QLD Holdings – 1 v Collingwood Holdings [2009] NSWSC 732

New South Wales Supreme Court

CITATION : QLD Holdings – 1 v Collingwood Holdings [2009] NSWSC 732

HEARING DATE(S) : 29 and 30 June 2009

JUDGMENT DATE : 30 July 2009

JURISDICTION : Equity

JUDGMENT OF : White J

1. Order that the claims for relief in the statement of claim and cross-claim be dismissed. DECISION : 2. Direct that the moneys paid into court by Mr Castino and interest accrued thereon be paid to the defendant, or as Mr Guerinoni may direct. 3. Exhibits may be returned after 28 days.

CATCHWORDS : CONTRACTS – general contractual principles - whether parties made binding agreement – whether intention to be immediately bound – construction of terms of written document – consideration of surrounding circumstances - intention of parties was not to make a concluded bargain unless and until execution of formal documents prepared by solicitor

CATEGORY : Principal judgment

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 CASES CITED : Masters v Cameron (1954) 91 CLR 353 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130

QLD Holdings – 1 Pty Ltd PARTIES : v Collingwood Holdings Pty Ltd

FILE NUMBER(S) : SC 5805/07

COUNSEL : Plaintiff: P O'Loughlin Defendant: L Gor

SOLICITORS : Plaintiff: Philip Gengos & Co Defendant: Slater & Gordon

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WHITE J

Thursday, 30 July 2009

5805/07 QLD Holdings – 1 Pty Ltd v Collingwood Holdings Pty Ltd JUDGMENT 1 HIS HONOUR: The plaintiff and the defendant each holds one share in Elliston Co-Operative Pty Ltd ("Elliston" or "the company"). Mr John Valentino is the sole shareholder and director of the plaintiff. Mr Edward Guerinoni is the sole shareholder and director of the defendant. Messrs Valentino and Guerinoni are the directors of Elliston. In 2005 they caused Elliston to purchase a farm at Cobar known as Balaclava Station. The purchase price was $700,000. The purchase was funded by loans provided by the plaintiff or Mr Valentino on the one hand, and the defendant and Mr Guerinoni on the other hand, in equal amounts. Elliston's only business has been to hold that property. It acquired no other assets. Since 2005, the business of the farm has been conducted by the plaintiff and the defendant in partnership. 2 By July 2006 Mr Valentino and Mr Guerinoni had fallen out with each other. They were not on speaking terms. Mr Guerinoni had made various proposals to buy out Mr Valentino or the plaintiff, or to put Balaclava Station up for sale, or to wind up Elliston. Mr Valentino and Mr Guerinoni communicated through Mr Valentino's accountant, Mr Dennis Castino. On 19 September 2007 Mr Guerinoni sent a fax to Mr Castino setting out proposed terms for the resolution of at least part of the matters in issue between the parties. The plaintiff claims that this was an offer for purchase of its share in Elliston which it accepted. It says that this gave rise to a binding agreement for the sale and purchase of its share. It seeks specific performance of the alleged agreement. 3 As is evident from the terms of the document, it was prepared without the benefit of legal advice. It read as follows: " TRANSFER OF SHARES & UNITS

Without prejudice The sale of 50% shares and units of Elliston Co-Operative Pty ltd, held by QLD Holdings/1 Pty Ltd – John Valentino. To be transferred to Collingwood Holdings Pty Ltd – Eddie Guerinoni. A sum of $500,000 is currently deposited in 'D. Castino & Co Trust Account' This is only valid for 7 working days. If Agreed, the money shall be released once all paperwork has been finalized by the acting solicitor. This is to include:- As follows: Walk in/Walk out arrangement. Removal of 4 unregistered 4x4 Nissan Patrols parked in Workshop. Closing of all bank & credit card accounts between the [sic] both entities – QLD Holdings/1 Pty Ltd & Collingwood Holdings Pty Ltd QLD Holdings/1 Pty Ltd to settle outstanding account with Westpac Credit Card Dept. Undertaking by both entities, that the partnership dispute is now resolved and no further legal action shall be taken. Each entity shall be responsible for there [sic] own legal costs. All the above terms and conditions have been accepted by both entities, agreed and the matter is now finalized. ........................... ........................... John Valentino, Eddie Guerinoni, QLD Holdings/1 Pty Ltd Collingwood Holdings Pty Ltd Dated / / 2007 Dated / / 2007 .......................... ........................... Witness Name Witness Name .......................... ........................... Witness Signature Witness Signature " 4 The defendant denies that a binding agreement was entered into. Its primary case is that the parties did not intend to be contractually bound until "all paperwork [had] been finalised by the acting solicitor." It also says that even if, objectively considered, the parties did intend to be contractually bound prior to the preparation of formal documentation by the solicitor, the agreement was void for incompleteness or uncertainty. It also says that if the parties intended to be contractually bound, and if the document did contain all the terms necessary for their bargain, performance of the term requiring payment for the transfer of shares was conditional upon the execution of the paperwork to be prepared by the solicitor. Mr Valentino refused to sign the further documents prepared by the "acting solicitor", Mr Barraket. 5 The defendant's alternative position is that if there were a binding contract it was on terms that included that the plaintiff procure the resignation of Mr Valentino from his position of director of Elliston by 1 October 2007 and procure from Mr Valentino releases by the plaintiff and Mr Valentino in favour of Elliston, the defendant and Mr Guerinoni for all claims against them. The primary way in which the defendant puts this alternative case is that if the document contains a binding agreement, it is a term of the agreement that the parties accept the terms to be included in the paperwork to be finalised by the acting solicitor. That paperwork included the provision of mutual releases, including releases by the plaintiff and Mr Valentino of the liability of Elliston to repay the loans provided by the plaintiff or Mr Valentino on the purchase of the property. 6 The plaintiff says that those loans were not dealt with by the alleged agreement for the transfer of shares. The plaintiff contends that it is entitled to be paid $500,000 for its share in Elliston and that Elliston remains indebted to it or to Mr Valentino for the moneys advanced on the purchase of the property. 7 The issues are:

a) whether the parties intended to be bound by the document called " Transfer of Shares & Units " prior to the preparation and execution of formal documents to be prepared by Mr Barraket;

b) if so, whether the alleged agreement is void for uncertainty or incompleteness;

c) if not, whether performance of the agreement by the defendant, that is to say, the defendant's obligation to pay for the shares, was conditional upon the execution of the formal documents to be prepared by Mr Barraket;

d) if not, whether the agreement contained express or implied terms for which the defendant contends; the express terms arising from the expression " walk in/walk out arrangement " and what is said to be the discretion of the acting solicitor to prepare paperwork to include additional terms;

e) if not, whether time for performance of the matters listed in the five arrow points was essential and whether the plaintiff did what was required on his part to perform those terms; and

f) whether the plaintiff was ready, willing and able to perform the agreement. 8 The defendant did not raise as an issue that if there were a binding agreement that did not provide for the release of the debt owed by Elliston to the plaintiff or Mr Valentino for the advances made on the purchase of the property, the agreement should be rectified, or was liable to be avoided, for unilateral mistake. 9 I have found that no contract was concluded. Background 10 Mr Valentino and Mr Guerinoni were once friends. In about April and May 2005, they inspected Balaclava Station which is situated between Cobar and Dubbo. It had been advertised for sale under instruction from a liquidator and had formerly been used as an emu farm. Mr Valentino and Mr Guerinoni had proposed buying a holiday farm with other friends, but the price required to purchase Balaclava Station put it out of reach as a weekend retreat. Mr Valentino and Mr Guerinoni incorporated Elliston. It was proposed that a unit trust structure would be established such that the property would be acquired by Elliston as trustee of a unit trust and that units in the trust would be issued to the plaintiff and the defendant, or to other companies nominated by Mr Valentino and Mr Guerinoni. 11 Contracts for the purchase of the property were exchanged in May 2005. The deposit was provided by each of the plaintiff's and the defendant's advancing $35,000 to Elliston to enable it to pay the deposit. The Unit Trust 12 Mr Castino prepared documents for the establishment of a unit trust. On 29 June 2005 he signed a trust deed as settlor which recited that he had paid $20 to Elliston which was named as trustee. The trust deed provided for the issue of ten units to each of the defendant as trustee of the Kangaloon Family Trust and of a company named as Retreat Road Holdings Pty Ltd as trustee for the Retreat Trust. It can be inferred that either the latter company and trust was associated with Mr Valentino or that the document was a standard precedent and the wrong names were inserted through inattention. The latter is more likely as other documents prepared by Mr Castino at this time provided for the plaintiff, as trustee of the Valentino discretionary trust, to be issued with the units. 13 Mr Guerinoni signed the trust deed as a director of Elliston. Mr Valentino did not sign the deed. Nor did he sign a copy of a draft resolution for the plaintiff to accept the issue of ten units in what was to be called the Elliston unit trust. 14 A year later, in July 2006, Mr Guerinoni was told, presumably by Mr Castino, that Mr Valentino had amended a page of the deed of settlement for the Elliston unit trust. Mr Guerinoni said he had not seen the amendment. He did not agree to any amendment. The amendment said to have been made by Mr Valentino was not produced at the hearing. The amendment proposed by Mr Valentino appears to have been simply to the identity of the beneficiary, although Mr Valentino was also concerned that as the property had not been settled on the trusts at the time of purchase, duty would be payable if it were later settled on the trusts. 15 In the result, Elliston did not execute the trust deed and no trust was established. Whilst the document prepared by Mr Guerinoni and signed by Mr Valentino on 21 September 2007 provided for the transfer of "50% shares and units of Elliston Co-operative Pty Ltd held by QLD Holdings/1 Pty Ltd – John Valentino", there were no units "of" Elliston and no units in a trust of which Elliston was a trustee. Disputes Between Mr Valentino and Mr Guerinoni 16 After Elliston purchased Balaclava Station, five cars were purchased, four of which were located on the property. The fifth car was garaged at Dubbo Airport. Mr Guerinoni deposed that he purchased the cars. Mr Valentino said that the plaintiff purchased the cars and that it contributed "some money" towards the vehicle which was garaged at the airport. The purchase and use of the cars and the payment of vehicle expenses was a matter of dispute between the parties. 17 The plaintiff and the defendant opened a joint cheque account in their names trading as Balaclava Station. This was also a source of friction because Mr Guerinoni caused $5,500 to be paid into the account, whereas Mr Valentino caused the plaintiff only to contribute $3,000. Mr Valentino said that the reason for the discrepancy was because Mr Guerinoni did not provide Mr Castino with bank statements and invoices so that tax returns could be prepared. 18 The plaintiff and the defendant registered Balaclava Station as a business name for their partnership. No written partnership agreement was entered into. Counsel for the defendant submitted that it was unclear who were the partners of the partnership and whether it included the individuals. However, the opening of the bank account in the joint names of the plaintiff and the defendant and the registration by the plaintiff and the defendant of the name Balaclava Station as the business name of the partnership indicates that the two shareholders of Elliston were the partners. 19 The potential significance of this issue is that it is the plaintiff's case that the parties to the agreement it seeks to enforce are itself and the defendant. It does not claim that Mr Valentino and Mr Guerinoni were parties to that agreement. The defendant says that as the document purportedly sought to resolve partnership disputes, it could not have been intended to be binding if the partnership was not between those parties. This is not a significant point. If on the true construction of the document, Mr Valentino and Mr Guerinoni were intended to be parties to the alleged agreement, then they would be bound by their signatures, both in their own capacity and as signing for the companies of which they were the sole shareholders and directors. However, I do not consider that Mr Guerinoni or Mr Valentino in their personal capacity were partners. 20 In about October 2005 the plaintiff and the defendant established a credit card facility with Westpac. Mr Valentino and Mr Guerinoni guaranteed the credit card facility. By July 2006 there was a dispute about it. Mr Guerinoni complained that Mr Valentino had not made equal payments of the credit card debt. Mr Valentino said that the reason the plaintiff did not pay its share of the credit card debt was because Mr Guerinoni had not provided Mr Castino with bank statements and invoices. 21 Another issue concerned the installation of Foxtel reception at Balaclava Station. Elliston paid for the expense of installing the Foxtel connection, but Mr Valentino complained about the expense because he said he did not use the facility. 22 In about June 2006 Mr Valentino and Mr Guerinoni also disagreed in relation to a proposal made by Mr Valentino that Elliston refinance the loans it had received from its shareholders. Proposals for Compromise 23 From 14 July 2006 Mr Guerinoni made a number of proposals to separate his and Mr Valentino's interests. On 14 July 2006 Mr Guerinoni sent an email to Mr Castino recording a proposal he made to Mr Valentino that morning. He wrote: " I had a discussion over the mobile this morning 7.15am with John Val. I explained about our partnership. That it was not working. And told him that I knew him for over 20years. Partnerships are like marriages, they work or they dont. I told him, I'll like to leave on good terms, and get on with our lifes. I told him that our partnership was not working. 'And I want out". I told him the Offer on the table is $500,0000 payable in 7 days, for your share, walk in walk out, cars, every think that's there. I told him that this Offer is also open for you to buy my share, same deal applies. Subject to legals & Dept of Infrastructure & Planning. Johns reply was 'I'll think about it, & I'll get back to you. " 24 On 18 July 2006 Mr Guerinoni withdrew what he called his offer. He sent a new email to Mr Castino saying: " My new offer is a cash deal, sum of $530,000.00, payable in seven days. This offer includes the purchase of all existing buildings, infrastructure, plant & equipment, stock, cars, all loose furniture, fixture and fittings, walk-in/walk out. Everything there. Subject to Legals and Dept. of Infrastructure & Planning. Note: * What must take place for this deal to happen – transfer of 50% shares in the trustee company and the transfer of 50% of units in the unit trust. * Dissolve the Balaclava Station partnership (each partner is responsible for their own expenses incurred to date). * The existing bank accounts are to be closed – Both CBA – Elliston Co-operative account and the Westpac Balaclava partnership account, as well as the Westpac Credit card account, and the remaining funds that are left in the accounts shall be distributed 50/50. * Agistment income split 50/50. * Confirmation of equal funds injected in both accounts to be provided. I would be prepared to accept the same deal and conditions for Ed's shares and units. This offer expires next Tuesday 25 th July, 06 at close of business, 5pm. " 25 That so-called offer expired on 25 July 2006 without any response from Mr Valentino. On 26 July Mr Guerinoni proposed that Balaclava Station be put for sale on the open market. He sought confirmation by 2 August 2006 that Mr Valentino agreed to this course. Mr Valentino did not agree. Mr Valentino said that he was not willing to sell his shares, nor put the property for sale on the open market. He complained that Mr Guerinoni was refusing to refinance the company's debts and said that it was Mr Guerinoni's duty as a director to give personal guarantees to support the company's refinancing its shareholder loans. 26 This led Mr Guerinoni to propose on 2 August 2006 that as no agreement had been reached between the parties, there should be a members' voluntary winding-up. Mr Valentino did not agree. 27 On 22 August 2006 Mr Guerinoni wrote to Mr Valentino stating that Elliston was indebted to "each of our respective liabilities [sic] in the sum of $350,000". He said that if they could not agree to part amicably, then they would need to appoint a liquidator which would involve significant costs. He made an offer that: " a) I will sell to you my share for $500,000.

b) If you do not wish to buy me out I will buy your share for $500,000.

c) If neither of the above is satisfactory then the property is to be auctioned, either of us can bid. " 28 In none of his proposals did Mr Guerinoni expressly say that if Mr Valentino accepted the offer for the purchase of the plaintiff's share, the plaintiff and Mr Valentino should release Elliston from the debt of $350,000. 29 Mr Valentino did not reply to Mr Guerinoni's last offer. Instead, through his then solicitor, Mr Peter Maatouk, he purported to accept an offer said to have been made on 8 August 2006 to "buy my share of the farm for $530,000 cash deal, payable to me in seven days." 30 Mr Guerinoni instructed Mr Bob Barraket of Legal Ease Lawyers to act for him in the negotiations which followed. Mr Maatouk asserted that Mr Valentino had accepted an offer to buy "our client's share of all interests in the farm known as Elliston Co-operative for $530,000". Mr Guerinoni did not accept that there was any such binding acceptance. Any such offer had obviously been withdrawn by the facsimile of 22 August. 31 On 22 September 2006 Mr Barraket wrote to Mr Maatouk: " to propose that our client will acquire your client's interest in the project for the sum of $450,000. The offer is of course subject to satisfactory contracts being exchanged and agreement being reached on the inventory as well as mutual releases from any guarantees and obligations. The offer will expire at 5pm on Monday 25 September 2006. " 32 On 12 October 2006 Mr Maatouk wrote to Mr Barraket referring to Mr Barraket's email correspondence of 22 September 2006. He said: " We advise that our client has instructed us to accept your offer and therein confirms that he is prepared to buy your client's interest for $450,000 as stated. Please prepare the contract of sale and the other relevant documentation in order to finalise the above transaction. We confirm that this offer is subject to our acceptance of the contents of your contract of sale and other relevant documents. " 33 This was ridiculous. The offer of 22 September 2006 was not an offer by Mr Guerinoni to sell his "interest" for $450,000. It was an offer to buy Mr Valentino's "interest" for that sum. On 23 October 2006 Mr Barraket rejected the offer submitted by Mr Valentino under cover of Mr Maatouk's letter of 12 October 2006. He threatened to apply to wind up Elliston. 34 Whilst the "offers" from Mr Guerinoni did not expressly deal with the debt owed by Elliston to the plaintiff or to Mr Valentino, the proposal of 22 September 2006 from Mr Barraket on behalf of Mr Guerinoni made it clear that the proposal to acquire Mr Valentino's "interest in the project" for $450,000 was subject to the giving of mutual releases from any obligations. Further Dispute: Terms of Shareholder Loans 35 Apparently in order to maintain pressure for resolution of the impasse, Mr Guerinoni instructed Mr Barraket to issue a statutory demand on behalf of the defendant addressed to Elliston. On 9 November 2006 the defendant served a statutory demand claiming repayment of a debt alleged to be due to it of $335,000 in respect of the loan advances made in 2006. Mr Valentino's response to this step was to dispute the validity of the demand. He retained a new lawyer, Mr Carlos Toda, of Carlos Toda & Co. On 22 November 2006 Mr Toda wrote to Mr Barraket advising that he acted for Mr Valentino, whom he described as a shareholder as well as a director of Elliston. Mr Toda said that Mr Valentino disputed the demand on certain bases including that: " i. It was never agreed between the shareholders that shareholder loans would be re-payable on demand, but repayable by the company when any of the following events occurred:- a. If and when the shares in the company or the real property owned by it was sold; or b. If and when the company was able to refinance borrowings from the shareholders; or c. If and when the company started to make a profit and it could afford to repay shareholder loans. " 36 Mr Guerinoni, through Mr Barraket, denied that any such agreement existed. There was correspondence between the parties in which particulars of the agreement asserted by Mr Valentino were sought. 37 Mr Toda sought an undertaking that Mr Guerinoni would not take any action to place the company into liquidation and would withdraw the demand. On 29 November 2006 Mr Toda delivered a copy of a draft originating process to set aside the statutory demand. He proposed that the parties continue to try to reach a resolution by agreement. On 29 November 2006 Mr Barraket advised that Mr Guerinoni gave the undertaking sought in relation to the statutory demand on the basis of attempting a resolution. The dispute as to the terms upon which the shareholder loans (or the loans from Messrs Valentino and Guerinoni) to the company were made, was never resolved. Further Dispute: Agistment of Sheep 38 Another dispute concerned the agistment of sheep on the property. In October 2006 Mr Valentino placed an advertisement in The Land newspaper advertising unspecified land as being available for the agistment of goats and sheep. On 2 November Mr Maatouk wrote to Mr Barraket confirming that on Mr Valentino's instructions, a cheque for $792 for four weeks' agistment had been received by Mr Valentino and had been placed in his trust account "pending the conclusion on this matter". He stated that "these funds form part of the income of the company which is obviously solvent and our respective client's [sic] will need to adjust to same [sic] in due course." 39 On 3 November 2006 Mr Barraket demanded that the moneys held in Mr Maatouk's trust account should be paid to the company's bank account and that no future funds due to the company should be paid into his trust account but should be paid to the company's bank account. Mr Maatouk did not comply with that demand. On 21 December 2006 he advised Mr Barraket of the deposit of a further cheque "into our trust account today as per our client's instructions, being for further agistment payments received for the property." 40 On 29 November 2006 Mr Barraket wrote to Mr Toda (who also acted for Mr Valentino) complaining that Mr Valentino had, without Mr Guerinoni's authority, arranged for the agistment of sheep on the property and had received funds which, at Mr Valentino's direction, had been paid into the trust account of Maatouk's Lawyers. He complained that Mr Valentino was attempting to arrange the agistment of additional sheep without the concurrence of Mr Guerinoni. Mr Guerinoni said that no further agistment should be made because of drought conditions. 41 Mr Toda responded on 22 December 2006. He said that the agistment funds remained in the trust account of Maatouk's Lawyers on behalf of Elliston as "we are instructed that Maatouk's were waiting for contracts for the transfer of the shares and units". He proposed that all future income for agistment continued to be placed into Maatouk's trust account on behalf of Elliston and not be disbursed otherwise than in the ordinary course of the company's business or to pay expenses incurred by the company for which receipts would be provided to Mr Guerinoni. 42 Whilst the solicitors for both parties accepted that the income from agistment should be treated as property of Elliston, this was another fertile subject for dispute, given that the business of the partnership was the operation of Balaclava Station and the moneys might well be regarded as partnership property. Mr Maatouk had referred to the need for the clients to make some unspecified adjustment in due course in relation to the moneys. 43 Matters remained unresolved. It is against this background that Mr Guerinoni made the proposal set out in para [3] above which he described as a further or last effort to resolve the dispute. Entry into Alleged Agreement 44 On 19 September 2007 Mr Guerinoni sent the document set out at para [3] to Mr Castino as an attachment to a fax which read as follows: " Attach: TRANSFER OF SHARES.doc Subject: Fw: TRANSFER OF SHARES & UNITS 19 September, 2007 Hi Denis, As per our discussion, I thank you for assisting me in an attempt to resolve the dispute between the directors of Elliston Co-Operative Pty Ltd. I have arranged for a telegraphic funds transfer to be deposited straight into your "D. Castino & Co trust account.' A sum of $500,000. D. Castino & Co Trust Account Commonwealth Bank - Drummoyne bsb: 062-157 acc: 1004 9253 Valid only for 7 working days, After that date, please transfer back the total sum of monies, to my same bank account. Could you please contact Mr & Mrs Valentino to attend your office and present the letter that has been prepared. This is the last attempt to resolve our 13 month partnership dispute, before I proceed with my Barrister to lodge documents into the Supreme Court. Note: Could you please minute any discussions held with both John & Jackie Valentino. Eddie Guerinoni Collingwood Holdings Pty Ltd. " 45 On the same day Mr Guerinoni deposited $500,000 into Mr Castino's trust account. 46 Mr Valentino responded through Mr Castino on 21 September 2007. Mr Castino sent an email to Mr Guerinoni raising two points, namely: " 1. The offer is incomplete because it does not state a specific settlement date.

2. Prior correspondence offered $30,000 more?? " 47 On 21 September 2007 Mr Guerinoni had a telephone conversation with Mr Castino. He deposed that he said to Mr Castino words to the effect: " That's it: $500,000 – lock, stock and barrel. Bob will prepare all the paperwork, once all the paperwork has been finalised by the acting solicitor [sic]." 48 "Bob" was Mr Bob Barraket, a solicitor and director of Legal Ease Lawyers Pty Ltd. He was also the person referred to in the document as the "acting solicitor". 49 Mr Valentino was advised in relation to the proposed transaction by a barrister, Mr Stephen Stanton. It was not disputed that the reference in the alleged contractual document to the "acting solicitor" was to Mr Guerinoni's solicitor, Mr Barraket. 50 On 21 September, Mr Castino told Mr Valentino that Mr Guerinoni would not be changing the document. Mr Valentino crossed out the words "without prejudice" and signed the document and had his signature witnessed. He then faxed a copy of the document to the office of Mr Castino and sent a copy to Mr Stanton. He telephoned Mr Castino to see if he had received the facsimile. Mr Castino said that he had. Mr Valentino asked if he would prepare the share transfer and asked when he would get the money. Mr Castino said words to the effect: " I'll get on to Eddy [Mr Guerinoni] right now and tell him the deal has been done. I will tell Eddy that you want to prepare the share transfer and you want to know when you will be paid. " 51 Mr Castino telephoned Mr Guerinoni and told him that Mr Valentino had signed the offer. He sent a copy of the document signed by Mr Valentino to Mr Guerinoni. 52 The plaintiff's primary case is that, in this way, on 21 September 2007, an agreement was entered into between the plaintiff and the defendant in terms of the document prepared by Mr Guerinoni. 53 On Sunday 23 September 2007 Mr Valentino drove to the property and arranged for the removal of four 4x4 vehicles from the workshop and his personal belongings. He deposed that items that were not necessary and did not fit into his vehicle, he left behind in a locked room. 54 On Monday 24 September Mr Guerinoni attended Mr Barraket's office and signed the document. He asked Mr Barraket to prepare all the relevant paperwork. That morning Mr Stanton and Mr Barraket spoke by telephone. Mr Stanton advised Mr Barraket that he had instructions to act for Mr Valentino and had a copy of the document prepared by Mr Guerinoni and signed by Mr Valentino. On 24 September, Mr Barraket sent a facsimile to Mr Stanton enclosing the document headed "Transfer of Shares and Units" signed by Mr Guerinoni. In the facsimile under cover of which he sent the document signed by Mr Guerinoni, Mr Barraket wrote: " I am instructed that an amount of $500,000 is in a trust account with Mr Castino will be released immediately the following documentation and transactions are complete: 1. Mr Valentino/Qld Holdings-1 Pty Ltd is to execute a share transfer and director's resignation 2. [Mr] Valentino is to pay or permit the deduction from the $500,000 of an amount of $2,056.81 being a credit card debt due on his company credit card. 3. Mr Valentino is to remove the Nissan 4-wheel drive vehicles within 5 days. 4. No furniture, fixtures or fittings are to be removed. Mr Guerinoni has photographed all rooms and itemised the contents 5. Your client will need to execute the relevant documentation to close the Balaclava Station account No. 178576 with Westpac and authorise the transfer of the balance of approximately $3,000 to Elliston Cooperative Pty Ltd 6. Our clients will need to execute a Deed of Mutual Release 7. Mr Valentino will need to co-sign an authority to Maatouks Law Group authorising the payment to the company of moneys in their trust account belonging to Elliston Cooperative Pty Ltd. Subject to your client's acceptance of the above we will prepare the relevant documentation and proceed to complete the settlement of this difficult dispute. " 55 Mr Barraket and Mr Stanton proposed to settle the matter on the afternoon of Friday 28 September. On 27 September Mr Barraket sent an email to Mr Stanton attaching copies of documents to be signed for settlement. The documents he proposed for the parties to sign consisted of a draft deed of release between the plaintiff, the defendant, Mr Valentino, Mr Guerinoni and Elliston. 56 In the draft deed, EG meant Mr Guerinoni. CH meant the defendant. JV meant Mr Valentino. QH meant the plaintiff. "The company" meant Elliston. The draft deed contained the following clauses: " 1. EG and CH will procure the payment to JV and QH of the sum of $500,000 (the amount) free of deductions other than an amount of $2,061.00 referred to elsewhere in this Deed. The parties acknowledge that the amount has been deposited in cleared funds to the trust account of Castino & co, Chartered Accountants, the accountant to the venture. Payment of the amount shall be deemed to have taken place on the execution hereof and the execution by EG and/or CH of a direction to Castino & Co that they are authorised and directed to hold the amount on trust for and on behalf of or at the direction of JV and/or QH and upon receipt thereof neither EG nor CH shall have any right or entitlement in or to the amount or any trust in relation thereto. 2. Simultaneously, with the execution hereof, the parties shall attend upon the following: (a) JV will resign as a director of the Company (b) QH will execute a transfer of all shares held by it in the Company (c) JV, in his own capacity and as a director of QH, will execute a change of bank signatories in relation to any bank accounts of the Company and in relation to the Agri Business Cheque Account with Westpac styled QLD Holdings-1 Pty Ltd and Collingwood Holdings Pty ltd trading as Balaclava Station. (d) Letter of Direction addressed to Maatouks Law Group in relation to certain agistment fees held in trust by that firm totalling $3,195.99 being executed by JV, QH, EG and CH. This money upon payment shall be the property of the Company (e) A direction to Castino and Co in relation to the amount. 3. JV and QH warrant that the moneys held by Maatouks Law Group are held in trust for the Balaclava Station partnership and that no lien or charge is held by that firm over such money or any part thereof. 4. JV and QH, upon execution of this Deed and the documents referred to in clause 2 hereof, release and discharge forever the Company from the payment to them or either of them of any money, debt or obligation due by the Company to them or either of them whether directly or indirectly on any account whatsoever. 5. JV, QH, EG and CH upon the execution of this Deed and the documents referred to in clause 2 hereof hereby release and discharge each of them forever from the payment or satisfaction of any money, debt or obligation of any kind including any action, claim or demand they or any of them may have against all or any one of them howsoever arising whether as shareholders of any company, beneficiaries or contingent beneficiaries of any trust estate actual or constructive, partners or co-venturers of any kind. 6. Upon execution of this Deed and the documents referred to in clause 2 hereof neither JV nor QH shall have any right or entitlement in or to the property or any part thereof or any plant, furniture, fittings or equipment situated on the property or elsewhere owned or controlled by the Company. " 57 Mr Barraket also enclosed a blank form to be signed by Mr Guerinoni and the defendant directing Mr Castino to hold the amount of $500,000 in his trust account by holding $497,939 on behalf of, or at the direction of, Mr Valentino and the plaintiff, and the balance for a Westpac Mastercard Account. Another enclosed document comprised a letter to Westpac advising that the partnership of the plaintiff and the defendant trading as Balaclava Station had been dissolved and appointing Mr Guerinoni as the sole signatory to the Agri Business cheque account. Another enclosed document was a letter of resignation from Mr Valentino as a director of Elliston. Another document was a direction to Mr Maatouk authorising him to pay all money held in his trust account for agistment fees paid between 1 November 2006 and 1 March 2007 (totalling $3,195.99) to Castino & Co. The last document was a form of share transfer. 58 On 6 September 2007 Mr Valentino arranged for his credit card on the company account to be paid in full. On 27 September he attended the Westpac bank at Rhodes for the purpose of closing the credit card and cheque account and transferring the funds to Elliston. On his direction, the officer of the Westpac bank wrote out a request (to be signed by him and Mr Guerinoni) from the plaintiff and the defendant trading as Balaclava Station addressed to the bank asking for the partnership account to be closed and the funds transferred into a bank cheque to be made out to Elliston. He then signed the document which was left with the bank. At the same time he gave an authority to the bank asking it to close the credit card account as of that day. There was some dispute as to whether these steps were taken on 27 September. I accept Mr Valentino's evidence that he took those steps on that day. The bank noted that it was awaiting Mr Guerinoni to sign the instruction to close the partnership account and transfer the funds to purchase a bank cheque. Mr Guerinoni said that he became aware of this on 28 September 2007 after he had been told that Mr Valentino had refused to sign the documents prepared by Mr Barraket. Nonetheless, I accept that by 27 September Mr Valentino had done all that was within his power to close the accounts and have the moneys in the partnership account transferred to Elliston. 59 Mr Valentino also prepared a form of transfer of the plaintiff's shares in Elliston to the defendant. He completed the form of transfer and signed it for the transferor on 27 September 2007. 60 On 28 September Mr Valentino attended at the chambers of Mr Stanton. Mr Valentino deposed that Mr Stanton handed him some documents. Mr Valentino said: " ... I recall that these documents included a 5 page Deed of Release and a direction to the bank for me to resign as a signatory of an account that I had already agreed to close. There was also an authority to Maatouk Solicitors to be signed. I then had a conversation with Stephen Stanton to the following effect: I said: 'I'm not signing this. They have changed the agreement I signed on 21 September with Castino. I have already prepared the share transfer, closed the account and done everything else on the agreement. Where does it state on the agreement that there are further documents to be signed other than the ones mentioned in the agreement?' Stanton said: 'These are the documents they have sent to me.' I said: 'Where's the money?' Stanton said: 'I believe Dennis Castino is holding the money.' I said: 'I'll go and see him.' I then left Stanton's office. " 61 Mr Valentino telephoned Mr Castino and told Mr Castino that he did not agree to sign more documents. He said "I have done everything on the agreement and I am going to sign the share transfer [in fact he had already signed the share transfer] and present the documents to you as per the agreement on 21 September and I want my money." 62 Faced with conflicting demands from Mr Valentino that he transfer the $500,000 in the trust account to him and by Mr Guerinoni that he return the $500,000 to him, Mr Castino paid the $500,000 into court. Was there a binding agreement? 63 The question whether the parties intended to be bound by the document they signed prior to the preparation and execution of formal documents to be prepared by the solicitor is distinct from the question whether the agreement is void for uncertainty or incompleteness. Whilst the questions are distinct, they are related. The less complete the document relied upon as a contract, the less likely it is that the parties would intend to be bound by its terms. However, the parties might intend to be bound by terms which nevertheless fail to embody a binding agreement because some essential term is omitted and there is no mechanism for supplying the gap, or because a subject matter denoted by a term is incurably uncertain. By the same token, the parties might agree on detailed terms covering all essential matters but not intend to be bound by the terms on which they have agreed until execution of a formal document. The parties' intention is to be ascertained objectively by the construction of the document they signed, read in the light of the surrounding circumstances (GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634), and from those circumstances. 64 In Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149, Giles JA, with whom Hodgson and Campbell JJA agreed, said (at [68]-[69]): " [68] Where the question is whether a document constitutes a legally binding contract, McHugh JA said in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd at 634 that 'the decisive issue is the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances'. However, there is the prior question whether the document is the sole repository of the parties' contractual intention. A formal document expressed to be ' subject to contract', for example, may provide that starting-point, but it may nonetheless be shown that a legally binding contract was not intended. McHugh JA gave examples in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 336–7, and said that a party may prove that before signing an agreement the signatories agreed that it did not constitute a binding contract and that ' the intention to be bound is a jural act separate and distinct from the terms of their bargain'.

[69] The answer to what can generally be described as a Masters v Cameron question is not necessarily found in a single document. The intention of the parties may be found in a series of communications, or it may be shown that the signed document is only part of their putative contractual relationship. Further, in ascertaining the intention of the parties, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications or arrived at the document and to the subject-matter of the putative contract. The objective intention of the parties is fact-based, found in all the circumstances including ' by drawing inferences from their words and their conduct in the making of [their] agreement' : Allen v Carbone (1975) 132 CLR 528 at 532 per Stephen, Mason and Murphy JJ; see also Australian Broadcasting Corporation v XIV Commonwealth Games Ltd at 548 per Gleeson CJ. Regard can also be had to the conduct of the parties after the occasion of the putative contract, to cast light on the meaning of the communications in question and otherwise on whether they intended immediately to be contractually bound, of which I say more later in these reasons. "

65 Mr O'Loughlin, counsel for the plaintiff, submitted that this was not a case in which the parties agreed that the subject of the agreement set out in the document signed by both parties was to be dealt with by a formal contract. He submitted that the "paperwork" referred to in the fourth paragraph of the document was the form of share transfer. He submitted that each of the items referred to in the five arrow points did not require, and was not to be the subject of, formal documentation. Alternatively, he submitted that if the fourth paragraph did contemplate the preparation of a formal contract by the "acting solicitor", this was a case in which the parties had reached finality in arranging all of the terms of their bargain and intended to be immediately bound to the performance of those terms, even though (on this assumption) they proposed to have the terms re-stated in a form which would be fuller or more precise, but not different in effect (the first category in Masters v Cameron (1954) 91 CLR 353 at 360). Alternatively it was a "fourth category" case where the parties intended to be bound immediately by the terms to which they had agreed whilst expecting to make a further contract in substitution for the first containing additional terms as might be agreed (Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628). 66 The strongest indication that the parties intended to be immediately bound by the terms of the document is contained in the last sentence where it was said that not only were the "above terms and conditions" accepted by both entities and agreed but that "the matter is now finalized". However there are contrary indications within the document itself that the parties did not intend to be immediately bound. The most significant of the contrary indications is in the fourth paragraph which provides for the $500,000 to be released only on "all paperwork" having been finalised by the acting solicitor, and only then "if Agreed". I do not accept that the "paperwork" referred to would be confined to the preparation of the share transfer. If that were all the paperwork required, then there would be no need for it to be "finalized", nor even prepared by a solicitor. Even if it were proposed that the solicitor prepare the form of share transfer, the reference to "finalizing" the paperwork indicates that more than a form of share transfer was to be prepared. 67 Given that the "acting solicitor" was not to be an independent third party, it is not objectively likely that the parties would have intended to be bound by whatever further terms the solicitor might prepare. Further, there were two significant disputes between the parties which were not dealt with by the terms of the document. The first concerns the shareholder loans. On the plaintiff's case, the agreement did not deal with shareholder loans because that was not an intended subject matter of the agreement. The agreement related to the transfer of shares and of units, if there were any units in the unit trust. On the plaintiff's case, Elliston was not to be released from its obligation to repay loans made to it by the plaintiff or Mr Valentino. The plaintiff contended that this was a commercially sensible outcome, even though Balaclava Station had been purchased two years before for only $700,000 and had a market value in September 2007 of about $800,000. This was because the property had a special value to Mr Guerinoni. By 21 September 2007 Mr Guerinoni had purchased two of three lots of the adjoining farm and had in contemplation that he would purchase the remaining lot of the adjoining farm. Therefore, it was submitted, it was reasonable to expect that he would pay a premium to Mr Valentino to acquire his share. 68 Whilst that may have been Mr Valentino's thinking, it is not objectively likely that the parties would intend to enter into a binding agreement which dealt with only part of the matters in dispute. It is not objectively likely that they would intend to be bound by an agreement which was silent on the question whether the loan from the plaintiff or Mr Valentino to Elliston was to be released. The parties had also been in dispute about the terms of the loan. If the debt or debts owed by Elliston for loans made to it by the plaintiff or Mr Valentino were not to be released, it is objectively likely that a settlement would spell out the terms of the loan. Otherwise the matters between the parties would not be finalised. 69 The same applies to the agistment fees held in Mr Maatouk's trust account. The document did not deal with those. If those were partnership moneys, there was no mechanism for distributing the moneys to the partners. If the agreement were immediately binding, neither partner could take any legal action to recover the moneys. There was no provision for the moneys to be paid to Elliston. There was no provision for making the adjustment to which Mr Maatouk had previously referred. 70 A further indication that the parties did not intend to be immediately bound by the document is that it is obvious on its face that it had been prepared by Mr Guerinoni without legal advice, and was neither precise nor full in its expression of the intended agreement. In the first sentence the subject matter of the sale was described as "shares and units of Elliston Co-operative Pty Ltd held by QLD Holdings/1 Pty Ltd – John Valentino". One share (not shares) in Elliston was held by the plaintiff, not by Mr Valentino. There were no shares or units "of" Elliston. Nor were there any units of a unit trust of which Elliston was the trustee. No shares or units were held by Mr Valentino. 71 The second sentence provided for the shares and units to be transferred to Collingwood Holdings Pty Ltd – Eddie Guerinoni. The identity of the transferee was not made clear. Was it to be the defendant and Mr Guerinoni jointly, or one or other of them? 72 The third paragraph is curiously expressed, but evidently means that the sum of $500,000 deposited in Mr Castino's trust account would only be available to be released to the plaintiff or Mr Valentino for seven working days. 73 The fourth paragraph suggests that further agreement would be required before the money was released. This would be inconsistent with the document being immediately binding unless the matters to be covered by the paperwork were defined or the parties agreed to accept whatever paperwork was prepared by the acting solicitor. In my view, the fourth sentence was to the same effect as Mr Guerinoni's previous stipulations that the offers he made were "subject to legals". 74 The fifth sentence, stating "this is to include", prima facie suggests that the paperwork to be finalised by the acting solicitor was to include provisions dealing with each of the following five arrow points. That would not confine the topics to be dealt with by the "paperwork" to the topics identified in the five arrow points. Prima facie, those five arrow points provided a non-exclusive list of matters to be addressed by the paperwork. However, it was the plaintiff's case that the matters in the five arrow points did not require documentation. 75 The details of the "walk in/walk out arrangement" were not identified. Did this refer only to the physical removal of chattels from the property, and if so, what chattels were to be removed? Did it refer to closure on all issues so that on Mr Valentino and the plaintiff "walking out" they would have nothing further to do with Mr Guerinoni, the defendant and Elliston? 76 The third arrow point is at least poorly expressed. There were no "bank and credit card accounts between the both [sic] entities". The plaintiff and the defendant had a joint bank account and operated a credit card account, but they were not accounts "between" those entities. 77 The fifth arrow point did not identify what was the partnership dispute that was resolved. Nor did it make clear the extent of the release proposed by the words "and no further legal action shall be taken". No legal action had been taken at the date of the agreement, although litigation had been threatened to wind up Elliston and to set aside the statutory demand served by the defendant. As the threatened legal action included action against the company, did the reference to no "further" legal action being taken extend to the parties releasing any claims they might have, not only against each other, but against the company? 78 Finally, it is not clear from the face of the document who were the parties to it. The agreement provided for the signatures of Mr Valentino and Mr Guerinoni immediately above the names of the companies they controlled. The reference to the acceptance of the terms and conditions by "both entities" and the other references to "both entities" and "each entity" suggest that only the companies were parties to the agreement. Yet the author of the document was evidently uncertain as to whether the shares and units (which did not in fact exist) were held by the companies or the individuals. Mr Toda had previously asserted that Mr Valentino was the shareholder of Elliston. 79 These infelicities in the document do not necessarily mean that the terms are so uncertain or incomplete as to be incapable of giving rise to a binding agreement. But they are such as to indicate that, objectively considered, the parties are not likely to have intended to be bound by a document so evidently drawn by a layman and poorly expressed. Particularly is that so when on the previous occasion the parties had entered into a negotiation as to the terms on which one would acquire the shares or interest of the other, they had stipulated through their solicitors that there would be no binding agreement until formal documents were signed. 80 The last sentence of the document is prima facie a strong indicator that the parties did intend to be bound by the document they signed (although, as discussed below, that has to be qualified in the case of Mr Guerinoni by the circumstances in which the communication of his signature to the document was conveyed). But as Giles JA explained in Sagacious Procurement Pty Ltd v Symbion Health Ltd, the search for the objective intention of the parties is not confined to the terms of the document. In that case there was an express agreement between the parties who signed a letter that they were bound by the terms and conditions contained in the letter, which were described as terms and conditions that had been finalised and accepted. But that indication was not conclusive as to the parties' contractual intention. Nor is it so in this case. 81 There is a further consideration that the document provided for the signatures of both parties. When Mr Guerinoni sent the document to Mr Castino on 19 September, it was unsigned. It would be inferred from the fact that the document provided for its being signed by both parties that even if it were intended that the document be contractually binding, that would not be so unless and until the document was signed by both parties and the signed acceptance communicated to each party. That is to say, even if the document was capable of giving rise to an immediately binding contract, that contract did not come into existence upon the provision of Mr Valentino's signed copy of the document to Mr Guerinino. At that point, Mr Guerinoni would not be bound because he had not signed the document, although the document provided for his signature. When the document signed by Mr Guerinoni was sent to Mr Stanton, it was sent under cover of the letter from Mr Barraket that showed that Mr Guerinoni did not intend that he would be required to purchase the plaintiff's shares by releasing the $500,000 in Mr Castino's trust account unless the matters referred to in Mr Barraket's letter of 24 September 2007 (quoted at para [54] above) were attended to. As Mr Valentino did not agree to all of those matters, there never was a point at which both parties expressed their intention to be bound by the terms of the document headed "Transfer of Shares & Units". 82 For these reasons I conclude that this is a "third category" Masters v Cameron case where the intention of the parties was not to make a concluded bargain unless and until they executed the formal documents to be prepared by the solicitor. 83 If that conclusion be wrong, then this would be a "second category" case where the parties had made performance of the terms conditional upon the execution of the "paperwork" to be prepared by the solicitor. For the reasons I have given I do not accept that the reference to "paperwork" was confined to a share transfer. 84 Further, because no definition was given to the terms to be included in the paperwork to be finalised by the acting solicitor, the agreement would be void for uncertainty unless the parties were to be taken to have left all such terms to be settled by the solicitor (see Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 136). As the "acting solicitor" was Mr Guerinoni's solicitor, it is not a reasonable construction of the clause that Mr Valentino was to be taken to have accepted any term that the solicitor might choose to incorporate in the paperwork. I consider that once it is determined that "all paperwork" is not confined to the share transfer and is not limited to the five subject matters in the arrow points, the agreement is too uncertain to be enforced. It amounts to an agreement to agree on terms to be included in the document to be prepared by the solicitor. Accordingly, if there were an objective intention of the parties to be bound by the document, the agreement would be void for uncertainty. 85 For these reasons, I conclude that the parties have not settled their dispute. I order that the claims for relief in the statement of claim and cross-claim be dismissed. 86 I direct that the moneys paid into court by Mr Castino and interest accrued thereon be paid to the defendant, or as Mr Guerinoni may direct. 87 The exhibits may be returned after 28 days. 88 I will hear the parties on costs and on the orders to be made in related proceedings for the winding-up of Elliston and in proceedings brought by Mr Guerinoni against Mr Castino.

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