P'Auer AG & Anor v Polybuild Technologies International Pty Ltd & Anor [2015] VSCA 42

Court of Appeal (Vic)|2015-03-19|Before: Whelan JA

Polybuild Technologies International Pty Ltd v P'Auer AG & Anor [2014] VCC 1868 (Judge Murphy)

CONTRACT LAW - Commission for sale of business - Absence of clear offer and acceptance - Whether acceptance of offer could be inferred from the circumstances - Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, ; and ; applied - Trial judge correctly found offer was accepted - Appeal dismissed.

CONTRACT LAW - Commission for sale of business - Variation of original agreement - Whether term as to amount of commission implied into varied agreement - Hawkins v Clayton (1988) 164 CLR 539 and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 applied - Commercial setting important - Trial judge correct in implying term - Appeal dismissed.

STATUTORY INTERPRETATION - Estate Agents Act 1980 - Whether respondents required to comply with requirements of Act - Meaning of 'estate agent' under s 4 discussed - Mercer v Dalley [1934] VicLawRp 3; [1934] VLR 14 and Garbett v Rosemen Investments Pty Ltd [2002] VSC 575 discussed and applied - Act directed at 'ongoing business' and not 'one off' transactions - Trial judge correctly found s 50 did not apply as a bar to contract law action - Appeal dismissed.

1 The applicants are seeking leave to appeal from a judgment in the County Court.[1] The first applicant ('P'Auer') is a Swiss company which conducted a printing business. The second applicant, Mr Auer, is the principal of that company. The two respondents ('Polybuild' and 'Cooper & Turner' respectively) were engaged by P'Auer and Mr Auer to act as brokers in the sale of P'Auer's business.

2 On 15 July 2011 P'Auer and Mr Auer entered into an agreement entitled 'Asset Sale Agreement' for the sale of printing equipment, stock, intellectual property, customer data, and website content to an Australian company named Pact Group Pty Ltd for CHF 2.5 million, payable by instalments. The issues in the case were whether an agreement was ever made as to the commission due to Polybuild and Cooper & Turner consequent upon that sale, and whether Polybuild and Cooper & Turner were precluded from recovering any commission because they were unlicensed 'estate agents' within the meaning of the Estate Agents Act 1980 (the 'EA Act') and were not entitled to sue for commission by reason of s 50 of that Act.

3 The trial judge found that an agreement as to commission had been made in September 2010, which was then varied in February 2011 and again in April 2011. The trial judge's conclusion was expressed as follows:

In final address Mr Moon put that the case was on all fours with Empirnall.[2] The defendants had an obligation to respond or they were to be held to the September agreement as varied by the February variation and the April variation. I accept that submission.

The alternative basis upon which the plaintiffs rely is that under the authority of cases such as Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 and Vroon BV v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32, a contract is to be inferred by the conduct of the parties in all the circumstances.[3]

4 The September agreement referred to in the quoted passage was found to have been constituted in part by a written document entitled 'Exclusive Agency Agreement' ('EAA'), which was sent to Mr Auer under cover of an email of 27 September 2010, but which was never signed. The agreement as to commission which the judge found was that the respondents were entitled to the difference between the sale price and Mr Auer's specified minimum or reserve price. The judge described this as a 'success fee'.[4]

The learned trial judge erred in holding that the document entitled 'Exclusive Agency Agreement' (EAA), in particular clause 5(a) properly construed, provided a formula for a commission applicable to any reserve price as determined from time to time.

1A The learned trial judge erred in holding that the EAA had been varied in February 2011 and/or April 2011, respectively.

The learned trial judge erred in holding (at [104] to [111]) that, by the parties' conduct, the parties had concluded an agreement in the terms set out in EAA, because:

(a) the evidence did not positively indicate that the parties considered themselves bound by the EAA (contrary to his Honour's holding at [107]) and the Respondents did not discharge their onus of proof;

(b) the terms of offer in the EAA had been clearly rejected by Mr Auer's email of 30 September 2010 (set out at [38]).

The learned trial judge erred in holding that the Respondents were not prohibited by section 50(1) of the Estate Agents Act 1980 (Act) from recovering their claim, because:

(a) the Respondents were 'estate agents' within the meaning of the Act (contrary to his Honour's holdings at [133] and [137] to [140]);

(b) the Respondents were not licensed under the Act;

(c) the Respondents sold a 'business' within the meaning of the Act (contrary to his Honour's holding at [145] to [148].

The learned trial judge in disallowing the Applicants' call for Mr Turner to produce previous written agreements entered into by the Second Respondent (Cooper) whereby Cooper agrees to sell goods for vendors in exchange for a commission (T210:1-9 and T219:16-19).

6 The application for leave was conducted and argued on the basis that if leave were granted the appeal would be heard and determined instanter.

7 The submissions of the parties on the contractual issues raised by the first three proposed grounds (grounds 1, 1A and 2) focused on the facts of the case. The facts of the case are such that, with the possible exception of the April variation, offer and acceptance were not clearly present. Before turning to the facts, and the submissions made on those contractual issues, it is useful to address the legal principles applicable in that situation.

Applicable legal principles - Contracts in the absence of clear offer and acceptance

8 The relevant starting point in a case of this kind is the principle that a contractual obligation cannot be imposed by an offeror upon an offeree merely by reason of a failure to reject an offer made. Silence, in itself, cannot constitute acceptance.[5]

9 Nevertheless, leaving to one side cases of estoppel,[6] cases where there is an historic relevant course of dealing,[7] and cases where the events are so obscure or so far in the past that direct evidence is not available,[8] there are circumstances where acceptance of an offer can be inferred in the absence of express consent. This will be the case if an objective bystander would conclude from the offeree's conduct, including his silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.[9]

10 Further, and more generally, it is now accepted that the existence of a contract can be established or inferred where a manifestation of mutual assent must be implied from the circumstances.[10]

11 It is important to emphasise that the circumstances in which a contract will be inferred, otherwise than by the traditional analysis of offer and acceptance, will be rare. It seems to me that the position was well summarised by Sundberg J in Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd when he said:

A contract may in certain circumstances be inferred from conduct, even where no offer and acceptance can be identified ... However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained ... Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement ...[11]

12 In determining if an agreement has been made in this way regard must be had to the entirety of the relevant conduct.[12] The precise point in time at which the agreement comes into existence may not be clear, and the relationship between the parties themselves may be dynamic in such a way that the terms of the agreement might be added to or superseded over time.[13]

13 In this context the absence of non-essential terms, or a lack of agreement on non-essential terms, will not invalidate the existence or effective operation of a binding contract.[14]

14 The trial judge in this case, in the conclusion which I quoted earlier, found that the applicants had by their conduct accepted an offer made to them by the respondents and had signalled that acceptance to the respondents, and, in the alternative, that the existence of a contract was to be inferred by the conduct of the parties in all the circumstances.

16 The principal of Polybuild is a man named Gary Reinke. In 2009 and 2010 he was employed by an Australian printing company named Burgess Printing and Packaging Pty Ltd. In that capacity he met Mr Auer and began discussing proposals for the relocation of the P'Auer business to Australia. Initially, the suggestion was that Mr Reinke's employer might be interested in a joint venture or the purchase of the P'Auer business. Mr Reinke introduced Mr Andrew Turner, described by the trial judge as a 'partner' in Cooper & Turner.[15] Mr Turner had experience in selling and importing machinery. In an email of 18 May 2010 from Mr Reinke to Mr Auer, Mr Reinke described Mr Turner as 'my partner in this project'.

17 The trial judge reviewed the correspondence and events which occurred prior to a lunchtime meeting in Zurich between Mr Reinke and Mr Auer on 25 September 2010. Relevantly, that review revealed:

Mr Auer was under pressure from his banker and was also concerned to make an arrangement which would ensure his son, Roland Auer, was employed in the relocated business in Australia;[16]
in correspondence in May and July 2010 both parties used the term 'broker' in describing the activities of Mr Reinke and Mr Turner;[17]
the price which Mr Reinke and Mr Turner were quoting to prospective purchasers was € 4 million;[18] and
by an email of 13 August 2010 Mr Auer advised Mr Reinke and Mr Turner:

Your price with 4 Mio Euro will be OK. Compare to the Swiss Franc is this at the moment 5'400'000.- CHF. This 1.400'000 CHF really that will be enough space for a quit good commission. .... ! But you are right, I need minimal CHF 4'000'000.[19]

18 Mr Reinke had a lunchtime meeting with Mr Auer at a restaurant near Zurich on 25 September 2010.[20] Prior to that meeting Mr Turner had written to Mr Auer stating, amongst other things, that he and Mr Reinke's 'expectation' was that they would receive by way of commission the amount by which the sale value exceeded the reserve price.[21]

19 At the lunch on 25 September 2010 Mr Reinke, amongst other things, explained that he and Mr Turner were going about the process of seeking to sell the business on the basis that the price asked was € 4 million, that Mr Auer was asking for CHF 4 million and the difference was their commission.[22] The trial judge recorded Mr Reinke as having given evidence that the terms of the arrangement were not discussed 'as such, but rather he didn't disagree with it'.[23]

20 The transcript bears out the trial judge's description of Mr Reinke's evidence on this point. Mr Reinke's evidence was that Mr Auer did not disagree. That same day Mr Reinke reported to Mr Turner on his lunchtime meeting by email. That email referred to the differential between € 4 million and CHF 4 million and stated:

The difference in the 2 prices is our commission.

This has all been agreed by Hans [a reference to Mr Auer].[24]

21 When asked by the trial judge in the course of evidence-in-chief about that particular entry the following interchange occurred:

So just that email of the 25th, do you say that was in fact what was discussed in the meeting in the restaurant? - - - Yes.

Then there is a discussion about the 4 million Euro and the difference is your commission. You are saying it was expressly discussed? - - - Yes, it was, but perhaps by me and not necessarily by Hans.

22 Thereafter Mr Turner drafted the EAA. The EAA expressed itself to be made between Mr Auer and P'Auer on the one hand, and Cooper & Turner on the other. Cooper & Turner was defined as 'the Agent'. The Agent was appointed as the exclusive agent for the sale of the company's 'Machinery, Raw Materials, Finished Products and Sales Contracts (hereinafter called "the Business")'. As to commission, the document provided as follows in clause 5(a):

The Agent will get from the Company as a commission the balance above CHF 4,000,000.00 (Four Million Swiss Franc's) for the sale of the Company's Business.

In special cases there can be a change in the commission, only after a prior mutually written consent by Hans Auer (the Company) and the Agent.[25]

23 At about that time a prospective purchaser named Multicolor entered into a confidentiality agreement in order to commence a due diligence process. The EAA was sent to Mr Auer by Mr Turner by email on Monday 27 September 2010. On Thursday 30 September 2010 Mr Auer sent the following email to Mr Turner, which, omitting formal parts, read:

Thank you for the agreement with Multi Color. To the written agreement (contract) about you as agent ..

There is a small issue, I'm well to read such things in German, but to do this in English i need more

time. One possibility is the translating over computer with this I can do it easy.

Possible to send my the contract as word-data.

.... On thing is to correct. It is not possible to give you the sales/possibility worldwide. You know there are a discussion with USA and sins few days also with INDIA

We need to restrict this to your contact's in Australia.[26]

24 In subsequent correspondence, apart from expressions of concern arising out of the fact that the companies being approached in Australia and New Zealand were multinationals, the EAA forwarded on 27 September 2010 does not seem to have been expressly addressed again until 2011.

25 In early 2011 Mr Auer advised that he needed to move his machines within the next six months and referred to a need to show his bankers written evidence of the sales efforts being made.[27] Then, in an email of 18 February 2011 from Mr Auer to Mr Reinke, Mr Auer advised:

Price for IML factory.

1'500'000.- Swiss Franc ex Switzerland.

Rock bottom price not to discuse!

important

needs a working place for my son, he is willing to go to Australia.[28]

Date of the dismounting has to by in June 2011.

26 On 23 February 2011 Mr Turner sent Mr Auer an email, which was copied to Mr Reinke, relevantly stating:

I have great faith in you being honourable as you do in us. The concern I have in offering your business to potential buyers is that most of the companies locally that can afford to buy it and are possibly interested are also multinational companies. I would appreciate your personal assurance that should you be approached by any of the companies we refer that you will advise them initially to deal through us. We are excited by the revised conditions of sale as the viability looks far more attractive now to any potential customer however we could both be financially penalised if we do not show unity. Also with the change in sale value and inclusions the agency agreement we established now needs to be changed.[29]

27 When asked in his evidence whether he ever discussed that email with Mr Auer, Mr Reinke said that the only discussion he had was that 'Andrew would like a formal agreement signed'. He went on to say the Mr Auer 'acknowledged' that comment but that there was no answer given either in the affirmative or the negative.

28 Later the same day (23 February 2011) Mr Reinke sent an email to Mr Auer, copied to Mr Turner, which advised on prospects they were pursuing and stated, amongst other things:

We discussed the price and decided on 2.5 million CHF as a good start point as we are sure there will be negotiating.

...

I assured Andrew you are a man of honour and will work with us on our contacts.[30]

29 In his evidence-in-chief Mr Reinke related the 'man of honour' observation in that email to the fact that at that point they had not received a formal signed copy of the agreement.

30 By an email of 24 February 2011 to Mr Reinke, Mr Auer advised that he thought the 2.5 million was 'good discussion ground' and also advised:

[T]hank you to tell Andrew that I am a man of honour.

I will work with you on your contacts. One problem will by the short time.[31]

31 My reading of the emails is that the 'man of honour' references concerned direct approaches to Mr Auer by multinational companies introduced to the proposal by Mr Reinke and Mr Turner.

32 The trial judge referred to evidence given by Mr Auer that at no stage had he intended to sign anything in writing. The judge observed that this could 'almost be' an acceptance of the evidence Mr Reinke had given as to their February conversation.[32]

33 Mr Reinke and Mr Turner continued working on the sale in Australia. Amongst other things, they prepared a detailed information memorandum which was sent to Mr Auer for his comment before it was settled and which Mr Auer in his evidence conceded that he would have read.[33] The information memorandum stated that Cooper & Turner had been appointed as exclusive sales agent 'through a deed of appointment'. It also stated that Mr Auer had engaged Cooper & Turner 'and its colleagues' as his agent and that that agent and its colleagues would be compensated by Mr Auer from the sale of the business and/or intellectual property.

34 By April 2011 the work done by Mr Reinke and Mr Turner in Australia in promoting the acquisition of the business had progressed to a point where it was determined that Mr Auer and his son should travel to Australia.

35 Mr Reinke attended a meeting in Clifton Hill with a prospective purchaser, referred to as 'NCI', in company with Mr Auer and his son. At that meeting the representative of the prospective purchaser said that he could not get his board to approve a price in excess of CHF 2 million.

36 The judge's description of what then happened is as follows:

Outside, there was a brief discussion and Mr Reinke stated that this was a good starting point where he had someone prepared to offer 2m CHF for the business, and that given that the base price was 1.5 m the gap and the commission was good. At this point Mr Auer stated that the base price was 1.8m CHF. Mr Reinke then referred to the 18 February email that referred 1.5m CHF. The Auers then had a discussion in German, and then reiterated that the base price was 1.8m CHF. Mr Reinke indicated that he would produce the email, and the matter was left there. He denied that Mr Auer had mentioned an issue with the roof of the factory. He then spoke to Mr Turner by phone and later forwarded the 18 February email to him. He was not involved in later meetings.

There was disputed evidence from Mr Auer as to events associated with the increase in the base price from 1.5m to 1.8m CHF. His evidence, which was not expressly put to Messrs Reinke and Turner was that in a conversation in a café when they had been at Burgess he had told them that the minimum price was now 1.8m CHF because the roof required repair at a cost of 300,000. There was then a discussion that Mr Reinke was hoping for a payment of 120,000 in an unspecified currency which could be shared with Mr Turner. Mr Auer refused this because the agreement had not been concluded and the company had not been sold yet, and it was too expensive for him.

I do not accept that evidence. I prefer the account of Mr Reinke as to what occurred after the NCI meeting. I accept that the meeting at Burgess took place some days later because the original scheduled meeting could not proceed. What is common ground on the competing accounts is the increase in the base price from 1.5m to 1.8m CHF. It was common ground that thereafter the plaintiffs proceeded on that basis.[34]

37 The relevant passage in Mr Reinke's evidence, which the trial judge accepted in the passage I have quoted, reads as follows:

We exited the building and out on the street Hans and myself and Roland had a brief discussion about the positivity of the meeting and my comment was that it's a really good starting point from a week of appointments where we've got the possibility of somebody being prepared up to 2 million Swiss Francs for his business [sic]. So from that point it was good and I added that given the base price was 1.5 million Swiss Francs then the gap in the commission was good. It was at that point that Hans said 'No, no, no. The base price is not 1.5 million Swiss Francs, but 1.8 million Swiss Francs'.

What did you say? - - - I said, 'No, that's not correct and I have an email you sent me with the price point of 1.5 million Swiss Francs on it'.

38 Mr Reinke's evidence was that Mr Auer and his son then talked in German. His evidence continued:

So then what happened? - - - Hans then reaffirmed that the base price was 1.8 million Swiss Francs.

What did he say? - - - He said, 'No, the price is 1.8 million Swiss Francs.'

What happened next? - - - I said, 'I disagree with that and will produce the documents', but on the street out the front with a prospective client wasn't the time or place to stand and have an argument, and so I said 'I'll produce the document', and we parted company.

39 Mr Reinke's evidence was that the issue was raised again when he had dinner with Mr Auer and his son later that week. His evidence was as follows:

Did you have any discussions about this issue that had arisen outside NCI? - -- I brought a copy of the email. I took with me a copy of the email of the 1.5.

Which email is that? - - - The email that Hans had sent me with the 1.5 million 'rock bottom price, no discuss'.

...

[Counsel]: What did you say to Mr Auer? - - - I then said that we were disappointed with the change in price but that Andrew and I could continue to work with him at the revised price of 1.8 million Swiss Francs.

What did Mr Auer say, or words to the effect, do you recall? - - - 'Okay'.

His Honour: Was his son there? - - - At the dinner, yes, your Honour.

40 After a series of meetings Pact Group Pty Ltd agreed to purchase specified assets of P'Auer, agreed to employ Roland Auer as its employee and Mr Auer as a consultant, and agreed to pay a total purchase price of CHF 2.5 million in instalments. The terms of the agreement were embodied in an Asset Sale Agreement. According to Mr Reinke the payment of commission was subsequently discussed and it was agreed that payment would be deferred as Mr Auer had to ensure the bank was paid first.[35] Eventually Polybuild and Cooper & Turnbull sent invoices to Mr Auer and P'Auer seeking a total of CHF 700,000, being the difference between CHF 1.8 million and CHF 2.5 million.

41 The respondents' case was that an agreement had been reached in September 2010, the terms of which were to be found in the unexecuted EAA. The trial judge found that such an agreement had been reached.

42 The judge observed firstly that the respondents could rely on the discussion at the lunch on 25 September as well as upon 'the unreturned EAA'.[36] He considered that the evidence positively indicated that the parties considered themselves bound by the EAA and that they conducted themselves 'as though they were in an agency relationship for the sale of the business with a remuneration basis agreed.'[37] The judge then referred to the information memorandum and to other activities undertaken with 'Mr Auer ... playing his part' in order to advance the sale of the business.[38] The judge referred to the fact that Mr Auer had taken the 'benefit' of the work done in Australia which had been reported upon to him by Mr Turner, had not disputed the matters set out by Mr Reinke at the lunch on 25 September, and had only queried the issue of coverage in his reply of 30 September to the emailed EAA. The judge observed:

At that point a reasonable bystander would conclude that he had accepted the commission terms set out in the EAA.[39]

43 The judge rejected a submission made that the evidence was consistent with Mr Auer either not having received the EAA or not having understood it.[40]

44 The judge then turned to the respondents' submission that what occurred in February 2011 constituted an amendment to the agreement which had been made the previous September. After referring to the finding already made that the conduct of the parties prior to February 2011 was 'referable to the September agreement', the judge reached the following relevant conclusions:

After Mr Auer reduced his asking price to the 1.5m CHF 'rock bottom price' he again was acting with reference to his earlier 'minimal' amount. The role of the plaintiffs was to achieve as much above it as possible. The main task, however, was to actually effect a sale as I am satisfied that Mr Auer was under bank pressure. He had to move out of the factory by June as he set out in his email, and he was looking to obtain a position for Roland. Further, his response to Mr Reinke's 2.5m CHF 'good start point' for negotiating in the 23 February email was positive.

An objective observer at that point, particularly one who accepts the evidence of Mr Reinke as to the failure to respond to a request for a written agreement, and having regard to the 'man of honour' references would I am satisfied, say 'of course' when asked whether the parties were operating at that time on a commission basis set out in the EAA. In the context of having earlier received the EAA, and the later request by Mr Reinke to enter a written agreement, then the duty on Mr Auer, if he was not to be bound to the September terms was, under Empirnall to break his silence or be held that he was bound by those earlier terms. I find that Mr Auer and the first defendant are so bound.[41]

45 When the judge turned to the April variation, after referring to his rejection of Mr Auer's version of the relevant conversation, and to the respondents' submission that what occurred was an increase in the 'base or rock bottom price to 1.8 m CHF', the judge said:

The conduct of the parties after the April discussion is consistent with what is alleged by the plaintiffs. There was no need to renegotiate the agreement. Its terms had been acted upon by all up until that time.[42]

46 His Honour then referred to the two alternative legal bases for the case put by the respondents, which I have quoted earlier.

47 His Honour accepted the analysis based upon the decision in Empirnall[43] and also accepted the alternative analysis based upon Integrated Computer and Vroon.[44] After quoting a passage from Integrated Computer, the judge said:

I accept the submission that the conduct of the parties can be analysed along the same lines to reach a conclusion that there has been assent to the contractual terms set out in the unsigned EAA.[45]

48 The judge referred to an issue raised about parties[46] and observed:

Similarly, given that I accept that Mr Reinke unsuccessfully sought from Mr Auer a written agreement in a conversation in February 2011, but received only in return a representation that he was a man of honour, this can be the basis, along with all the other conduct, that Mr Auer, and his company are bound by those terms.[47]

For all the above reasons I am satisfied that the plaintiffs have proved a claim for commission in the amount set out in the invoices.[48]

50 The trial judge accepted the credit of Mr Reinke and Mr Turner in preference to that of Mr Auer.[49] On the appeal, no challenge was made to that position. Rather, submissions were made upon the basis that the findings as to credit would stand.

Submissions made on the contractual issues (proposed grounds 1, 1A and 2)

51 The respondents supported the judge's findings and conclusions on the contractual issues, emphasising the course of dealings between the parties and suggesting that the applicants' position that no agreement as to commission had ever been made was untenable and commercially most improbable. They particularly relied upon the trial judge's findings, substantially based upon his preference for the evidence of Mr Reinke and Mr Turner over that of Mr Auer, in relation to the discussions at the luncheon on 25 September 2010,[50] the conduct of the parties after September 2010,[51] and the discussion concerning the base price of CHF 1.8 million in April 2011.[52]

52 In relation to the agreement allegedly made in September 2010, the applicants firstly addressed what they described as the trial judge's misconstruction of the EAA, accepting for the purposes of this submission that the EAA had been received by Mr Auer and had been accepted by the applicants by conduct.

53 The submission was that the only construction of clause 5 of the EAA which was open was that the commission would be any amount obtained above CHF 4 million, and that this could be altered only by written agreement. It was submitted that the primary judge had erroneously adopted the approach of treating the EAA as containing a commission arrangement that would apply to any reserve price that might be set by the vendor.

54 In the passages in the judgment cited in support of that proposition the judge does not expressly put the matter that way,[53] but the submission was that it is clear from the judge's treatment of the September agreement and the later variations that that is what he has done. It was submitted that this approach could not be adopted given the EAA's express written terms, and that the discussion at the lunch on 25 September 2010 did not relevantly advance the position as that was 'perfunctory' on Mr Reinke's own evidence.

55 As to the alleged variation in February 2011, it was submitted by the applicants that the judge had wrongly treated Mr Auer's email referring to the 'rock bottom' price of CHF 1.5 million as in effect varying the EAA by substituting the figure of CHF 1.5 million for the figure of CHF 4 million. It was submitted that this was an error because:

(a) The EAA did not set out a formula but rather contained an express term referable to one specified figure (CHF 4 million);

(b) Mr Auer's email contained no reference to the EAA and no suggestion that the CHF 1.5 million figure was to be equated with the previous CHF 4 million figure;

(c) There was no offer under consideration at that time and no reason for necessarily fixing the commission then;

(d) It was inherently improbable that Mr Auer had effectively given up obtaining any amount in excess of CHF 1.5 million for the machinery and other assets;

(e) It was understandable that Mr Auer wanted the agents to know the bare minimum price because below that price there would be no sale;

(f) The trial judge's characterisation of the arrangement as a 'success fee', did not adequately explain why a vendor would forego everything above the 'rock bottom price'.

56 Further, it was submitted on behalf of the applicants that Mr Turner's response in his email of 23 February 2011 in which he expressly stated that the agency agreement would need to be changed reflected the fact that whatever had been agreed about commission in the past was no longer applicable. There was no evidence, or finding of the primary judge, the applicants submitted, as to what the changes to which Mr Turner had referred were or would be.

57 As to the alleged variation in April 2011, the submission of the applicants was that the judge's conclusion on this variation 'proceeds on the basis of the earlier variation' which was submitted to be erroneous. It was submitted that the evidence went no further than showing that if the sale price was CHF 2 million Mr Auer wanted to clear CHF 1.8 million.

58 Having addressed the issues which the applicants characterised as misconstruction, the applicants then submitted that his Honour's conclusion that the EAA had been received and understood by Mr Auer and that its terms had been accepted by conduct was erroneous. The applicants did not seek to disturb the finding that Mr Auer received the EAA. They submitted, however, that his responding email revealed, first, that he had not understood it because he could not translate it, and, secondly, that he did not accept it because he was not prepared to give the agents worldwide exclusive authority.

59 The applicants submitted that the respondents may have had a case for a quantum meruit or an implied term for reasonable commission but that they had never pleaded nor advanced such a case.

60 The applicants' submission that clause 5 of the EAA dealing with commission addresses only one specific circumstance must be accepted. The EAA provides that the commission is to be the balance above CHF 4 million. The commission can be changed in 'special cases' but only after a prior mutually written consent. But insofar as the judge dealt with the terms of the EAA, I do not consider that he construed the EAA as providing a formula applicable to any reserve price which might thereafter be determined. The parts of the judgment upon which the applicants rely in that respect do not state that to be the position, with the exception of one passage in the judgment dealing with the February 2011 variation.[54] I will deal with that in the context of that alleged variation.

61 The context in which the EAA was sent to Mr Auer, and was responded to by him, was the following:

(a) Mr Auer had been told that the price Mr Reinke and Mr Turner were quoting to prospective purchasers was € 4 million;

(b) Mr Auer had advised Mr Reinke and Mr Turner that he needed a minimum of CHF 4 million and had stated that that would leave 'enough space' for a good commission;

(c) Mr Auer was then told by email that the expectation of Mr Reinke and Mr Turner was that the commission would be the difference between CHF 4 million and the eventual price; and

(d) Mr Auer was then told face to face that Mr Reinke and Mr Turner considered that that was the arrangement at the lunch in Zurich on 25 September 2010 and Mr Auer did not dispute that position.

62 The EAA was received by Mr Auer. It embodied what he had been told and had not disputed. He responded to it. The only issue he raised in relation to it was the question of international coverage. Thereafter, the parties proceeded as if there was an agreement in place and they advised prospective purchasers that an agreement was in place.

63 In the circumstances, it seems to me that the judge's conclusion on each of the alternative bases he relied upon was correct. The applicants' acceptance of the terms set out in the EAA, subject to one qualification, can be inferred notwithstanding the absence of express consent. Further, the existence of a contract containing the term in clause 5 of the EAA should be inferred because a manifestation of mutual assent must be implied from the circumstances.

64 The qualification concerns the issue of coverage of the agency. The parties were not agreed on that issue, it seems to me. However, by April 2011 at the latest, that issue had been superseded. By then, Mr Auer and his son were in Australia to negotiate with the prospects established by Mr Reinke and Mr Turner's work in Australia. Whether the absence of agreement as to coverage prevented an enforceable agreement as at September 2010 does not matter in the circumstances of this case and does not need to be resolved. At some point between September 2010 and April 2011 the issue was superseded by events.

65 It is important to emphasise, however, that in my view the applicants are correct in their submission that what was agreed about commission in September 2010 did not go beyond agreement as to the position in relation to a price above CHF 4 million.

66 When the judge turned to addressing the February variation, it seems to me that he did begin characterising the relevant clause of the EAA in terms broader than the clause can bear. Under the heading 'The February "rock bottom" variation affirms the agreement', after referring to the relevant email exchanges in February 2011, the judge said:

An objective observer at that point, particularly one who accepts the evidence of Mr Reinke as to the failure to respond to a request for a written agreement, and having regard to the 'man of honour' references would I am satisfied, say 'of course' when asked whether the parties were operating at that time on a commission basis set out in the EAA. In the context of having earlier received the EAA, and the later request by Mr Reinke to enter a written agreement, then the duty on Mr Auer, if he was not to be bound to the September terms was, under Empirnall to break his silence or be held that he was bound by those earlier terms. I find that Mr Auer and the first defendant are so bound.[55]

It is difficult to understand this reasoning in the context unless one treats the EAA as applying to any specified reserve price.

67 The applicants are also correct in submitting that Mr Turner himself recognised that the EAA did not cover the position then pertaining, given the new 'rock bottom' price, and that he said so in terms in his email of 23 February 2011.

68 It seems to me that the parties did not address the significance for the commission arrangement of Mr Auer's advice as to his 'rock bottom' price. I cannot find any agreement about it in the February 2011 emails. The February emails are important, however, when one comes to April.

69 The judge's conclusion that a manifestation of mutual assent must be implied from the circumstances in April 2011 is, in my view, well founded and correct.

70 The discussion between Mr Reinke and Mr Auer in relation to the CHF 1.8 million after the meeting with NCI was a discussion about the amount which was to go to Mr Auer on an eventual sale. The issue was the same as the issue had been in relation to the CHF 4 million in September 2010. In this context the dealings in February 2011 support the respondents' position. Even if the variation they contend for had not been mutually agreed in February, what Mr Reinke said to Mr Auer about the CHF 1.5 million in the course of the discussion outside NCI makes it clear what he thought the agreed arrangement was, rightly or wrongly. In response, Mr Auer stated that the 'base price' was CHF 1.8 million. When senior counsel for the applicants was asked what 'base price' meant in the context, other than the price which sets the 'base' for commission just as the EAA had set CHF 4 million, he could not suggest any alternative other than that the arrangement was confined to a specific potential NCI offer of CHF 2 million. I do not accept that. It does not reflect the evidence of Mr Reinke which the judge accepted. When Mr Reinke then told Mr Auer that he and Mr Turner were prepared to proceed on the basis of the CHF 1.8 million, it is clear from all the circumstances what the arrangement then was. Indeed, although the judge did not rely on this, Mr Reinke's evidence as to what transpired at the dinner later that week seems to me to constitute express acceptance. Mr Reinke told Mr Auer that he and Mr Turner were prepared to work with him at the level of CHF 1.8 million and Mr Auer responded 'ok'.

71 In the end, the respondents' claim is for the sum of CHF 700,000 based upon the difference between CHF 1.8 million and CHF 2.5 million. If there was an agreement to that effect in April 2011, the respondents are entitled to succeed whether they had established an agreement in September 2010 and/or February 2011 or not. There was an agreement to that effect in April 2011, as the judge found.

72 In my view the applicants should be granted leave to appeal on grounds 1, 1A and 2, but the appeal should be dismissed.

Proposed ground 3 - recovery prohibited by the EA Act

73 Section 50 of the EA Act relevantly provides as follows:

(1) An estate agent is not entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless -

(a) at all material times in relation to the transaction he or she is the holder of an estate agent's licence; ...

74 Section 4 of the EA Act includes the following definition:

estate agent or agent means any person (whether or not he carries on any other business) who exercises or carries on or advertises or notifies or states that he exercises or carries on or that he is willing to exercise or carry on or in any way holds himself out to the public as ready to undertake the business of -

(a) selling buying exchanging letting or taking on lease of or otherwise dealing with or disposing of;

(b) negotiating for the sale purchase exchange letting or taking on lease of or any other dealing with or disposition of;

(c) collecting rents for -

any real estate or business on behalf of any other person;

75 Section 4 also contains the following definition:

business means any hotel business, boarding-house business, storekeeper's business, manufacturing business, professional business, service business or any trading business whatsoever, and includes any share or interest in or concerning any stock goodwill or other property or assets included in any transaction relating to a business ...

76 The applicants at trial contended that the respondents were precluded from recovering commission because they were unlicensed estate agents. The trial judge rejected that contention on two grounds. He held that the respondents were not exercising or carrying on a business of selling or negotiating a sale because the relevant transaction was 'one off'.[56] Secondly, he held that the relevant sale was not the sale of a business but was the sale of certain specified assets.[57] In proposed ground 3 the applicants contend that the trial judge was wrong in both of these conclusions. I will deal firstly with the issue of whether the respondents were required to be licensed because they were exercising or carrying on a relevant business.

77 Mr Reinke's unchallenged evidence was that neither he nor Polybuild had ever previously earned any commission from the sale of any land or business. Mr Turner's evidence was that Cooper & Turner had never acted as an agent in selling a business and had never sold any land. Mr Turner described his involvement in the 'deal' constituted by the Asset Sale Agreement as being 'quite unique'. The trial judge stated that the unchallenged evidence was that the respondents were not in business as estate agents and did not intend to commence that business.[58]

78 The Real Estate Agents Act 1928 ('REA Act') provided as follows in s 16:

Subject to this Act no person shall be entitled to bring any proceeding in any court to recover any commission fee gain or reward for any service done or performed by him as a real estate agent -

(a) unless he was the holder of a licence at the time of doing or performing such service; ...

79 Section 3 of the REA Act contained the following definition:

'Real Estate Agent' means any person (whether or not such person carries on any other business) who exercises or carries on or advertises or notifies or states that he exercises or carries on or that he is willing to exercise or carry on in Victoria or in any way holds himself out to the public as ready to undertake for payment or other remuneration (whether monetary or otherwise) any of the following functions, namely -

(i) selling buying exchanging letting or taking on lease of or otherwise dealing with or disposing of; or

(ii) negotiating for the sale purchase exchange letting or taking on lease or any other dealing with or disposition of

land of any tenure or buildings or any estate or interest in land of any tenure or buildings on behalf of any other person or for or in consideration of any payment or other remuneration (whether monetary or otherwise).

80 In Mercer v Dalley Lowe J reviewed a finding by a magistrate dismissing a complaint seeking to recover commission on the sale of a block of land.[59] The complainant had introduced a purchaser but he did not hold a real estate agent's licence. He did not carry on business as a real estate agent and the sale in question was the only time that he had acted as an agent for the sale of land. A magistrate found he was precluded from recovering commission by s 16 of the REA Act.

81 On the order to review, the complainant argued that he did not come within the definition of real estate agent in s 3 of the REA Act because this was 'an isolated transaction'. It was submitted that the expression 'exercises or carries on' in the definition denotes continuity or intended continuity. The defendant submitted that the complainant had been 'carrying out the functions of a real estate agent' and s 16 was an absolute bar.

82 Lowe J set aside the magistrate's order. Relevantly, he concluded:

In my opinion a person does not exercise or carry on such functions on the bare facts which I have before me.

I think it may be conceded that a single act may be sufficient to establish that a person is exercising or carrying on such functions, if such single act is done in circumstances which indicate an intention that other acts of the same kind will follow. But, in my opinion, it is not shown in this case that other acts of the like kind will follow, and I think the single act or isolated occurrence does not come within the words to which I have made reference.[60]

83 He went on to observe that reading the Act as a whole he found 'the absence of anything ... indicating an intention of affecting a person who would not in any ordinary use of the language be said to be, or be acting as, a real estate agent'.[61]

84 It will be noted that the relevant provisions of the REA Act were not identical with the provisions now under consideration. In particular, the definition of 'real estate agent' applied to one who 'exercises or carries on' certain specified 'functions'. The definition in its current form still refers to a person who 'exercises or carries on', but the reference to 'functions' has been replaced by 'the business'.

85 Relevantly, the same issue as had been dealt with by Lowe J in Mercer arose again, under the legislative provisions as they now stand, before Smith J in Garbett v Rosemen Investments Pty Ltd.[62]

86 Smith J referred to the differences in the legislative provisions and to the construction which Lowe J had adopted in relation to the earlier provision. He observed that Lowe J had held that the requirement to be licensed had no application to a single act or isolated occurrence notwithstanding the fact that at that time the definition required no more than whether a person had exercised or carried on a 'function'. His Honour continued:

Further, notwithstanding amendment to the Act since 1934, no attempt has been made to alter the effect of the decision in Mercer v Dalley. Rather, the drafter has substituted the concept of 'business' for 'function'. In the debate before His Worship, counsel for the respondents argued that this broadened the definition. It does in the sense that 'business' is broader than a specific 'function'. But it is easier to construe the 1928 definition to apply to a single or isolated transaction than it is the current definition. It has in fact narrowed the scope of the definition and affirmed Lowe J's interpretation.

The substitution of 'business' for 'functions' appears to have occurred when the Parliament enacted the 1980 legislation. That legislation was the result of an extensive review of the previous legislation. A reading of Hansard does not reveal any detailed discussion of the reason for the change to the definition of 'estate agent'. In the second Reading speech of the Attorney-General, however, the following appears:

The definition of 'estate agent' has been changed in form rather than in substance and this change of form means that the word 'business' has had to be defined in the interpretation section of the Bill.

This statement supports the view that the Parliament did not intend to alter the effect of Mercer v Dalley.[63]

In light of that legislative history I have come to the conclusion that Lowe J's construction is applicable and the statutory definition is not intended to apply to a person engaged for the first time in a single transaction who does not intend to engage in subsequent similar transactions.[64]

I suggest that such an interpretation accords with the structure and content of the Act. I refer for example to the requirements to be fulfilled before a licence can be obtained and requirements imposed upon licensed estate agents to maintain trust accounts and other requirements. The Act is directed to the regulation of people whose business it is to work as estate agents.[65]

Submissions made on 'one off' transaction issue

89 The applicants submitted that the word 'exercises' in the definition is 'central'. The submission was that, relevantly, the definition catches 'any person who ... exercises ... the business of ... selling ... any ... business on behalf of any other person'. It was submitted that the EA Act is a consumer protection statute. It was submitted that s 39(a) of the Interpretation of Legislation Act 1984 was not in existence at the time when Mercer was decided. That provision requires the Court to give an interpretation to a statute which promotes its underlying object or purpose. It was submitted that the purpose of the EA Act is consumer protection and that that purpose is best promoted by a requirement that any agent acting on behalf of another person in the sale of a business must be licensed.

90 The trial judge found that the respondents were not required to be licensed following the decisions in Mercer and Garbett. The respondents on the application submitted that he was correct to do so.

91 In my opinion the trial judge was correct. The decision in Garbett is precisely on point and the reasons given by Smith J for his conclusion are cogent. I would adopt them without qualification and with the following additional observations.

92 It seems to me that the word 'exercises' is a vestige of the REA Act and that the significance placed upon it by the applicants is misplaced.

93 Smith J's observation that the structure and content of the EA Act reveal it to be one directed to the regulation of people whose business it is to work as estate agents, referring in particular to the requirements to be fulfilled before a licence can be obtained and requirements imposed upon licensed real estate agents to maintain trust accounts, is significant. By way of amplification, the EA Act:

(a) does not contain a statement of objects but it does establish an Estate Agents' Council whose statutory objectives include the promotion of appropriate standards of conduct and competency for persons in the 'real estate industry' (Pt IIA);

(b) provides for a comprehensive licencing regime (Pt III), which includes:

(i) a requirement to pass examinations and to undertake work experience of not less than the equivalent of one year's full-time employment before a person can be licenced (s 14);

(ii) a requirement that each application specify the address at which the applicant 'intends to carry on business' (s 17);

(iii) the consideration of each application by the Business Licensing Authority (s 21), with a power to impose conditions (s 21A);

(iv) an annual licence fee payable on the anniversary of the first licence grant (s 23);

(v) provisions governing management of every estate agency office (s 30); and

(vi) a public register of licensed estate agents (s 33);

(c) regulates the activities of estate agents (Pt IV), by provisions which include:

(i) a requirement to produce the licence on demand to specified persons (s 41(1);

(ii) a requirement to display a copy of the licence 'at every premises where [the agent] carries on his business' (s 41(2)); and

(iii) the prohibition on recovery of commission if unlicensed (s 50);

(d) regulates the finances of estate agency businesses (Pt VI), by provisions which include:

(i) a requirement to establish a trust account if money is received on behalf of another (s 59);

(ii) the annual auditing of that trust account (s 64); and

(iii) comprehensive powers given to inspectors under the Fair Trading Act 1999 to monitor an 'estate agency business' through inspecting documents, requiring the provision of information and entering and searching premises (Pt VI Div 2).

94 These provisions reveal the EA Act to be, as Smith J observed, one directed at the regulation of an ongoing business, not at 'one off' transactions. They are generally inconsistent with application to a person engaged in a 'one off' transaction. It seems to me that it is almost inconceivable that some of them, such as the requirement to pass examinations, to complete at least the equivalent of a year's work experience before being licenced and to display a copy of the licence at every business premises, were intended to apply to a person engaged in a 'one off' transaction.

95 The trial judge held that in any event the respondents were not required to be licensed because their relevant activities did not concern selling or negotiating the sale of any business. This conclusion relied upon an analysis which was confined to the Asset Sale Agreement in isolation from the dealings which had preceded it, and upon an analysis of the Asset Sale Agreement itself which concluded that it did not constitute the sale of a 'business'.

96 Given my conclusion that the respondents were not required to be licensed because the transaction was 'one off' it is unnecessary to address those matters.

97 I would grant leave to appeal on ground 3 but dismiss the appeal.

98 During Mr Turner's cross-examination counsel for the applicants called for documents. The trial judge refused to order production. The applicants contend he was in error.

99 The matter arose this way. Mr Turner was being asked about other occasions upon which he had sold second-hand machinery over the previous 21 years. He agreed that he had regularly sold such machinery for vendors, that he had been paid for his services (without agreeing with the description 'commission'), and that he had reduced agreements with the vendors to writing. When asked if he still had copies of those written agreements he said that he would have to check his files. Counsel for the applicants called for those documents. Counsel for the respondents objected that this was a matter which ought to have been the subject of discovery. In the course of interchanges about the matter, the trial judge asked how agreements about the prior sale of machinery could be relevant. The submission put was that they might be relevant to the question of the application of the EA Act.

100 It was never put that the documents called for were relevant, rather what was put, both to the trial judge and on appeal, was that counsel was entitled to 'test' Mr Turner's evidence that he had never previously been involved in a transaction involving the sale of a business or real estate.

101 On the basis of the questioning which prompted the call, the documents called for (if they existed at all) related to the sale of second-hand machinery, not to the sale of a business or land. The period covered by the call was 21 years.

102 The trial judge refused to order production of the documents on the basis that 'if this had any relevance it should have been the subject of an application earlier'.

103 This is a matter of practice and procedure. The principles which apply in

relation to such matters are well established.[66] Appellate courts are reluctant to interfere. It has not been demonstrated that the trial judge made any error of principle or that any substantial injustice was suffered. The call made was too wide and, on the basis of the questioning relied upon, of marginal, if any, relevance. The trial judge was entitled to take into account the failure to make an application earlier.

104 In my opinion leave to appeal should be refused on proposed ground 4.

105 I agree with Whelan JA that the applicants should be granted leave to appeal in respect of grounds 1, 1A, 2 and 3 and that leave to appeal should be refused in respect of ground 4. I also agree with his Honour that the appeal should be dismissed.

106 I have had the advantage of reading in draft the reasons of both Whelan and Kaye JJA. I agree with Whelan JA's reasons for concluding that the appeal should be refused, save in respect of his Honour's reasons concerning whether there was any variation of the agreement in February 2011. In this regard, for the reasons which Kaye JA gives, I agree that the trial judge was correct in finding that there was a February 2011 variation.

107 I agree with Whelan JA that the applicants should be granted leave to appeal in respect of grounds 1, 1A, 2 and 3, but that the appeal should be dismissed. Subject to one matter, I agree with his Honour as to the reasons for that conclusion.

108 For the reasons stated by Whelan JA, I agree that the applicants impliedly agreed to the terms of the contract set out in the Exclusive Agency Agreement ('EAA') sent to Mr Auer by Mr Turner on 27 September 2010. However, unlike Whelan JA, I also consider that the trial judge was correct in concluding that in February 2011 the parties varied that agreement, so that the respondents were entitled to a commission consisting of the amount by which the sale price of the business exceeded CHF 1.5 million.

109 It is clear that the agreement of September 2010 was varied by the communications between the parties, relating to the sale price of the business, in February 2011. By those communications, the parties set a base ('rock bottom') price of CHF 1.5 million for the sale of the business. However, the parties did not

expressly address the issue of the commission payable to the respondents in the event of a sale of the business at that price. In particular, the parties did not expressly state that any amount of the price, above CHF 1.5 million, would constitute the commission payable by the applicants to the respondents in respect of the sale. Thus, the question for the trial judge was whether such a term should be either inferred as constituting the unspoken actual common intentions of the parties,[67] or implied as a term in the variation agreement.

110 The judge appears to have treated the task as one of identifying an implied term, rather than inferring the actual unspoken intentions of the parties. In the context of the communications that took place between the parties in February 2011, there is little practical difference between inferring, as distinct from implying, such a contractual term. In a case such as this, in which the court is inquiring whether a term is to be implied into a contractual arrangement which is not encapsulated in a formal detailed document, it is not necessary to apply the fivefold test, specified by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,[68] in its full rigour. Rather, in such a case, inquiries, such as whether the postulated implied term is 'reasonable', or 'necessary to give business efficacy to the contract', or 'so obvious that it goes without saying', are considered to be helpful guides as to whether or not a particular term should be implied in such a contract.[69]

111 In considering whether the term relating to the entitlement to the respondents for commission, found by the trial judge, was correctly implied or inferred as part of the agreement between the parties, it is necessary to take into account the particular commercial setting in which the September 2010 agreement was formulated, and in which the subsequent communications of February 2011 took place. That setting is critical to understanding, and properly interpreting, the inferred (actual) or implied (presumed) common intentions of the parties to the transaction.[70]

112 In that respect, it is important to bear in mind that for some time before the September 2010 agreement, the applicants had been under some financial pressure to sell the business. By approximately the middle of 2010, the relationship between the applicants and the respondents had evolved to become the relationship of, on the one hand, the vendor of the business, and, on the other hand, the selling broker or selling agent of that business. That formulation of the relationship was evident from the email from Mr Reinke to Mr Auer dated 18 May 2010, and the email of Mr Auer to Mr Reinke dated 15 July 2010. Ultimately, the relationship was formulated in the EAA, which the judge (correctly) found constituted the basic agreement between the parties.

113 In considering that agreement, it is important to bear in mind that by September 2010, Mr Auer had specified that the vendor's asking price was then CHF 4 million. Mr Auer confirmed that price at the luncheon meeting that he had with Mr Reinke on 25 September 2010. Thus, it was in that context that the parties agreed that the respondents would be entitled to a commission, consisting of the amount by which the sale price, achieved by the parties, exceeded the then asking price of the applicants.

114 In the ensuing four months, the applicant's business appears to have become under increasing financial pressure. By a series of emails sent by Mr Auer to Mr Reinke dated 17 January, 15 February and 17 February 2011 respectively, Mr Auer told Mr Reinke that he was under some financial pressure from the bank, and that he had a forthcoming meeting with the banker. He requested that the respondent provide information which, he hoped, would placate the concerns of the bank.

115 That, then, was the background to the email sent by Mr Auer to Mr Reinke dated 18 February 2011, to the responses to that email by Mr Turner and Mr Reinke each dated 23 February, and to Mr Auer's reply dated 24 February 2011. It was also the background to the conversation, which Mr Reinke had with Mr Auer, and to which Whelan JA has referred in paragraph 27 above.

116 There is no dispute that, as at February, the respondents were still engaged by the applicants to sell the business. It is also beyond dispute that it was contemplated that the respondents would be entitled to a commission in respect of any sale of the business concluded by them. Mr Turner, in his email to Mr Auer dated 23 February 2011, referred to the need to adjust the EAA to cater for the change in the sale price of the business. Mr Auer, in his email in response, confirmed that he was 'a man of honour'. In the meantime, Mr Reinke had a conversation with Mr Auer in which Mr Reinke reiterated, and Mr Auer did not disagree, that there should be a new formal agreement between the parties. The trial judge inferred that the reference by Mr Auer to being 'a man of honour' was an acknowledgment by him of that fact.[71]

117 Thereafter, the respondents continued to act for the applicants, and, ultimately, to conclude a sale of their business. The basis upon which the commission was to be payable, in respect of the lower price to be achieved for the business, was not articulated between the parties. However, as I stated, it was clearly understood between the parties that the respondents would be entitled to a commission in respect of that sale. In the September 2010 agreement, the parties had agreed that the commission would consist of the amount, by which the sale price of the business exceeded the then expected price of CHF 4 million. By February 2011, the parties' expectations as to the price, for which the business would be sold, had significantly reduced. Accordingly, it was agreed that there would be a base sale price of CHF 1.5 million. There was no suggestion that the respondents would not be entitled to a commission on a sale of the business at or above that price. While the respondents foreshadowed the need for a variation of the existing document, there was no suggestion that it would alter the structure of the existing method by which the entitlement to commission was stipulated. At that same time, it could not have been sensibly contemplated that the respondents would only be entitled to commission at a sale price above CHF 4 million.

118 In those circumstances, I consider that when the parties varied the arrangements between them in February 2011, it was 'so obvious that it goes without saying' that the parties agreed that the commission arrangements, in respect of the sale of the business, would be varied accordingly, so that the respondents would be entitled to commission consisting the amount by which the ultimate sale price of the business exceeded the then base price of CHF 1.5 million, stipulated by the February 2011 variation.

119 That inference, from the facts, is confirmed by the discussions between the parties in April 2011, after they had visited a company in Clifton Hill, NCI. When Mr Reinke stated that the possible sale price of CHF 2 million would provide a good commission to the respondents, given that the base price was CHF 1.5 million, Mr Auer's response was that the base price was CHF 1.8 million. It is significant that Mr Auer did not, at that stage, or indeed subsequently, demur from the proposition that the commission payable to the respondents was the difference between the agreed base price and the sale price of the business. Rather, his response was solely directed to specifying the amount of that base price.

120 In those circumstances, in my view, the trial judge was correct in holding that in February 2011 the agreement between the parties was varied, so that the respondents would be entitled to commission in respect of any sale of the business effected by them, such commission being the amount of any sale price above the base price of CHF 1.5 million.

121 Subject to the foregoing, I otherwise agree with the reasons given by Whelan JA and with his Honour's conclusions.

[1] Polybuild Technologies International Pty Ltd v P'Auer AG & Anor [2014] VCC 1868 ('Judgment').

[2] A reference to Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 ('Empirnall').

[5] Empirnall (1988) 14 NSWLR 523, 527 (Kirby P) and 534 (McHugh JA with whom Samuels JA agreed).

[8] Vroon v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32, 80 (Ormiston J) ('Vroon').

[9] Empirnall (1988) 14 NSWLR 523, 528-9 (Kirby P) and 534-5 (McHugh JA with whom Samuels JA agreed) citing and relying in particular upon Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd's Rep 334, 340. Ashley JA (with whom Maxwell P and Nettle JA agreed) adopted the same approach in PRA Electrical v Perseverance Corporation Pty Ltd [2007] VSCA 310; (2007) 20 VR 487, 502-505 [59]-[66] ('PRA') citing and relying in particular upon Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 682, 686 (Lord Hatherley) and 693 (Lord Blackburn) ('Brogden'). Similar reliance was placed on Brogden by Ormiston J in Vroon [1994] VicRp 53; [1994] 2 VR 32, 79-80.

[10] Vroon [1994] VicRp 53; [1994] 2 VR 32, 81-3 (Ormiston J) and PRA [2007] VSCA 310; (2007) 20 VR 487, 489 (Nettle JA).

[11] [2009] FCA 499 [39] ('Adnunat') (citations omitted) (emphasis added).

[12] PRA [2007] VSCA 310; (2007) 20 VR 487, 503-505 [64], [66] (Ashley JA) citing the reasoning of Kirby P in Empirnall (1988) 14 NSWLR 523, 530 and again in Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551, 14,569-70.

[13] PRA [2007] VSCA 310; (2007) 20 VR 487, 489 [5] (Nettle JA) quoting with approval McHugh JA in Integrated Computer Services Pty Ltd v Dynamic Equipment (Aust) Pty Ltd (1988) 5 BPR 11,110, 11,117-118 ('Integrated Computer) and further citing the reasoning of Heydon JA in Brambles Holdings Pty Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 176-80 [71]-[82].

[14] Empirnall (1988) 14 NSWLR 523, 530 (Kirby P) citing Brogden (1877) 2 App Cas 666, 674.

[53] The Applicant's Written Case cites the judgment at [57], [106], [114] and [121].

[62] [2002] VSC 575 ('Garbett').

[63] Ibid [14]-[15] (citation omitted).

[66] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177.

[67] Compare Hawkins v Clayton (1988) 164 CLR 539, 570 (Deane J); Griggs v Noris Group of Companies [2006] SASC 23; (2006) 94 SASR 126, 135 [21] (White J); Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1, 243-4 [1395]-[1399] (Drummond AJA).

At a glance

Court

Decision date

Before

Source

Judgment (203 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (9)