the appeal
34 The appellants submit that his Honour ought to have found that there was an agreement not to re-enter the Melbourne market until conditions improved. They submit that the likelihood of there being an agreement finds support in Mr Burchell's evidence. Regard should not have been had by his Honour to what he regarded as the true economic conditions in Melbourne at the relevant time, it is submitted. Alternatively, the parties did not intend to abandon the agreement. In this regard, it is submitted that, the Court may resort to evidence of the parties' actual intentions. It is also submitted that if the Court limits its consideration to the parties conduct, nevertheless that conduct does not clearly indicate that they had abandoned the agreement, but only that they were not pursuing performance of it for commercial reasons. With respect to that conduct it is also submitted that his Honour ought not to have included, as relevant conduct, a failure on Wallera's part to fulfil its contractual obligations. No such obligation arises from the terms of clause 5, it was submitted.
35 It has been said that great care is required when judges act upon assumptions about current conditions or circumstances in society: Australian Broadcasting Commission v Lenah Game Meats Pty Ltd (2001) CLR 199 at 298, [252]. Nevertheless judges have taken judicial notice of economic conditions generally prevailing: J D Heydon, Cross on Evidence, Butterworths, Australia, 2003 at [3060]. Many matters in this category will be well known and uncontroversial. In the cases referred to in Cross, judges have taken notice of the decreasing value of money and the existence of an overall inflationary trend. The question in each case will be whether evidence is necessary. This will be so where views might differ on the subject. In the present case his Honour found that (at [13]):
'…it is incorrect to suggest that the economic situation in Victoria was so poor for the whole of the period from 1992 through 1997 that the business could not operate.'
36 There would appear to be two limbs to his Honour's finding. The first involves his Honour's perception of the economic climate at the time. The second puts a carpet-cleaning business in that context. Considerations of the latter kind would, in my respectful view, require some understanding of the extent to which such a business is affected by a downturn in the economy. I take his Honour to have at least considered that the economic situation in Victoria was affected to an extent. It is the degree to which it was affected with which he disagreed. However, without knowledge as to how sensitive businesses such as this are to economic downturns I am unable to see that his Honour could reach a conclusion about whether it could operate profitably in the period in question. The evidence, such as it was, suggests that at least in the early part of that period the sub-franchisees did not think it could be and Mr Jain and Mr Burchell were apparently reluctant to re-enter the market.
37 His Honour's finding influenced the view he took of Mr Jain's creditworthiness on that topic. It confirmed the view his Honour had already reached about there not having been an express agreement between Mr Jain and Mr Burchell. His Honour formed that view because of the lack of detail Mr Jain was able to give about the discussions concerning it. No basis has been shown for interfering with that finding. Whilst it remains the appellants cannot establish the existence of the agreement, even if one were to disregard his Honour's additional finding based upon his understanding of economic conditions. I turn then to the question of abandonment.
38 It has been said, in connexion with the law relating to the formation of contracts generally in Australia, that proof of actual intention is not necessary: Taylor v Johnson (1983) 151 CLR 422 at 428-429. Mason ACJ, Murphy and Deane JJ there observed that pursuant to the 'objective theory', which commanded the field, the law is concerned not with the parties' actual intentions, but with the outward manifestations of those intentions (see also Air Great Lakes Pty Ltd v KS Eastern Pty Ltd (1985) 2 NSWLR 309 at 336; CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas 61-232 at 75,558. As Mahoney JA observed in Air Great Lakes (at 330) the existence of a contract is 'a consequence which the law imposes upon, or sees as the result of, what the parties have said and done'.
39 The Australian cases on abandonment would not appear to be concerned with whether a contract to terminate the agreement was concluded, nor with what the party relying upon abandonment actually understood or assumed to be the case. The latter appears to be the English approach the Court of Appeal in Allied Marine applied Lord Brightman's test in 'The Hannah Blumenthal' rather than the approach of Lord Brandon, which was similar to that followed by Australian courts. I respectfully agree with his Honour the primary Judge that it is not necessary to enter upon that debate.
40 Whilst the Australian cases may not have discussed the theoretical basis for abandonment to any great extent it is clear that regard is to be had to the conduct of the parties and what might be inferred from it. Abandonment may be seen as a conclusion that parties have no further interest in a contract continuing, even though they may have said nothing to that effect. It may nevertheless be clear that they both regard it as at an end. This can more readily be discerned where one or more of the parties have ineffectively attempted to bring the agreement to an end and both behave as if it was ended as occurred in Summers v The Commonwealth (1918) 25 CLR 144 and DTR Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423.
41 In Summers v The Commonwealth, the assignee of the contractor, who had agreed to supply a quantity of marble, claimed damages for refusal to accept some marble or a quantum meruit for that which had been tendered. The parties' approach to the question as to what the contractor was to supply differed and this had led to the contractor being unwilling to perform it. The purchaser gave notice cancelling the contract, but its terms were held to be ambiguous and ineffective. The contractor responded by saying that he did not wish the agreement to be cancelled, but modified. He did not however take the matter further and took no step towards performance. Isaacs J found him to have 'acquiesced in considering his obligation at an end' (at 151). The purchaser also treated it in that way, since it proceeded to procure the marble from another source.
42 Isaacs J considered that, whatever the terms of a contract may be, parties might conduct themselves so as to mutually abandon or abrogate it, regardless of whether there had been something in the nature of rescission (at 151-152). His Honour (at 152) referred to De Soysa v De Pless Pol [1912] AC 194, at 202 where Lord Atkinson had observed that:
'One party to a contract is not bound to give to the other unlimited time after a day named to do that which the other has contracted to do. There must be some point of time at which delay or neglect amounts to refusal …. In truth, the projects seem to have been to a great extent, if not altogether, abandoned by all the parties concerned.'
43 Isaacs J concluded that the position in that case was the same and that 'Informally, but effectively, the parties have so acted in relation to each other, as to abandon or abrogate the contract' (at 152).
44 In DTR Nominees, which applied Summers v The Commonwealth, the parties bona fide held different views as to what the contract required. Their attempts to rescind were ineffective. The Court was however in no doubt that, when the proceedings commenced, neither party regarded the contract as being on foot or intended that the contract should be further performed. The parties had so 'conducted themselves as to abandon or abrogate the contract' (at 434).
45 No such conduct was involved in the present case. His Honour the primary Judge's view was that it was sufficient evidence of abandonment that there be no fulfilment of a contractual obligation, without objection from the other party, for a long time. In Fitzgerald v Masters (1956) 95 CLR 420 specific performance was sought of an agreement for the sale of an interest in land which had been partly performed by the payment of some monies but not completed by either party for many years. The question of long delay evidencing abandonment, such that equity might refuse relief, was the ultimate issue for the Court. The Court had been unable to conclude, although there had been such delay, that the agreement should be regarded as abandoned at law. Importantly, the contract had been partly performed and the purchaser had acquired an equitable interest in the land which could not be lost by mere inaction on his part. The view which might be taken in contract, where neither party has attempted to perform and where an 'inordinate length of time' had elapsed, was however considered. Dixon CJ and Fullagar J considered that in such circumstances it may be inferred that the contract has been abandoned, giving as an example the decision in Pearl Mill Co Ltd v Ivy Tannery Co Ltd (1919) 1 KB 78 per Rowlatt J at 82. As their Honours observed (at 432):
'What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that (in the words of Rowlatt J) "the matter is off altogether".'
46 The appellants rely upon the view expressed by Mahoney JA in Air Great Lakes, that where parties 'have, in terms, indicated that it is not their intention that there be not a contract but rather the contrary, reference may, I think, be made to that evidence' (at 332). That case involved the question whether extrinsic evidence should be admitted to prove the parties' intentions with respect to whether a contract was concluded, in circumstances where there was a written agreement. Mahoney JA and McHugh JA considered that regard could be had to what the parties had said and done to determine that question (at 332-3; 337). In that sense evidence of intention could be received, at least where it was known to the other: Mahoney JA at 331. However, as his Honour there observed an unknown subjective intention could not be set up where the other party reasonably understood there to be a legal commitment.
47 Air Great Lakes provides no support for the proposition that Mr Jain's uncommunicated intentions could be taken into account. At the very least such evidence would be inherently unreliable. Regard may however be had to what was said and done by the parties. The parties' conduct is the very evidence that the Courts resort to in order to determine whether they have abandoned an agreement. It is not inconsistent with an objective assessment to do so. Here there was some evidence beyond that simply of the parties' inaction, to which I shall shortly refer.
48 It was of some importance to his Honour's reasoning that Wallera was contractually obliged to exploit the name and process 'in a proper and business-like manner' and did not do so. The appellants submit that the reference to a 'business-like manner' in clause 5 enabled Wallera to perform or not, depending upon its commercial judgment. The submission must be rejected. The words import a standard of behaviour. The obligation to exploit the name would be implied, were it not already clear from clause 5.
49 The appellant's contention that the contract could not be abandoned, for the reasons dealt with in Fitzgerald v Masters, must also be rejected. Whilst there had been some performance of the agreement at an early point, Wallera had not paid for and did not obtain any proprietary interest which is subject to being divested were the contract held to be abandoned. It merely had a licence, albeit one which extended over a long period of time.
50 The length of the term of the agreement is a matter of some relevance in assessing the likelihood of abandonment. It provides a context for seven years of inactivity and raises the question whether the parties can be taken to have no interest in any further performance over the next thirty years or so. Abandonment may be somewhat more difficult to infer in such circumstances.
51 It is also relevant to consider the position of CGM and Wallera, in my view. CGM was a shareholder in Wallera and their interests were, to an extent, coincident. They acted, in a sense, as if they were joint venturers. Mr Burchell took an active part in the management of Wallera until 1996. He was aware that it was not re-entering the Melbourne market in the years following 1992. It must be inferred, in my view, that he knew why, even if it was not a matter upon which he was questioned at the hearing. That he and Mr Jain had discussed it is confirmed by his own evidence. Neither were apparently concerned to have Wallera operate in Melbourne for the time being. Even if no agreement based upon the economic climate was in fact made, it is plain that Mr Jain did not consider it a course which was prudent and Mr Burchell had his own reasons for not requiring Wallera to recommence operations. It would have required his companies to expend monies at a time when their resources were diverted elsewhere.
52 These factors indicate that the parties were unconcerned about Wallera's present inactivity but, in my respectful view, they do not permit a conclusion that Wallera and CGM would not take it up in the future. It is not possible to infer that the parties thought the matter was 'off altogether'. This conclusion is supported by the correspondence between the parties in late 1998. In it Wallera asserted its right to continue and CGM did not challenge it. Importantly, CGM did not assert that it considered that the contract was no longer available to Wallera.
53 There was a further period of inaction by Wallera after this correspondence was exchanged and during which CGM commenced operations. It may be by this point that the parties' contractual relationship, and their assumptions about it, had altered. This is not a matter dealt with by his Honour and not the subject of any cross-appeal. It would not necessarily involve issues of abandonment in any event.
54 In my respectful view his Honour did not have regard to the available evidence of the parties' conduct and their circumstances under the agreement and considered only what unexplained inaction could mean. The evidence, such as it was, did not suggest that the parties regarded the contract as abandoned. At most it suggested they were not presently interested in its performance.
55 The appeal should be allowed and the order numbered 1 made on 20 February 2003, the orders numbered 1 and 2 made on 19 March 2003 and the order numbered 1 of 6 May 2003 be set aside. In lieu of the firstmentioned order there should be an order that the answer to the question 'Was the said agreement abandoned?' is 'No'. The first, second and third respondents should pay the appellant's costs of the appeal. The costs of the trial should be reserved to the trial Judge as a decision as to who should bear them may be affected by the ultimate outcome of the proceedings.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.