Western Export Services Inc v Jireh International Pty Limited [2010] NSWSC 622 | Case summary

Western Export Services Inc v Jireh International Pty Limited [2010] NSWSC 622 | Case summary | Zoe

CATCHWORDS : CONTRACTS - intention to create legally binding relations - written instrument entitled Letter of Agreement ("the agreement") signed by the plaintiff and the defendant included a clause providing for review after six months of commissions payable under the agreement - whether agreement was legally binding from date of execution or only after review and further agreement on commissions had taken place - MISTAKE - whether the defendant was labouring under a serious and fundamental mistake that the contract was not to be immediately binding and whether the plaintiff induced this mistake by failing to correct it - FRUSTRATION - whether the agreement was discharged by supervening impossibility when this state of circumstances was induced by the defendant - RECTIFICATION - whether the omission of the words "or an associated entity" in the agreement was a mutual mistake and whether its inclusion would give effect to the parties' common intention - CONSTRUCTION - construction of commercial contracts - agreement provides for commission payable on "sales by" the defendant but on 11 March 2004 the defendant executed a Supply Agreement with an associated entity appointing it as the defendant's preferred supplier - whether "sales by" the defendant should be construed to include sales by the defendant or an associated entity of the defendant - whether sales to the defendant's Franchisees through the medium of the associated entity are "sales by" the defendant - IMPLIED TERM - whether a term should be implied into the agreement under which the defendant is obliged to refrain by its own voluntary act from depriving the plaintiff of the benefits it would be entitled to, but for that voluntary act, under the agreement - whether the defendant has breached this term by interposing a third party to supply products to its Franchisees - TRADE PRACTICES - MISLEADING AND DECEPTIVE CONDUCT - Trade Practices Act 1974 (Cth) s 52 - whether the plaintiff engaged in conduct which was misleading or deceptive, or likely to mislead or deceive by inducing the defendant to believe that the contract was to be non-binding until further agreement on commissions had taken place - EQUITY - ESTOPPEL - general principles - whether the plaintiff held out and the defendant relied upon the assumption that the agreement was to be non-binding until further agreement on commissions had taken place - FIDUCIARY DUTY - whether the plaintiff was acting as legal advisor to the defendant and thus owed a fiduciary duty to act in the defendant's best interests - whether the plaintiff breached this duty by failing to disclose that the agreement between them was legally binding

Ermogenous v Greek Orthodox Community (2002) 209 CLR 95 Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 Sagacious Procurement Pty Limited v Symbion Health Limited [2008] NSWCA 149 Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited (1985) 2 NSWLR 309 United Group Rail Services v Rail Corporation New South Wales [2009] NSWCA 177 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd trading as "Uncle Bens of Australia" (1992) 27 NSWLR 326 Commonwealth v Verwayen (1990) 170 CLR 394 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248 Chan v Zacharia (1984) 154 CLR 178 Muriti v Prendergast [2005] NSWSC 281 CASES CITED : Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 International Air Transport Association v Ansett Australia Holdings Ltd (Subject to Deed of Company Arrangement) (2008) 242 ALR 47 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Franklins Pty Limited v Metcash Trading Ltd [2009] NSWCA 407 Wilkie v Gordian Runoff Limited (2005) 221 CLR 522 Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 Chartbrook Limited v Persimmon Homes [2009] 1 AC 1101 BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266 Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 Elders IXL Limited v National Employer's Mutual General Insurance Association Limited (1988) 5 ANZ Ins Case 60-847 Australis Media Holdings Pty Limited v Telstra Corporation Limited (1998) 43 NSWLR 104 RDJ International v Preformed Line Products (Australia) Pty Limited (1996) 39 NSWLR 417 Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592 Lazarus v Cairn Line of Steamships Ltd [1918] 106 TLR 378 Rhodes v Forwood [1876] 1 App Cas 256 Roadshow Entertainment Pty Limited v (ACN 053 006 269) Pty Ltd Receiver & Manager Appointed (1997) 42 NSLWR 462

22 Correspondence passed between WES and Mr Saleh over the remainder of 1994, amongst others about the possibility of a franchise. In December 1994 Mr Cisneros wrote that WES was pushing hard for international expansion of Brothers' franchises and that he thought there would be good opportunity to move forward in several countries, including Australia. In December 1994 Mr Cisneros wrote optimistically about the prospects of a franchise of the Gloria Jean's coffee concept from Brothers'. 23 By the middle of 1995 Mr Saleh had been provided with a draft Master Franchise Agreement from Gloria Jean's. He consulted Mr Garry Best, a solicitor and partner in the law firm Mallesons Stephen Jacques about the document. He met with Mr Best on 26 June 1995. Mr Best gave him comprehensive written advice on 3 July 1995. One of the things on which Mr Best advised was a provision in the draft that provided it was to be governed by the laws of Illinois. Mr Best thought that there may be aspects of the law of that State which would affect interpretation of the document and in respect of which Mr Best was not qualified to advise. He told Mr Saleh to let him know if he would like such advice. 24 At around this time (probably on or about 9 July 1995) WES proffered to Maranatha a proposed Letter of Intent intended to record arrangements between it and Maranatha under which WES would be compensated for the introduction of Maranatha to Gloria Jean's and for ongoing liaison, representative and export management services. The Letter of Intent provided for payment to WES of "not less than 5% of the ex factory price for supply of Gloria Jeans' products from USA" and "10% ownership in the entity established by Maranatha designated for the purposes of this Letter of Intent". 25 A file note of Mr Best reflects that he had a discussion with Mr Saleh on the 12 July 1995 about the draft Master Franchise Agreement. The note reflects further that Mr Best recommended in relation to tax matters that advice from accountants be obtained before signing. Mr Saleh told him that he did not want to involve US lawyers but may consider that later on prior to signing. 26 In a letter dated 13 July 1995, Mr Best gave Mr Saleh further written advice in relation to the draft Master Franchise Agreement. On 24 July 1995, Gloria Jean's provided to both Mr Cisneros and Mr Saleh a document described as an "Offering Circular Offering a Franchise". The circular explains certain obligations upon a proposed franchisor offering a franchise, apparently in conformity with obligations under US law. 27 In addition to the prospects of a franchise, Mr Saleh wished to roast coffee beans within Australia. He raised this with Mr Best. Mr Best told him that this should be raised expressly with Gloria Jean's and that an amendment would be needed to the draft Master Franchise Agreement to confirm the arrangement. 28 On 4 August 1995, Messrs Cisneros, Meier, Irvine and Saleh met at WES' offices in Denver, Colorado. They discussed the proposed negotiation of a deal with Gloria Jean's, with whom they were later to meet. They also engaged in negotiations concerning the terms of a proposed arrangement between their respective interests. By all accounts the discussions took most of the day. 29 Mr Cisneros says that at the 4 August 1995 meeting he suggested that the WES side have a ten per cent interest in the equity of the proposed enterprise and receive five per cent compensation on products from the US. He says that Mr Saleh said that he had no problem with five per cent, except that they (the Jireh side) needed to ensure competitive pricing for what was purchased from the US. He says that Mr Saleh stated that as to the ten per cent ownership proposal, Mr Saleh had been advised by his solicitor that it was very difficult to have foreign ownership in an Australian entity and that Mr Saleh suggested that their side be the sole signatory to the proposed Master Franchise Agreement. At some point during the discussion, Mr Cisneros says Messrs Saleh and Irvine left the room for a private discussion and that on their return, a discussion to the following effect occurred: SALEH: Peter thinks 10% is too much. We are willing to offer you 4%.

CISNEROS: This is significantly different to what Steve and I proposed. So what we will do is to talk about it and then draft an agreement setting out what we will accept. 30 Mr Meier's version of this part of the conversation is as follows: CISNEROS: WES should have a 5% fee on products from the US and a 10% ownership of the venture as originally proposed by our Letter of Intent of 5 July 1995. SALEH: Peter and I need to talk about that privately. After which Saleh and Irvine left Cisneros and Meier for private discussions. After their discussions, they returned. SALEH: The WES interest should be 4% of the value of the franchise on sale and 5% of all sales. CISNEROS: Steve and I need time to consider this proposal. We will let you know. 31 Mr Irvine says that they were provided with the Letter of Intent at the meeting. According to him, Messrs Cisneros and Meier said that the ten per cent share of the proceeds of sale which they wanted was for bringing the opportunity and because of their relationship with Gloria Jean's. He says that his and Mr Saleh's reaction was that ten per cent was a lot. He says that at some time during the meeting, Messrs Cisneros and Meier went to another office and when they returned, the number was reduced to four per cent. He recalls that at one meeting (in Denver or later in Chicago), a conversation to the following effect took place: SALEH: 5% of any number, we don't know if the business will sustain that, all we can do is agree to go forward and then have a review after six months to see how it is going. I don't know whether the product will sustain the 5% when we start operating. CISNEROS and/or MEIER: Well, we will talk about it when that event occurs. 32 In his principal affidavit sworn 9 September 2009 Mr Saleh does not recount the contents of any discussion about the Letter of Intent or its terms at the Denver meeting. 33 After meeting in Denver, the group travelled to Chicago to meet Gloria Jean's and then went on to the head office of Brothers' and Gloria Jean's at Boca Raton, Florida. Messrs Irvine and Saleh returned to Australia on or about 12 August 1995. 34 On 21 August 1995, Mr Meier sent a facsimile to Mr Saleh referring to discussions he had had concerning the proposed Master Franchise with Gloria Jean's and providing a reformulation of certain provisions of the proposed franchise. As well, Mr Meier attached a proposed Letter of Agreement between the plaintiff and Messrs Saleh and Irvine (collectively defined as GJGC Australia) containing proposed terms of an arrangement between them. The document had already been signed by Messrs Cisneros and Meier and contained provisions for the payment of five per cent commission on products from the US and five per cent commission on coffees, teas and other products sold by GJGC Australia to Gloria Jean's stores in Australia, as well as for payment to WES of four per cent of the sale price upon the sale or transfer of any interest of GJGC Australia. The covering facsimile stated as follows: Also, following is a "Letter of Agreement." Kindly review and let us know if it accurate reflects the understanding we reached. Please note, paragraph 4, which we have previously discussed; additional language to paragraph 5 to provide an option for David and me to receive our interest prior to a "sale" of Peter's and your interest; and paragraph 6 regarding providing a payment and accounting schedule. If you have any questions or comments, I would like to discuss with you by telephone.

With regard to the report on Brothers and also our requirements, these will be with you in the next two days. 45 On 18 January 1996, Mr Saleh wrote to Mr Cisneros on Maranatha letterhead with the following comments on the proposed WES agreement: re: W.E.S. AGREEMENT My sincere apologies for the delay in responding to this agreement. As mentioned to you several times during the course of our telephone conversations and by fax, we have the spirit between your organisation and ours to put this agreement into practice to our mutual advantage, however, you need to keep in mind that we do not want to constantly chop and change the agreement but would like it resolved in a manner that we believe would be to our mutual benefit. I have been waiting on suggested changes from Peter as he had taken down notes of our last meeting in Denver. I also made notes and we needed to have these confirmed as being exactly what was agreed upon in your office. The following changes are suggested:- Point 2 of your Agreement: W.E.S. shall be sole and exclusive supplier for products from the United States. Europe was not to be included. The 5% was very clearly mentioned and it was agreed that we should be in a position to still be competitive in our pricing for items obtained on our behalf and should the item not be able to wear this additional percentage we would need to look at a lower percentage depending on each item category. Point 3. With regard to coffee, there was no percentage that was agreed upon as we were waiting to see the outcome of our meeting with G.J. and as you no doubt are aware, Jim Wayman gave the roasting agreement to me up front. We can tell you right now that there will be no way that a 5% commission on coffee is sustainable as Gloria Jean's themselves are only getting 25 cents a pound. We believe that once we have costed out the product to the selling price, we would be in a far better position to tell you what the product can bear but as an indication feel that this would be in the vicinity of 20-25 Australian cents per kilo. Point 4. We believe for any exports that 1% would be the likely figure that we could give in way of commission to W.E.S. Point 5. We agree to the 4% and this is on the sale of company and not equity and not limited to a period of six years. Should the above be acceptable to you, we are happy to have this agreement signed and sent over to you even prior to the main agreement being signed.

46 On 18 January 1996, Mr Cisneros wrote to Mr Saleh: Thank you for your several faxes. In preparation for our telephone conference tomorrow, please let me advise as follows: 1. Gloria jeans a. Main agreement. We recommend immediate completion of the agreement per our January 12 fax and then signature. Since the roasting agreement is still being finalized, we have drafted a Letter of Intent which you can sign in conjunction with the Main Agreement, a copy of which we can send to you tomorrow during our telephone conversation. We need immediate confirmation of trade name status. b. Roasting agreement - This is being finalized, and we are confident we can sign at least within close proximity of main agreement. c. WES agreement - Please let me review the points in your letter. Point 2 - We are glad to take Europe out, but we would still like to handle export from Europe also. As to commission, 5% is our minimum standard charge to all our customers for export service, and does not make any product uncompetitive because it is a necessary cost to get products effectively from here to there. I assure you it is reasonable based upon the organization and efforts it takes to supply products from this end. We would like to keep this figure in the agreement, and if and when we agree that based on total volume or other factors a reasonable compromise is necessary, we will discuss. I don't think we should leave this open on an item by item basis. Point 3 - The basic reality is that the main business of Gloria Jean's will be coffee sales. The bulk of this coffee will be roasted at your facilities, not only for Australia, but also for Asia, a deal that we helped put together, despite the fact that we won't make nearly as much money on licensed product, than if we sold from the U.S. The fact that Gloria Jean's is licensing this opportunity for 25 cents a pound, does not bear on our relationship. We are willing to compromise, but your offer is only approximately 1.7% of sales. Let's finalize something during our conversation tomorrow. Point 4 - The amount of commission in this paragraph will depend on the efforts necessary for WES to assist with development of supply opportunities for Jireh with Gloria Jeans, and assistance with import facilitation. This is why we left the amount open for now. However, if we are to be motivated to actively and aggressively develop supply for Jireh in the U.S., then we are partners no less than other aspects of our business, and the margin should be more reasonable than 1%. Point 5 - If you review the agreement, the 4% is only upon the sale of the franchise, but allows WES principals to take their share after six years, only based upon your reasonable approval. Frankly, in six years you may want to purchase our share and not wait until your final sale. 2. Brothers - We appreciate your efforts, but I think we need to talk about a more specific report, similar to your original proposal to Brothers, though of course shorter and simpler. I talked with Steve Kintz yesterday, the VP in charge of international, and advised the outline would be forthcoming, with projections and order schedule. Let's review tomorrow. 3. Other projects - We can discuss tomorrow further to our last telephone conversation, particularly the Kroger opportunity. Thank you and best regards. 47 On 22 January 1996, Mr Cisneros wrote to Mr Saleh as follows: Thank you for talking with Steve and me on Friday regarding various matters. Sorry for tiring you out a bit, but I hope it didn't effect the enjoyment of your weekend.

49 On 30 January 1996, Mr Saleh made further comments on the proposed WES agreement. He wrote as follows to Mr Cisneros: Many thanks for your revised agreement. Our comments are as follows:- Point 2: You do need to include that the 5% is subject to the product being able to sustain the on-selling price. Point 3: This will be 25 Aust. cents per kilo on the coffee and not 5% and also that a figure to be determined for the teas and other products. I believe that once this is altered we should be in a position to sign your agreement and send it even before the main agreement has been signed. 50 On 31 January 1996, Mr Cisneros wrote to Mr Saleh, relevantly as follows: Thank you for your fax of 23/01 and 30/01. Please be advised as follows: Gloria Jeans- 1. Main agreement - All your solicitor's final points/revisions have been passed on to Gloria Jeans. However, I believe we should assume that the agreement is now in its final form, and Gloria Jeans is awaiting receipt of final agreement and remittance no later than the business week of February 5. 2. Roasting agreement - Suggested final revisions sent to Gloria Jeans, we are requesting final confirmation of agreement by end of this week and will advise so this can also be sent out next week. 3. WES agreement - If you review Point 7 of the agreement, we changed it to reflect a final negotiation of the numbers as you requested, and hence, we don't see the need to change Points 2 and 3, since these will be subject to a final discussion anyway. We believe that a full discussion of the nature of our relationship should be discussed when Steve or I visit for the Gloria Jean's first store opening, and the numbers will naturally follow from that discussion. 51 On 6 February 1996, Mr Saleh wrote to Mr Cisneros, relevantly as follows: Gloria Jean's - Have noted Steve will be faxing to me to pass on to Gary Best his confirmation that matters mentioned in Gary Best's last fax to him are all in order. Roasting Agreement - Have noted that the final version should be made available to us in the course of this week. W.E.S. Agreement - Have noted that the inclusion of Point 7 to this agreement makes this matter quite clear that none of the above becomes operational until we have negotiated the numbers together and worked out what in fact is the right mix and what each product can bear for an on charge by W.E.S. Happy to go through this in total detail when you or Steve visit Australia.

The letter went on to deal with various other matters including other proposed projects not presently relevant. I will refer to this letter as the "6 February letter". 52 On 13 February 1996, Mr Cisneros wrote to Mr Saleh, relevantly as follows: Please be advised of the following matters:

Gloria Jeans - We talked to GJ today, and they approve the roasting agreement as we faxed to you yesterday. As advised, we recommend signature on this and the main agreement before the end of this week. Please send both documents via express mail to the following address: Stephen Cleary Gloria Jeans Gourmet Coffee 3703 West Lake Ave. Glenview, Illinois 60025 Tel: (708) 808-0580 As advised previously, we will send you an original roasting agreement for your records. Please also make appropriate remittance to the previously advised bank. Finally, please send us a signed, fax copy of the WES agreement at the same time. Starting next week, let's get our planning in synch! 53 On 20 February 1996, Mr Saleh wrote to Mr Cisneros, relevantly as follows: It was indeed a great pleasure talking to you on the phone on your Friday, our Saturday. As mentioned to you our attorney has been away and when speaking with him on the telephone on his return last Friday he mentioned various points as raised with you. I will meet with him early this coming week and will do our best to have all matters resolved and the documents signed. These will then be sent to you or if you require, to Steven Cleary. The funds will also be transferred. We would request that signed copies be sent back to us from Gloria Jean's and all the changes to be implemented within the contracts. We have based our entire costings on the figures of sales given to us by Gloria Jean's through Cecil Johnson via yourself. It is important that these figures do stand when put to the test in Australia in way of profitability. All other contracts including yours will be signed off and sent to you during the course of this week. We would also request you to inform us of the whereabouts of the airfreight shipment as this is most urgently required. Your help in this regard would be very much appreciated. Furthermore, we would like an air shipment of 200 cartons of Irish Cream Trial Packs to be sent as soon as possible. For one reason or the other we have had a run on the product and stock are down to five cartons. Please find attached the order duly completed. We look forward to working with you on the Gloria Jean's project and will have details of all our requirements sent to you within the next week. 54 At about this time, Messrs Irvine and Saleh were taking advice from Mr Best about a Gloria Jean's requirement that they personally guarantee the obligations of their master franchisee entity as well as about the fact that they were relying on financial information provided by Gloria Jean's. On 23 February 1996 and again on 26 February 1996, Mr Best wrote to Mr Meier about these issues. Mr Best wrote to Messers Irvine and Saleh about them on 23 February 1996. Gloria Jean's agreed to limited modifications of the proposed Master Franchise Agreement to alleviate certain concerns of Messrs Irvine and Saleh. 55 On 5 March 1996, Mr Saleh wrote to Mr Meier, relevantly as follows: Re: GLORIA JEAN'S It was a pleasure talking to you on the phone on 1st March and confirming to you that we believe that you have achieved all that was needed to proceed with the signing of the contracts. Do please accept my sincere thanks for all your efforts and commitment to see this contract come through. We will be meeting with Gary and Athena on Monday, 4th March, or at the very latest on the 5th of March, depending on their availability, to have the contract signed and couriered out to Gloria Jean's Corporate Counsel. We would have made all the necessary changes and would be waiting to receive their count-signed copy at which time funds would be transferred to Gloria Jean's account. We now look forward to giving you a new address for this venture, telephone numbers, etc. etc. Also, details of items that we would need faxed to us together with details of visits by Gloria Jean's executives. Once again, please accept my sincere thanks to you and David for all of your help and assistance. The W.E.S. contract will be couriered to you directly as well. We look forward with interest to the growth in our relationships and that of our organisations.

NABI SALEH 62 Before Gloria Jean's executed the agreements, an issue arose about the fact that the Master Franchise Agreement had been delayed whilst the Roasting Agreement was being negotiated. This had the consequence that the payment by Jireh of the Master Franchise Fee provided for would be delayed beyond what was said to be Gloria Jean's' expectations. Mr Cisneros described this as a serious dispute between Jireh and Gloria Jean's which endangered the whole deal. With the assistance and intervention of Messrs Cisneros and Meier, this issue was resolved and on or about 5 April 1996, Gloria Jean's executed the Master Franchise Agreement and the Roasting Agreement. 63 Messrs Cisneros and Meier signed the Letter Agreement on the same day, that is 19 March 1996. The course of the parties' relationship until the denial by Jireh of a binding agreement with WES 64 Once the Master Franchise Agreement and Roasting Agreement had been signed, Jireh proceeded with WES' assistance to plan for the commencement of a franchise operation in this country. Mr Meier was in contact with Gloria Jean's executives and legal counsel in the US. The Gloria Jean's Illinois operation was apparently moved from Illinois to Castroville in California, where Mr Meier travelled to meet Gloria Jean's general counsel. Plans were made for the opening of initial stores, for the supply of products and for the roasting of coffee in Australia, beginning in September 1996. 65 On 5 August 1996, Mr Meier sent Mr Irvine invoices for Ghiradelli (a well-known brand of sweet ground cocoa), which had been ordered for Jireh. The invoices were sent under cover of a fax which referred to the invoiced amounts as including "our 5% commission". On 16 August 1996, Jireh made payment to WES for all amounts due in August (apparently including in respect of the Ghiradelli invoices). 66 WES assisted in what Mr Cisneros described as the "mammoth task" of sourcing, negotiating the supply terms for and the export to Australia of a large number of different product lines for the new stores. 67 The first Australian Gloria Jean's coffee store opened on 4 November 1996 in Miranda, a southern suburb of greater Sydney and the second on 27 November 1996 in a shopping centre known as Eastgardens, which is in an eastern suburb of greater Sydney. 68 Unprocessed (or unroasted) coffee was commonly referred to by the parties as green coffee, bulk coffee or GJ bulk. Clause 3 of the Letter Agreement contemplated Jireh or an associated entity roasting such coffee and then supplying it as Gloria Jean's or other branded coffee for sale in Gloria Jean's stores in Australia. The Roasting Agreement licensed Jireh to roast. 69 Initially, Jireh bought green coffee and had Columbia roast it on its behalf. By arrangement with Columbia, Mr Saleh placed orders for green coffee on behalf of Columbia for Jireh's exclusive use. The green coffee was delivered to Columbia for roasting and Columbia invoiced Jireh for a roasting fee and packaging costs. WES routinely invoiced Columbia for green coffee delivered. Later (in about 1999) Maranatha installed its own roasting facilities and obtained green coffee which it roasted for on sale by Jireh. Maranatha remains the prime roaster. As will appear below, however, coffee is now roasted for GJCI, which in turn supplies it to JIWD for sale to Jireh's Franchisees in Australia and to other Master Franchisees around the world.

· Payment of $4,968.81 invoice for commissions on green coffee per invoice 4282. · Jireh/Nabi to provide an accounting for all green coffee, in addition to above, and negotiate mutually agreeable payment schedule. · Future, we will assess Jireh a 5% handling fee at time we issue invoices for green coffee purchases. · Jireh (Phillip) to contact and organize sales of roasted to GJ Japan. 90 On 27 March 1998, Mr Meier wrote to Mr McCullough. At that time, according to Mr Meier, Jireh owed WES $255,332.45 not including "Jireh commissions for roasted coffee". 91 On 9 June 1998 WES provided Mr McCullough (copy to Mr Saleh) account balances which included an estimated amount of $5000 in respect of unpaid GJ roast royalties, subject to confirming a mutually agreed amount. 92 On 15 June 1998, Mr Saleh wrote relevantly as follows to Mr Meier: I sincerely hope that the GJ convention is working out well and that you are having meaningful discussions with Peter. I have had long discussions with Peter assuring him that we do need to have all our products sourced through you and that at no time should we go outside of the system even if Phillip puts pressure on Peter. I have made this quite clear in our meetings to Phillip as well, so work on the affirmative that they do need to support the relationship and the arrangements that we have, that everything be passed through WES. With regard to the roasted coffee commission, this has been a very delicate issue but have been able to work this through with Peter and will have the amounts due, over and above what has been in fact worked out by you, on figures given by us, in the next week. At that you can put in your claim and this will be met. You do not need to have this brought up at all in your discussions as this has been dealt with at this end. I am looking forward to talking to you on your return. 93 On about 15 June 1998, WES rendered invoice no. 4449 to Columbia in an amount of $5000 for "COMMISSIONS EARNED UNPAID ROYALTY TO WESTERN EXPORT SERVICES FOR COFFEES ROASTED FOR JIREH/GLORIA JEAN'S". 94 On 11 December 1998, Mr Saleh wrote, relevantly, to Mr Cisneros: Your Fax of 9th December. Will have a letter from Bob outlining specific points as requested with both columbia and Brothers repayment programme. Also with regard to Maranatha and Brothers payment against regular monthly orders. Will also come back to you with a quantifiable number of coffee that was used for royalty basis. However, with regard to coffee 5% commission, this should not be double charged both to Columbia and to Jireh and as such, with enormous pressure on margins, we would need this to be charged out to only one of the parties, and this time it should be Columbia. However, will need to discuss this with you and come to a resolution. I have been given several invoices by Jireh who cannot see the rationale in them having to pay for this 5% of coffee. However, if this is the 5% that was agreed upon for all sales of items by Jireh, as being charged out by you for shipments made out of the US then this would be to Jireh's account. Hence, would need to discuss this together. 95 On 1 March 1999, Mr Tim King, Jireh's internal accountant, wrote to Mr Meier, relevantly as follows: With reference to the invoices for commission on green beans and flavours we understand from Nabi that this matter is in abeyance pending your discussions with him on your visit to Australia in the next couple of months. This program has been calculated with reference to a reasonable forecast of cash flows of the Company over the next couple of months. Should more favourable circumstances arise, such as new franchisees being signed up to the system we will endeavour to clear these payments sooner than what has been outlined here. 96 On 1 March 1999, Mr Meier wrote to Mr Irvine, relevantly as follows:

WES Receivables · Our agreement is that Jireh pays WES within vendor terms. However, to help out in the short term, we will accept the proposal Tim set out. We will need to assess interest of 2% per month on the past due months from the invoice due dates to cover our cost of funds and loss of use and the funds. We'll provide a statement with these charges shortly. · Commission on green beans and flavors were not an issue we had discussed with Nabi to hold in abeyance pending my visit. Our original agreement was that a fee based on Jireh's Australia roasted coffee price would be paid to WES. For ease of administration, we agreed to the handling fee on green coffee and flavors. This actually results in much lower fees to Jireh so payment shouldn't be delayed - some invoices are 115 days old. · In the future, we will be willing to consider providing additional purchase financing to Jireh on a case by case basis, but we need to discuss and agree in advance. 97 On 2 March 1999, Mr King wrote: Hi Steve Further to your fax to Peter today, we wish to advise at this stage there will be no amendments to the payment program to Progress Packaging advised yesterday. A revision of Jireh's cash flow forecast has been done and there is not the scope to bring these payments forward, unless this is done in lieu of payment of some of the other WES receivable outstanding. However we reiterate the point that if our circumstances improve such as new franchisees being signed then the payment timings would obviously be brought forward. On the issue of the outstanding commissions on the green coffee and flavours, we will be incorporating payments on these into WES receivables payment program outlined. Please contact me if you have any questions. Regards Tim King Accountant. 98 On 15 July 1999, Mr Cisneros wrote, relevantly to Mr Saleh: Finance: · Payments - I will confirm this week's payment with Donna. Thank you. Maranatha and Columbia are still not meeting their weekly payment obligations as agreed with Steve in Australia, both paying for new orders before eta Sydney, and paying off debt. The debt is still significant, and we have had to make payments to P&G to cover again. Steve will confirm specifics with Bob early next week. · Maranatha/Jireh bulk commissions - We were promised that Maranatha would organise this sales information for your meeting with Steve. If we don't receive this information by end of July, then we will have to approximate ourselves and send an invoice. Nabi, please understand that this information is important for many reasons, both for our sales numbers/program for our transition partner, and also an important part of our compensation. 99 On 27 July 1999, Columbia wrote to Mr Meier concerning invoice 4449. In their fax, which was copied both to Mr Saleh and to Mr McCullough, Columbia said that invoice 4449 should never have appeared in their account, as it was strictly between Jireh and Gloria Jean's (presumably meaning WES). They requested that the payment be reallocated. 100 On the same day, Mr McCullough wrote to Mr Meier, advising that invoice 4449 for $5000 should be "charged to Jireh…for Gloria Jeans and accordingly credited to Columbia's account". 101 On 10 August 1999, Mr Meier wrote to Columbia (copy to Messrs Saleh and McCullough) as follows: The issue of 4449 invoices royalties due Western Export under our agreement with Jireh for coffee roasted by Columbia. Payment should be resolved between Jireh and Columbia Coffee and Tea. Upon confirmation from both Jireh and Columbia Coffee & Tea, we will allocate the payment as you agree with Jireh.

105 On 31 August 1999, Mr Meier wrote to Messrs Irvine and Saleh as follows: Dear Peter and Nabi; As you know, over the past weeks, Jireh has been stretching payments of our invoices. We understand there have been cash flow issues, especially with opening of all of the new stores and the corresponding build-out and other costs. Our agreement with Jireh is that we would obtain best domestic customer terms from vendors and Jireh will pay us within the vendor terms. We have obtained 45 - 60 day terms with many of the vendors and continue to push for longer terms. However, in order to maintain these terms, we must pay vendors within terms. When timely payment is not received from Jireh, we must borrow against our bank line to pay the vendors. David and I understand that to date, this business has not been profitable for Jireh and will not be until additional stores open with corresponding store opening fees and growing royalties on sales. At current levels, our supply business has also not been profitable. But, again as sales volumes increase, we should start covering overhead and see a profit, with an eventual bigger pay-out when you and Nabi convey your interest in Jireh or the Gloria Jean's business to another entity. To help Jireh though (sic) the current cash-flow situation, we would offer an additional 30 days to pay our invoices for an additional 2% fee. As an alternative, David and I are open to discuss increasing our interest in Jireh in return for providing longer payment terms. Our bank reviews our account receivable aging reports and is pressuring us to limit our open account exposure to customers who don't pay within terms. We will need to have timely payment or some acceptable agreement, or our ability to continue selling Jireh on open account will be limited. I have sent Tim an invoice for a royalty on green coffee for 1997 - we had previously invoice Columbia Coffee & Tea but they have refused to pay. Given the fact our agreement for royalties on the roasting of coffee is within the supply agreement we have with Jireh, we would agree that this should be invoiced to Jireh. For 1998 and 1999 to current, are awaiting Columbia's report regarding the quantity of coffee roasted under the roasting agreement. Upon receiving this information, we can discuss past due royalties to W.E.S. from Jireh under our supply agreement. Best regards, 106 On 21 September 1999, Mr Meier wrote to Mr McCullough (copy to Mr Saleh), relevantly as follows: · Columbia Bulk - We know how much we sold last year, and we know how many stores there are this year, and a good idea how much bulk is being sold. And yet, Columbia has not yet paid down its account, and has only ordered $4,163.74 this year. Last year, it ordered $84,802.07, which did not include a large amount of unauthorised coffee and this quantity was for fewer stores. Even if Jay did authorise Nabi to make some blends in Australia, still some coffees need to be supplied from GJ, and a royalty fee to GJ and commission to WES paid on all non GJ coffee sold there. We don't care if Columbia or Jireh pays this only, that it is timely paid. · Audit/payment to WES - What we have requested many times is very reasonable. These commissions are critical, and well earned, for our company. Maranatha paid us a commission for unauthorized coffee sold in 1997, but still has not made payment for any of 1998 or 1999 to date. Therefore, we request the following by no later than October 15, with full payment before end of year:

Audited amount of non-Brothers bulk coffee sold in 1998 through third quarter, 1999. We will retain the right to independently audit these figures. We have a very good idea of the quantity of bulk sold, and it is far greater than the Brothers bulk bought over the last two years.
Audited amount of non-GJ coffee sold in 1998 through third quarter, 1999.
Payment of commissions, after confirmation, before the end of 1999.
Quarterly commission payments/audit for both Brothers and GJ, starting with 4th quarter, 1999, payable within one month after the end of each quarter. 107 On 23 September 1999, Mr Meier faxed Mr McCullough (copy to Mr Saleh), relevantly as follows: Dear Bob: Thank you for talking with David and me today. Let me confirm as follows: Brother's payments Maranatha will make US$25,000 payments each and every week until all regular shipments and outstanding note have been paid. The payments will be made starting Monday, September 27. WES will release Invoice 5068 shipment on Monday, October 4, based on receipt of first payment, and written confirmation (wire remittance notice) of second $25,000 payment. Next ocean shipment will be held at MAP until third $25,000 payment is received, and will be held in Sydney until fourth $25,000 payment received. Thereafter, subsequent weekly payments will be applied to outstanding notes and regular shipments at WES' discretion. Maranatha's goal is to place regular money orders that can be financed effectively, while at the same time paying down outstanding note. Based on this payment schedule, and an October order of no more than $35,000, this account will be down to zero by November 6 weekly payment. No exceptions to this payment schedule will be accepted, and orders/shipments will be halted until schedule met. Thereafter, Maranatha can increase orders if necessary, consistent with demand, ability to pay, and WES finance system under an export insurance program (to be finalized separately). Columbia payments - I will make necessary adjustments to Columbia/Brothers' accounts tomorrow, and fax same. Then, please confirm two or three weekly payments within October to finish off this account. Outstanding commissions for bulk - McCullough will provide an audited report of Brothers and Columbia/Jireh bulk coffee sold, according to the system as outlined in our September 21 fax, by no later than October 15. We will then mutually agree as to the commission amount and payment schedule. Thereafter, we will also establish a quarterly payment/report for payment of commissions from fourth quarter, 1999. We are going to continue to work with you and Nabi to establish a more sound, long term financing capability that allows us to grow these and other businesses in an effective manner and one that is mutually beneficial. Please sign this fax and return by fax acknowledging your agreement to the above matters, so that we can proceed. Thank you.

115 On 20 March 2000, Mr Saleh wrote to Mr Meier, amongst others, the following: Thank you for understanding our frustration in being able to obtain payments from retailers to meet our ongoing commitments to you… With regard to the bulk coffee used by Jireh and Maranatha, let me work these figures through with both Tim and Bob and I would be happy to then discuss this matter and resolve it with you at that point in time. 116 On 13 June 2000, Mr Cisneros sent an email to Mr Saleh which contained, amongst others the following: 3. Bulk commissions- Once you have resolved the outstanding payments with Steve, within June, then you and I need to discuss this matter and work out an agreement, including monthly payments starting in July. There is no way it can legitimately take over a year to determine these sales, and you will admit that this is not a reasonable delay by any means. This problem will not go away and will just grow unless Maranatha and Jireh take responsibility to resolve the past and move into the future in a manner that is consistent with the rights and responsibilities of our partnership; 117 On 29 June 2000, Mr Cisneros wrote to Mr Saleh as follows: Dear Nabi: The following reflects our agreement. Finance 1. Current trade account - The current balance due on the trade account of US$3,768.00. This needs to be received before arrival of the next ocean shipment, currently scheduled for ETA Sydney July 16. 2. On going orders - We will continue to accept an ship on-going orders. Payment must be received before arrival in Sydney of each order. We will release the cargo (B/L) for each order upon receipt of payment. 3. Note receivable - The current balance, not including accrued interest for June, is US$87,250.00. We must receive four remaining payments on the note receivable prior to August 31, 2000. These payments must be made according to schedule and independent of on-going orders. If payments on the note receivable are not current, we will not release any on-going orders until payments on the note receivable are brought current. Week of 7 July $21,812.50 Week of 28 July $21,812.50 Week of 18 August $21,812.50 Week of 8 September $21,812.50 (plus accrued interest for June, July) Maranatha agrees to fully and reasonably resolve the outstanding bulk commissions on both Maranatha and Jireh bulk, both in terms of resolving past commissions and/or license fees. This resolution will be effected by no later than the end of July 2000.

118 At the foot of Mr Cisneros' letter, provision was made for Maranatha to sign its acceptance, which it did. Mr McCullough returned the signed version by facsimile on 30 June 2000. 119 On 19 July 2000, Mr Meier wrote to Mr McCullough, (copy to Mr Saleh), relevantly as follows: Commissions due on Maranatha/Jireh bulk - We have been extremely patient now for several years on this matter. Your statements concerning the bulk "over supply" are not based in fact. The last shipment of Brothers' bulk was in December 1998. We negotiated with Brothers for a very strong discount on that shipment, which met requirements, set by Maranatha. In addition, throughout 1998, 1999 and 2000, Maranatha has sold its own roasted coffee in the Brothers Coffee bins, presumably at a good profit-given the cost of roasting bulk green beans vs. buying roasted bulk from the US. Despite this, we have not been paid our commissions on the Maranatha/Brothers bulk or the Jireh bulk for over two and a half years now. We have long agreed to accomplish two things: 1. Establish the amount owing (now through June 2000) for both Maranatha and Jireh bulk coffees. This report needs to be provided immediately, and may be audited independently. Based on the amount agreed upon, we will need to set up a monthly payment program for arrears starting in September; and 2. Establish a system for ongoing quarterly payment of our commissions, starting with third quarter, 2000. We need to establish an ongoing payment system, or commissions will just keep accruing for both Maranatha and Jireh and we will need to accrue interest on past-due amounts. As to your comment about our "bank's attitude" about Maranatha as a valuable customer - Maranatha is a valuable customer and Nabi is a good friend. However, this has no connection whatsoever to over three and a half years of delinquent payments, and a finance system that has yet to properly supported to establish current purchases, let alone market growth. Our bank has been very tolerant with respect to our use of the credit line. In essence, we are borrowing money to lend to Maranatha to pay us so we can pay the vendor and our bank no longer wishes to finance this type of business arrangement. We request that we have a telephone conference call with you and Nabi on this Friday morning (Australia time). Please confirm a time on this date when we can review the above matters. Thank you for your assistance. 120 On 5 August 2000, Mr Meier wrote to Mr McCullough, (copy to Mr Saleh), relevantly as follows: Maranatha/Jireh commissions You have agreed that this matter has been too long unresolved and the situation will only get worse if not resolved. By the end of August, you have agreed to provide a full accounting of whole bean sales for Maranatha and Jireh for the years 1998, 1999 and 2000 (through June 2000) and understand this accounting may be subject to an independent audit. If the accounting is not provided in a timely manner, we will proceed with an independent audit. Along with providing the accounting, you agreed to following: · Starting in September, establish a monthly payment plan for the past due amount (until the outstanding payment is fully resolved); and · A plan to provide a quarterly accounting of both Jireh and Maranatha bulk sales (from 3rd quarter 2000 onwards) including regular quarterly payments, separate from past due amount, payable within the month following each quarter.

123 This letter was sent to Mr Saleh under cover of a fax from Mr Meier, in which he said: We understand you will be meeting with the potential financier today regarding various opportunities. Both David and I wish you success with your discussions. With respect to Jireh, please keep in mind our interest, which is triggered by a sale or transfer as you consider alternatives for structuring a deal with the investor. Also, we are still waiting for an accounting for the roasted coffee sold by Jireh for which we're entitled to compensation per our agreement. In lieu of compensation by dollars, David and I would consider exchanging that compensation for an additional equity interest in Jireh, if we can mutually agree to formula. 124 On 9 October 2000, Mr Meier wrote to Mr McCullough, (copy to Mr Saleh), relevantly as follows: Dear Bob: On last Thursday, we sent a letter again requesting advice regarding report of Jireh and Maranatha bulk sales commissions for 1998-present day, and a plan for ongoing payment of commissions. This report and plan was originally promised several times in 1998 and 1999, and again, before the end of August, 2000. It is clear that this information is readily accessible, and that the failure to provide this information is simply a longstanding delaying tactic on your part. Unfortunately, this debt is only increasing month by month, and failure to have a plan to resolve it will not benefit Maranatha or Jireh, but only injure their long term prospects. In addition, if these debts are not fully disclosed on Maranatha's and Jireh's financial records, then there may also be other potentially negative consequences. McCullough has not advised the outstanding commissions owed, nor advised a quarterly payment plan for ongoing payments. To assist Maranatha and Jireh to resolve this longstanding problem, by way of this letter, we are attaching an invoice for $9,000. An invoice in this amount will be sent on a monthly basis, and must be separately paid on a monthly basis. This amount will cover payments for the ongoing commissions due, and the remainder (if any) will start paying down the outstanding commissions owed. Any unpaid amount will be added to the note receivable within two months of invoices. The total amount of the outstanding and the ongoing commissions due will be finally determined upon provision of the report/plan, and if necessary, our audit thereof, and any payments made in the interim will of course apply to reduce the total amount due. We simply cannot risk, for out partners' sake and our own, this continuing and building problem. Once a reasonable amount of the outstanding debt is paid down, based on the final confirmed amount for outstanding, and a workable system is established for reporting and paying on going commissions, we are most willing to discuss ways to invest a portion of the remaining debt back into Jireh, for a mutually agreed interest, in addition to our existing 4% interest in Jireh. Thank you for your prompt attention to this matter. 125 On 14 December 2000, Mr Meier wrote to Mr McCullough, (copy to Mr Saleh) as follows: Dear Bob: Nabi advised you were unable to be available for our scheduled telephone conference earlier this week, and that a conference is not possible today. We are quite frustrated that Maranatha and Jireh were unable to meet our scheduled dates for discussing the commissions. It seems, after failure to pay on both accounts for several years, and failure to provide accountings when these are reasonably available based on actual sales by Maranatha and Jireh, that both entities are avoiding their obligations in this matter. Until resolved, we will continue to issue monthly commissions invoices to Maranatha and Jireh per our letter to you of October 9. Our company is now carrying these invoices on our books, though we do not know the exact amounts, due to your failure to provide accountings. Also, per our October 9 letter, the unpaid invoices (net 60 days) will be moved to the Maranatha's note receivable and we will establish a note receivable for Jireh, with interest assessed at 2% per month on the unpaid balance. Failure to pay these amounts is resulting in serious damage to our company. Further, these obligations need to be brought above-board. Maranatha and Jireh also need to bring these obligations above-board as well, particularly if you're looking at investment partners. We have worked long and hard as part of the team for many years, with in effect, little or no net compensation. Unfortunately, we have been ignored or minimized, despite ongoing promises to resolve these issues. These amounts need to be quantified and a system needs to be organized to make payments or alternative arrangements if agreeable. The accountings have been promised now for over a year. I will be back in the office on Tuesday, December 26. I will call Nabi and Peter on that date to arrange a telephone conference within that week, with our without your participation. We need to resolve this matter within December, as our final books are completed on December 29. Best regards, The defendant denies an obligation to pay commission 126 On 22 December 2000, Mr McCullough wrote to Mr Meier as follows: Dear Steve RE: MARANATHA IMPORT EXPORT PTY LIMITED JIREH INTERNATIONAL PTY LIMITED I refer to the above and would advise I am reviewing the position, but I am finding some difficulties in completing my report as I need to reflect the significant losses incurred. I will respond to you on my return from annual leave. Maranatha advises that there was no commission arrangement and Jireh advise commission would only be paid from when the business is profitable. The existing invoices for commission are not presently recognised. Yours faithfully McCullough & Associates Pty Limited 127 Mr Cisneros responded to Mr McCullough, copy to Mr Saleh on the same day: Dear Bob: We are in receipt of your letter of the above date, and I have discussed this matter with Steve by telephone. He has requested that I advise you as follows: First, it is highly inappropriate of you to write to us on the eve of your annual leave, when you have ignored our many good faith requests for a telephone conference. We imagine this action was intentional. You are doing a serious disservice to your clients by not fully and directly resolving these matters to our mutual satisfaction. Second, as to the report referred to in your letter, we assume you mean the accounting of Maranatha and Jireh coffee sales for the last several years. Since you promised this report many times last year, your have now had several years now to complete it. At this stage, this is just another attempt to continue to delay this process. Any alleged losses for either Maranatha or Jireh are not relevant to finalizing the report itself, as it is simply an accounting of the coffee quantities sold. Third, as to Maranatha's agreement, we have significant verbal and written correspondence and agreements reflecting Maranatha's understanding to pay our commissions on our mutually developed retail bulk program, including agreements signed by yourself. If you need a copy of these correspondence and agreements, we are glad to provide them, though you have a complete record as well. Any attempt on your part to disavow our agreement is highly inappropriate. Fourth, as to Jireh, we suggest your look at our Agreement again. It does not advise that commissions would only be paid when the business is profitable. These commissions are due and owing, just as with any other legal obligation. As we have advised several times, because our main goal is to support Jireh, we are willing to discuss options for these sums due, but only when the past due amount is clearly determined, and an ongoing accounting is in place. Fifth, the invoices sent for commissions are lawful, and though we do not have an accounting after more than a year now, the invoices likely reflect a small portion of the amounts due by Maranatha and Jireh. As such, the invoice will be included in our 2000 financial documents, and will continue on a monthly basis in 2001. These invoices need to be paid in a timely manner, until a full accounting is provided and this matter mutually agreed upon. Finally, since out 2000 financial documents need to be completed within next week, we are planning to talk with Nabi per our scheduled telephone call next Wednesday morning (your 9:00 a.m.), without tour presence. Hopefully, we can in good faith, directly and promptly resolve these matters. 128 Mr Cisneros came to Australia in May 2001. He met with Messrs Saleh and McCullough at Jireh's office in Sydney. 129 He wrote on 30 May 2001, amongst others, as follows: Thank you for meeting with me yesterday. We do appreciate your sincere efforts to resolve these longstanding financial matters. After discussions with Steve, let me review the following… … 3. Maranatha and Jireh roast coffee commissions- · Jireh- We have provided a draft Letter of Understanding to resolve this matter in a win win manner. For this to work effectively, we have agreed that Jireh will provide a complete accounting by the first week of July of the ex factory value of all roasted coffee produced from 1998 through second quarter, 2001, by quarter. This accounting will be subject to independent verification. At a separate meeting at convention, we will finalize this matter and the proposed Letter. At this stage, following the form proposed in the Letter, we would agree to the following: $54,000 payment by the year end- We would accept a payment of this amount for past due commissions. This amount will allow us to take the $27,000 amount invoiced for past due commissions off our 2000 books, and includes an equal nominal payment for 2001. The remaining amount due will be bundled into a future payment at the time of sale or transfer of Jireh, per IPO, investment, etc., projected for 2003 or 2004. For 3rd and 4th quarter, 2001 onwards, Jireh will report the amount of roasted coffee on a quarterly basis, and this amount will either be paid in full, or bundled into the future payment due. For 2002 onwards, we will agree to a reasonable amount of commissions to be paid for that year, likely in one lump sum, again with the remainder to be bundled into the future payment due. At the first week of July, we will need to determine a mutually agreeable interest rate on the underlying amounts charged from the quarter in which each amount is due. As per out agreement, we are also willing to consider a mutually agreeable exchange rate for this amount (not including the 4% existing interest), though this hopefully won't be an issue by 2003 or 2004. · Maranatha- We would consider this matter resolved as it now stands based on the following: 1. Provision of mutually acceptable Jireh accounting by first week of July 2. Signed Letter at international convention 3. Payment of $54,000 within 2001 4. Documentation provided by Bob showing Maranatha losses on bulk program for 1998 though 2000, to be provided by end of June. If these points are not met, we will consider both the Jireh and Maranatha matters to be unresolved, with serious consequences for all parties concerned. 130 On 9 July 2001, Mr Cisneros wrote to Mr Saleh, relevantly as follows: Maranatha/Jireh Roast Coffee commissions- We agreed to waive Maranatha commissions, and resolve Jireh commissions based on the following points: 1) Provision of mutually agreeable Jireh accounting by first week of July; 2) Signed Jireh letter at international convention; 3) Jireh payments totaling $54,000 within 2001; and 4) complete accounting showing losses on Maranatha bulk coffee for 1998 through 2000 provided by end of June. We received neither the Maranatha or Jireh accounting. 131 On 10 July 2001, Mr McCullough wrote to Mr Cisneros, relevantly as follows: Roasted Coffee Commission - Jireh In respect to roasted coffee commission for Jireh, I would confirm that payment terms of $50,000 by end of this year can be achieved with balance being deferred until disposal of the Gloria Jeans business by Jireh. This obligation is for Jireh and there is no commission obligation on Maranatha. Invoicing is to be to Jireh only. I will assemble the information to determine Jireh commission liability as soon as possible. I will also report separately to you on the Maranatha bulk coffee losses which are extreme. 132 On 10 September 2001, Mr Saleh emailed Mr Meier as follows: Dear Steve, Many thanks for your mail of the 4th and 7th September respectively. We thank you for taking the trouble and obtaining for us the Cherry Vanilla and Mango flavours to be used in Tea, and we do acknowledge what Melchez have said that one would need flavour flakes for a dry flavour for teabags, as any oil would come through the teabags. Your mail of the 7th gives us the pricing for both the Mango Flavour and Cherry Vanilla, and both these are acceptable by us. We have also noted the percentage to be added to the tea. We would request you to have this sent through to Indonesia where these trials are currently being conducted. We would need these flavours to be made with the least possible delay, and your help and assistance in this regard would be appreciated. Steve, whatever comes under our letter of agreement will be dealt with accordingly and you should have implicit trust and faith that this will be the case. With regard to GJ's USA, we are carrying out tests at the moment and they are well aware that we are looking at a tea program for ourselves. Have been working with Bob and sincerely hope that this week will have all matters dealt with according to our arranged agreement, and that you should have correspondence and initial payments. Best regards, NABI SALEH 133 Mr Meier forwarded this email to Mr Cisneros with the following message: FYI. One to keep in the file. 134 On 14 September 2001, Mr McCullough wrote to Mr Meier as follows: Dear Steve, RE: JIREH INTERNATIONAL PTY LIMITED I have received a report from my above client regarding bean roasting quantities (copy attached) to determine commission due to WES. The quantity of roasted coffee up to 30 June 2001 was 186,532 kgs. The commission due is to be 5% of the ex factory price which is calculated to be US$3.50 per kg. This calculates as follows:- 186532 x US$3.50 x 5% = US$32,643 I would suggest this amount be met by 3 monthly payments of US$5,548 by 31 December 2001 and the balance deferred for payment with the fee due by Jireh to WES when the business is sold. I would appreciate your comments regarding the above. I have attached executed letter of understanding for your counter signature and return. Sale of products other than roasted coffee already attract a 5% commission on each invoice and hence no further adjustment is necessary. Yours faithfully McCullough & Associates Pty Limited 135 The Letter of Understanding attached was in the following terms: LETTER OF UNDERSTANDING

138 On 13 August 2002, Mr Meier wrote to Mr Saleh and Mr McCullough, informing them that WES was not agreeable to modifying the existing agreement or Letter of Understanding. 139 On 27 August 2002, Mr McCullough wrote to Mr Meier in the following terms: Dear Steve I have met with Nabi and Peter regarding your commission in respect to both the formula and the payment terms. Whilst we recognise that in earlier years both Jireh and WES were unprofitable in this venture, Jireh are prepared to recognise your contribution to the establishment of the business by 5% basis to June 01. The agreement was subject to renegotiation, but as there was a distinct possibility the venture could fail, which would have been personally horrendous for Nabi and Peter, no renegotiation took place until I sent you the proposed amended joint venture agreement in September 01 which reflected the commission reduction from 5% to 2%. I believe you were aware of the significant losses incurred by Jireh (in excess of A$1M) and would have been aware of Jireh's incapacity to pay any commission previously. Although volume increase has been significant, it is still a very marginal business and the 2% rate is as much as Jireh can afford. You would be aware they also pay US25¢ per lb to Gloria Jeans USA. To preserve the franchisees margin it is not possible to increase prices. Payment terms would be 50% of accrued liability to 30 June 02 to be deferred to end sale and 50% to be paid on terms suitable to Jireh's cash flow but to be cleared by June 03. In the meantime, current commission would be paid as due at the new rate. Commission payments are to be kept separate from other stock payments. I agree the quarterly calculations will be made in A$ and converted to US$ at the time payment is made. Our belief is the agreement is not legally binding and was a sign of good faith. If our requested amendments are not agreed to the arrangement will be terminated. I am instructed that no payment will be made until the matter is resolved, when appropriate terms (as previously indicated by me) will commence. Nabi and Peter maintain that no interest charge should be made due to the aforementioned matters as WES will receive a significant sum from their 4% of the end sale. This would be forfeited if the agreement is terminated. I accept, for reconciliation purpose, your payment credit of $7,900 instead of my requested payment credit of $13,300 as mine was in A$ and not US$. I look forward to discussing this matter with you further after you have received this fax. I will make myself available for you at 10.00am Thursday 29th August, our time. Yours faithfully, McCullough & Associates Pty Limited

140 On 30 August 2002, Mr Meier wrote to Mr McCullough as follows: Dear Bob: We are in receipt of your 27/08 letter regarding the outstanding commissions due by Jireh. While we do appreciate Jireh's recognition of our contribution to the establishment of our mutual business in Australia, we were very disappointed to receive your letter. Let me advise as follows: We recognize the tremendous risks and efforts taken by Nabi and Peter. We too have made significant and unrecompensed contributions to our joint venture over these many years. We all understood when we starting this venture that there would be significant investments of time and money, especially on the front-nd but also for many years. Most importantly, it is critical that you understand that the Agreement we entered into is legally binding under both Australian and American law. If you advised Jireh to the contrary, you provided them a dis-service. Neither can the Agreement be unilaterally terminated. These statements are counterproductive and contrary to the nature of our partnership with Nabi and Peter. Our Agreement provided for a possible renegotiation of the terms within six months. There were ample opportunities to do so but to claim that you attempted to "renegotiate" the Agreement six and a half years after its signing date is simply untrue. As you well know, the Letter of Understanding was undertaken for one simple purpose- to assist Jireh in the short term to carry forward this obligation, because Jireh had not reported or made timely commission payments. As the correspondence of that time period clearly show, our discussion was never intended to amend the Agreement. Nabi, you and David negotiated a Letter of Understanding last summer during his visit to Australia, which went back and forth, until December 2001, at which time a final Letter of Understanding was agreed upon. This has been confirmed numerous times in writing, in conduct, and by telephone. In fact, you again confirmed your belief in our last several telephone conversations, that it was your understanding that the December 2001 Letter of Understanding was valid and binding. We already have clearly showed our commitment to Jireh by agreeing to carry forward 40% of the commissions due on the coffee roasting to the time of sale or transfer, and to carry forward 100% of the non-coffee GJ product commissions due and owing. Since the majority of commissions due and owing are being carried forward, these do not affect the margin and the profitability to the franchisees. The remaining 3% rate on roasted coffee only is quite reasonable and affordable to Jireh, especially given the significantly reduced costs from the roasting license versus outright purchase of the roasted coffee from GJ. However, to finalize this matter once and for all, we would be willing to amend the Letter of Understanding by agreeing to accept the proposed 2% commission amount paid quarterly and to put 3% in abeyance, from third quarter 2002 onwards, based on the following: · Payment of past due commissions per the existing Letter of Understanding, as outlined in my e-mail letter of August 14 and attached Commission Acct Finance Overview. This overview is re-attached, and sheet "Aug 30" reflects a modification to a weekly payment for the past due amount. Based on the Letter of Understanding, these amounts have been entered into our books through 2001 year-end. · Timely quarterly reports and payments from third quarter 2002 onwards at the 2.0% rate. Interest would continue to be charged on the 3% held in abeyance per the Letter of Understanding. This is a continuing significant investment on our part in Jireh, and shows our commitment as partners and members of the team. Since you advised in one of our most recent telephone conversations that you are no longer authorized to treat this matter, and because of the serious statements made in the letter, we will plan to contact Nabi early next week to directly and finally resolve this matter, and promptly commence weekly payments on the past due amounts and quarterly payments for the future. We are hiring a supply manager primarily to handle Jireh matters, and these monies will be used with a positive effect to continue to improve our support to Jireh. 141 On 2 October 2002, Jireh's premises were destroyed by fire. 142 On 25 September 2003, Mr McCullough wrote to Mr Cisneros as follows: Dear David

149 On 11 March 2004, Jireh and JIWD executed an instrument entitled "Contract for supply of products directly to the Franchisees of Jireh International Pty Limited"("the Supply Contract"). 150 Under the Supply Contract the defendant appointed JIWD as its preferred supplier of all products as agreed from time to time to be supplied to the Franchisees of Jireh. 151 Clause 2 of the Supply Contract provides relevantly for Jireh to nominate JIWD as its preferred supplier of products to the Franchisees. 152 Under cl 3 JIWD must pay a fee on a monthly basis, based on total monthly sales less costs of the sales and freight. 153 On 1 July 2004, under a contract for supply of consumables, JIWD appointed Maranatha as its supplier for coffee, chocolate and tea products in Australia for a period of five years with an option to renew for a further five years. 154 GJCI was established to purchase the international franchising rights which had been operated by Gloria Jean's Gourmet Coffees Franchising Corp. 155 On 5 December 2004, by way of a written Asset Purchase Agreement, GJCI (for a purchase price of US$ 16 million) acquired from Gloria Jean's Gourmet Coffees Corp and Gloria Jean's Gourmet Coffees Franchising Corp all their right, title and interest to and in the international franchise operation of Gloria Jean's, excluding the US and Puerto Rico. GJCI thereby acquired the right to supply coffee and other products to the international Master Franchisees including in Australia. 156 The US company retains exclusive coffee roasting rights for the globe until 2011. On 10 February 2005, a new grant of roasting rights (replacing the earlier Roasting Agreement) was given to Jireh for the rest of the world excluding the US. 157 The Master Franchise Agreement expired on 6 March 2006. JIWD now deals exclusively with GJCI and with Australian Franchisees. Jireh deals with GJCI regarding Master Franchisees. 158 According to Mr Saleh since the establishment of JIWD in 2003, Jireh does not purchase goods (including coffee) from suppliers, including roasted coffee from Maranatha and does not sell goods to its Franchisees. Since 2005, GJCI purchases and then supplies all coffee and other Gloria Jean's branded and non-branded products to JIWD. JIWD continues to supply these products to Franchisees in Australia. 159 By 2006 there were 348 Gloria Jean's stores in Australia and by 2009 there were 489. 160 In evidence were two examples of standard store franchise agreements between Jireh and Australian Franchisees, one of 18 December 2002 and the other of 17 December 2009. Both contain provisions under which the Franchisee must not (without Jireh's prior written approval) offer for sale at the store any products or services other than as specified in writing by Jireh from time to time, and under which the Franchisee must purchase from Jireh all gourmet coffee and other products as specified by Jireh from time to time. Termination of WES' arrangements with Gloria Jean's Gourmet Coffees Corp 161 On 3 February 2004, Gloria Jean's Gourmet Coffees Corp and WES executed a Letter of Understanding "to memorialize the terms of the relationship". The letter provided that WES was authorised, subject to the agreement of Franchisees (excluding in the US) to supply products and services to Franchisees. WES was to be given a six per cent discount off the standard wholesale coffee pricing which Gloria Jean's Gourmet Coffees Corp charged domestically to its Franchisees in the US. Either party could terminate the agreement within 60 days before the end of each one year term by written notice. Absent such notification, the agreement was to automatically renew on 1 January each year for consecutive one year terms. 162 According to the unchallenged evidence of Mr Matthew McGuiness, the then executive vice-president of development for Gloria Jean's Gourmet Coffees Corp, on 20 December 2004, as a consequence of the sale by Gloria Jean's Gourmet Coffees Corp of its international business to GJCI, Gloria Jean's Gourmet Coffees Corp terminated the Letter of Understanding with WES with effect from 31 December 2004 from which time WES' authority to supply products to Gloria Jean's international Master Franchisees was terminated. CONTENTIONS ON LIABILITY WES 163 WES puts that: a the Letter Agreement is a binding contract and is still on foot; b by cl 3 Jireh was and remains obliged to pay WES a commission of five per cent of the ex-factory price of Gloria Jean's or other branded coffees, teas and other products sold by Jireh to Gloria Jean's stores; c in breach of that obligation, Jireh has failed to pay to WES commission in respect of such sales; d as a consequence WES has suffered, and continues to suffer, damage.

168 WES puts firstly, that on the proper construction of cl 3 and in the events that have occurred, sales by JIWD and GJCI are sales by Jireh within the meaning of the provision. 169 Secondly, it puts that the reference to Jireh, where it appears second in cl 3 should be construed to mean Jireh or an associated entity, and that each of JIWD and GJCI is such an entity. 170 Thirdly, WES puts that the Letter Agreement should be rectified by inserting after the reference to Jireh in the second sentence of cl 3, the words "or an associated entity". 171 Finally, it puts that it is an implied term of the Letter Agreement that: a Jireh would not voluntarily remove itself as, or cease to be, the seller of Gloria Jean's, and other branded coffees, teas and other products to GJGC stores in Australia and to GJGC Master Franchisees and GJGC Stores in other countries; b Jireh would not voluntarily do anything to cause or permit WES' enjoyment of the right to commission referred to in cl 3 to be rendered nugatory, worthless or to be undermined; or c WES would not, by the voluntary act of Jireh, be deprived of the circumstances which entitled WES to receive a commission under cl 3, namely sale of the products by Jireh. 172 WES puts that Jireh has breached one or more of the asserted implied terms by entering into the arrangements which have resulted in JIWD and GJCI, rather than it, selling to the GJGC stores. It says it has suffered, and continues to suffer damage equivalent to the commissions it would have earned. Jireh 173 Jireh's first submission is that there is no binding agreement between the parties on the terms of the Letter Agreement. It puts that neither party intended to contract when signing it. 174 Secondly, Jireh puts that when it signed the Letter Agreement, it was, to the knowledge of WES, labouring under the serious and fundamental mistake that the Letter Agreement was not binding and was not to be operational. Jireh does not, however, plead that any contract was thereby rendered void. Nor does it claim any order for rescission on the basis of mistake. Rather, it pleads that the Letter Agreement should be rectified to contain a provision that it is not binding or operational until a further negotiation between the parties concerning the compensation amounts is concluded successfully in accordance with cl 7. During the hearing, however, it abandoned any claim for rectification. I will accordingly proceed on the basis that its true contention is that there is no contract, or if there is one, it is voidable by reason of its unilateral mistake.

187 Jireh pleaded and intended to motivate an argument that the relationship of the parties (or at least significant aspects of it) were regulated by the law of Colorado on the basis that Messrs Cisneros and Meier were lawyers in that jurisdiction and were bound by the rules thereof in their dealings with WES. Expert evidence from practitioners in that jurisdiction was served. The Colorado proposition was correctly abandoned by Jireh on commencement of the hearing. It also abandoned a contention that the Letter Agreement was subject to a condition precedent which suspended its operation until the review contemplated by cl 7 occurred. Jireh also abandoned propositions that the Letter Agreement had been terminated on reasonable notice and that WES' claim was statute barred. It also abandoned cross-claims which it brought personally against Messrs Cisneros and Meier. For its part WES abandoned a claim based on unjust enrichment. It also did not press a contention that by subsequent conduct the parties entered into an agreement on the terms of the Letter Agreement. 188 The hearing took place over 13 hearing days between 19 April and 11 May 2010. 189 Mr F C Corsaro of Senior Counsel, together with Mr F G Kalyk of Counsel appeared for WES. 190 Mr D J Higgs of Senior Counsel together with Mr T Maltz of Counsel appeared for Jireh. THE ISSUES 191 The following issues arise for determination: a whether in entering into the Letter Agreement, the parties intended to create binding legal relations; b whether (assuming that WES did), Jireh, to the knowledge of WES, mistakenly believed that the Letter Agreement was not to be binding or operational; c whether WES is estopped from denying that the Letter Agreement was not to be binding or operational until there was further agreement on the commissions, if any, which Jireh was to pay; d whether WES engaged in conduct which was misleading and deceptive or likely to mislead or deceive by inducing Jireh to believe that that the Letter Agreement was not to be binding or operational until there was further agreement on the commissions, if any, which Jireh was to pay, and if so, whether an order should be made declaring the contract void ab initio; e whether WES owed to Jireh, and breached, (by not disclosing that the Letter Agreement was binding), a fiduciary duty not to permit its personal interests to conflict with that of Jireh so that their contract should be set aside; f whether the Letter Agreement was frustrated and discharged by supervening impossibility when WES' contractual arrangements with Gloria Jean's Gourmet Coffees Corp came to an end; g whether, (if there is a contract between the parties on the terms of the Letter Agreement), cl 3 should be rectified by the insertion in the second sentence after the words "Jireh International Pty Limited" of the words "or an associated entity"; h whether, (if there is a contract between the parties on the terms of the Letter Agreement), the words "Jireh International Pty Limited" where they appear in the second sentence of cl 3 should be construed to mean "Jireh International Pty Limited or an associated entity"; i whether, (if there is a contract between the parties on the terms of the Letter Agreement), sales by JIWD to GJGC stores are sales by Jireh within the meaning of cl 3; j whether, (if there is a contract between the parties on the terms of the Letter Agreement), a term or terms are to be implied into it, to the effect that: i. Jireh would not voluntarily remove itself as, or cease to be the seller of Gloria Jean's and other branded coffees, teas and other products to GJGC stores in Australia and to GJGC Master Franchisees and GJGC stores in other countries; ii. Jireh would not voluntarily do anything to cause or permit WES' enjoyment of the right to commission referred to in cl 3 to be rendered nugatory, worthless or to be undermined; or iii. WES would not, by the voluntary act of Jireh, be deprived of the circumstances which entitled WES to receive a commission under cl 3, namely sale of the products by Jireh; k the proper construction of the term "ex-factory price". 192 There is no issue that if the Letter Agreement is binding, WES' damages equate to the amount of cl 3 commission it should have, but has not, received, plus interest for the delay.

203 Jireh's principal response is that whilst the parties wanted to enter into a contract, they never did so. It says that at 19 March 1996 the parties were still negotiating on price and that they never reached agreement. It identifies the following as features indicating a lack of intention to be bound: a the parties' dealings from the time at least of Mr Saleh's letter of 18 January 1996 in particular the 6 February letter in which Mr Saleh said: W.E.S. Agreement - Have noted that the inclusion of Point 7 to this agreement makes this matter quite clear that none of the above becomes operational until we have negotiated the numbers together and worked out what in fact is the right mix and what each product can bear for an on charge by W.E.S. Happy to go through this in total detail when you or Steve visit Australia. b the fact that Mr Saleh (as well as Mr Irvine) made it clear that the percentages being sought by WES were unsustainable and that Mr Cisneros' facsimile of 31 January 1996 referred to the figures being "subject to a final discussion anyway"; c the fact that (as it contends) WES did not respond to, but rather deliberately remained silent in the face of the 6 February letter; d that WES' non-response to the 6 February letter induced Mr Saleh to believe that WES accepted as correct his understanding that the Letter Agreement was not to be operational; e that if the Letter Agreement was binding, agreement to cl 7 meant that Mr Saleh implausibly gave up Jireh's power to bargain, replacing it with a review in which it would have little, if any, bargaining power in the context of an enterprise where WES was not to have a say in the running of the business or any equity in it; f that there is a lack of precision in the drafting of the Letter Agreement in that cl 2 and cl 3 do not define the term "ex-factory", cl 3 does not define the term "associated entity", cl 5 does not define the term "interest of Jireh International Pty Limited" and cl 7 does not define the term "the business of the parties". 204 With respect to its conduct after the Letter Agreement, Jireh puts that the parties' dealings are properly to be characterised as continuing negotiation with a view to reaching agreement on the commission percentages rather than conduct consistent with, or confirmatory of, the existence of a binding agreement.

206 As is readily apparent, a critical question for determination is whether the conversation to the effect Mr Meier says he had with Mr Saleh on 1 March 1996 occurred. 207 If it did, then WES did not, as Jireh asserts, remain silent with respect to the 6 February letter. Moreover, if the conversation occurred, Mr Saleh's assertion of a belief that the Letter Agreement was not to be immediately operational is undermined. 208 A finding on this issue also has significant effect on Jireh's claims based on mistake, estoppel, misleading and deceptive conduct and breach of fiduciary duty. 209 Jireh made a submission that even if the conversation did occur, its terms were not sufficiently certain so as to establish on an objective test that Jireh intended the Letter Agreement to be binding. The difficulty with this submission (which was not developed) is that after it and in the light of it, Jireh executed the Letter Agreement. On any view, the Letter Agreement bears all the hallmarks of an instrument which the parties intended to be binding. 210 Jireh made a submission that Mr Meier had a motive for not reverting back to Mr Saleh on the 6 February letter because if Mr Meier had insisted on five per cent commission this would have had the potential to destabilise the position at a delicate stage of the negotiations (between themselves and with Gloria Jean's). 211 I am satisfied, and I find, that the 1 March 1996 conversation took place. 212 Mr Meier impressed me as a completely truthful witness and I accept his evidence. For reasons which appear later I do not consider that the same can be said of Mr Saleh, and where his evidence is inconsistent with that of Mr Meier, I prefer that of Mr Meier. 213 I should say that Mr Cisneros equally impressed me as a completely truthful witness and I accept his evidence. For reasons which appear later I do not consider that the same can be said of Mr Irvine. 214 Mr Meier was subjected to searching cross-examination. His credit was attacked. It was put that his evidence of the 1 March 1996 conversation was a reconstruction from the 5 March letter, which was recently invented after discussion with Mr Cisneros.

222 Although this letter refers to a discussion between Mr Saleh and Mr Cisneros (rather than Mr Meier) at the time of the Letter Agreement, it is consistent with what Mr Meier says was discussed on 1 March 1996 and entirely inconsistent with a state of mind on the part of Mr Saleh (and of Mr Irvine) that the Letter Agreement would not be operational at all until after the figures were later agreed. With justification, it was not put that on its terms cl 7 means anything other than the stated percentages in the Letter Agreement would apply until varied by later agreement between the parties. 223 Turning then to matters which go to, but also go beyond the conversation itself and are pertinent to whether there was an intention to contract. There is a significant, if not overwhelming body of material revealing conduct on the part of Mr Saleh, Mr Irvine, Mr McCullough and the internal accountant Mr King (neither of whose authority was put in issue) spanning from the time of the Letter Agreement until disavowal of its binding effect on 27 August 2002, inconsistent with belief on the part of any of them that the Letter Agreement was not binding and consistent only with it being, and having been understood to be, binding. 224 Examples include: Mr Meier's facsimile of 6 December 1997 referring to the agreement and suggesting that rather than require an accounting for all coffee roasted, seven per cent would be a fair alternative; Mr Cisneros' letter of 16 December 1997 stating that per Mr Saleh's advice, an invoice for commission on GJ bulk would be faxed to Jireh; Mr Irvine's letter of 9 January 1998 referring to the original agreement; Mr Meier's letter to Mr Irvine of 22 January 1998 referring to the commission payable per the agreement; Mr Meier's letter to Mr Irvine of 18 February 1998 concerning invoice 4282; Mr Meier's letter to Mr Irvine dated 21 February 1998 referring to the need for WES' invoiced commission to be paid; Mr Meier's letter to Mr Irvine of 25 March 1998 referring to points discussed including for "Jireh/Nabi" to provide an accounting for all green coffee and to negotiate a mutually agreeable payment schedule; Mr Meier's letter to Mr McCullough and Mr Saleh of 9 June 1998 which included an account balance and referred to estimated unpaid GJ roasting royalties; Mr Saleh's letter to Mr Meier of 15 August 1998 saying that WES should put in its claim for roasting coffee commission and that it would be met; the parties' dealings in relation to invoice 4449 and its redirection to Jireh and subsequent payment; the reference in Mr Cisneros' letter to Mr Saleh of 14 December 1998 to the five per cent by agreement; the statement by Mr King in his letter to Mr Meier of 2 March 1999 that on the issue of the outstanding commissions on green coffee and flavours, Jireh would be incorporating payments on them into the WES receivables payment program outlined; Mr Cisneros' letter to Mr Saleh of 6 July 1999 referring in relation to bulk royalties that they awaited a promised outline by no later than July 15, and were very frustrated that Maranatha evoked a team spirit, which WES had supported without question, and Jireh delays payment to its partners of agreed-to commissions; Mr Cisneros' letter to Mr Saleh of 15 July 1999 saying that they were promised that Maranatha would organise this sales information for Mr Saleh's meeting with Mr Meier and saying: "[i]f we don't receive this information by end of July, then we will have to approximate ourselves and send an invoice. Nabi, please understand that this information is important for many reasons, both for our sales numbers/program for our transition partner, and also an important part of our compensation"; Mr Meier's letter to Messrs Irvine and Saleh of 31 August 1999 referring, amongst others, to the agreement for royalties on green coffee and to the possibility of a bigger pay-out when their interest in Jireh or the Gloria Jean's business is transferred to another entity; Mr McCullough's signature agreeing to provide an audited report for the payment of commissions as required by Mr Meier in his letter to Mr McCullough and Mr Saleh of 23 September 1999; Mr Cisneros' letter to Mr McCullough and Mr Saleh of 14 October 1999 saying: "[o]utstanding commissions for bulk- According to our agreement, your report of bulk sold by Brothers and Columbia/Jireh is due this week. Please ensure that it is provided. Once agreed upon, we will mutually schedule agreed weekly payments"; WES' invoice 5274 to Maranatha of 15 December 1999 claiming commissions for Jireh roasting; Mr Cisneros' letter to Mr Saleh on 29 June 2000 in which Maranatha signed acceptance of its agreement to fully and reasonably resolve the outstanding bulk commissions on both Maranatha and Jireh bulk, both in terms of resolving past commissions and/or license fees; Jireh's agreement to provide a full accounting of whole bean sales for it and Maranatha for the years 1998, 1999 and 2000 reflected in Mr Meier's letter to Messrs McCullough and Saleh of 5 August 2000; Mr Meier's references (not demurred to by Jireh) of WES' entitlements upon a sale or transfer in his letters dated 12 September and 9 October 2000; Mr Saleh's reference in his email to Mr Meier of 10 September 2001 to "our Letter of Agreement and our arranged agreement"; cl 4 of the proposed Letter of Understanding signed by Messrs Irvine and Saleh and sent in September 2001 stating that the original agreement provided for a commission rate of five per cent and, due to significant initial losses incurred by Jireh, the rate was to be reduced to two percent; Mr McCullough's letter to Mr Meier of 28 November 2001 setting out details of the amount due from commencement to 30 June 2001 including commission due of US$ 62,954; and Mr McCullough's reference in his letter to Mr Meier of 13 August 2002 advising that Messrs Irvine and Saleh insisted that the commission arrangement be amended to conform with Mr McCullough's letter of understanding attached to his fax of 7 August 2002.

The existing invoices for commission are not presently recognised. 226 Even this letter is inconsistent with Mr Saleh's avowed belief that there was no operative agreement at all until figures were negotiated. Mr Cisneros' response was to suggest that Jireh look at the agreement again. Mr Cisneros followed this up with a draft Letter of Understanding which would have provided for the provision by Jireh of a complete accounting subject to independent verification. His draft Letter of Understanding was not acceptable to Jireh, which then proffered its own, which included the Recital that WES was Jireh's partner and supply manager pursuant to Agreement dated 19 March 1996, negotiated in Denver and the statement that the original agreement provided for a commission rate of five per cent. 227 During cross-examination various documents were put to Mr Saleh as reflecting conduct on the part of Jireh consistent only with there being a binding agreement with WES. Mr Saleh is an intelligent man and he is articulate. He was to my observation acutely aware of the significance of the documents being put to him as being inconsistent with his position. No less than seven times (in some instances evasively and not responsively to the question), Mr Saleh's evidence was that the parties were continually negotiating and working towards an agreement or mutually satisfactory relationship which was never achieved. I reject this evidence. It is inconsistent with his own behaviour and with a significant body of contemporaneous objective material. 228 During the course of argument I asked senior counsel for Jireh to identify documents which evidenced negotiations, counter-proposals or assertions by Jireh after the date of the Letter Agreement and which might indicate that negotiations in respect of commission rates were ongoing or which evidenced Jireh indicating that there was no binding agreement. Prior to Mr McCullough's 22 December 2000 letter (to which I have already referred), the only documents identified were: a a handwritten note (apparently by Mr Saleh to Mr Cisneros) made on or about 22 June 1998 as follows: Royalties charges are not Columbia's. This will be worked out and then paid by Jireh. No action until then.

230 There are various statements in Mr Saleh's principal affidavit which are inconsistent with a belief on his part that the Letter Agreement was not to be binding or immediately operational. Examples include: a Paragraph 122 in which he says with respect to his understanding of cl 2 commission: The agreement to pay commissions under this Clause 2 was only intended to apply for so long as Jireh imported goods from the US under the Master Franchise Agreement. It was always clear in my mind that there might be a time when the supply of goods from the US might stop. Although there is no reference to the Gloria Jean's US Agreement in the alleged WES Agreement, it was always my understanding that if the Gloria Jean's US Master Franchise Agreement "fell over" for any reason, then the WES Agreement would have no operation. b Paragraphs 127 and 128 in which he says with respect to his understanding of cl 3 commission: The 5% commission which was to be imposed on the sale of these goods was not workable. I was content for it to be included in Clause 3 because I understood it could and would be adjusted, notwithstanding that supply may have been in small volumes initially. I understood that the agreement to pay commissions for roasted coffee was only to apply for so long as the Roasting Agreement was in operation. c Paragraphs 129 and 130 in which he says with respect to his understanding of cl 5 commission: I understood the 4% payment under Clause 5 was to be made to WES for their help and assistance before, during and after closure of the Master Franchise Agreement. I never viewed Cisneros, Meier or WES as having an equity interest in the business. This was never the subject of discussion. I negotiated Clause 5 on the basis that it would cover the $100,000.00 value of services provided by WES including legal services. d Paragraph 141 in which he says with respect to cl 7: I was not particularly concerned of the 6 month period elapsing without any discussion of renegotiating the commission rates because it was subject to be reviewed on an on-going basis and the commission rates could continue to be dealt with during the relationship. 231 Mr Saleh's affidavit does refer to an undated alleged conversation (not communicated to WES) between him and Mr Irvine before the Letter Agreement was signed, to the following effect: IRVINE: I still don't see why we need to have this agreement and to execute it? SALEH: Peter, this is not a binding agreement. It is the foundation of a working relationship going forward. I am comfortable with David and Stephen. We can review it afterwards and on an on-going basis. 232 I am not satisfied that this conversation occurred. What was allegedly said is inconsistent with the outward behaviour of both. 233 Mr Irvine was cross-examined on the letter from Mr McCullough to WES dated 22 December 2000. His evidence was that contrary to what the letter says, he did not have a belief that Jireh was to pay commission only when the business was profitable because at that point in time he still believed that they "did not have an agreement in place which was actionable". I reject this evidence. Not only is it inconsistent with what Mr Irvine wrote on 9 January 1998 and the significant body of material to which I have referred, it is also inconsistent with various statements he made in his affidavit sworn 9 September 2009. For example: a his statement in par 76 with respect to his understanding of cl 2 that: My understanding of Point 2 in the letter was that 5% commission was not "locked in", but was to be negotiated again when Nabi and I understood the operation of the business and the margins it could bear, after some period of operation. My understanding of Point 3 was that we could not commit to a percentage until we were in a position to set selling prices and understood the margins. My understanding at that time was that if we signed the Letter of Agreement, but it turned out that it was not sustainable on these issues, then it could and would be changed. b his statement in par 105 with respect to his understanding invoice 3990 that: Invoice 3990 dated 26 March 1997 ... When Jireh paid the invoices, that payment included the commission. I understood that commission was 5% until Jireh was able to review and renegotiate it with WES. c his statement in par 115 with respect to his understanding of cl 2 and cl 3 that: At this time, my understanding was still that the 5% WES commissions under Clauses 2 and 3 of the Letter of Agreement were open to review.

235 There is an undoubted shift in position between Mr Irvine's 9 September 2009 affidavit and his 7 April 2010 affidavit on the question of lack of intention to create a binding agreement. This, as well as the statements made by Mr Saleh in his principal affidavit which are inconsistent with a belief on his part that there was not to be an immediately binding or operational agreement, may be explained by the fact that only by its Further Amended Defence filed on 10 February 2010 did Jireh for the first time expressly deny that the "alleged Letter Agreement was or is, or was intended to be, a binding contract". Previously the denial was that the document constituted a contract. 236 Jireh's position that the parties were still negotiating on price and never reached agreement, and that subjectively neither Mr Irvine nor Mr Saleh intended or believed that a binding agreement had been concluded is unsustainable and I reject it. 237 I do not accept Jireh's proposition that by agreeing to cl 7 Mr Saleh gave up Jireh's power to bargain or that there was anything implausible in Jireh agreeing to that provision. Jireh's agreement to cl 7 enabled the Letter Agreement to proceed in a manner which satisfied both WES' requirement for the percentages to be specified and Mr Saleh's concerns about sustainability of profit. Both parties had an interest in the enterprise succeeding. Jireh had the protection that WES would be unlikely to act so as to undermine its own interests, especially given the efforts which WES had to that point made. Also, at the least each had an obligation of honesty and good faith with respect to the negotiations which cl 7 contemplated: United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177 at 77-78. Mr Saleh had no reason to, nor did he believe (indeed the contrary) that WES would act other than honestly and in good faith. In various documents Mr Saleh referred to the parties (or Messrs Cisneros and Meier) as partners, joint venturers and friends. 238 I also do not consider that there is substance in Jireh's submission that there is a lack of precision in the drafting of the Letter Agreement which points to a lack of intention to contract. The parties did not define the terms "ex-factory", "associated entity", "interest of Jireh International Pty Limited" and "the business of the parties", but there was no need for them to do so. None of those terms is incapable of definite or precise meaning such that the court would be unable to attribute to the parties a contractual intention: see Upper Hunter County District Council v Australian Chilling &Freezing Co Ltd (1968) 118 CLR 429 at 436-7; Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd trading as "Uncle Bens of Australia" (1992) 27 NSWLR 326. 239 Of the terms concerned, it is necessary only for present purposes to determine the meaning of "ex-factory", in respect of which only two alternatives were put. I have resolved this controversy below. It is not necessary to determine the outer limits of the term "associated entity", suffice it to say that an entity such as Maranatha, owned and controlled by Mr Saleh or his interests, and which had a relationship with Jireh for the roasting of coffee doubtlessly was an associated entity of the type which cl 3 contemplated.

ESTOPPEL 250 The central principle of the doctrine of estoppel is that the law will not permit an unconscionable (or unconscientious) departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption is not adhered to. For the departure to be unconscionable the party concerned must have played such a part in the adoption of, or persistence in the assumption, that that party would be guilty of unjust and oppressive conduct if it were now to depart from it. Cases where departure would be unconscionable include where that party has induced the assumption by express or implied representation, has entered into contractual or other material relations with the other party on the conventional basis of the assumption or knew that the other party laboured under the assumption and refrained from correcting it when it was that party's duty in conscience to do so. Estoppel by conduct does not in itself constitute an independent cause of action. The assumed fact or state of affairs (which one party is estopped from denying) may be relied upon defensively, or it may be used aggressively as the factual foundation of an action arising under ordinary principles, with the entitlement to ultimate relief being determined on the basis of the existence of that fact or state of affairs: Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J. 251 It follows from my finding that the 1 March 1996 conversation occurred as well as from all the considerations which have caused me to conclude that the parties intended to create legally binding arrangements, that WES never held out, and Jireh never held or relied upon any belief or assumption, that the Letter Agreement was not to be binding or operational until there was further agreement on the commissions, if any, which Jireh was to pay. 252 In addition, I am not satisfied that by entering into the Letter Agreement, given the benefits which Jireh obtained and retained from it, that it suffered any detriment sufficient to warrant intervention of a court of equity. MISLEADING OR DECEPTIVE CONDUCT 253 Section 52(1) of the Trade Practices Act 1974 (Cth) ("the Act"), which is a provision of Part V, provides: A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 254 Section 82(1) of the Act provides, relevantly, that: … a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part … V … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 255 Section 87(1) of the Act provides, relevantly, that: … where … the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part … V … the Court may, … make such order or orders as it thinks appropriate against the person who engaged in the conduct … (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. 256 Section 87(2)(a) of the Act provides, relevantly, that: "[t]he orders referred to in subsection (1) … are: an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct … to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order 257 The question is, whether having regard to all the relevant circumstances, there was conduct by WES which was misleading or deceptive or likely to mislead or deceive Jireh: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32.

258 Silence can be misleading or deceptive even if there is no duty to reveal relevant facts: Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88. Unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, mere silence does not support the inference that that fact does exist: Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 at 53,195. If the circumstances are such that a person is entitled to believe that a relevant matter affecting him, her or it would, if it existed, be communicated, then the failure to communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his, her or its detriment is entitled to infer from the silence that no danger or detriment existed: Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97. 259 It follows from my finding that the 1 March 1996 conversation occurred as well as from all the considerations which have caused me to conclude that the parties intended to create legally binding arrangements, that WES never engaged in any conduct, nor did Jireh suffer any damage by any conduct on the part of WES, which was misleading or deceptive or likely to mislead or deceive within the meaning of s 52 of the Act. 260 Accordingly, no occasion arises for the making of an order declaring the contract between the parties void. FIDUCIARY DUTY 261 Fiduciary relationships are sometimes called relationships of trust and confidence. Their critical feature is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical way: see Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-7. 262 There are traditional or accepted categories of fiduciary relationship. They include solicitor and client, principal and agent, and partners and company directors in relation to the company. The categories are not closed.

264 Where fiduciary obligations arise because of a contractual relationship, the terms of the contract will affect the scope and extent of the fiduciary obligations between the parties, not the other way round. It is necessary to consider the particular circumstances to determine what particular obligations are owed. 265 A well-known obligation imposed on a fiduciary is to act in the interests of the person with whom the relationship exists. An aspect of this is the cognate duty of a fiduciary to refrain from putting himself in a position where his own personal interests conflict with the interests of the person to whom he owes the duty. It is a general principle of equity that a person in a fiduciary relationship is obliged to account for personal benefit or gain obtained in circumstances where such a conflict exists: see Chan v Zacharia (1984) 154 CLR 178 at 198 per Deane J. 266 A contract entered into in breach of fiduciary duty is liable to be set aside by a court of equity. 267 It was put by Jireh that Messrs Cisneros and Meier (and consequently WES) were in a fiduciary relationship with Jireh because they were in truth acting as its lawyers, particularly with respect to Jireh's position under US law. 268 Jireh articulated the particular fiduciary duty as being one which required WES to disclose (or not fail to disclose) that the Letter Agreement was to be binding. It put that if (contrary to its submission) the Letter Agreement is binding, then WES breached that duty and the Letter Agreement should be set aside. 269 Jireh's submissions are unsustainable for the reason that in my view WES was not under any such duty in relation to the Letter Agreement and if it was, it never breached that duty. 270 In negotiating the Letter Agreement Jireh and WES were negotiating at arm's length the terms of their commercial arrangement. WES was not (as was arguably the case with the Master Franchise Agreement and Roasting Agreement) negotiating for or on behalf of Jireh or in a position where Jireh was vulnerable to it. 271 More importantly, Jireh intended (as did WES) there to be a binding contract. It was not operating under any misapprehension, and accordingly Jireh could have been under no duty to disavow it of its belief. 272 Finally and in any event, WES made it abundantly clear that the Letter Agreement was to be binding. FRUSTRATION 273 A contract may be discharged and terminated by frustration when it becomes impossible of performance. Where a supplier's source is not available to supply the contents of a contract, the question of frustration depends on the reason the source is not available and the scope of the supplier's promise. Where the event relied upon occurs because of the blame, fault or default of a party, the contract is not frustrated because reliance cannot be placed on self-induced frustration: JW Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia at [33-14], [33-43]. 274 Counsel for Jireh put a perfunctory submission that the Letter Agreement was discharged by supervening impossibility when, with effect from 31 December 2004, Gloria Jean's Gourmet Coffees Corp terminated the Letter of Understanding between it and WES. The Court was not taken to any authority. 275 The submission is unsustainable because: a that event did not make the Letter Agreement impossible to perform. Gloria Jean's Gourmet Coffees Corp could thereafter just as well have supplied WES with product without any such Letter of Understanding; b Jireh could have declined to take any products originating in the US other than through WES; c other parts of the contract clearly remained operative, including cl 3, which did not oblige Jireh to buy via WES; and d as Mr Saleh remarked in another context, Jireh and JIWD are "part of the same family". Clearly, GJCI is another member. WES lost its Letter of Understanding with Gloria Jean's Gourmet Coffees Corp because of GJCI's acquisition of the Master Franchise in Australia. I have no difficulty in concluding that any impossibility on Jireh's side of the record was thus self-induced. RECTIFICATION 276 To obtain rectification, WES must establish that at the time of the Letter Agreement the parties had a common intention that when executed it would include the asserted provision, but, by mutual mistake, it was omitted: see for example Muriti v Prendergast [2005] NSWSC 281 at [105] and the authorities collected there by White J. 277 It has been said that to obtain rectification clear and strong evidence is required and that a court is very wary of acting on the evidence of a single witness: see RP Meagher, JD Heydon and MJ Leeming, Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th ed (2002) Butterworths LexisNexis at par 26-050. 278 WES' claim for rectification was brought by way of amendment permitted during the course of the trial and affidavits by Messrs Cisneros and Meier dated 30 April 2010 were read in support of it. 279 On first impression one might have concluded that the omission in the second sentence of cl 3 of the words "or an associated entity" is an obvious error. However, I do not consider that the evidence established that it was. 280 By the time of the Letter Agreement, Jireh and only Jireh was to be the Master Franchisor for Australia and the licensed roaster under the Roasting Agreement. The parties contemplated that an associated entity might carry out the physical act of roasting and supplying (in the sense of making roasted coffee available), but it was to be Jireh who the parties contemplated was going to sell (whether directly or indirectly) to its own Franchisees. The evidence of Messrs Cisneros and Meier (both affidavit and oral) did not go so far as to persuade me that the words concerned were omitted in error.

285 The meaning of words used in the Letter Agreement is to be determined by what a reasonable person would have understood them to mean. This requires consideration of the language used, the surrounding circumstances known to the parties, the purpose of the transaction and the objects which it was intended to secure: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179; International Air Transport Association v Ansett Australia Holdings Ltd (Subject to Deed of Company Arrangement) and others (2008) 242 ALR 47 at [8]. 286 A commercial contract should be given a business-like interpretation. The nature and extent of the commercial aims and purposes of the agreement or parts of it are part of the essential background circumstances: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 589; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350. See too the summary of principles in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [19] and following. 287 The whole of the instrument has to be considered. Preference is given to a construction supplying a congruent operation to the various components of the whole of an instrument: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 529. 288 If the words used are unambiguous, the Court must give effect to them. If the language is open to two constructions, that will be preferred which avoids consequences which appear to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. 289 Recently, in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at 1112 [14] Lord Hoffmann said: There is no dispute that the principles on which a contract (or any other instrument or utterance) should be interpreted are those summarised by the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912-913. They are well known and need not be repeated. It is agreed that the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. The House emphasised that "we do not easily accept that people have made linguistic mistakes, particularly in formal documents" (similar statements will be found in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 , 269; Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] 1 All ER 667 , 681-682 and Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 , 296) but said that in some cases the context and background drove a court to the conclusion that "something must have gone wrong with the language". In such a case, the law did not require a court to attribute to the parties an intention which a reasonable person would not have understood them to have had.

295 In law the word "agency" is used to connote a relationship arising from consent which relationship exists when one person (the agent) has the authority to act on behalf of another (the principal). The relationship usually, but not necessarily, arises by contract: Halsbury's Laws of England, 5th ed, vol 1, at [1]; GHL Fridman, The Law of Agency, 7th ed (1996) Butterworths at 55. 296 As referred to above, there were two examples of Australian Franchise Agreements in evidence, one dated before the Supply Agreement and one dated after it. Under the first version, the Franchisee must purchase from the Master Franchisee (that is, Jireh), all gourmet coffee and such other Products, supplies, materials, equipment and services as specified by the Master Franchisee from time to time in such quantities as are ordered by the Franchisee from time to time. Under the second version (which was clearly amended to take account of the fact that by then JIWD had been appointed Jireh's preferred supplier for the products), the Franchisee must only purchase from the Master Franchisee all products and services supplied by the Master Franchisee and only purchase from Approved Suppliers all products and services not supplied by the Master Franchisee. 297 The position under the two types of agreements may be different. Where (as in the first type of agreement) the Franchisee must purchase Products from Jireh and JIWD is interposed, there is a stronger argument for the existence of an agency arrangement than where (as in the second type of agreement) the Franchisee buys either from Jireh or JIWD. However, on the state of the evidence it is not possible to distinguish between the two with respect to the sales figures which have been agreed. 298 The question is what the parties intended the phrase "sales by Jireh…to GJGC stores" to mean. The requirement for there to be a sale is satisfied, and GJGC stores is undoubtedly a short-hand expression for Jireh's Franchisees. The sales in question were made to GJGC stores under Jireh's franchise arrangements with them. 299 I do not consider that a reasonable person in the position of the parties would have understood the term "sales by Jireh…to GJGC stores" to include only sales by Jireh itself and to exclude sales to GJGC stores under Jireh's franchise arrangements where all that happens is that Jireh appoints a Preferred Supplier closely related to it to make the sales to the GJGC stores. Giving the term "sales by Jireh…to GJGC stores" a commercial and business-like operation, I think it comprehends sales to GJGC stores under Jireh's franchise arrangements with them by Jireh's Preferred Supplier acting where Jireh itself (but for the interposition of a Preferred Supplier), Jireh itself would have sold.

IMPLIED TERMS 300 If I am correct that the sales by JIWD to Jireh's Franchisees are sales by Jireh to GJGC stores within cl 3, it is not necessary for WES to establish the implied terms for which it contends for those sales to attract cl 3 commission. However, if I am incorrect, then, for the reasons which follow, I consider that there is to be implied into the Letter Agreement a term under which Jireh is obliged to refrain by its own voluntary act from removing from the operation of cl 3 sales which are made to its Franchisees and which would, but for that voluntary act, have attracted cl 3 commission. 301 The requirements for the implication in fact of a term into a written contract which is complete on its face are well established. They are that it must be reasonable and equitable, be necessary to give business efficacy to the contract, be so obvious that it goes without saying, be capable of clear expression and not contradict any express term of the contract: Codelfa Construction Pty Limited v State Rail Authority of New South Wales at 347; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3. 302 There is readily implied into contracts an obligation on each party to do all that is reasonably necessary to secure performance of the contract and generally it will be implied that each party agrees by implication to do all such things as are necessary on that party's part to enable the other party to have the benefit of the contract: Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. However, Mason J went on to say: It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. 303 WES formulates the implied term in three alternative ways: a that Jireh would not voluntarily remove itself as, or cease to be, the seller of Gloria Jean's, and other branded coffees, teas and other products to GJGC stores in Australia and to GJGC Master Franchisees and GJGC Stores in other countries; b that Jireh would not voluntarily do anything to cause or permit WES' enjoyment of the right to commission referred to in cl 3 of the Letter Agreement to be rendered nugatory, worthless or to be undermined; c that WES would not, by the voluntary act of Jireh, be deprived of the circumstances which entitled WES to receive a commission under cl 3 of the Letter Agreement, namely sale of the products by Jireh. 304 Jireh does not take issue with WES' formulations, nor does it put that an effective term is not capable of clear formulation. 305 Rather, it puts that: a its arrangements with JIWD were and are bona fide commercial ones; b implicit in WES' implied terms is the imposition on Jireh of a promise, which it has never given, that it would continue to sell products to Franchisees; c it is neither obliged to continue to sell, nor to bring about something that the contract does not require; d it follows that WES' implied terms are not necessary to give business efficacy to the Letter Agreement. 306 Whether a term is to be implied in fact (as is the case here), depends primarily on an assessment, derived from the express terms of the particular contract in the light of the circumstances against which it was made, of how the parties intended it to operate and how it will (if at all) operate without the implication. Because the assessment is contract specific, other cases are likely to be of limited assistance: Elders IXL Ltd v National Employer's Mutual General Insurance Association Ltd (1988) 5 ANZ Ins Case 60-847 at 75,297 per Samuels JA. 307 In the present case this entails a determination of what benefits Jireh promised WES and whether the term for which WES contends is necessary to give business efficacy to the Letter Agreement so that WES receives the benefit of Jireh's promise. As the Court of Appeal pointed out in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 125 "a contract may 'contemplate' many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party". 308 There are examples in the authorities of claimants succeeding because of an implied term that the circumstance from which the claimant is entitled to get their remuneration will not by the voluntary act of the other party be terminated. In RDJ International v Preformed Line Products (Australia) Pty Ltd (1996) 39 NSWLR 417, Young J (as his Honour then was) surveyed such authorities. At 422 his Honour expressed the view that the principle applies in a wider class of cases. In that case the plaintiff sold to the defendant a business that manufactured jars and pales with lids. The contract provided for the payment of a fixed sum plus an amount equivalent to five per cent of the amount of revenue received by the defendant from sales of jars and pales during three years. His Honour found that there should be implied into that contract a term that the defendant would not do any voluntary act which would make it materially more difficult for the royalty stream to continue for the three year period. 309 There are instances where a term requiring a party to go on conducting its business has been implied, particularly where the provision specified the circumstances under which the contract could be terminated: see for example Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592. Likewise, there are instances where no such term has been implied. A well-known example is Lazarus v Cairn Line of Steamships Ltd [1918] 106 TLR 378. In Rhodes v Forwood [1876] 1 App Cas 256 the House of Lords considered that a contract required payment to be made in the event of a business being carried on, but did not oblige the principal to carry on business. 310 In Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd Receiver & Manager Appointed (1997) 42 NSWLR 462, the Court of Appeal considered a contract which did not directly oblige one side to continue their business, but contained provisions which obliged that side to take certain steps which depended upon such continuance and also gave the other side a right to a continuing benefit. 311 Each case however, depends on its own circumstances. A more exhaustive review of cases which turn on their own facts would be of little value. 312 Under the Letter Agreement Jireh promised to reward WES for its contribution (past and ongoing), amongst others, by paying WES a commission on sales to GJGC stores. The basal premise underlying this is a contemplation that the sales to GJGC stores would be by Jireh. For the promise to WES to be efficacious, Jireh cannot be free by its voluntary act to except from the operation of cl 3 sales made to its Franchisees (which it itself otherwise would have made) by interposing a third party to be the seller, whether or not Jireh has other genuine commercial reasons for doing so. A breach remains a breach, irrespective of whether the breaching party has genuine commercial reasons for its behaviour. The position may have been different if the breach depended on an absence of good faith.

Western Export Services Inc v Jireh International Pty Limited

At a glance

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Judgment (195 paragraphs)

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Legislation Cited (1)

Cases Cited (27)

Cited By (5)