Platformco Investments Pty Ltd v Hanna Contracting Services Pty Ltd

District Court of NSW|2024-03-07|Before: Optus Vision P, Investments P, Hannas P, Platformco P

JUDGMENT

Platformco Investments Pty Ltd ('Investments P/L') alleges that Hannas Contracting Services Pty Ltd ('Hannas P/L') is indebted to it in the sum of $787,231.11, which is described in the Statement of Claim as a 'liquidated claim'. Investments P/L seeks, in this action, to recover the alleged debt from Hannas P/L. Hannas P/L denies that it is indebted to Investments P/L and says that Investments P/L is not entitled to the relief claimed, or any relief.
At the trial of the matter, two affidavits of Mr Julian Doyle ('Mr Doyle'), the Director of both Investments P/L and another company called Platformco Pty Ltd ('Platformco P/L'), one dated 4 August 2023 ('Mr Doyle's affidavit') and the other dated 8 December 2023, were admitted into evidence. A portion of a report of Niall Mc Sweeney ('Mr McSweeney'), a Quantity Surveyor, dated 24 August 2023, and a redacted version of an affidavit of Danny Hanna ('Mr Hanna'), dated 1 November 2023 (Mr Hanna's affidavit'), were also admitted into evidence in the plaintiff's case. Mr Doyle and Mr Mc Sweeney gave oral evidence.
The defendant tendered an email of 11 February 2022 from Mr Doyle to Charlie Martin (Chief Operating Officer of the Hannas Group)('Mr Martin') and adduced no further evidence.

History

Mr Doyle and Mr Hanna met in 2018 when they were working on the same project in Sydney. Mr Doyle was then the Director in charge of Icon's business in New South Wales. Mr Hanna was a Director of the Hannas Group of companies.

The Lane Cove Retainer Agreement

The Lane Cove Retainer Agreement is an agreement between Platformco P/L and Hannas P/L. The agreement provides for Platformco P/L (which is referred to in the agreement as 'the consultant') to provide to Hannas P/L (which is referred to in the agreement as 'the principal') the services set out in Schedule 1 to the agreement, which says the following: ROLE: DEVELOPMENT DIRECTOR - HANNAS CONTRACTING SERVICES PTY LTD Oversee, manage and employ all necessary resources for the delivery of Hannas Development projects including but not limited to: - Feasibility - Finance - Pre-Planning - Development Application - Design Development - Sales - Contractor Procurement - Delivery - Commissioning - Settlement
Schedule 2 of the Lane Cove Retainer Agreement says, in clause 1: 1. The Fees The Fee is as follows: - A monthly $20,000 (ex GST) retainer will be paid by the principal to the consultant from February 2021 up to the completion date [sic].
The Lane Cove Retainer Agreement provides, in clause 7(i), after listing a number of circumstances in which the principal may terminate the agreement: (i) in any other event, either party may terminate this agreement for any reason by giving 30 days written notice to the other party. In the [e]vent the agreement is terminated, profit share is to be valued as a percentage of development completion. For the avoidance of doubt. If the development programme is at month 15 of 30 when notification is provided, 50% of the profit share will be provided on termination.

Lane Cove Profit Share Agreement

The Lane Cove Profit Share Agreement is an agreement between Investments P/L and Hannas P/L. It provides for Investments P/L (which is referred to in the agreement as 'the consultant') to provide to Hannas P/L (which is referred to in the agreement as 'the principal') the services set out in Schedule 1 to the agreement, which is in the same terms as Schedule 1 to the Lane Cove Retainer Agreement (set out above at [18]).
The following terms are defined in the Lane Cove Profit Share Agreement (among others): commencement date means 1/10/21 completion date means: In accordance with Development Program updated time to time and incorporated in the monthly reporting PCG (Currently circa March 2023). fees means the fees payable to the consultant in accordance with schedule 2. practical completion has the meaning given to that term in each building contract per project these services are engaged for. project completion means when at such time when the project has achieved practical completion. Fees will be calculated at this point in time based on settlements to date. If settlements occur post practical completion, the fees will be paid at each future settlement.
The Lane Cove Profit Share Agreement says, in clause 5: 5. Payment of the fee (a) The principal will pay the consultant the fee in accordance with schedule 2. (b) The consultant may claim payment for the fee by tax invoice to the principal at the times indicated in schedule 2. (c) The fee and any other money payable to the consultant under this agreement are calculated on a GST exclusive basis. This provision is common to all four agreements.
Clause 5 refers to Schedule 2 of the Lane Cove Profit Share Agreement, which provides as follows, in relation to the quantum of the fee, in clause 1: 1. The Fees The Fee is as follows: - For the Arc Lane Cove Project, a 4% dividend of project profit will be paid upon project completion. Any dividend payable will be determined on the profit figure at project completion. For the avoidance of doubt this may be transferred to unit(s) in the development to an equivalent value as determined by the consultant. - In the event the Arc Lane Cove Project is sold before development with a DA, and no construction/development works have occurred, Hannas will pay the consultant 2% of the profit from the sale (for the site at 14-16 Orion Road Lane Cove specifically, for any other sites this will be agreed on a case by case basis).
The Lane Cove Profit Share Agreement provides, in clause 7(i), after listing a number of circumstances in which the Agreement may be terminated: (i) in any other event, either party may terminate this agreement for any reason by giving 30 days written notice to the other party. In the event the agreement is terminated, profit share is to be valued as a percentage of development completion as per the development programme as reported in the monthly PCG.

The Brookvale Retainer Agreement

The Brookvale Retainer Agreement is an agreement between Platformco P/L and Hannas P/L. It provides for Platformco P/L (which is referred to in the agreement as 'the consultant') to provide to Hannas P/L (which is referred to in the agreement as 'the principal') the services set out in Schedule 1 to the agreement, which is in the same terms as Schedule 1 to the Lane Cove Agreements. It can be inferred from the whole of the Brookvale Retainer Agreement that it was intended that the services to be provided by Platformco P/L were primarily for the purposes of the Brookvale project.
As I have said, the Brookvale Retainer Agreement provides the procedure for the payment of the fee in clause 5, in the same terms as clause 5 of both of the Lane Cove agreements (see [23], above).
Schedule 2 of the Brookvale Retainer Agreement provides, in clause 1, for the payment of a monthly fee of $20,000 in the same terms as in Schedule 2 of the Lane Cove Retainer Agreement (see [18] above).
The Brookvale Retainer Agreement, in clause 7, provides for the early termination of the agreement by the principal in the event that the circumstances specified in clause 7(a) to (d) arise (subject to clause 7(h)), but does not provide for the termination of the agreement by either party on 30 days written notice 'for any reason', unlike the Lane Cove agreements.

Brookvale Profit Share Agreement

The Brookvale Profit Share Agreement is an agreement between Investments P/L and Hannas P/L. It provides for Investments P/L (which is referred to in the agreement as 'the consultant') to provide to Hannas P/L (which is referred to in the agreement as 'the principal') the services set out in Schedule 1 to the agreement, which is in the same terms as Schedule 1 to all three of the agreements discussed above.
The Brookvale Profit Share Agreement, in clause 5, deals with the procedure for the claiming of the fee by the consultant in the same terms as the three agreements discussed above. As to the quantum of the fee, Clause 5 refers to Schedule 2 of the Brookvale Profit Share Agreement which says, in clause 1: 1. The Fees The Fee is as follows: - A 4% dividend of project profit will be paid upon project completion. Any dividend payable will be determined on the profit figure at project completion. For the avoidance of doubt this may be transferred to unit(s) in the development to an equivalent value as determined by the consultant. - In the event the project is sold before development with a DA, and no construction/development works have occurred, Hannas will pay the consultant 2% of the profit from the sale.
The Brookvale Profit Share Agreement provides, in clause 7(i), after listing a number of circumstances in which the agreement may be terminated by the principal: 7(i) in any other event, either party may terminate this agreement for any reason by giving 30 days written notice to the other party. In the event the agreement is terminated, profit share is to be valued as a percentage of development completion as per the development programme as reported in the monthly PCG.
In clause 1.1 of the Brookvale Profit Share Agreement, the commencement date is defined to mean 1/10/21. The definitions for the terms 'fees', 'practical completion', and 'project completion' are the same as in the Lane Cove Profit Share Agreement and are set out above at [21]. The definition of 'completion date' in the Brookvale Profit Share Agreement is as follows: completion date means: In accordance with Development Program updated time to time and incorporated in the monthly reporting PCG. (Currently circa February 2024)

Payments made to Investments P/L by Hannas P/L

In August 2022, Hannas P/L paid Investments P/L the sum of $20,000. On 5 December 2022, Hannas P/L paid Investments P/L the sum of $350,000. In his affidavit of 4 August 2023, Mr Doyle characterised these payments as 'advance payment of the profit share' under the Lane Cove Profit Share Agreement and the Brookvale Profit Share Agreement. Hannas P/L paid the retainers provided for in the Retainer Agreements to Platformco P/L throughout the operation of those agreements.
In cross-examination, Mr Doyle agreed that he had asked Mr Hanna for the $350,000 payment to Investments P/L because he needed that money to purchase a unit. Mr Doyle said that the payment "was always going to be set off against the profit share (Transcript p 38 line 8).

Termination of Agreements

On 27 February 2023, Mr Hanna and Mr Doyle had a meeting, at which Mr Hanna outlined a financial issue which had the potential to affect the Hannas Group.
On 3 March 2023, Mr Doyle received a letter from Mr Hanna dated 2 March 2023 and addressed to Mr Doyle, Platformco P/L and Investments P/L ('the termination letter'). The letter referred to the discussion on 27 February 2023 and said that a decision had been made to reduce Hannas P/L's overheads. The letter indicated that it terminated "your engagement" meaning, I infer, the engagement of Platformco P/L and Investments P/L, there being no evidence of a separate engagement of Mr Doyle in his personal capacity. It said that the retainer of $40,000 would be paid by way of 30 days notice for the month of March [2023]. It further said: In November 2022 we agreed on an advance of your profit share to the sum of $350,000 which was paid on 5 December 2022. You also received $20,000 in a separate payment in 2022. Total paid to you to date is $370,000. With respect to your profit share arrangement this is applicable only to the Arc Lane Cove project. As per the terms of your contract you are entitled to 4% of project profit on project completion. You are not entitled to future profit share for any other Hannas project due to the current status of these and associated risks with them continuing. Your profit share and final payout is calculated as follows for Arc Lane Cove: I am prepared to pay your Notice Payment ($40,000) on 31 March 2023 and the balance of funds from your profit share ($24,000) paid on 28 April 2023. As you can appreciate the project profit is projected and may fluctuate due to increase costs, delays or settlement risk. We have also assumed that we will sell all remaining stock (including developer stock) at full list price. For the sake of clarity and monies due to you I am happy to assume the above profit figure will hold and the balance of funds from your profit share will remain fixed at $24,000. [sic] Below are the figures relied upon to calculate the above. Construction Contract: Original Contract Sum $21,500,000.00 Approved Variations $2,407,951.08 Adjusted Contract Sum 23,907,951.08 Forecast Variations $550,000.00 Forecast Final Contract Sum $24,457,951.08

% Construction Complete (February 2023) Adjusted Contract Sum $23,907,951.08 Claimed to Date $10,817,591.37 Percentage Complete 45.2%

…

On 17 April 2023, Investments P/L, through its solicitor, issued a letter of demand ('the letter of demand') to Hannas P/L for a total amount of $742,513.97. The amount of $417,231.11 was claimed as a component of the total amount claimed, being what was asserted to be the outstanding profit share for the Lane Cove project of $787,231.11 (see below at [39] and [80]) minus the advance payment of $370,000. The balance of the amount claimed was the asserted profit share for the Brookvale project of $325,282.86 (see below at [86]).

Quantum of claim

Investments P/L, in its Statement of Claim (at paragraph 25), concedes that the "development program as reported in the monthly PCG", referred to in clause 7(i) of the Lane Cove Profit Share Agreement, did not come into existence for either the Lane Cove Project or the Brookvale Project.
The letter of demand says, at paragraph 11: 11. … (d) a DA was submitted on 26 May 2021; (e) site clearing and excavation works commenced in November 2021; (f) the Lane Cove Construction Report records a commencement date of 19 August 2021 with the submission of the tender price. This report covers the construction phase only (ie, the construction phase of the broader development programme) excluding site clearing, remediation and excavation carried out by an early works contractor; (g) it is incorrect to state that the starting point for measuring the percentage of "development completion" is the commencement of construction. The forecast/claimed date for Practical Completion recorded in the Lane Cove Construction Report is 21 June 2023; (h) the forecast project profit is $21,753,927. 12. Adopting the above, the development programme duration is 22 February 2021 to 21 June 2023, being 27 months and 30 days (ie, 850 days). Our client's engagement was terminated, effective 1 April 2023, being 25 months 10 days (769 days) into the development. 13. Accordingly, the profit share for the Lane Cove Development is calculated as follows. (a) 4% of $21,753,927 = $870,157.08 (b) 769/850 = 90.47% complete (c) 90.47% of $870,157.08 = $787,231.11 14. Deducting the Advance Payment, the profit share owing under the Lane Cove Development is $417,231.11 (Lane Cove Profit Share).
This is the basis for the claim in the Statement of Claim regarding the Lane Cove project.
In his affidavit of 4 August 2023, Mr Doyle explains, in paragraph 55: A monthly client run Project Control Group (PCG) is standard for developments. A PCG takes into account all development activities including funding, feasibility, planning, construction etc. Within a PCG report, there is generally a development programme and a construction programme…. Given there was no requirement by the funder and the familiarity of the stakeholders for both Arc Lane Cove and Rockwater Brookvale, there was no development PCG for either development, there was only a builder PCG.
Mr Doyle further says, in the affidavit: 57 The provision of the Services and as such the start date for Platformco Investments is as per the Consultancy Agreements under Definitions. However, Mr Doyle then adopts the commencement date of 22 February 2021. The definition of commencement date under both Profit Share Agreements is 1/10/21. In his affidavit, Mr Doyle refers to a document annexed to his affidavit entitled "Summary of Project Returns", which predicts a "time span" for the Lane Cove project of "Jan 21 - Jan 23". In cross-examination, Mr Doyle agreed that he prepared the "Summary of Project Returns". Mr Hanna, in his affidavit, said that Mr Doyle prepared the document in March 2021.
Mr Doyle says that he has adopted the 'forecast date for completion' of the Lane Cove project which appeared in the Project Monthly Report dated 7 March 2023, prepared by Patterson Building Group which was contracted to perform the construction of the superstructure and fit out. The "forecast date for completion" in that report was 21 June 2023 (affidavit of 4 August 2023 paragraphs 58 and 59).
In his affidavit, Mr Doyle adopts the total project profit (projected) with respect to the Lane Cove project from the termination letter.
In the redacted version of Mr Hanna's affidavit dated 1 November 2023, Mr Hanna says that practical completion of the Lane Cove project was reached on 24 October 2023 (paragraph 6).
Mr Hanna also says that the precise profit to be realised for the Lane Cove project was not yet clear, but that it would probably be about $18 million (paragraph 8).

Relevant Principles of the interpretation of contracts

The relevant principles to be applied in the interpretation of the four agreements under consideration are encapsulated in Realestate.com.au Pty Ltd v Hardingham and Others; RP Data Pty Ltd v Hardingham and Others [2022] HCA 39 by Gordon J at [43]-[44]: Principles 43 The rights and liabilities of parties under a contract - whether oral, in writing, or partly oral and partly in writing - are determined objectively. The concern is "not with the real intentions of the parties, but with the outward manifestations of those intentions". As this Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd: It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. And where the contract is commercial, it is necessary to ask what reasonable persons engaged in the respective businesses of the parties would have understood the words and conduct to mean. 44 As this Court held in Toll, a person who signs a contractual document conveys a representation to a reasonable reader of that document that the person has read and approved its terms or is willing to take the chance of being bound by its contents. If the document on its face appears to be a complete contract, it will contain the whole of the contractual terms. Extrinsic evidence cannot be adduced to subtract from, add to, vary or contradict those terms, except in limited circumstances. And a term will be implied only if, among other things, it is necessary to make the contract work.
In Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd (2022) 275 CLR 165 ('the CFMMEU case'), Gordon J said, at [176]: 176 One "general principle" of construction of contracts is that "it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made" (what might be described as "subsequent conduct"). The rationale of the general principle, identified by Lord Reid in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd, is to avoid the result "that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or a year later". The general principle may permit exceptions. No party contended that any exception should be recognised in this appeal.
The termination letter may not be used in the interpretation of the Profit Share Agreements because it is "subsequent conduct", for the reasons set out in the CFMMEU case.

Interpretation of each of the Profit Share Agreements by themselves

The Lane Cove Profit Share Agreement

The only 'fee' provided for under this agreement is the fee set out in Schedule 2 (see clause 1.1).
Schedule 2, clause 1 provides for a 4% dividend of project profit to be paid upon project completion. Clause 1 further says: Any dividend payable will be determined on the profit figure at project completion…
Clause 5 of the agreement provides (among other things) that the principal will pay the consultant the fee in accordance with schedule 2.
Clause 7(i) of the agreement provides for termination on 30 days notice and says that, in the event that the agreement is terminated "profit share is to be valued as a percentage of development completion as per the development programme as reported in the monthly PCG".
On a plain reading of the text of the Lane Cove Profit Share Agreement, what is conveyed to a reasonable person in the position of the parties is that, in the event of termination, there will be a 'valuation' of the profit share to be paid by the principal to the consultant. That 'valuation' must occur after the end of the project, when the quantum of the profit of the project is known, because Clause 1 of Schedule 2 requires the actual profit to form the basis of the 'valuation'. Clause 7(i) anticipates that there will be a development programme which will be reported in the monthly PCG. The expectation, I infer, was that the development programme would be updated at least monthly to reflect what was actually happening with the development (assuming that it was progressing). At the end of the project, the development programme reported in the monthly PCG would therefore reflect reality. This is consistent with the definition of 'completion date'. The development programme and the monthly PCG were to be used in arriving at 'the percentage of development completion'; that is, in the assessment of what proportion of the development the consultant had participated in prior to termination. The proportion of the total project time which elapsed between the beginning of the project (or the beginning of the consultant's engagement in relation to the project) and the termination of the agreement with the consultant may be a factor in that calculation, but it may not be the only factor.
In the event, however, neither a development programme nor a monthly PCG came into existence. Other means therefore need to be used to ascertain "the percentage of development completion" when the profit generated by the project is known.

The Brookvale Profit Share Agreement

The definition of 'fee', the provision for the payment of the fee in clause 5, the provision in clause 7(i) concerning termination 'for any reason' and the provision in Schedule 2 for the determination of the 'dividend of project profit' are the same in the Brookvale Profit Share Agreement as in the Lane Cove Agreement.
For the reasons set out above with respect to the Lane Cove Profit Share Agreement, on the basis of the text of the Brookvale Profit Share Agreement, considered alone, what is contemplated upon termination under clause 7(i) is the 'valuation' of the profit share when the profit becomes known, which must be after the completion of the project. Again, the agreement provides for the percentage of development completed at the date of termination to be ascertained with reference to the development programme reported at the monthly PCG, but the evidence is that no development programme and no monthly PCG came into existence for the Brookvale project.
Mr Hanna said, in his affidavit, that the precise profit for Lane Cove was not yet known, though he was able to estimate it. Mr Hanna indicated that the Brookvale project had encountered difficulties related to the site. He said "The Rockwater Brookvale development is now likely to proceed but not in the way contemplated when the land was acquired".

Should the agreements be read together?

Investments P/L argued that clause 7(i) of the Lane Cove Retainer Agreement could be used to clarify "any doubt as to how clause 7(i) in the Investments P/L Profit Share Agreement should be construed". This was said to be so on the basis that it is a longstanding principle of interpretation that, where parties have executed a number of documents contemporaneously which relate to a single transaction between them, each of the documents must be examined together and apparent inconsistencies between them are to be reconciled (I will refer to this as 'the doctrine as to contemporaneous documents').
Investments P/L relied on the decision of the High Court in Toohey v Gunther (1928) 41 CLR 101 at 196 in support of this proposition: "The mortgage transaction" in this connection must be understood in the wider sense as the general comprehensive arrangement or agreement made between Astby and the brewery company whereby the Company was to advance £4,500 and Astby was to execute the mortgage, the bill of sale and the bond. (See per Lord Parker in Kreglinger's Case[13].) Had the bond been executed on a later date, the fact that in truth it was part of the mortgage transaction would bring it within the principle quoted. It was argued, notwithstanding the contemporaneous execution of the instruments, that because the bond says "whereas the said Company at the request of the said obligor has agreed to advance to him on certain terms the sum of £4,500," &c., the bond was an independent contract based on the promise to advance, and so proclaims itself. Much the same could be said of the recital in the bill of sale. The true principle of construction in such cases is stated by Knight Bruce L.J., when delivering the judgment of the Privy Council in Shaw v Jeffery[14], as follows: "When the same parties execute contemporaneously several instruments relating to different parts of the same transaction, all must be considered together; all must be examined in order to understand each; apparent inconsistencies are to be reconciled; and where there are real inconsistencies, the governing intention of the parties is still to be collected from a consideration of the language of all the instruments, and effect given to it." Applying that principle, no doubt can exist that the three documents are integral parts of the same wide transaction, intended to regulate as a totality the relations and rights and obligations of the parties with reference to the advance of £4,500, and therefore incapable of being treated as independent of each other in the only sense that would avail the mortgagee, and, therefore, the present appellant.
Investments P/L further relied upon the following statement in the decision of Jessel MR in Smith v Chadwick (1882) 20 CH D 27: …and in the next place, the doctrine as to contemporaneous documents rests on this, that when documents are actually contemporaneous, that is, two deeds executed at the same moment, a very common case, or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are all treated as one deed; and, of course, one deed between the same parties may be read to shew the meaning of a sentence, and be equally read, although not contained in one deed, but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose.
It was submitted by Investments P/L that this doctrine has been applied in the following cases: Krelinger (G&C) v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25; Baker v Biddle (1923) 33 CLR 188; Solution 6 Holdings Ltd v Industrial Relations Commission of NSW (2004) 60 NSWLR 558 at [173] (Handley JA); Fermiscan Pty Ltd v James [2009] NSWCA 355 at [174] (Ipp JA); Pang v Bydand Holdings Pty Ltd [201] NSWCA 175 at [19](Handley JA0; Nelson v Moorcraft [2014] WASCA 212 at [193], [197] (Murphy JA). In all of these matters, the parties to the litigation were parties to all of the agreements in issue.
Investments P/L argued, in effect and in summary, that the Lane Cove Retainer Agreement and the Lane Cove Profit Share Agreement ought to be treated as though Hannas P/L and Investments P/L were the parties to both agreements. In support of this proposition, it was argued that both Platformco P/L and Investments P/L had a single director, being Mr Doyle, and that they both had the same shareholder, being Julian Doyle Nominees Pty Ltd, a company associated with Mr Doyle. It was further argued that the fulfillment of the obligations of Platformco P/L and Investments P/L, under the agreements to which they were a party, relied on Mr Doyle's expertise. I reject this argument. When an agreement is entered into by a corporation, then that corporation is the party to the agreement for all purposes (with some irrelevant exceptions). It is not permissible, for example, to have Platformco P/L execute an agreement and be treated as the party to that agreement for tax purposes, but for Investments P/L or Mr Doyle to be treated as the party for other purposes.
Investments P/L pointed out that the arrangement for the consultancy services reflected in the four agreements was formerly the subject of an earlier agreement between Hannas P/L and Platformco P/L. The earlier agreement was executed in September of 2021. I note that it provided, in clause 7(i) for termination "for any reason" on 30 days written notice. In Schedule 1, it provided that "4% dividend of project profit will be paid upon project completion. Any dividend payable will be determined on the profit figure at project completion." The existence of this earlier agreement does not assist the plaintiff in its arguments.
The judgment of Finkelstein J in the Full Federal Court in McVeigh, in the matter of Piccolo v National Australia Bank Ltd [2000] FCA 187 (Heerey, Finkelstein (in dissent), and Kenny JJ) was cited in support of Investments P/L's argument. Finkelstein J acknowledged, at [31]: It seems that English law has only developed to the point where several instruments representing a single transaction may be read together if the documents are between the same parties: Smith v Chadwick, above, Chitty on Contracts 27th ed (1997) at par 12-057. This is also the position that has been taken in Australia: see Halsbury's Laws of Australia Vol 10, 'Deeds & Other Instruments' par 140-535(1) citing Smith v Chadwick. Finkelstein J then went on at [33] to describe the position on the point in the United States of America, quoting Palmieri J in Kurz v United States 156 FSupp99 (1957) at (103-104) (Kurz): New York law, which is applicable here, requires that all writings which form part of a single transaction and are designed to effectuate the same purpose be read together, even though they were executed on different dates and were not all between the same parties. This is in accordance with the general rule that where several instruments, executed contemporaneously or at different times, pertain to the same transaction, they will be read together, even though they do not expressly refer to each other. This canon of construction applies with particular force in situations where, as here, one document requires the execution of the second to achieve its purpose. The rationale is that by construing the instruments together, the intent of the parties can be perceived and enforced. Its application is generally recognised to extend to instruments relating to the same subject matter even though some of the documents are executed by parties who have no part in executing the others. Finkelstein J said: There is no reason why this approach should not be followed in this country. It would avoid the anomalous result that I have described. It would more readily permit the court to ascertain the true intention of the contracting parties. It is consistent with the objectivist view of contract, namely that the intention of the parties should be gathered from what they say (write) and so and not what they think. It is not inconsistent with any ruling of the High Court.
Kenny J, in McVeigh, said at [70]: Whether or not the rule ordinarily only permits transactional documents to be read together when between the same parties, it plainly has a wider application in cases of the present kind, where a question arises as to the extent of an obligation assumed by a surety or a mortgagor under a guarantee or mortgage. That is a consequence, I think, of the accepted rules of construction in the field. Kenny J noted, at [74], that the position in the United States on the point "varies, as a matter of State law, from State to State".
The broader rule as to contemporaneous documents set out in the judgment of the United States District Court for the Southern District of New York in the case of Kurz and approved by Finkelstein J in McVeigh has not been adopted to date by the High Court or by the Supreme Court of New South Wales.
As I have said, the arrangement concerning the provision for the Lane Cove project and the Brookvale project of those consulting services described in Schedule 1 to each of the agreements involved the entering into of four agreements. Platformco P/L was the consultant under both the Lane Cove Retainer Agreement and the Brookvale Retainer Agreement, which both provided for Platformco P/L to receive a monthly retainer, and Investments P/L was the consultant under both the Lane Cove Profit Share Agreement and the Brookvale Profit Share Agreement, which both provided for Investments P/L to receive a profit share. It was pointed out, in Hannas P/L's case, that Mr Doyle agreed that this was an arrangement sought by him on the basis of tax advice received by him. Mr Doyle was the author of the four agreements, and, in those circumstances, Hannas Pty Ltd submitted that it is surprising that Mr Doyle now seeks to argue that a different arrangement, contrary to the plain wording of the agreements sued upon, (ie the Land Cove Profit Share Agreement and the Brookvale Profit Share Agreement) should be found to exist for the limited purpose of reading clause 7(i) of the Lane Cove Retainer Agreement into the Profit Share Agreements.
Under Smith v Chadwick, there is no warrant for reading the four agreements together, or for reading the Lane Cove Retainer Agreement and the Lane Cove Profit Share Agreement together, or for reading the Brookvale Retainer Agreement and the Brookvale Profit Share Agreement together. This is because the consultant is different in the Retainer Agreements from the consultant in the Profit Share Agreements.
In Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2016] NSWCA 224, Ward JA, with whom Basten JA and Meagher JA agreed, set out the passage from Smith v Chadwick quoted above at [64] and said, at [68]: 68. Similarly, in Manks v Whiteley [1912] 1 Ch 735 at 754, it was recognised that several deeds may form part of the one transaction such that, if contemporaneously executed, they have the same effect as if they were one deed. There it was said that in such a case "[e]ach is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole".:
I reject Investments P/L's submission that the doctrine as to contemporaneous documents applies to the four agreements under consideration in this case. The agreements do not all have the same parties and they are not "part of the one transaction".
Even if the principle approved of by Finkelstein J in Mc Veigh did apply, the four agreements do not "pertain to the same transaction" and nor were they "intended to speak only as part of the one transaction". Each agreement, on its face, is a self-contained agreement for the provision of services for the purpose of a project in exchange for either the payment of a monthly retainer (the Retainer Agreements) or the payment of a profit share (the Profit Share Agreements). Two separate projects are involved. Whilst the four agreements were all executed on 22 February 2022, the commencement date of the Lane Cove Retainer Agreement was 22 February 2021, whilst the commencement date of the other three agreements was 1 October 2021. The agreements do not have entirely contemporaneous operation.

Can clause 7(i) of the Lane Cove Retainer Agreement be used to interpret the Profit Share Agreements as extrinsic evidence?

Hannas P/L argued that it is a fundamental principle of contract law that the wording of the contract must be applied (see Lewison and Hughes, The Interpretation of Contracts in Australia, (2012, Thomson Reuters (Professional) Australia Ltd) p 55-57).
In Optus Vision P/L v Australian Rugby Football League Ltd & 5 Ors [2000] FCA 187 Santow J, with whom Meagher JA and Stein AJA agreed, said: 24. But resort to extrinsic evidence, here documentary, must not detract from the axiomatic proposition that the starting point when considering a point of interpretation must be the text itself. As Lord Steyn observes "The mandated point of departure must be the text itself. The primacy of the text is the first rule of legal interpretation for the judge considering a point of interpretation. Extrinsic materials are therefore subordinate to the text itself". Mason J reminds us in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-3 that the starting point is to identify ambiguity in that text: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. 25. Thus far no Australian authority has gone so far as to allow unambiguous language to be contradicted by context….
The only extrinsic evidence Investments P/L wishes to rely on in the interpretation of the Profit Share Agreements is the last two sentences of clause 7(i) of the Lane Cove Retainer Agreement which says: For the avoidance of doubt. If the development programme is at month 15 of 30 when notification is provided, 50% of the profit share will be provided on termination.
There is no evidence that these words were ever the subject of any discussion between the parties. There is no evidence that the meaning and effect attributed to the words by Investments P/L in argument was ever agreed between the parties. The extrinsic evidence relied on is simply the existence of the words in the Lane Cove Retainer Agreement.
The Profit Share Agreements are not ambiguous in any way that would be overcome by the use of the note as an extrinsic aid to interpretation.
The difficulty with the calculation of the profit share upon termination of the consultancy under the Profit Share Agreements does not arise from ambiguity, but rather from the reference in those agreements to a development programme which did not come into existence and a monthly PCG meeting that never happened.
I reject the contention that clause 7(i) of the Lane Cove Retainer Agreement may be used as extrinsic evidence in the interpretation of the Profit Share Agreements. Its use would not clarify the meaning of the Profit Share Agreements.

Lane Cove project

At paragraph 25 of its Statement of Claim, Investments P/L claims that it is entitled to a profit share of the Lane Cove project calculated in the following way: Development Duration = 22 February 2021 to 21 June 2023 (27 months and 30 days (ie, 850 days)) Development Duration as at 1 April 2023 (being 30 days after the Termination Notice) = 22 February 2021 to 1 April 2023 being 25 months 10 days (ie, 769 days) 769/850 days = 90.47% 90.47% of $21,753,927 = 19,680,777.76 90.47% of $19,680,777.76 = $787,231.11

The first input to the calculation is the 'development duration'. The starting date used is 22 February 2021, the date upon which Platformco P/L first entered into a consultancy agreement with Hannas P/L. The finishing date is taken from a Project Monthly Report dated 7 March 2023, prepared by Patterson Building Group. None of the agreements refer to that document.
The second input is the 'development duration as at 1 April 2023 (being 30 days after the Termination Notice)'. The starting date for arriving at the 'development duration' is, again, 22 February 2021.
The third input is a calculation of what percentage of the "development duration" is represented by the "development duration as at 1 April 2023".
The fourth input multiplies the percentage arrived at by the calculation in the third input by the projected Lane Cove project profit estimated by Mr Hanna in the termination letter.
The fifth input calculates four percent of the fourth input and arrives at $787,231.11.

Brookvale Project

At paragraph 29 of its statement of claim, Investments P/L claims that it is entitled to a profit share of the Brookvale project calculated in the following way: Development Duration = 1 November 2021 to 30 April 2024 (29 months, 29 days (ie 911 days) Development Duration as at 1 April 2023 (being 30 days after the Termination Notice) = 1 November 2021 to 1 April 2023 being 17 months (ie, 516 days) 516/911 days = 56.64% 56.64% of $14,357,471 = 8,132,071.57 4% of $8,132,071.57 = $325,282.86

The first input is the 'development duration'. The starting date falls between the commencement date of the Brookvale Profit Share Agreement (1 October 2021) and a project modelling forecast which predicted a starting date of 30 November 2021 (see Mr Doyle's affidavit at paragraph 69). It may have come from the document entitled "Summary of Project Returns", which cites "Nov 21" (see p 170 of JD1). The source of the stated forecast completion date of 30 April 2024 is not stated.
The second input is simply the time which elapsed between the chosen starting date and a date 30 days from the termination of the consultancy.
The third input is a calculation of what percentage of the "development duration" is represented by the "development duration as at 1 April 2023".
The fourth input multiplies the percentage arrived at by the calculation in the third input by the projected Brookvale project profit estimated in a document entitled 'Summary of Project Returns', which is undated but states a "Time span" of November 2021 - December 2023 (see exhibit JD 1 to the affidavit of Mr Doyle at p 738). None of the agreements refer to this document.
The fifth input calculates four percent of the fourth input and arrives at $325,282.86.

Is Investments P/L's calculation in accordance with the Profit Share Agreements?

Mr McSweeney

A quantity surveyor, Mr McSweeney, gave evidence in the plaintiff's case. Mr McSweeney, in his statement, gave his opinion as to the date of commencement of each project, the anticipated completion of each project and the date at which Platformco P/L began providing consulting services with respect to the projects. Mr McSweeney also gave his opinion as to what percentage of each project was complete as at the date of the termination of the consultancies. I have given Mr McSweeney's opinions in relation to these questions no weight. The question of when each project began is a question of fact, which requires no expertise to ascertain. The question of when Platformco P/L began providing consulting services has a place in the history of the matter but is not germane to the ultimate questions raised in this matter. The prediction as to when each project is likely to be completed (relevantly) is a mixed question of interpretation of the Profit Share Agreements and the evidence, which is a matter for the Court, if it is relevant at all. Even if the giving of an expert opinion on the likely completion date of each project were a matter within the expertise of a quantity surveyor, Mr McSweeney was unable to provide a proper opinion because his analysis was confined to the examination of the documents with which he was provided by the plaintiff and he lacked information as to what was actually happening on the sites or in the management of the projects after April 2023.

Principles of interpretation

The method of calculation of the profit share under the Lane Cove Profit Share Agreement, as I have said, must be ascertained objectively by reference to "what reasonable persons engaged in the respective businesses of the parties would have understood the words and conduct to mean" (see [47] above). The subsequent conduct of the parties may not be used in the interpretation of the agreement (see [49] above).

Lane Cove Project

There is no warrant in the text of the Lane Cove Profit Share Agreement for the use of any document other than "the Development Program updated time to time and incorporated in the monthly reporting PCG" [sic] in any prediction of the completion date for the Lane Cove project.
In any event, the Lane Cove Profit Share Agreement clearly states, in Schedule 2, the timing for the payment of the profit: …a 4% dividend of project profit will be paid upon project completion.
Schedule 2 clause 1 also says: Any dividend payable will be determined on the profit figure at project completion. In other words, the calculation is to use actual profit determined at actual completion.
As I have said, clause 7(i) of the Lane Cove Profit Share Agreement says, in part: …In the event the agreement is terminated, profit share is to be valued as a percentage of development completion as per the development programme as reported in the monthly PCG.
There is no reason to interpret this sentence as requiring any prediction or forecast. There is no need to read it as changing the plain words of clause 5 and Schedule 2 of the Agreement. The provisions co-exist harmoniously when clause 7(i) is read to direct that only the percentage of development completion at the date of termination is to be calculated by reference to the development programme. The starting date of the project, the completion date of the project and the profit achieved by the project are all matters of reality to be ascertained when the project is complete, which is when the profit share will become due under Schedule 2. The development programme reported to the monthly PCG, had it existed, would have been expected to reflect the actual situation at project completion.
Investments P/L argued that Schedule 2 should be disregarded in circumstances where the consultancy had been terminated mid-project. There is nothing in the Lane Cove Profit Share Agreement which supports this argument, and I reject it. The Lane Cove Profit Share Agreement says, in clause 5(a), that "The principal will pay the consultant the fee in accordance with schedule 2". Clause 5(a) is the source of Investments P/L's entitlement to a fee under that agreement. It is not displaced by clause 7(i) of the agreement, which speaks only to the method of valuation of the profit share "as a percentage of development completion…", and not to the entitlement to payment, which is left to clause 5 of the agreement.
Even if the last sentence of clause 7(i) of the Lane Cove Retainer Agreement were able to be used to interpret the Lane Cove Profit Share Agreement (which I reject), the last sentence of that clause would not be read as altering the plain words of clause 5 and Schedule 2 of the Lane Cove Profit Share Agreement.
Investments P/L is not entitled to the profit share amount claimed as a "Liquidated claim" with respect to the Lane Cove project under the Lane Cove Profit Share Agreement.
Mr Hanna said, in his affidavit, that it was not yet clear how much profit would be made in the Lane Cove project. It is not, therefore, possible, on the basis of the evidence before me, to calculate what sum might be payable to Investments P/L by way of profit share on the Lane Cove project, if demanded.

Brookvale Project

Mr Hanna says, in his affidavit: The Rockwater Brookvale development is now likely to proceed but not in the way contemplated when the land was acquired.
I accept Mr Doyle's evidence that he negotiated the termination of existing leases on the Brookvale site, of which there were about seven. I also accept his evidence that no demolition of any building on the Brookvale site had occurred as at the date of the termination of Investment P/L's consultancy.
I infer that development in accordance with the original plans for the Brookvale project did not proceed after the termination of Investment P/L's consultancy. There is, therefore, no actual completion date and no profit.
The interpretation of the Lane Cove Profit Share Agreement set out above at [100]-[103] is equally applicable to the Brookvale Profit Share Agreement.
Investments P/L is not entitled to the profit share amount claimed as a "Liquidated claim" with respect to the Brookvale project under the Brookvale Profit Share Agreement.
On the evidence before me, it is clear that no profit share has become payable under clause 5 of the Brookvale Profit Share Agreement to date.

Conclusion and Summary

I have rejected the plaintiff's contention that the four agreements executed on 22 February 2022 should be read and interpreted together under 'the doctrine of contemporaneous documents' (Smith v Chadwick).
I have further rejected the plaintiff's contention that clause 7(i) of the Lane Cove Retainer Agreement should be used as extrinsic evidence in the interpretation of the Lane Cove Profit Share Agreement and the Brookvale Profit Share Agreement.
On the proper interpretation of the Lane Cove Profit Share Agreement and the Brookvale Profit Share Agreement, any profit share is to be determined on the profit figure at project completion and is to be paid upon project completion in accordance with clause 5 and Schedule 2 of each agreement, respectively.
On the evidence, the profit realised by the Lane Cove project is not yet known and there is no profit from the Brookvale project because it has not yet proceeded. There is, therefore, to date, nothing owed by Hannas P/L to Investments P/L by way of profit share under either the Lane Cove Profit Share Agreement or the Brookvale Profit Share Agreement.

Orders 1. The plaintiff's claim is dismissed.

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: 17 April 2024

At a glance

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Judgment (29 paragraphs)

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Cases Cited (10)