Motor Yacht Sales Australia Pty Limited trading as The Boat Boutique Company v Robert Blann

THE CONTRACT

1. The parties entered into an agreement in early October 2016 where the Plaintiff agreed to sell the vessel to the defendant. The written agreement headed 'Contract for the Sale of a Display Vessel Contract # 1779' together with its annexures, and the 'Rose Bay Marina Berthing and Mooring Agreement Schedule A' formed the contract(s) for the sale of the vessel.
2. While there has been some argument between the parties as to the exact date that the contract was entered into, I accept that it was about 14-19 October 2016. I accept that the contract has been properly executed and that it is legally binding.
3. I note that all of the invoices for berthing have been issued by Rose Bay Marina Pty Ltd and/or Enares Pty Limited. No invoices were issued by the plaintiff for the berthing of the vessel.

THE PLEADED CASE

1. The plaintiff's case can be summarised as follows: 1. It was an express term of the contract for sale that required the defendant to pay to the plaintiff the sum of $5,500 per month, inclusive of GST, for three years commencing on 14 February 2017. 2. This was 'in exchange for' a rent free period of three months commencing on 14 November 2016. 3. It is also pleaded in the alternative that the agreement, or more precisely the obligation described above, was effectively re-instated.

THE DEFENCE

1. The defendant resists liability on two main bases; 1. Any mooring fees were due to Rose Bay Marina Pty Ltd not to the plaintiff; and 2. The correct construction of the berthing term is that rent is only payable 'for as long as the defendant owned the vessel or chose to take up the opportunity to moor the vessel at Rose Bay'.
2. In essence, therefore the dispute concerns the correct construction of the berthing term - that is, who is obliged to pay what and when?

EVIDENCE TENDERED

1. The plaintiff tendered following : 1. Affidavit of James Michael Thompson sworn and filed 30 November 2018 ('Exhibit A'); 2. Affidavit of Sean Michael O'Doherty sworn 29 November 2018 and filed 30 November 2018 ('Exhibit B'); 3. Affidavit of James Michael Thompson sworn 4 February 2019 and filed 5 February 2019 ('Exhibit C'); 4. Affidavit of Christine Louise Perry sworn 27 November 2018 and filed 30 November 2018 ('Exhibit D'); 5. Document titled 'Bob Blann Berthing Schedule and Invoicing' ('Exhibit E'); 6. Contract for the Sale of a Display Vessel #1779 ('Exhibit F'); 7. The Boutique Boat Company advertisement in Club Marine, Volume 34, No. 2 ('Exhibit G'); and 8. The berth plan at Rose Bay Marina ('Exhibit H').
2. The defendant tendered the following: 1. Copy of texts sent between the defendant and Mr O'Doherty ('Exhibit 1'); 2. Affidavit of Robert Fredrick Blann affirmed and filed on 13 January 2018 ('Exhibit 2'); and 3. Black and white aerial photograph of the Rose Bay Marina marked by Mr O'Doherty ('Exhibit 3').

PRINCIPLES OF LAW

1. The plaintiff submits that principles of law that I should apply are as follows: 1. The court has the task of identifying the imputed intention of the parties, by reference to the contractual text construed in light of its context and purpose: Cherry v Steele-Park [2017] NSWCA 295 at [46] (Leeming JA). 2. The court will give effect to the plain, natural or common meaning of the words used. The 'plain meaning' reflects the primacy of the text of a written contract. The starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties to record their bargain. Cherry at [72] (Leeming JA) 3. Evidence of the parties' subjective intentions is not relevant to the construction of the contract. Cherry at [57] (Leeming JA) 4. Evidence of prior negotiations (and other relevant surrounding circumstances or the factual/contextual matrix) is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract: Cherry [59]-[63] (Leeming JA). It may be used to assist in determining the plain or natural meaning of words but not to contradict those meanings: Cherry at [68] (Leeming JA) citing Codelfa Construction Pty Ltd v State Railway Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352 (Mason J). 5. Ambiguity is a conclusion to be reached after consideration of evidence of surrounding circumstances rather than a precondition to the admissibility of evidence of surrounding circumstances: Cherry at [76]-[85], [122]-[124] (Leeming JA). 6. Subsequent conduct is not admissible to construe the terms of a contract: Cherry at [140] (White JA) citing Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570. It is admissible however to determine the existence of a contract or its terms: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. 7. Generally speaking, a court will be reluctant to accept a construction which would achieve an unreasonable result: Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 at 299 (Santow J).
2. The defendant submits that the principles of law that I should apply are as follows: 1. The meaning of a term in a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean: Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 at 656-7 [35]. 2. Consideration of the issue involves consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. 3. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating" 4. The court may have regard to events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating, but not to evidence of the parties statements and actions reflecting their actual intentions and expectations. 5. Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect; Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166 (19 July 2016) at [45].
3. I have had regard to all of these authorities in coming to my decision in these proceedings.

THE PLAINTIFF'S CASE

1. On the plaintiff's construction and understanding of the berthing term, the defendant is obligated to pay the rental sum of $5,500.00 per month inclusive of GST for a 3 year term commencing February 2017. The plaintiff relies on the following: 1. The plain meaning of the terms would indicate that the seller was providing a berth in exchange for rent, and that this construction does not require additional words for understanding; 2. The plaintiff submits that the situation does not become ambiguous when one has regard to the surrounding circumstances. The interconnectedness of the businesses is that Rose Bay Marina Pty Ltd assists Enares in managing the Rose Bay Marina - the companies have the same directors and secretaries, and Enares does not employee its own staff. The plaintiff, being the Boat Boutique, is just another related entity to Rose Bay Marina Pty Ltd. The plaintiff submits that Rose Bay Marina Pty Ltd does not have control over the terms on which they (or Enares) choose to rent the berths. The plaintiff further submits that Mr O'Doherty was paid a commission, not only for the sale of the vessel but also for the rent generated from the berth; 3. There were other terms in the contract that were consistent within the textual context. Namely that a term which gave '[an] Initial 3 months free berthing at Rose Bay Marina' (Annexure A Cl 2 from the Contract) and that 'If Berth 12 vacant MYMH will attempt to fill for a period of time to offset cost' (Annexure A Cl 6 of the Contract). The plaintiff submits that these terms support the argument that the plaintiff was simply exercising its ability to rent out the Marina Berth; 4. The Rose Bay Marina Pty Ltd was not a party to the contract. The plaintiff submits that the 'inclusion of Annexure B to the Contract (being the Berthing and Mooring Agreement) is, at most, a separate contract between different parties that does not affect the construal of the Contract and Berthing term proper', and that construing the Berthing Term as an obligation vis-a-vis the defendant and Rose Bay Marina Pty Ltd would be incorrect; 5. The plaintiff submits that when settling the initial disagreement (the catalysis of the Alternative Contract) both parties were fully aware of their obligations; and 6. The defendant paid up until, and in accordance with, the contract to March 2018. It is asserted that this fact confirms the existence of a contract between the plaintiff and defendant.

THE DEFENDANT'S CASE

1. The defendant submits that the inclusion of the berthing term was for the purpose of securing berth 12 at the discounted price of $5,500 including GST for 3 years. The plaintiff was able to give such a guarantee because of the relationship it had with the marina.
2. It was then the Rose Bay Marina that sent the defendant the berthing agreement and the welcome letter. It was also the Rose Bay Marina that issued and sent all the invoices to the defendant (except for one month which was invoiced by Enares).
3. Following the defendant's construction and understanding of the berthing term, the plaintiff was not entitled to terminate the contract as the defendant did not repudiate the contract.
4. The defendant submits that their interpretation of the berthing term is preferable for the following reasons: 1. The text, in its terms, links the obligation about the berth and its price to the boat. Rent being due is conditional on having the vessel being berthed at the Marina. 2. It does so in agreement about the sale of the boat. 3. By referencing 4% and CPI, the berthing term can be understood to be a term about fixing a berthing fee rather than a term that dictates the amount of time the berth has been secured for. 4. The contract itself is for the sale of a boat. The berth was an incentive that was added into the contract; where the berthing term outlined fees associated and it is not to be read independently of the rest of the contract. In this way the berthing term is conditional on having the vessel. 5. Put another way, it is not a berthing agreement, but a contract of sale for a boat and it does not deal with the question of the berthing fees for the vessel independently of it. 6. The provision is clearly an inducement associated with sale. It was submitted that the genesis of the provision offered by the plaintiff as such in May 2016 clearly demonstrates this. 7. The marina agreement, which is a collateral contract to the sale contract, includes a term which permits the 'owner' (as that term is defined in the contract, here the defendant) to effectively terminate the marina agreement with a month's notice. In this regard, a construction of the key term in line with the first interpretation would cause friction between the two terms.

ORAL EVIDENCE

1. James Michael Thompson ('Mr Thompson'), the company secretary and group operations officer for Enares Pty Ltd and its subsidiaries, swore two affidavits that were admitted into evidence (Exhibit A and Exhibit C). He also gave evidence orally before me.
2. Sean Michael O'Doherty ('Mr O'Doherty') affirmed an affidavit which was admitted into evidence (Exhibit B). He also gave oral evidence before me.
3. The defendant, Robert Blann, swore an affidavit that was admitted into evidence (Exhibit 2). He also gave oral evidence before me.
4. The defendant submits that as the plaintiff did not call Neil Sutton, director, or Hugh Simpson, the national head of sales, who were involved in the negotiations concerning the purchase of the boat, I can draw an inference that their evidence would not have assisted the plaintiff's case; see Jones v Dunkel (1959) 101 CLR 298.
5. The plaintiff does not concede that I can draw that inference. However, I accept as the two individuals intrinsically involved in the negotiation of the sale, their potential evidence would appear to me to be quite important, and I infer that by the plaintiff not calling them, their evidence would not have assisted the plaintiff's case.
6. Of the three witnesses that did give evidence, that evidence was to me of little assistance. I do not accept that they were witnesses of truth, and believe that all of those witnesses would have said anything to assist the parties by whom they were called. They were evasive in their answers and lead me to believe that not all of their evidence was truthful.
7. Some of the oral evidence the witnesses have was in contradiction to their affidavits. There were also inconsistencies in the oral evidence they gave. On occasion, Mr O'Doherty and Mr Blann appeared to give flippant responses to questions asked, and on occasion belligerent replies.
8. This has caused me, despite the authorities that indicate that I must have regard to the context in which the agreement(s) were reached, to be in a position where I am not comfortable to do so. Having not accepted the three witnesses as witnesses of truth in some of the evidence they had given by affidavit and orally, I must construe the agreement(s) having regard to the documentary evidence before me.
9. Such evidence must be read with commercial sense and regard to the surrounding circumstances in which it is placed. That leads me to the conclusion that both the sales agreement for the purchase of the vessel and the berthing agreement with Rose Bay Marina, need to be read together, as they form part of the one commercial transaction.
10. With regard to the comments made by Santow J in Spunwill (supra), I generally should be reluctant to accept a construction which would achieve an unreasonable result.
11. It seems to me that to bind the defendant to a minimum period of three years pursuant to the berthing term would be unreasonable.
12. I do not accept that it would be reasonable that the termination clause in the Marina Agreement could be overridden by the berthing clause.

FINDINGS OF FACT

1. Having regard to all the evidence before me I make the following findings of fact: 1. The plaintiff acquired the vessel in 2014 for $3.2 million and paid cash for it at the time. 2. Thereafter, the vessel was always on sale until the plaintiff and the defendant concluded a contract for sale on or about 19 October 2016 3. On 6 May 2016, Mr O'Doherty offered to sell the vessel to the defendant for $3,850,000, and in doing so offered an incentive to the defendant to purchase the vessel. That incentive was that berthing fees would be discounted down to $5,000 per month plus GST and paid 6 months in advance. 4. The defendant accepted that proposal whilst making a counter offer to buy the vessel for $2,400,000 and sought to then fix the length of time during which the discount would be available at three years. 5. On 9 May 2016, Mr O'Doherty sent an email regarding the berthing fees in the following terms: 'Berth fees $5,000 per month + GST= $5,500 + 4% review at end of three years.' 1. This position was repeated in a further email the following day. 2. Shortly after 10 May 2016 the parties reached an in-principle but non-binding agreement for sale at $2.7 million only for the sale to fall through. That agreement included the three year berthing incentive. 3. In August 2016 the negotiations recommenced, and Mr O'Doherty referred to the provisions about the berthing as an inducement for the defendant. 4. In October 2016, negotiations recommenced, and on 12 October 2016: 1. Mr O'Doherty sent a draft set of conditions for a contract to Mr Blann which included the following term, which was ultimately included in the final contract; 'the boat will be berthed at Rose Bay Marina for a period of three years at $5,500 per month with 4% (or CPI whichever is the less) review at the end of 3 years. Berthing will be paid by the purchaser.' This term gave effect to the agreed objective intention of the parties in May 2016 about the berthing fee discount. 1. The defendant made a counter offer of $2,070,000 based on depreciation and currency fluctuations. 1. On 14 October 2016 an agreement was reached for the purchase of the vessel at $2.4 million and various discussions were had between the parties as to the payment of a deposit. 2. On 19 October 2016, Mr O'Doherty visited the defendant at his home in Palm Beach where a contract was finalised and a deposit of $40,000 was paid on that day. 3. The provision of the berthing fees in the final contract included an inducement offered by the plaintiff to facilitate a sale of the vessel. 4. Rose Bay Marina Pty Limited, at the suggestion of Mr Thompson, issued a Rose Bay Marina Berthing and Mooring Agreement to the defendant which was subsequently executed. 5. This berthing agreement did not include any term indicating that the term was for three years. 6. Rose Bay Marina also sent a letter of welcome to Mr Blann which included the following: 'Termination of Rental Agreement: You are legally required to provide one (1) month's written notice should you wish to vacate our facility which is otherwise subject to the 3-year minimum term.' 1. Since 4 February 2017, Rose Bay Marina has invoiced the defendant for all berthing fees, with one exception, being an invoice for such fees from Enares. 2. The defendant has not been issued with, by the plaintiff, any invoice for berthing fees or services payable to the defendant. 3. No further invoices have been issued by either the plaintiff or Rose Bay Marina as at 31 March 2018. 4. On 31 March 2018 the defendant completed the sale of the vessel to a third party. 5. The defendant paid all berthing fees up to and including 31 March 2018.
2. Having regard to all of the circumstances leading up to and surrounding the creation of the berthing term, I do not accept that it binds the defendant to taking up the specified berth at Rose Bay Marina in respect of the vessel for the specified discount rate for a minimum of three years, and thereafter at a rate calculated at 4% or CPI, whichever is the lesser.
3. I do accept that once the vessel was sold, the defendant had no further need for the berth and the defendant was no longer bound to continue to pay for a berth for the remainder of the three year term.
4. The construction of the berthing term in this way recognises that the term was for the benefit of the defendant and part of the inducement to sell the vessel at a discounted price.
5. The construction of the term in this way is also consistent with the Mooring Agreement which clearly governed the operation of the berth in any event - as it allowed the occupier of the berth to give one month's notice of their wish to terminate such agreement, and thus extinguish their liability for berthing fees. The defendant gave such notice.
6. The plaintiff accepts that payments for berthing were paid up until 31 March 2018. This is the date upon which the defendant sold the vessel. Thus, there are no outstanding monies payable to the plaintiff.

ORDERS

1. I make the following orders: 1. Verdict and judgment for the defendant. 2. Plaintiff to pay the defendant's costs as agreed or assessed. 3. Grant leave to the parties to approach my associate within 21 days of this date if any alternate costs order is sought.

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 October 2019