New South Wales Supreme Court CITATION : Independent Print Media Group Publishing Pty Limited v Estate Agents Co-operative Limited [2007] NSWSC 1098 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 24, 25, 27 September 2007 JURISDICTION : Equity Division Expedition List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 27 September 2007 DECISION : Side letter established interim agreement only. Summons dismissed with costs CATCHWORDS : CONTRACTS – contractual intent – construction – joint venture – where prospective joint venturers execute "side letter" – whether parties intended to produce binding final agreement or merely an interim measure – where side letter refers to presentation to boards of directors for "execution" – whether intention that boards merely execute as opposed to approve contract LEGISLATION CITED : (NSW) Evidence Act 1995, s 64 Masters v Cameron (1954) 91 CLR 353 CASES CITED : Gardiner v Agricultural and Rural Finance Pty Limited [2007] NSWCA 235 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 PARTIES : Independent Print Media Group Publishing Pty Limited (plaintiff) Estate Agents Co-operative Limited (defendant) FILE NUMBER(S) : SC 1964/07 COUNSEL : Mr B A Coles QC w Mr J T Gibson (plaintiff) Mr T Alexis SC w Mr R Hardcastle (defendant) SOLICITORS : Rodd Peters Lawyers (plaintiff) Von Muenster Solicitors (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST BRERETON J Thursday, 27 September 2007 1964/07 Independent Print Media Group Publishing Pty Limited v Estate Agents Co-operative Limited JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff Independent Print Media Group Publishing Pty Limited, through its subsidiary Southern Independent Publishers Pty Limited, publishes three local newspapers circulating in the Illawarra region on the South Coast of New South Wales. The defendant Estate Agents Co-operative Limited publishes a weekly real estate publication called the Illawarra Realtor, also in the Illawarra region. From about May 2006, IPMG and EAC negotiated with a view to forming a joint venture between them, by which the Illawarra Realtor would be distributed as an insert in IPMG's newspapers. Such an arrangement for the distribution of the Realtor in IPMG's papers was implemented with effect from 7 September 2006, and continues until today, albeit since the institution of these proceedings pursuant to an interlocutory order of the Court. As a result, the circulation of the Illawarra Realtor has increased from 20,000 to about 75,000. At issue in these proceedings is the basis on which these arrangements were implemented from and subsequent to 7 September 2006. 2 On 11 September 2006, executive officers of IPMG and EAC executed a document entitled "Side Letter", in the following terms: "Side Letter" The below representatives of EAC and IPMG agree the contents of an agreement between them are set out substantially in the draft Shareholders, Publishing Management and Licence Agreement. The parties agree the agreements contained therein are enforceable and are operating in respect of the publishing of the publication for the first and subsequent editions. The parties will negotiate in good faith to finalise the documents as soon as reasonably practical for presentation to each of the EAC and IPMG's Boards, for execution. 3 IPMG contends that the effect of the 11 September side letter was to establish a binding and enforceable final agreement upon the terms and conditions of the attached documentation referred to in it, and claims specific performance of that agreement. EAC contends that the side letter created an interim arrangement for the distribution of the first and subsequent editions of the Illawarra Realtor from 7 September onwards, from which the parties were at liberty to withdraw on reasonable notice if they did not reach a final agreement. 4 Three matters do not admit of doubt. The first is that the parties intended the side letter to create a legally binding and enforceable agreement. So much is apparent from the first and, in particular, the second sentence of the side letter, which record an agreement that "the agreements contained therein are enforceable and are operating". The second is that the parties contemplated further negotiations and documentation. So much is apparent from the third sentence of the side letter, which records that the parties "will negotiate in good faith to finalise the documents as soon as reasonably practicable". The third is that the parties contemplated some involvement of the Boards of each of EAC and IPMG (though whether that involvement was to be a mere formality or involved approval of the documentation is in issue). So much is apparent again from the third sentence of the side letter, which records that the documents would be presented to each of the Boards "for execution". 5 The fundamental dispute between the parties is whether, as IPMG contends, the side letter created an agreement in one or the other of Masters v Cameron (1954) 91 CLR 353 classes 1 or 4 – that is, an agreement by which the parties were immediately bound upon the terms of the annexed draft documentation, though intending that it be incorporated in a more formal document containing substantially the same terms (in the case of class 1), or by consent different or additional terms (in the case of class 4); or, as EAC contends, that the parties while intending to be immediately bound in respect of initial and subsequent editions of the Illawarra Realtor in IPMG's newspapers, did not intend otherwise to be finally bound on the terms of the annexed draft documentation but to remain at liberty to withdraw on reasonable notice if they did not reach final agreement. 6 The role of the Court in these circumstances is to ascertain the objective contractual intent of the parties and, in particular, whether they intended to be immediately and finally bound or, alternatively, to be bound only effectively until further notice. A great deal of extrinsic evidence has been adduced. It is useful at this point to record the role of that evidence. The correct approach to the construction of commercial contracts has been recently restated by Spigelman CJ in Gardiner v Agricultural and Rural Finance Pty Limited [2007] NSWCA 235, [7]-[13]. With reference to decisions of the High Court of Australia, his Honour explained that the meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean, which normally requires consideration not only of the text but also of the surrounding circumstances known to the parties and the purpose and object of the transaction. His Honour also pointed out that regard may be had to the broader context of the words in issue – that is, as I understand it, what is sometimes called "matrix" evidence – not only after some kind of ambiguity in the written document has been identified. Evidence of pre-contractual negotiations is not of itself admissible to show what one or other party subjectively intended, but pre-contractual negotiations can form part of the contractual "matrix" to the extent that their content is known to both parties, and in that way can illuminate their ultimate contractual intention by revealing, for example, the purpose for which a contractual provision was included. That said, the starting point is the words of the document themselves, although it is unlikely in a context such as the present that one would reach a conclusive view on the words alone without considering the context in which they appear. And it is important to bear in mind that ultimately the Court's role is to ascertain what the parties intended objectively and not their private cogitations and reservations. As the High Court said in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, [25]: Because the inquiry about this last aspect may take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. 7 Although conduct of the parties subsequent to an alleged contract is admissible as to whether a contract has been made – because subsequent conduct consistent with a contract may illustrate that the parties did intend to create binding legal relations – in this case the subsequent conduct of the parties in proceeding to distribute the Illawarra Realtor in IPMG's newspapers is equivocal, because it is equally consistent with their intent on 11 September having been to make an interim agreement as it is with their intent having been to make a final agreement. The text of the document 8 The first matter of significance arising out of the express words of the side letter is the use of the word "substantially" in the first sentence, which suggests that although the substance of the agreement is to be found in the drafts attached, there may be some departure from it. 9 The second matter of significance is the use in the second sentence of the words "in respect of the publishing of the publication for the first and second editions". These suggest that the agreements are enforceable and operating for that limited purpose, rather than for all purposes. 10 The third is the use of the words "for presentation to each of the EAC's and IPMG's Boards, for execution" in the final sentence. Generally speaking, Boards do not execute documents. They may authorise the affixation of the company seal to documents, but the ideas of a board of directors executing a document is a curious one. In this case, EAC's Articles of Association, as is not unusual, required that a seal not be affixed without the authority of the Board. That, of course, does not necessarily require that each specific affixation be separately authorised, and it may be that there will be a standing authority to certain directors to affix a seal. But in any event, there is a distinction between a Board authorising the affixation of a seal, and a Board executing a document. Moreover, a Board of Directors is not lightly to be taken to have been relegated to the role of a mere cipher in respect of documents, execution of which is explicitly reserved to the Board. And quite apart from corporations, the notion of submitting a document to a party for execution does not import that the act of execution is a mere formality; it ordinarily involves approval – that is, a decision whether or not to execute – as well as the mere act of signing or sealing. Accordingly, uninformed by extrinsic evidence, I would not conclude that "for presentation to each of the EAC and IPMG Boards, for execution" meant that the role of the Boards was merely to authorise the affixation of a seal to an agreement which had already been made by executive officers and which the Board was not at liberty to decline to execute. Such words ordinarily would contemplate a role for the Boards in deciding whether or not the agreements should be executed; and thus that there was not intended to be a final and binding agreement until the agreements had been approved by, and executed by authority of, the Board. 11 A further observation to be made about the express terms of the side letter and the annexure to it is that, on any view, there were some issues outstanding. This is apparent not only from the contemplation in the third sentence of the side letter that the parties would negotiate in good faith to finalise the documents, but also from the documents themselves which, in some respects, remained incomplete, not only in that amendments upon which consensus to that point had been reached were yet to be engrossed, but more significantly there were some aspects upon which there had as yet been no consensus. It is of particular significance that these included the provisions of schedules 3B, C and E in the Publishing Management Agreement. Schedule 3B covered press fees payable to EAC, 3C covered salaries payable to EAC, and 3E covered call centre fees payable to EAC. These all formed part, at least, of the remuneration to be derived by EAC from the proposed joint venture. Attributing to the parties an intention to make a Masters v Cameron class 4 agreement would involve attributing to them the intention that, if they were not subsequently able to agree on that remuneration, EAC would go without it. Viewing the situation objectively, that is an unlikely intention. The contractual context 12 It is relevant to consider the context in which the agreement was made. First, Newco, the joint venture vehicle, did not yet exist; as Newco was intended to be a party to at least some of the documentation, this was one reason why the formal agreements could not yet be made. 13 Secondly, the first edition had already been published and distributed on 7 September. That, at least, created a perceived need on the part of IPMG to make a binding agreement at the earliest possible opportunity, because IPMG was concerned that it was exposed in distributing the Realtor without having any binding agreement in place. This perceived need was reinforced by a dispute between the parties as to whether their earlier negotiations between them on 11 August of the same year had produced a binding and enforceable agreement. However, this need could be satisfied at least to some extent by a side letter, if it was not possible for final agreement to be reached, so ultimately this does not really assist in ascertaining whether the parties intended to make an interim or a final agreement. 14 Next, a proposal that the parties enter into a trial arrangement, to see whether or not a joint venture was workable and satisfactory, had been rejected. It was submitted that that suggested that the parties were unlikely to have intended an interim agreement. However, what was rejected was not a short term interim arrangement while the final documentation was sorted out, but a much longer term (twelve month) trial, to see whether the joint venture would work to the satisfaction of both parties. The concept had been a trial of the venture, rather than a short term interim agreement pending finalisation of a final agreement. The side letter involved no trial, but an arrangement pending finalisation of documentation which seemed likely to be agreed. They are different concepts. Rejection of the first does not indicate rejection of the second. Moreover, as will be seen from the analysis of the negotiations below, the parties continued to contemplate an interim arrangement by side letter after the concept of a trial had been rejected. 15 Finally, there are the negotiations that had taken place between the parties up to and including 11 September 2006, and in particular the references that had been made in them to the role of the EAC Board and to the potential use of a side letter. Because these were negotiations of which both parties knew, the mutual references in them to a side letter provide aid in understanding what role the parties intended a side letter to fulfil when they ultimately came to execute it. 16 On 26 June 2006, IPMG's solicitor, Mr Peters, submitted to EAC's then CEO, Mr Carson, a draft Memorandum of Understanding. Mr Carson replied with some comments on the draft on 7 July 2006. On 12 July, Mr Dennis of IPMG, sent an email to Mr Carson that plainly contemplated that the proposed amendments would be submitted to the Board: In the knowledge that you have your Board meeting tomorrow afternoon, would it be possible for me to get together with you tomorrow morning to take you through our proposed changes? If we can work towards agreeing the changes prior to your meeting it should demonstrate to your Board members our joint determination to work together to achieve a mutually acceptable outcome. 17 Mr Carson replied to Mr Dennis on 12 July that he was indeed happy to meet the following morning. On 17 July 2006, Mr Carson sent an email to Mr Dennis which recorded that the EAC Board had approved the core MOU draft except for certain requested changes, and those changes were expressed to be changes requested by the EAC Board. Again, involvement of the EAC Board is apparent. 18 On 18 July, IPMG, through Mr Dennis, sent an email to Mr Carson submitting a revised draft Memorandum of Understanding. On 1 August, Mr Dennis submitted to Mr Carson, in anticipation of a meeting that was to take place on 2 August, first drafts of the Publishing Management Agreement, the Publication Licence and the Shareholders Deed. Following that meeting, at 5.45pm on 2 August, Mr Peters submitted to representatives of both parties amended documents with mark ups resulting from the meeting. 19 On 7 August, Mr Carson sent to Mr Dennis an email recording that he was still awaiting a final report from EAC's solicitor, and observing that the introduction of key performance indicators will be "unacceptable to my Board and even less acceptable to the local Wollongong Board", again indicating that assent of the Board was required. On 10 August 2006, Mr Dennis sent Mr Carson an email confirming arrangements for a meeting to take place on 11 August, which indicates, first, that a side letter had been discussed at the previous meeting (presumably on 2 August), secondly, that a side letter was contemplated as an interim arrangement if the final agreement could not be completed in time, and thirdly, that presentation of the matter to an EAC Board meeting was required: What is your current thinking on what is going to be presented to your Board meeting August 17th and what can now been achieved in terms of the final contract given your leave commitments and the go live date of September 7th? Should Rodd prepare the side letter we discussed at the last meeting for consideration tomorrow? 20 On 11 August 2006, at 8.20am, Mr Carson replied to Mr Dennis in terms that again indicate that a side letter was contemplated by the parties as a possible interim measure until final agreement on the documentation could be reached: Accordingly, I think it would be a good idea for the side letter we discussed to be prepared whereby perhaps we insert the publication into your current mastheads in the Illawarra (perhaps you absorb these costs) and do the distribution in "central Wollongong" to homes as discussed (perhaps EAC covers these costs including additional print costs) until these agreement matters are sorted. 21 A meeting took place on 11 August 2006. It is not necessary to recite in detail the competing versions of what took place at this meeting. The parties reached substantial, if not complete, consensus on the issues concerning the proposed documentation of the joint venture, that the first publication would occur on 7 September 2007, and that marked up documents setting out the amendments which had so far been agreed would be circulated. There is controversy as to whether Mr Carson stipulated at the beginning and end of the meeting that there would be no agreement until EAC's solicitor Mr Parasyn, and EAC's Board, had approved it. Mr Parasyn recorded the events of the meeting in a handwritten file note made at the meeting and a typewritten file note which he says was made driving home from the meeting and in his driveway when he reached home. I will return to this in due course. 22 However, on 16 August 2006, Mr Peters sent a letter to Mr Carson – which, in due course, was forwarded to Mr Heath of EAC and EAC's solicitor Mr Parasyn, which included the following: My understanding from Friday is that all the important terms of the joint venture are now agreed in principle – I appreciate some further fine tuning of the documents may be necessary before they can be signed off by all parties. It seems both parties have been and continue to proceed as though the transaction will be completed and we have full confidence that the documentation will be finalised in short order for approval by your Board. Given that we have until the first publication to complete the transaction (about 3 weeks) I question the need for a side letter at the moment. If we are getting close to 'launch day' and the documents are still not signed, perhaps we should revisit the need for a side letter at that point ... 23 This letter, as an inter partes communication, forms part of the relevant "matrix", and conveys a contemplation that the role of a side letter would be to cover the situation, if the documentation could not be finalised for approval by EAC's Board in time for the 7 September edition, until such approval could be gained. 24 A meeting of EAC's Board took place on 1 August 2006. Its contents were not communicated to IPMG, so they do not form part of the relevant "matrix", but their consistency with the evidence given on behalf of EAC may be relevant to an assessment of the credibility of that evidence. The minutes record that Mr Carson brought the Board up to date with the negotiations, and that while he said he was not entirely comfortable with the agreements as they stood, was prepared to recommend an MOU to get things moving and suggested that the Board approve authority for the Finance and Policy Committee to further negotiate until such time as EAC was comfortable to sign any agreement. 25 On and following 28 August 2006, there was an exchange of emails which again illustrate that a side letter was contemplated as an interim measure until final agreement was concluded. Mr Dennis sent to Mr Heath an email expressing concern "that we will not have a contract in place before we go live", a reference to the proposed date of the first edition on 7 September. Mr Heath responded on 29 August: "From memory I also thought John had discussed the idea of a side letter in the event that what appears to be now occurring arose and that both sides were in agreement if that had to happen". Mr Dennis responded later that morning (emphasis added): "It was further agreed that the EAC executives attending that meeting [a senior executive meeting that had been proposed for 31 August] would have the authority to approve in principle the tabled documents. Based on the above, it was agreed that there was no need for a side letter. In effect, we gave ourselves a window of opportunity to complete the contracts that were acceptable to all of us". Mr Carson replied, on 30 August, "I did mention at the last meeting that it may not be a bad idea to prepare a side letter in case we do not finalise the agreements in time. I am not sure what happened in regard to the discussions that were to occur between our mutual legal representatives ... I very much doubt that we will be in a position to conclude our agreement prior to the proposed 'first edition' and suggest the only alternative is a side agreement". 26 The minutes of a meeting of EAC's Financial and Policy Committee on 30 August – which, for reasons already explained, does not form part of the relevant matrix, but may be relevant for assessing the credibility of evidence given on behalf of the EAC – record "formal agreements were proving a hurdle, however side letters would be entered into in the interim". 27 On 6 September 2006, Mr Carson sent a letter to Mr Dennis which recorded that EAC was still happy to enter into an arrangement with IPMG "but not on the current proposed terms", and setting out various arguments and issues which EAC wished to agitate. The first edition was published on 7 September. That day, Mr Peters sent a letter to Mr Carson asserting that since 11 August, there had been agreement on all major terms: … On that day there was an acceptance that all major terms of the relationship and the transaction were agreed and all that was needed was for the lawyers to complete the documentation and agree any drafting points. The parties shook hands on the deal with the understanding that EAC and FPC would work together to get the first edition out for distribution around 7 September and that the documents would be completed for execution by your Executive on or about 31 August. Our client has performed all its obligations under the agreements. On the following Monday (14 August) we redrafted the agreements adopting all the changes discussed and agreed on 11 August and sent them to you. 28 Mr Peters' letter does not assert in terms that there was a binding and concluded agreement made on 11 August, but simply that there was an acceptance that all the major terms of the relationship and transaction was agreed and all that was needed was for documentation to be completed and drafting points agreed. It suggests what might be called agreement in principle, short of a concluded binding and enforceable agreement. It was only subsequently, after counsel's advice had been sought, that it was asserted that a binding agreement had been concluded. I interpolate that the letter asserts that the documents were to be executed by the executive, which does not appear consistent with any of the evidence now given, and certainly not with IPMG's case (that execution was to be by the Boards); this is important only to illustrate that the parties were not apparently giving as close attention to the concept of who would actually execute the documents as is now suggested. 29 Meanwhile, Mr Parasyn responded to Mr Peters' letter on 7 September 2006, in a letter to which it will be necessary in due course to return: Without going to the details of your letter, I have to point out that from the meeting on 11 August 2006 my clear recollection is the following: 1. At the opening of the meeting Mr John Carson expressed in clear and precise terms that whatever was discussed in the meeting will proceed nowhere without the final advice and approval of EAC's Solicitor. 2. After some time into the meeting I then expressed my view that I would prefer to see the arrangement other than as set out in the three documents tabled and that was that the arrangement proceed on the basis of EAC provide the magazine for distribution through the paper which provides a benefit to EAC and to your client for about 12 months to see how it works and then review it. This was not received very favourably by your clients but it was nonetheless put and not withdrawn. 3. The discussions continued to iron out several issues but at no time was Mr Carson's opening statement varied or withdrawn. 4. The meeting resolved that you would produce fresh agreements which would be looked at by EAC and myself. However, in all respects the arrangement and the documentation was subject to EAC's legal advice being received. 5. At the close of the meeting I expressed the view that what was put by your clients was encouraging me to review my personal view of how the arrangement should proceed but after I consider the documentation I will see if it causes me to alter my view. 6. It was also expressed by Mr Carson that until the formalities are worked through and settled on, the immediate need to meet an earlier deadline for 7 September 2006 could proceed by way of a "side- letter". As of this time it is clear that until EAC receives its final advice as to the arrangement and documentation the parties are still in negotiations as they have been at all times and the matters that have occurred have been carried in good faith. At all time Mr Carson suggested that the parties exchange a "side-letter" addressing the September 2006 distribution deadline. This was never received from your client. Apart from the above, my client does not agree with the contents of your letter. However, my client is willing to continue with discussions and negotiations with the view to reaching some finality and to that end I note the meeting has been arranged for 2.30pm on Monday next. In the meantime and without prejudice or admission of any liability, my client is also willing to continue with the publication, printing and distribution of the magazine. It is hoped that is all resolved shortly. 30 The foregoing describes the substance of the negotiations, and in particular their references to the relevant functions of EAC's Board and to the role that a side letter might play, up to the meeting that took place on 11 September. At that meeting, IPMG was represented by Mr Dennis, Mr Thomas, and its solicitor Mr Peters. EAC was represented by Mr Crombie, Mr Carson, and its solicitor Mr Parasyn. Mr Crombie, Mr Carson and Mr Parasyn gave versions substantially consistent with each other, the features of which are, first, that Mr Carson stipulated at the outset that there would be no agreement until it had been approved by Mr Parasyn and the Board of EAC; secondly, that after some hours not all issues had been resolved and Mr Peters proposed there be a side letter; thirdly, that Mr Peters wrote out the side letter and added the last sentence in response to a request from Mr Carson that reference be made to the requirement for EAC's board's approval; fourthly, that Mr Parasyn said that if the side letter were executed, EAC would be bound to provide magazines for publication and to continue negotiations in good faith and that it was okay for EAC's representatives to sign; and fifthly, they conceded that no express reference was made to the arrangement being an interim one. 31 Mr Peters, Mr Dennis and Mr Thomas also gave versions substantially consistent in most respects with each other, and substantially different from those given by EAC's witnesses. They deny that Mr Carson or anyone else made any reference to any agreement being subject to EAC's board's approval. They say that all issues were resolved in principle. They agree that the side letter was drafted by Mr Peters, but there is some discord between them as to the circumstances in which the last sentence was added, though they substantially agree that at some stage reference was made to the Boards being required to execute (as distinct from approve) the documentation. They assert that Mr Parasyn said that the side letter if signed would produce a binding agreement, and they deny that any reference was made to the arrangements being interim. 32 As will be apparent from that summary, each version is substantially corroborated by the other witnesses of the relevant party. Ultimately, I think both reflect the genuine beliefs of the witnesses who gave evidence, but those beliefs are based more on assumption, and on recollection of what their negotiating position and intent on 11 September was, than on recollection of what was actually said. For the purposes of deciding objectively what were the parties' intentions, I am concerned to observe their proceedings as a bystander, focussing on what they did and what they said, rather than what they were internally thinking, assuming or intending. Accordingly, although there was a substantial amount of cross-examination which elicited answers as to what various of the witnesses assumed or understood, that is of slight assistance – and, in particular, while cross-examination established that IPMG's witnesses assumed that Mr Carson and his associates had EAC's authority to conclude a binding contract and that they intended to make a binding agreement, at least in principle, there was, I think, no evidence that anyone on behalf of EAC ever actually said that Mr Carson and his associates had authority to conclude a binding agreement or intended to do so. In any event, I do not think that the question of Mr Carson's authority is the vital issue in the case, although it may to some extent inform whether the intention of the negotiating parties objectively ascertained was there and then to make a concluded final agreement. 33 It is also to be observed that on several occasions in the course of the evidence, reference was made by IPMG witnesses to "agreement in principle" having been reached. An agreement "in principle" is, in the vernacular, usually a Clayton's agreement: the agreement one has when there is not an agreement. It is terminology well-familiar to lawyers as indicating that consensus has been reached on the main terms, but the parties do not intend yet to be bound, because that consensus needs to be properly recorded, documented and approved. Accordingly, the references in the evidence given on behalf of IPMG to agreement in principle tend to detract from rather than to assist the case that a final binding agreement had been made. The oral evidence 34 Although my conclusions in this case do not depend to a large extent on the oral evidence, there are two aspects, one pointing in each direction, that call for comment. I have already referred to Mr Peters' letter of 16 August 2006 in which he recorded confidence that the documentation could be finalised in short order "for approval by your Board". Without reflecting in the slightest on the bona fides of Mr Peters' evidence, this indicates that the view now espoused on behalf of IPMG that a requirement for Board approval was never contemplated, was not always so clearly held. That letter casts considerable doubt on the accuracy of the evidence given on behalf of IPMG that all was ever contemplated was execution, as distinct from approval, by the Board. 35 On the other hand, evidence given on behalf EAC suggests that Mr Peters was in a hurry to leave the meeting on 11 September, which had to be abbreviated for that reason. Mr Peters' flight bookings, which indicate on 11 August he was due to fly out that evening to Byron Bay, but on 11 September not due to do so for a couple of days, suggest that there may be some confusion between the meetings of 11 August and 11 September. However, the flight records do not demonstrate conclusively that Mr Peters was not in some hurry to leave on 11 September as well as on 11 August. Although this weighs somewhat in favour of IPMG's version, it is inconclusive and relates to a marginal matter. It does not weigh significantly in resolution of the dispute. 36 One other matter in the oral evidence can be resolved, and that is the circumstances in which the ultimate sentence in the side letter came to be inserted. All three witnesses for EAC say that it was inserted in response to a request from Mr Carson to the effect that it was necessary to record that EAC's Board's approval as required. So too does Mr Dennis of IPMG, although Mr Peters does not share that recollection, nor Mr Thomas. But ultimately, when Mr Dennis' evidence is added to that of the witnesses for EAC, on the probabilities those were the circumstances in which the last sentence was inserted. 37 That it was inserted in response to a request from Mr Carson illustrates that it was intended primarily for the benefit of EAC. Mr Carson's request was that there had to be some reference to the requirement for EAC Board's approval or execution. It was not as if Mr Carson was requesting that reference be made to execution by IPMG's Board – although, ultimately, reference to execution by both Boards was included. A requirement for mere execution by the Board would provide no relevant protection for and be of no utility to EAC. The context of the negotiations which led to the incorporation of that clause illustrate that it was intended to preserve the ability of its Board to approve or disapprove any final agreement. That this is so is fortified to some extent by the circumstance that – although I accept that Mr Parasyn was sitting next to Mr Peters during the meeting, and Mr Peters was recording the amendments to the documents as they were agreed, and reading them out for approval by the meeting, and Mr Parasyn had an opportunity to see and hear what Mr Peters was recording – it would nonetheless be unusual if commercial parties intended to be finally bound by such documentation without having first had an opportunity to examine the execution copy and approve it at their leisure. Mr Parasyn's file notes 38 I said I would have to return to Mr Parasyn's file note of 11 August meeting. Mr Parasyn also made a file note of 11 September meeting; relevantly, it records that at the commencement of the meeting, Mr Carson said that the meeting was without prejudice and that nothing would progress to any finality with the documents until the Board had gone over them and the final approval of EAC's solicitor, and that Mr Parasyn added "what goes on here is all subject to the Boards accepting it and the final approval by EAC's lawyers". The file note also records that when it came to preparation of the side letter, Mr Carson observed that the Board could "hit the deal on the head and nothing might go ahead": John also said that what these meetings are about is to work through the documents to bring them into a state that he considers could be put before the Board for consideration. The Board is made up of real estate agents and anything could change. The side letter would identify the documents that have been marked up as of today which in principle outlined the amendments to this date but would basically be in the form that might go before the Board first and then to the legal eagles to approve after the Board made its comments. 39 The file note concludes by recording that, at the close of the meeting, Mr Carson reiterated: I must again say that nothing is final until the Board considers and approves the arrangements and it is signed off by the legal eagles. In the meantime, I trust that this side letter can see the magazine out there for our local members. 40 Both Mr Parasyn's typewritten file notes purport to have been dictated immediately following the meeting in question, either on his way home or upon having reached his home, which was not far away from where the meetings took place. It is curious that they focus, not on the content of the negotiations as to what amendments had and had not been approved – which is what one might think a solicitor at that stage would be concerned with – but on the stipulations that there was to be no binding agreement without Board approval. It demonstrates remarkable prescience of the issues which ultimately arose in these proceedings. In addition, in Mr Parasyn's 7 September 2006 letter, which I have set out above, in which he was at pains to respond to the assertion that agreement had already been reached, while he maintained that Mr Carson had said in opening that any agreement was subject to the lawyer's approval, he made no reference to any stipulation that it was subject to Board approval. This is a curious and striking omission. Moreover, in the course of the evidence in the case, it emerged that Mr Carson, who has the conduct of the matter on behalf of EAC, had heard nothing of these file notes – which, if authentic, are most powerful evidence for EAC and practically fatal for IPMG – until he saw the draft agreed bundle of documents a week ago, and that Mr Parasyn had never mentioned to him that he had these file notes – although, if authentic, they provided a complete answer to IPMG's case from the outset. 41 On the other hand, although Mr Parasyn was asked whether he had, in fact, dictated those file notes in the circumstance that he described (which he confirmed), and whether there was any possibility that he had dictated them later (which he denied), and although it was suggested to him that he was mistaken in what he had regarded in them in some respects (which he also denied), it was not put to him that they were fabrications. Given the contents of the file notes and Mr Parasyn's sworn evidence as to their provenance, this is a case in which it can be said that there were only two real possibilities: one is that the file notes are authentic contemporaneous file notes, and the other they have been maliciously and fraudulently created by Mr Parasyn, a solicitor, for the purposes of creating a case for his client that did not otherwise exist. I do not think it is open to a court to draw the sinister inference in the absence of it having been put distinctly to Mr Parasyn. If such an inference were to be suggested – and Mr Coles QC did not submit that I should draw it – Mr Parasyn should have been given the opportunity of answering it. In those circumstances, I do not think I can proceed on any basis other than that they are authentic contemporaneous file notes, and on that basis, they provide very strong contemporaneous evidence in favour of EAC's version of what transpired not only on 11 August but also, and importantly, on 11 September. 42 In addition, Mr Parasyn's handwritten file note of the 11 September meeting records, in respect of the discussion on the side letter, that it was said that its intent was to cover documentation "in principle", and that the terms of the agreement as amended were to be put for approval and that all was subject to EAC Board to approve the final documentation. This is evidence of what passed between the parties at the meeting, and forms part of the relevant matrix which illuminates the purpose of the side letter. 43 On 18 September 2006, Mr Carson reported to a Board meeting of EAC that confirmation was awaited on the final agreement from Mr Parasyn before it was presented for the Board's consideration. Again, while this does not form part of the relevant matrix, it is some evidence (admissible for that purpose pursuant to (NSW) Evidence Act 1995, s 64) corroborating Mr Carson's version of what he said and did on 11 September. 44 I have not overlooked that at a meeting of the Board of EAC on 30 November, Mr Crombie, who had by then become CEO, said, in response to a query as to the status of the agreements, that a side letter had been signed "pending completion of the final agreements", and after commenting on certain actual or rumoured sales by IPMG of its mastheads added: As a result ... it would be now be appropriate to reconsider EAC's decision to enter into the proposed agreements with FPC. A major concern was a view that FPC may have already intended to sell at the time it was negotiating the agreement with EAC and was only entering into the agreement to build up the value of its masthead in the Illawarra. This being the case, EAC should have been advised accordingly. 45 There are some aspects of this entry which are consistent with the idea that a decision to enter into the proposed agreements had already been made, and that negotiations were complete. On the other hand, the entry is not unequivocal in this respect: the opening words themselves refer to a side letter having been signed "pending completion of the final agreements". Moreover, this minute is not part of the relevant matrix, and records events occurring long after 11 September. It does not conclusively show that EAC believed that a final agreement had been reached. Conclusion 46 It will be apparent from the foregoing that the extrinsic evidence demonstrates, to my mind, that the parties intended by use of a side letter to create an interim arrangement to govern the publication of the first and subsequent editions of the Realtor in IPMG's newspapers, while they continued to negotiate in good faith for a final agreement, but without binding themselves on a final basis to the terms of the draft documentation. In particular, it would be extraordinary for them to have intended to bind themselves finally when part of the terms which remained undecided affected EAC's remuneration. Moreover, the extrinsic evidence shows a contemplation of involvement, going beyond mere execution, of EAC's Board. 47 Accordingly, also there is nothing in the extrinsic evidence which would lead me to a conclusion different from that which I would have reached without resort to it, namely, that the reference on the face of the side letter to presentation to the Boards for execution did not contemplate that the Boards were a mere cipher, bound to execute whatever the executives put before them, but that they were entitled to approve or disapprove the draft agreements until they executed them. 48 It follows that if the parties, having negotiated bona fide, failed to reach final agreement, then either was at liberty to withdraw on reasonable notice from the interim agreement, as EAC has purported to do. No contrary or alternative proposition was advanced. 49 It follows that the summons should be dismissed. 50 I order that the summons be dismissed with costs. ********** 04/10/2007 - Spelling Correction - Paragraph(s) Date DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.