outcome rather than an obligation in itself. Mr Maher deposes that, in circumstances to be examined in detail presently, the drafting of that clause occurred after business hours on 20 November 2003 and that it was therefore not possible to consult the bank at that time in relation to the current state of the leases. He says that he said to Mr Honeysett words to the effect of "Let's see the bank tomorrow and talk to Ray" (this being a reference to Ray Dawson, the bank manager in charge of HME's accounts) and that Mr Honeysett agreed that this was a good idea. In cross-examination Mr Maher gave similar evidence to the effect that Mr Honeysett had agreed that it would be necessary to telephone the bank in order to confirm the "pay-out figures" before being able to proceed. Because, as will be seen, Mr Honeysett's evidence is that he is unable to recall most of what happened on the relevant occasion, there is no reason to doubt that general state of affairs. The absence of specificity as to who was to actually talk to Westpac is not material.
24 The remaining issue is whether the absence of a timetable for the repayments constitutes the absence of an essential term. There is some ambiguity as to what is "essential" in this context. In Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Ipp J cited the judgment of Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 (at p.619) in which it was said:
"It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'."
25 The clause clearly contemplates further details being obtained before the logistics of the pay-outs could be effected. Therefore, any timetable would be necessarily dependent upon the consultation with the bank. It does not seem to me that its absence in this clause should be regarded as "essential" in a way so as to void the clause of content altogether. The truly important term is that the parties agree that HME is to bear the cost of the lease repayments. Such an agreement would not be altered by deferral of the question of when that payment was to occur. I do not think that in these circumstances the clause should be seen as an unenforceable "agreement to agree" in the sense contemplated by the so-called third class in Masters v Cameron (1954) 91 CLR 353.
26 It should be noted that the Honeysett parties also rely on the fact that HME is not a signatory to either the November document or the December document and cannot be bound by it to perform any obligations arising therefrom. It is true, of course, that the company could not be bound as a contracting party in its own right, but the situation is specific to these facts. Mr Maher and Mr Honeysett, as the named contracting parties in each case, are the only shareholders and directors of the company in question. To that extent, Mr Maher and Mr Honeysett may be seen to have contracted with each other to exercise their individual powers as directors to wind up the business of the company in a manner consistent with their expressed decision as the only shareholders to divide and dispose of the capital of the company between them. The company would be bound not as a direct function of the contract but by a decision of its board of directors. It could not do otherwise.
27 Mr Fernon nevertheless submitted that the contracts should be read as including HME as a party, albeit one "not expressly named". He submitted that each of Mr Maher and Mr Honeysett was acting in his capacity as a director of HME in making each of the agreements and thereby had authority to bind it. That concept is really only useful in situations where a company is contracting with some other external person or entity. It is not meaningful to speak of a company contracting with itself to do certain things. Nor is it correct to conceive of a company's obligations to comply with decisions of its directors in contractual terms. Those "obligations" - or, more accurately, the legal consequences of controllers' actions - arise separately from the operation of principles of company law. It is accordingly not necessary to attempt to find some basis on which HME can be seen to be a contracting party.
28 Mr Fernon submitted that clause 2 of the December document does nothing more than flesh out and add definition to the arrangement contained in clause 8 of the November document and that it is not affected by any ambiguity. Mr Sirtes submitted that the December clause should be held incapable of specific performance because unsupported by consideration and, as a matter of construction, imposes no personal obligation on Mr Honeysett to do anything. Instead, it is said, the clause constitutes some kind of an acknowledgement that Mr Maher or a nominee specified by him will undertake to repay the leases and associated costs of the vehicles in the event that the vehicles are "signed over" from the ownership of HME to Demaher.
29 A further objection is taken on the grounds that the parties to the agreement are improperly defined. It is said that for the purposes of this particular clause, the promisor is "presumably" HME, the promisee is "presumably" Demaher or "its nominee", and that Demaher is "presumably… in truth" seeking specific performance of "the obligation contained in the clause". That can only refer to an apparent obligation upon HME to transfer the vehicles to Demaher which emerges from the phrases "Transfer to begin as of the 19.12.2003" and "Demaher Pty Ltd… repaid [sic] all existing leases… & any other charges in transferring vehicles… when signed over from Honeysett & Maher Electrical Pty Ltd". It was not argued that there was any ambiguity inherent in the use of the word "when" in the final part of the first paragraph and so I take the content of that obligation to be agreed, in that it denotes a definite and intended event rather than a condition precedent. Mr Sirtes says, however, that because Demaher is not a party to the contract, Mr Maher, having signed in his capacity as a director of HME, cannot seek specific performance on Demaher's behalf of what is really an obligation owed to a third party.
30 These submissions may be dealt with in the following manner. The clause expresses two ostensible "obligations", one being that of HME to transfer the vehicles to Demaher and the other of Demaher to pay the associated costs. However, since neither HME nor Demaher is a party, neither can be said to be the promisor or promisee. The promise being sued on is, in reality, one given to Mr Maher by Mr Honeysett to join in such action as is needed to cause HME to transfer the vehicles to Demaher or another nominee of Mr Maher or to acquiesce in such a transfer. The agreement is again one between the two persons constituting the whole of the membership and board of directors of HME and defines a course of conduct which they will cause to be adopted by and in relation to that company and its property. As consideration for Mr Honeysett's promise, Mr Maher promised to Mr Honeysett to cause Demaher, a company under his control (or "any other person or company" nominated by him, within the obvious limits defined by his ability to control such an agent), to pay the costs of the transfer. Consideration having therefore moved from Mr Maher, it is not material to the operation of the contract that he signed as a director of Honeysett & Maher (a status which could not, merely because "specific", be exclusive of all other offices he might have held) or that the benefit in the form of the vehicles themselves accrues to a third party. Mr Maher is entitled to sue because he is the true promisee in these circumstances.
31 It is also said that there is a legal "impossibility of performance" inherent in the clause because it contemplates the repayment of the moneys only after the vehicles are "signed over", but as a matter of the ordinary operation of transfer of leases, no "signing over" of the vehicles could occur until the leases had first been paid out. The correct interpretation of the clause again turns on the use of the word "when" in the final sentence of the first paragraph. I do not think that "when signed over" should necessarily be read as "after signing over has occurred" in that context. The word "when" merely denotes an event occurring at the same general time as another event. It is not straining the words of the clause to construe them as meaning "when the vehicles are to be signed over". Given that the "signing over" of the vehicles would not be an instantaneous event but a process taking some measurable amount of time, that would also not be inconsistent with the repayments actually being made before the transfer was effected, as legally required, but within that same general period of time. Nor is the mere fact that the words "signed over" are in the past tense significant, particularly when the clause suffers generally from what are conceded to be non-fatal errors of grammar and syntax.
32 In summary, therefore, I am not satisfied that any of the arguments based on the terms of the clauses regarding the leased vehicles, the absence of any necessary party or the absence of consideration acts as a barrier to the entitlement of Mr Maher to have the court's assistance in compelling compliance by Mr Honeysett with the requirements of those clauses.
33 Having reached these conclusions about the provisions of the agreements as they stand, I must turn to the questions of duress and unconscionable conduct and the contentions on behalf of Mr Honeysett that the agreements are vitiated or made subject to avoidance by such matters.
34 In approaching those matters, I should refer to some further background. It is clear that it was Mr Maher who initiated moves towards separation and the scheme of separation eventually set out in the documents of 20 November 2003 and 15 December 2003. His proposal that HME expand into the crane hire business and Mr Honeysett's negative attitude to that were the catalyst. Mr Maher raised the possibility based on crane hire with Mr Honeysett in September 2003. Mr Honeysett, according to Mr Maher, said that Mr Maher should speak to Mr Gleeson about it. Mr Gleeson, a solicitor, is the brother of Mrs Honeysett. Mr Maher raised the matter with Mr Gleeson (with whom he was well acquainted) and gave him a number of documents. Those are mentioned in a letter of 19 September 2003 sent by Mr Gleeson to Mr Maher. The letter is of almost nine pages and refers in detail to numerous matters relevant to the proposal Mr Maher wished to see HME pursue. The letter concluded with a general observation that there were a number of matters still requiring consideration in relation to the proposal.
35 Mr Gleeson wrote a second letter to Mr Maher on 29 September 2003. It commented on further documents submitted by Mr Maher. The letter concluded with generally negative comments about the usefulness of a process in which Mr Gleeson was asked to comment on drafts prepared by Mr Maher rather than being instructed to draft the documents himself. Mr Gleeson invited Mr Maher to contact him if he wanted to "talk about the conceptual issues" and said, "but otherwise I really think that I have taken things as far as I can because I am sure that continuing to have me involved in a critiquing fashion is bound to end in tears".
36 There was apparently no further contact with Mr Gleeson about the matter but Mr Maher continued to press on Mr Honeysett his desire to have HME branch out into crane hire. Mr Maher says that Mr Honeysett's only response was that he should speak to Mr Gleeson. That produced in Mr Maher a sense of frustration. He told Mr Honeysett that, as Mr Honeysett would not commit to the cranes proposal, he (Mr Maher) was going to "leave the company" and "go out on my own". This happened in the early days of October 2003. Mr Honeysett apparently interpreted Mr Maher's statements to mean that the HME business would be "closing down". He became worried about the implications of that, particularly because he had let Mr Maher develop greater day-to-day contact with the major customer, Orica. He was worried that "without the business structure we had developed at HME, I would be just thrown on the scrap heap at forty years of age". Mr Honeysett had been on extended leave attending to house renovations. He says that his conversations with Mr Maher caused him to decide to go back to work on 7 October 2003, which he did. Until then, he had been away from the day-to-day activities of HME for some months.
37 It was in the context that had developed in this way from September 2003 that Mr Maher had his solicitors, Mills Cameron Gallagher, write to Mr Gleeson on 14 October 2003. After stating that they acted for Mr Maher and that they understood Mr Gleeson to act for Mr Honeysett, Mills Cameron Gallagher conveyed on Mr Maher's behalf a request that a meeting take place between Mr Honeysett and Mr Maher (and the respective solicitors) "to discuss our client's proposal to leave the Company". Mr Gleeson replied on 15 October 2003 saying that Mr Honeysett was "agreeable to such a meeting occurring" and asking for an outline, in advance, of Mr Maher's proposal referred to in the Mills Cameron Gallagher letter. The letter concluded:
"In the meantime, may I remind your client, through you, that as each of the respective clients are directors, then each owe the company fiduciary obligations. It is being reported to my client by customers that your client is telling them, in words to the effect, that Honeysett & Maher is finished. You would appreciate that such comments are, to say the least, premature and certainly are not in the interest of the company as a whole."
38 Mills Cameron Gallagher wrote on 16 October 2003 giving an outline of Mr Maher's proposal. It was, in essence, that HME simply cease operations and go out of business:
"(a) That all existing Contracts with Honeysett & Maher Electrical Contractors be completed by Honeysett & Maher Electrical Contractors.