Supreme Court New South Wales Medium Neutral Citation: Southern Cross Autoglass Pty Limited v Protector Glass Industries Pty Ltd [2014] NSWSC 261 Hearing dates: 3-7 June, 17-20 September 2013, 3-4 October 2013 Decision date: 13 March 2014 Jurisdiction: Equity Division Before: Kunc J Decision: Judgment for plaintiffs; Cross-claim dismissed Catchwords: CONTRACT- General principles - Whether contract terminated for breach, abandoned or terminated by agreement - What constitutes repudiatory conduct -What is required for acceptance of repudiation ESTOPPEL - Estoppel by convention or representation - Detrimental reliance PRACTICE - Pleadings - Need to plead and prove readiness and willingness to complete contract - UCPR Part 14 r 14.11 - UCPR Part 14 r 14.14(2) PRACTICE - Amendment of Statement of Claim - Application during final submissions Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Barnes v Addy (1874) 9 Ch App 244 CGM Investments Pty Ltd & Ors v Chelliah & Ors [2003] FCA 79; (2003) 196 ALR 548 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Fazio v Fazio [2012] WASCA 72 Foran v Wight (1989) 168 CLR 385 at 441 Holland v Wiltshire (1954) 90 CLR 409 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634, 643, 658 and 664-7 Lo v Nielsen & Moller Autoglass (NSW) Pty Ltd [2008] NSWSC 407; (2008) 26 ACLC 497 Mannai Investment Co Ltd v Eagle Star Life Insurance Co Ltd [1997] AC 749 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 MLW Technology Pty Limited v May [2005] VSCA 29 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2013] NSWSC 764 National Autoglass Suppliers (Australia) Pty Limited v Nielsen and Moller Autoglass (NSW) Pty Limited (No 8) [2007] FCA 1625 Photo Production Ltd v Securicor Transport Ltd [1980] AC 927 Richards v Cornford [2010] NSWSC 99; (2010) 76 NSWLR 572 at 584 Ryder v Frohlich [2004] NSWCA 472 Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105 Category: Principal judgment Parties: Southern Cross Autoglass Pty Limited ACN 129 010 019 (First Plaintiff) Karin Elke Rankine (Second Plaintiff) Protector Glass Industries Pty Ltd ACN 001 427 176 Representation: Counsel: A.F. Fernon (Plaintiffs) A.J. Abadee (Defendant) Solicitors: File Number(s): 2009/289128; 2009/348087 Publication restriction: No Judgment 1These proceedings are a dispute between two family businesses engaged in the sale of car windscreens and related products. Without disrespect, I shall refer to the various family members by their Christian names. 2The third plaintiff (Geoff Rankine) ("Geoff") and his wife, the second plaintiff (Karin Rankine) ("Karin") operated the first plaintiff (Southern Cross Autoglass Pty Ltd ("Southern Cross")). Their son James also had a role in the business. 3The defendant (Protector Glass Industries Pty Ltd ("PGI")) is a company controlled by the Valkama family. Its founder and chairman is Aarne Valkama ("Aarne"). Although based in Switzerland, he visited Australia regularly. Aarne's son Asko ("Asko") lives in Australia and has held various roles in PGI. In addition to Aarne and Asko, two other PGI personnel played an important part in the events giving rise to these proceedings: PGI's former chief executive officer Mr Niko Lindell, and its former director and national sales manager, Mr Gregory Robertson. 4Southern Cross and PGI were competitors. The former operated from premises at Peakhurst in Sydney. The latter was based in Queensland but maintained a national sales network. Its New South Wales customers were serviced from a warehouse in Newcastle. 5Aarne thought Geoff had formidable sales skills. Over a period of a year the Rankines and the Valkamas discussed various options for a "joint venture" between them. Those discussions culminated in November 2008 with the execution of an asset sale agreement (the "ASA") between Southern Cross as vendor and PGI as purchaser. Geoff and Karin were also parties to the ASA. 6Under the ASA, PGI was to buy Southern Cross's assets and employ Geoff, Karin and another of their staff, Ms Kathy Kiernan. However, only a few weeks after the ASA was executed, a dispute arose between PGI and Southern Cross. 7Southern Cross sues PGI in damages for breach of the ASA and on other bases. Geoff and Karin sue for breach of the employment agreements they say they entered into with PGI as contemplated by the ASA or under subsequent agreements which they contend they made with PGI to mitigate their loss. The plaintiffs' claims are set out in their Second Further Amended Statement of Claim (the "Claim"). By its Defence (the "Defence") PGI denies liability and raises a number of special defences. PGI also prosecutes a Cross-Claim against the plaintiffs seeking indemnity under the ASA and by reference to the applicable consumer protection legislation. Finally, certain Local Court proceedings brought by PGI against Southern Cross and Geoff have been transferred to this Court. Southern Cross and Geoff admit the claim made in those proceedings. 8The plaintiffs are entitled to damages against PGI for breach of the ASA and their employment agreements. PGI's Cross-Claim fails. PGI is entitled to judgment in the Local Court proceedings. The facts 9I find the facts to be as follows. Most were not in dispute. If I have had to resolve a contest on the facts I refer to where in this judgment the reasons for a particular finding are set out. Quotations from documents are exact. In order to avoid excessive repetition, the expression "sic" has not been used. 10Geoff started in the car windscreen industry in 1974. An old school friend, Mr Carl Moller, was also in that industry. 11On 22 January 2004 Nielsen and Moller Autoglass (NSW) Pty Ltd ("NMA") was incorporated with Mr Moller as its sole director and secretary. From around April 2004 Geoff was employed as NMA's manager. About a year later Karin also began working for NMA. 12NMA traded from premises at Peakhurst (the "Peakhurst Premises"). NMA was the lessee of the Peakhurst Premises for a term of three years commencing 17 March 2004 and expiring on 16 March 2007, with an option to renew for a further three years. The lease expired and NMA did not exercise the option to renew. NMA continued in occupation as a month to month tenant. 13Between 2004 and 2006, Karin and Geoff made loans to NMA. 14In order to secure their past and future loans to NMA, on 20 October 2006 Geoff and Karin, in their capacity as joint trustees of the Rankine Family Superannuation Fund (the "Fund"), entered into a Deed of Loan with NMA (the "Loan") and NMA granted to Geoff and Karin, as trustees of the Fund, a fixed and floating charge over NMA's assets (the "Charge"). The Loan and Charge were subsequently stamped for duty and the Charge was registered with ASIC. As at the date of the Loan the principal sum due was $558,692.68. 15In September 2007 Mr Moller, while remaining a shareholder of NMA, ceased his active involvement with NMA, other than to continue as a commission agent for the supply of stock. Geoff became NMA's sole director and secretary and continued to manage NMA's business. 16In October 2007 Asko contacted Geoff to arrange a meeting which took place sometime later that month. At that meeting Asko raised with Geoff and Karin the possibility of a joint venture between them and PGI. 17On 26 October 2007 Ms Maggie Yeung Lo ("Ms Lo") obtained a judgment for $31,000 against NMA in the Federal Court of Australia (National Autoglass Suppliers (Australia) Pty Limited v Nielsen and Moller Autoglass (NSW) Pty Limited (No 8) [2007] FCA 1625). Ms Lo's company National Autoglass Suppliers (Aust) Pty Ltd ("NAGS") was a competitor of both PGI and NMA. 18On 19 December 2007 Karin and Geoff, as trustees of the Fund, issued a written demand to NMA for repayment of the Loan, which was then said to be $649,692.68. NMA did not repay the Loan or any part of it. (It was not an issue in these proceedings, and I make no finding, as to whether or not Geoff and Karin were entitled to make that demand.) 19Southern Cross was incorporated on 21 December 2007, with Geoff as its sole shareholder and director. 20Also on 21 December 2007, another creditor of NMA commenced winding up proceedings against NMA in this Court for failure to comply with a statutory demand which had been served on 22 October 2007. The statutory demand had been issued in reliance on a Local Court judgment against NMA delivered on 6 June 2007 for $34,466.18. 21In exercise of their power under the Charge, on 31 December 2007 Geoff and Karin appointed Geoff as controller of the assets of NMA. (It was not an issue in these proceedings, and I make no finding, as to the validity of Geoff's appointment as controller of NMA.) 22In his capacity as controller of NMA, Geoff decided that all of the assets of NMA should be transferred to Southern Cross in partial satisfaction of the debt which NMA owed to Karin and Geoff as trustees of the Fund under the Loan. No written agreements were prepared to transfer NMA's assets, including such rights as it had to occupy the Peakhurst Premises, to Southern Cross. However, from about 31 December 2007 Southern Cross commenced to operate from the Peakhurst Premises and to use all of the assets of NMA that had been the subject of the Charge. From that date Southern Cross paid rent to the landlord of the Peakhurst Premises. 23On 31 January 2008 Mr Christopher Wykes was appointed as voluntary administrator of NMA. 24On 6 February 2008 Asko reported to Aarne that he was continuing discussions with Geoff and Karin about a joint venture in Sydney. 25On 27 February 2008, in accordance with a resolution of NMA's creditors, Mr Wykes was appointed liquidator of NMA. 26In March 2008 Ms Kiernan left NAGS to join Geoff and Karin. 27On 2 May 2008, on the application of Ms Lo, this Court appointed two special purpose liquidators to NMA (Lo v Nielsen & Moller Autoglass (NSW) Pty Ltd [2008] NSWSC 407; (2008) 26 ACLC 497). The investigation of the circumstances surrounding the loan and the charge was foremost among the special powers given to the special purpose liquidators by the Court. The reason for their appointment was summarised by the Court: The overall thesis is, in summary, that all assets of value and some favoured creditors were, as it were, shifted out of [NMA] and into Southern Cross, leaving non-favoured creditors with [NMA] which was then subjected to voluntary administration in circumstances where no return for those remaining creditors could be expected. Part of the means of achieving this appears to have been actioned by the Rankines as holders of the charge affecting the whole of the company's property. 28The appointment of the special purpose liquidators was the subject of an article in the Australian Financial Review on 12 May 2008. On 30 May 2008 Mr Robertson forwarded a copy of that article to Karin under cover of an email saying "Have a fabulous weekend". 29Between May and November 2008 negotiations continued between the Rankines and PGI. Key features of those negotiations were: (1)Geoff and Karin attended meetings on behalf of Southern Cross. (2)Some or all of Aarne, Asko, Messrs Lindell and Robertson attended meetings on behalf of PGI. (3)PGI was aware of the special purpose liquidators and Ms Lo's determination that the Loan, Charge and transfer of NMA's assets to Southern Cross should be investigated (see paragraph [105] below). On various occasions Geoff and Karin themselves and through their lawyer, Mr Farshad Amirbeaggi, told Aarne, Asko, Messrs Lindell and Robertson that the transfer of NMA's assets to Southern Cross was legitimate and would survive any challenge. These conversations included a discussion devoted to the topic of the special purpose liquidators between Mr Amirbeaggi and PGI's solicitor, Mr Charles Sweeney. 30On 12 September 2008 Mr Robertson emailed to Mr Lindell a copy of the Australian Financial Review's May 2008 article about the appointment of the special purpose liquidators to NMA (see paragraph [28] above). 31On 13 October 2008 Geoff and Asko inspected potential new premises at Arndell Park in Sydney (the "Arndell Park Premises"). 32On 20 October 2008 the Rankines received a two page facsimile from Aarne. The first page contained this message: Dear Geoff and Karin, Please find enclosed my proposal considering your discussions with Asko on last Thursday in Sydney. I trust that you will be pleased for the offer in these troubled times. I regard this proposition as "winn winn" deal. It is essential that I would retain your unqualified enthusiasm for this joint venture. Best regards SGD (Aarne) PS Ring me to my mobile: [....] when ready. 33The second page was a document headed "Rankines Proposal (3 years)" (reproduced as Schedule 1 to these reasons). The proposal provided for PGI to buy all of Southern Cross' stock for $468,000, for Geoff and Karin to be employed by PGI for at least three years, for each of them to receive a 20% share of profit for three years as well as a buy-out bonus after three years. Making certain assumptions about the profitability of Southern Cross over the three year period, the proposal showed overall consideration to the Rankines for their participation in the transaction of $1,508,000. 34On 27 October 2008 the Rankines responded by email to Aarne: Dear Aarne, We thankyou for your proposal dated the 20th October 2008. Both Karin and I have read the document you have sent, and agree to the terms of this business venture. As I have mentioned previous all of the Rankines including James Rankine will give all the efforts and energy required to make this venture succeed. We all must put the effort in for this business to be successful so we can be the benchmarks of this competitive industry. In the future Karin and I will look into purchasing shared in the business. Best regards Karin and Geoff Rankine 35On 27 October 2008 Asko emailed Geoff: Geoff I am writing and sending Aarne's handwritten note of this morning as follows 'Dear Geoff and Karin, thank you of your acceptance of my offer 20/10/08 for a joint business venture in NSW. With commitment from both of us will no doubt make this venture exiting and profitable. We are now moving forward drafting the stock purchase document and employment contracts. Asko will be in Sydney on Friday to inspect with you the premesis available in Arndell Park. Everything is now just on fast track for earliest possible opening for business. I will be following closely the progress from overseas and are ready at any time to give my full support as required. Kind regards Aarne Valkama Good work and I am personally glad that we will be able to work together and make some good money. Cheers Asko. 36On 31 October 2008 Mr Lindell emailed to Geoff and Karin drafts of the ASA and their respective employment agreements for them "to review and discuss with Asko". While the plaintiffs had called in Mr Amirbeaggi to offer an explanation to PGI concerning the special purpose liquidators, in order to minimise their costs they did not retain Mr Amirbeaggi (or any other lawyer) to advise them about the terms of the ASA or their employment agreements. 37On 11 November 2008 Aarne emailed Mr Lindell with copies to Asko and Mr Robertson: Following our phone-discussion today I wish to confirm that the dedline for the completion of Rankin Purchase Contract ought to be this coming friday 14 November. Only minor amendments without lawyers involvement are allowed in our proposed contract. You will proceed with maximum urgency for signing the rental contract with the lessor who has accepted our offer for the spacious warehouse in Arndel Park. Asko will move to Sydney for a period required for the development our warehouse, the full range of products and the operations to well functioning level. PGI must issue a written notice to Rankins that the PGI owned truck in their temporary use must be returned to PGI by monday 17 November unless the purchase contract has been fully signed as stated above. Best regards Aarne 38On 14 November 2008 Mr Lindell emailed Aarne: Rankines Deal Geoff and Karin have accepted the agreement for Asset Sale as it was originally written without major changes. The only minor changes were to ensure all legal costs are pooled together (i.e. both parties pay 50/50 of all legal costs) and that PGI takes care of assigning leases (i.e. van leases) to ourselves. These are reasonable in light of us buying the assets. I will get them the latest copies tonight and get them to put their signatures on paper. Hopefully we will have original copies with his and Karin's signature next week. I believe this is very positive news. The warehouse in Arndell Park has been secured with a deposit and application for lease. Lease should be prepared next week and we can then hopefully proceed to move in quickly. 39On 15 November 2008 Mr Lindell emailed Geoff and Karin: Geoff, Karin as promised in my earlier email, please find attached the latest versions of the Asset Sale Agreement and Offers of Employment. As discussed and agreed with Geoff earlier today, can you please: a) Print 3 copies of each document and sign these 3 as originals? b) Can you please send these originals in an Express Overnight Bag to us at Beenleigh as soon as signed and as soon as possible? Any questions, please let me know. 40On 16 November 2008 Geoff executed the ASA on behalf of Southern Cross. Each of Geoff and Karin also executed the ASA on that day as covenantors as well as executing the offers of employment made to them by PGI. All of these documents were returned to PGI. 41On 19 November 2008 Mr Robertson and Asko executed the ASA on behalf of PGI in the presence of Mr Lindell. On the same day Asko emailed the Rankines (via their son James), Aarne, Mr Lindell and Mr Robertston: Having received signed contractual documentation from Geoff and Karin, we together, need to develop the single page 'spiel' document clarifying the new cooperation between the Rankin and Valkama families in the area of NSW for all employees, joint customer bases and competitors. We have identified that an extensive range of product, personalized and professional service, domestic manufacturing capability and the can do attitude of the only independent national distributor of ARG, (Automotive Replacement Glass) products will continue to offer a reliable and cost effective supply source. The sooner we announce our 'Family cooperation' the market will accept and respect our joint efforts to offer an alternative supply source. As we all have vested interests in this doc lets get the message right. Geoff and I think you need to develop the first draft, perhaps Greg you have the next go. Hopefully we have a doc for Friday. Asko. 42The relevant provisions of the ASA are set out in Schedule 2 to these reasons. 43The relevant terms of Geoff's employment with PGI are set out in Schedule 3 to these reasons. 44The relevant terms of Karin's employment with PGI are set out in Schedule 4 to these reasons. I shall refer to these together as the "November Employment Contracts". 45After the execution of the ASA and the November Employment Contracts, the parties continued to move towards the integration of the PGI and Southern Cross businesses. These included Geoff providing PGI with Southern Cross' customer price lists and details of Southern Cross' delivery runs. 46On 10 December 2008 Mr Lindell sent to Karin and Geoff draft copies of offers of employment for a number of Southern Cross employees, including Ms Kiernan. This was a step towards satisfaction of the condition precedent to completion of the ASA set out in Clause 4.1(b) of the ASA. 47On 18 and 19 December 2008 Geoff was examined by the special purpose liquidators. 48On 19 December 2008 the ACCC announced that it would not oppose the proposed acquisition of Southern Cross by PGI. This satisfied the first of the three conditions precedent to completion of the ASA set out in Clause 4.1(a) of that document. 49On 24 December 2008 the solicitors for the special purpose liquidators sent a facsimile to PGI copied to Mr Amirbeaggi (who was retained by Southern Cross, Geoff and Karin in relation to NMA): We act for the Liquidators of the above-named Company. Our clients originally were appointed Special Purpose Liquidators, and under the terms of orders made on 2 May 2008 by His Honour Barrett J, our clients were mandated to investigate specified matters. The terms of His Honour's orders can be seen at Lo v Nielsen & Moller (Autoglass) (NSW) Pty Ltd [2008] NSWSC 407. His Honour's judgment notes that, from public and other documentation made available to the Court in those proceedings, the former business of Nielsen and Moller had been substantially assumed by Southern Cross Autoglass Pty Ltd ("Southern Cross"), pursuant to the purported exercise of powers under a Deed of Charge dated 20 October 2006 ("The Charge") given by Nielsen & Moller in favour of the Trustees of The Rankine Family Superannuation Fund ("The Fund"). It appears that the business, before and after the purported exercise of powers under the Charge, continued at all times to operate from the same premises, with the same staff, and dealing substantially in the same products and with the same customers. According to evidence obtained by our client, Mr Geoffrey Rankine is and at all relevant times was a Trustee of the Fund. He is also a Director and sole principal of Southern Cross. He was also a Director of Nielsen and Moller, and was a principal controller of Nielsen & Moller at other relevant times. In Examination proceedings undertaken by our clients pursuant to Sections 596A and 596B of the Corporations Act 2001, conducted on Thursday and Friday, 18th and 19th December 2008, Mr Geoffrey Rankine, gave evidence that an arrangement in writing had been concluded, involving your Company or an Associate, for the sale, disposition or other dealing with certain assets. Mr Rankine's evidence specified those assets as being the customer base of the business. The purpose of this letter is to advise you that your Company has been mentioned in evidence in circumstances outlined above. Our clients' investigations are continuing, but from the evidence so far obtained, we are prepared to advise our clients that there now appears to exist substantial evidence that would enable our client to take action seeking to set aside the Charge on a variety of grounds. If that action is successful, it would have the consequence that we would advise our client each or any of the Fund, Southern Cross or Mr Rankine are, and at all relevant times have remained, to the extent of their involvement, Trustees for Nielsen & Moller of the former assets of that Company, including for present purposes its customer base and all profits derived from trading in that business. 50On 5 January 2009 Mr Lindell sent a copy of the 24 December 2008 letter to Geoff with a letter to him from PGI. The email asked if Geoff could "please review this information and respond to our concerns as quickly as possible". PGI's letter to Geoff said: PGI has received from McInnes Attorneys the attached letter. It refers to the investigations into the Nielsen & Moller (NSW) Pty Ltd liquidation proceedings. The concerning part of the letter is the last paragraph which refers to the advice McInnes Attorneys plans to provide to its client. It mainly mentions the fact that they are prepared to advise their clients that there now appears to exist substantial evidence that would enable their client to take action seeking to set aside the Charge on a variety of grounds. As we understood from conversations with you, the investigations were winding down. However, this now appears not to be the case. We believe this truly is a matter for you to sort out with your lawyers but at the same time it has an impact on our combined efforts. As you may recall, the main thing for PGI has been that we would in no way become involved or implicated in this legal matter. Thus, it would be the position of PGI at the moment that we cannot move forward with the deal until this legal matter is resolved or we receive full assurance that we will not be drawn into legal actions between Southern Cross, Nielsen & Moller and any other third party. What is the latest status and when and how can PGI be assured they cannot be drawn into this conflict? In the mean time, we want to continue to work in harmony with Southern Cross, both helping each other until any encumbrances that may exist as a result of legal action are satisfactorily resolved. Thus, can you please ask your lawyers to provide us a full written briefing on what is the latest status and what are the next steps that will be taken to resolve this investigation? If you have any questions, please do not hesitate to contact us. 51Sometime in January 2009 after receiving this letter Geoff and Karin spoke to Mr Lindell. They said they would be responding after they had consulted Mr Amirbeaggi, who was then on holiday. There never was a formal response from Geoff, Karin or Mr Amirbeaggi. It was PGI that pushed matters along. 52On 21 January 2009 PGI entered into a lease of the Arndell Park Premises for a three year term commencing on 1 January 2009 with an option to renew for a further three years (the "Arndell Park Lease"). 53On 23 January 2009 Mr Robertson wrote to Southern Cross, Geoff and Karin on behalf of PGI (the "23 January Letter"): This is a formal letter to inform you personally and Southern Cross Autoglass Pty Ltd ("Southern Cross") that as a result of recent evidence in terms of the legal matter which you have going on and its potential impact on the business assets of Southern Cross, Protector-Glass Industries Pty Ltd ('PGI') has no other choice than to issue you with a notice period to try to resolve the legal matter before we decide whether the Asset Sale Agreement is capable of completion. The basis for this decision is legal as the evidence our lawyers have been able to gather indicates a level of uncertainty over the title and ownership of Southern Cross' assets and in particular the inventory. Effectively, PGI believes it is caught in the middle because on one hand your lawyers are saying that everything is alright whilst on the other hand, court documents express uncertainty about the validity of the Fixed and Floating Charge. Further, no details have been provided to us to explain the transactions under which the Fixed and Floating Charge was used to convey the assets from Nielsen & Moller to Southern Cross. Thus, there are serious concerns that PGI may eventually face litigation after proceeding with the deal as PGI has no certainty over ownership of the assets. All of the above means that currently there is no other choice except to provide a notice period of thirty (30) days from the date of this letter during which you need to resolve the legal matter that is causing uncertainty over the fact that Southern Cross does not seem to have an unqualified right to sell its assets to PGI. This is the legal advice we have received and we must stand by it. This is based on the stance that PGI has clearly stated from the outset that if there was any hint of us being drawn into the legal matter, we would not be able to proceed with our commercial arrangement. We have been advised that the best ways for you to resolve the legal matter within the notice period would be either: (a) Obtaining a declaration of a Court that Southern Cross has good title to the business assets it is planning to sell to PGI as stated in the Asset Sale Agreement; or (b) Conclude a 3-way deal between you, PGI and the Special Purpose Liquidator. This 3-way deal would involve all parties getting together prior to any deal being completed between us and ensuring that the legal matter is settled. This could be achieved by getting a release from the Special Purpose Liquidator that you and PGI would not face litigation in the future as Southern Cross has obtained what PGI deems unqualified ownership of its business assets. If either one of the above is obtained within the notice period, PGI would then be happy to proceed with the Asset Sale Agreement because PGI still views that a potential business opportunity exists. Hopefully you understand and feel the same way that any potential business opportunity should not be hindered by a legal matter which could paralyse both parties if we join together without the assurance that you and PGI have been released from any further litigation. PGI views that such a scenario can only be achieved once you have settled your legal matter. We hope the prospect of a good business opportunity will now drive you to settle all of the legal matters as appropriate so that we can create value for you and PGI in the future. Naturally, in the mean time PGI is ready to fully co-operate with you so that the business assets will be saved for mutual benefit. As you know, currently we have in place a temporary arrangement to support specified aspects of the Southern Cross business, which includes inventory. However, PGI believes that if at the end of the thirty (30) days your legal matter has not been resolved, we will need to review the support arrangements with you. Further, if at the end of the notice period you have been unable to resolve the legal matter and PGI is still unclear over the ownership of the Southern Cross business assets, we will have to terminate the Asset Sale Agreement. This is based on the fact that you have been unable to provide to PGI evidence that Southern Cross has good title to the business assets. This has not been an easy decision and we have considered many different solutions before taking this course of action. Crucially though, the communication that has been directly aimed at PGI has reduced our confidence in the fact that we would not be drawn into your legal matter. Thus, this left us with the only option of issuing this letter. We hope that you can resolve the legal matter within the notice period. 54Mr Robertson gave evidence that in early February 2009 he had a telephone conversation with Geoff where the latter had said that he (Geoff) felt that the NAGS claim would potentially affect the arrangement that was being made between Geoff and PGI. I do not accept such a conversation took place (see paragraph [106] below). 55Within days after sending the 23 January Letter, PGI personnel adopted a mindset that some arrangement other than that contemplated by the ASA would be entered into. There was a clear assumption on their part that Southern Cross would almost certainly not be able to satisfy the requirements set out in the January 23 letter. 56So it was that on 3 February 2009 Aarne emailed Mr Lindell with copies to Mr Robertson and Asko: I suggest that an action plan will be drawn up in written format for PA NSW development. The plan should be updated weekly after reviewed in PGI Sales Meetings and faxed and/or e-mailed to above mentioned executives plus AMV. Few suggested inclusions for the plan: 1. Recommended winding-up of Southern Cross by end February. 2. Southern Cross stops trading by end February - sells stocks how, when, to whom - close Peakhurst or continue partially as store facility, when? 3. Arndell Park start trading 15 February - Kathy employed from 9 February - start-up staff, who doing what - southern run start-up 15 Mach 4. Asko stay in Sydney until 15 March - tasks in addition to setting-up racking and stocks 5. Geoff's engagement when legal case allows - perhaps selling on commission until fully employed - when employed by PGI will manage PA NSW, continue selling visit throughout the state, salary & profit share as already agreed 6. Karin's engagement to be reconsidered depending on productive role 7. Profitability Statements and Budgets prepared on various, progressive, stages of development The above is a starter for a living plan with constant omissions and insertions. Perhaps Greg could consider something similar for the remainder of the network in addition to plans that each branch manager should prepare for their own branch. ... 57On 4 February 2009 Mr Lindell replied to Aarne saying that he (Mr Lindell) and Mr Robertson would be in Sydney the next day and, after discussions with Asko, would prepare an action plan. This drew a response from Aarne to Mr Lindell, copied to Mr Robertson and Asko, on 9 February 2009: Niko, You did not mention Rankins, Kathy or Southern Cross for your visit to Sydney. It is shortsighted if you did not plan to see our JV partners and the key sales person while in Sydney. The most important party in our plans for NSW is Southern Cross and indeed for the future of PGI is Southern Cross. It is easy to invest into a new facility but to make it pay, get the sales, is another matter. I am more interested in information and latest news conserning Rankins current state of operation than Arndell Park which is known to us. Would it be possible that our JV partners could be upset and feel suspision after learning that you have been in town and did not wish to see them and let them know about our latestplans. I just hope that this episode does not endanger our efforts in NWS which are sop vital to us. These are my views as I see them from here. I hope there is something that I do not know related to this matter. I am looking forward to hear both of your views. As a last note we must not let Asko alone being in charge of the good relations with Rankins and Kathy. 58On the same day Mr Lindell responded to Aarne, copied to Mr Robertson: My email below may not have directly mentioned the Rankines but most certainly our plan was to meet them and Kathy if they were all available. As it turned out, when I rang Geoff Rankine as the main contact in relation to this deal, he was unavailable on Thursday as he was out delivering until late in the evening. I also believe it would not have made sense to just meet with Karin and Kathy as they could have miss-communicated information back to Geoff keeping in mind what Greg alluded to in his earlier email about Karin. I also did speak with Karin on the phone on Thursday when we were down in Sydney. I discussed with her mainly the fact that PGI was still waiting for a formal response from them to the letter we had sent them. Karin said they were going to see their lawyer the next day, being Friday. They would then get in touch with me about what their lawyer had told them. Karin contacted me on Friday and said that their lawyer would be sending through a written response on Friday afternoon. It is now Monday afternoon and I have received nothing from them. I believe we have kept in touch with them as much as we can given the current situation of the deal. As far as I can see it, we do not yet have an Asset Sale Agreement deal and this is the key decision for any other deal we may finalise with Rankines. Thus, we have kept Rankines in the loop as to what we are doing at Arndell Park and even Geoff has seen this first hand as he visited the branch. They know we are setting everything up that is required to operate out of Arndell Park. However, the Rankines keep asking about the opening date which we can only finalize now with Asko after seeing last Thursday at what stage the warehouse setup was and we cannot give any firm commitment to Rankines until we have clarification on the legal issue. They keep pressuring PGI to say what exactly are the plans (i.e. how we plan to service their customers) and we keep telling them that we are setting up. This is complicated by the fact that they have not resolved the legal matter as they firmly believe it is all fine but this really needs to be the case before we can take any other completion steps on the Asset Sale Agreement. My view of the matter is that we are supporting Rankines as they need with stock and through this they can keep supplying their customers. At the same time, before we can take any other specific steps with Rankines, we need the legal matter clarified as we requested in the letter. PGI has received nothing concrete in writing yet and only verbal indications that actually everything is alright and that there may be other options. I strongly believe that before we can incorporate Rankines into any next specific steps, PGI needs to know where we stand on the deal. ... 59Aarne replied to Mr Lindell on the same day, copied to Mr Robertson and Asko: Please refer to my e-mail today to Greg. Yes we can give commitments to Rankins which will ensure that JV will take place in some format. We already a committed to sell SC glas at special price. The JV will take place sooner than later and this we need to express to Geoff. We shall meet and discuss to find a way dispite the legal letter. The stock issue is already almost obsolete as there is very little stock left by now. We must make Geoff and Kathy feel that we are building a new home for them in Arndell Park. 60On 12 February 2009 Mr Robertson emailed to Asko: In approximately one weeks time, the 30 day notice period to the Rankines will have lapsed. It is a remote possibility that the Rankines may be able to satisfy the legal requirements that PGI have requested by then. I doubt it. I am of the strongest belief that we must have an option #2 to fall back onto if they cannot satisfy the legal requirements. If we do not have a second plausible option, this could become very messy. ... 61After some further observations, Mr Robertson's email of 12 February 2009 then attached what he described as "a second option in a bid to capture Southern Cross key personnel and customer base". This came to be referred to within PGI as "Option 2": Protector Autoglass NSW - Option 2 alias 'The Agreed Arrangement' (TAA) Introduction: This draft option is intended to fast track an agreed business arrangement between the Valkama and Rankin family to deliver beneficial outcomes to both families. This simplistic draft may form the basis for improved enhancements by NL, AV, AMV and GR to deliver a version of the original intended outcome. That being the transfer to PGI of the Southern Cross customer base and identified key personnel from Southern Cross. The cornerstone of this proposal is to deliver on the above whilst eliminating any exposure to potential future claims by NAGS on existing ex Nielson & Muller / Southern Cross assets. An option such as this, acknowledges that the lack of any financial contribution to the significant investment at Arndell Park should be reflected in reduced incentive participation by Geoff (unless Geoff is prepared to make an upfront monetary contribution to cover his 49% share of the costs to date in setting up Arndell Park). This option delivers the Rankine Family an exit plan from Southern Cross Autoglass Pty Ltd that they have been seeking and negotiating for some time. The benefits of our offer to the Rankines include: ● Elimination of Financial stress ● A career path for young James Rankin ● Lifestyle improvement for Karin & Geoff Rankine ● Continuity of supply to all primary and casual customers of Southern Cross ● Ongoing employment of Kathy Kiernan The 'Agreed Arrangement' (TAA) 1. The business entity named Southern Cross Autoglass will cease trading as at March 1 2009. 2. With the exception of identified staff, there will be no asset contribution to the new venture from SCA (specifically any asset that any other party may deem to have any current or future claim on) 3. Peakhurst location will not remain open as part of Protector Autoglass NSW (PA-NSW) unless conclusive documentation can be provided that it can deliver consistent profitable results immediately without affecting existing sales opps and potential profit of the Arndell Park 'super branch'. 4. Identified Key personnel from that business entity will be offered employment by (PA-NSW), under new contracts. 5. Kathy Kiernan will be offered employment as Sales representative for PA-NSW to promote overall Autoglass and accessory sales for PA Arndell Park & PA Newcastle, commencing February 23 2009 based out of the new site at Arndell Park. Kathy will participate in a similar incentive scheme currently enjoyed by all other PGI sales staff throughout Australia. At this time, Kathy would agreed to promote PA-NSW exclusively. 6. James Rankin will be offered a permanent position within the new Arndell Park super branch on a career path potentially leading to a management position within PA-NSW, commencing February 23 2009. At that time, James would agree to promote PA-NSW exclusively. 7. Geoff Rankin will be offered a two year contract* inclusive of a profit share incentive, based on the end of financial year trading result of PA-NSW (ie Arndell Park & Newcastle) but which better reflects the heavily reduced investment level of SCA into the Arndell Park business venture. His commencement date will be negotiated by AV, AMV and Geoff given that he may be required to assist Karin in finalizing the trading activities and liquidation of assets in relation to the permanent closure of SCA. Geoff's role in the new venture will carry the title of NSW Regional Manager reporting to Greg Robertson. Geoff will be expected to be intrinsically involved in the successful transition of northern NSW customers, (including the implementation of the 'northern-run'). However, David Hartcher, Newcastle manager will continue to report directly to Greg Robertson (pending further discussion, Glenn Kelly who used to manage our Sydney operation at Auburn, will be appointed as Arndell Park Branch Manager, directly reporting to Geoff Rankine) 8. Kathy and Geoff upon appointment to PA-NSW will immediately promote Protector Autoglass to all potential customers throughout NSW, regardless of who are the principal or casual current Autoglass suppliers to the NSW customer base. 9. Based on the significant investment made solely by AMV in establishing Arndell Park, and all the benefits that the Rankines will receive (outlined in the introduction to this proposal), Karin Rankine will receive (outlined in the introduction to this proposal), Karin Rankine will agree to exclusively promote PA-NSW during and after the winding up of SCA. At the discretion of AMV and AV, Karin may be offered a short term contract of say 3 months at Arndell Park to assist in transitioning customers over to PA-NSW. 7. It is recommended that within Geoff's appointment contract there be will be a carefully worded clause designed to protect PA-NSW from behavioural distractions - related to his previous business activities, that may have detrimental repercussions to his commitment to the new business entity. (such as a vendetta against any individuals or organizations; or lengthy absences from work due to the pursuance of court actions, etc) Further, and more importantly is the need for a clause to ensure that the Rankine family, for an agreed period, will not engage, or be an interested party, in any alternative automotive glass business in competition with PGI. 62Option 2 became the subject of an email on 16 February 2009 from Mr Lindell to Aarne, copied to Asko, Mr Robertson and others: The 30 day notice period for the Rankines Deal as an Asset Sale Agreement is coming to an end within the next week. From the verbal feedback and discussions with Geoff and Karin, it is unlikely that they will be able to provide the proof of ownership PGI is attempting to obtain. However, based on comments from Rankines and Asko's report from his visit to Peakhurst last week, it would appear that the Rankines are quite willing to entertain another, simple option. I have attached a draft document of the proposal put together by Greg. This is the draft overview of the proposal and naturally we would sit down with the Rankines to figure out the details. If you could please review this proposal and provide your instructions on this deal. I am sure you, just like everyone else, are getting very anxious to sort this matter out and get on with doing quality business. Kathy also at the moment is looking for answers and I have promised to call her tomorrow to explain the latest. I am sure, if we can agree with Rankines to mutually cancel the Asset Sale Agreement and set another deal, then Kathy could start to work in Arndell Park as soon as possible. I would think this could be in the next few weeks. I eagerly await your instructions in relation to the above to get this matter moving forward and becoming beneficial for all concerned. 63The "draft document of the proposal put together by Greg" is the document reproduced at paragraph [61] above. 64On 16 and 17 February 2009 Aarne emailed further comments about Option 2 to Mr Lindell, copied to Mr Robertson and Asko. On 17 February 2009 Aarne emailed Mr Lindell, copied to Asko and Greg: Rankins deal no. 2 must not take weeks to be concluded. I have given Asko a deadline 1 March. Kathy is to start even sooner on the original contract proposal which has as I understand been already agreed on. I am not comfortable with the Greg's proposal. Perhaps it is better that we put the ball first on Rankin's court. If you give Asko a short list of topics to be considered with your and Greg's points of views and let Asko to meet Geoff for seeking Geoff's wishes for engagement. Asko and Geoff should then prepare a simple draft and acknowledge it. After this we could draw up ouir proposal. 65On 18 February 2009 Asko and his then partner Ari met with Geoff and Karin at the Arndell Park Premises. After the meeting he prepared minutes which he circulated to Mr Lindell and Mr Robertson the next day. I accept those minutes as an accurate record of what occurred: Internal draft only Niko, Greg Here are my minutes from yesterdays meeting with G&K R, I was pleased with the spirit of the meeting and Ari could not find fault in their sincerity. Minutes of meeting 18/2/09 GR, KR, AV, AS Arndell Park NSW. Asko scheduled a meeting with GR&KR (SCA) to discuss the details of 'option B' presuming that no acceptable assurances are forthcoming regarding the asset sale agreement. G&K R are passionate to continue servicing "their customer base" as employees of PGI in the region of "NSW". They are also extremely hellbent on 'taking the bitch down', and will continue to pursue their legal rights until they do so. Their estimate was twelve to fourteen months of legal action. It was agreed that Peakhurst will cease trading on 1/3/09 and that the Rankines will never go into business again. They made an offer to give us a fridge, lounge, table and chairs ... anything we needed for Arndell Park as they will not be needing them anymore. I have suggested that we will be there on Saturday with our truck, as we need many items they they no longer have use for. SCA have approx: 6000 units of non PGI stock on hand and I suggested that we may assist Geoff in finding non PGI/SCA customers for that stock i.e., Dave Spiteri, John Wilson, Economy Bob .... in order to not disturb any potential sales from Arndell P. Will we continue to supply product until 1/5/09 for SCA to liquidate stock in prepackaged box lots? AV said yes, only if sales are to non PGII/SCA customer base. Kathy will commence employment with PGI 23/2/09 and we must determine a suitable vehicle for her before then as she cannot drive a manual (apparently). Karin would start 1/3/09 and drive the Falcon ute ?, as we agreed that MERCEDES company cars are inappropriate at our new branch. $50K per annum, etag, fleet card and phone. Not interested in % bonus. Geoff would potentially start 1/5/09 @ $65k +++ after stock liquidation that does not impact detrimentally to PGI sales, on a performance incentive (% of nett profit) as agreed with Aarne. A pricing meeting has been scheduled for 7.30am Monday 23 to determine if the new PGI pricing is accepted / rejected by the SCA group, GR, KR, KK, i.e., do they want a job. AV and SW will visit Jennigns and Campsie on Friday to initiate new pricing, product and delivery terms and commitments. 66At the 18 February meeting, Asko made clear that PGI would not complete the ASA if Southern Cross failed to satisfy the requirements set out in the 2013 January letter. However, the concept of "termination" of the ASA was not expressly discussed. The reasons for this finding are set out in paragraph [107] below. 67On 19 February 2009 Aarne sent an email to Mr Lindell, copied to Mr Robertson, commencing "As Asko and Geoff are getting near to completion of initial agreement for Deal No. 2 it is time to prepare drafts of Employment Contracts for Geoff, Karin and Kathy. It seems to me that the drafts already prepared in relation to original Deal No. 1 will apply in most parts" ... Aarne then goes on to make some further suggestions before concluding that "there may be further amendments once the initial overall agreements proposals have been considered between Asko and Geoff". 68On 20 February 2009 Geoff and Karin sent a communication on Southern Cross letterhead to all of their customers: 20/02/09 TO ALL OUR VALUED CUSTOMERS .... Unfortunately the time has come that we can no longer sustain our position within the wholesale market. Due to circumstances beyond our control we are now in a position that we can no longer keep trading. We have put all we can into the fight to keep Southern Cross Autoglass in the wholesale market. But unfortunately we have not been able to see our way clear of the obstacles that have been put in our way. Our service to you will continue in the same way you have always been used to. As from MONDAY 23/February/2009 Kathy will take up a position with PROTECTOR AUTOGLASS INDUSTRIES. Following Kathy will be Geoff and Karin the following week MONDAY 2nd/MARCH 2009. Our phone lines will be diverting to Protector Autoglass's new branch at Arndell Park The Arndell Park branch is well equipped with stock and consumables. Please be assured we will keep all deliveries and service levels the same. Our Customers have always been our first priority and will remain so. We have truly appreciated your loyalty and continued support and friendship throughout what have been extremely stressful and trying times for us all. We hope that you will all stay with us in our new venture as we all move forward into the future, and what we hope will bring better times for all of us. Once again a big THANKYOU to all of you for supporting us in the Market Fondest Regards Geoff and Karin Rankine 69When PGI became aware of Geoff and Karin's circular letter to their customers, it came as a considerable surprise to PGI. Meanwhile, on the same day (20 February 2009) Asko emailed Aarne, Mr Lindell and Mr Robertson: Hey Guys here is the current status and my thoughts on our strategy going forward with option 2. I spoke with Geoff 1.47pm today as he rang me to inform me that he has informed his staff that SCA will cease trading as of the 28/2/09, and that new arrangements have been made with PGI. The Arndell Park branch is ready to service our existing Sydney account customers from Monday 23/2 and SCA customers from 1/3/09 when Karin joins us. Karin is not interested in 'Profit Share' and I suggest we offer her $50K, ute, etag and phone. Geoff could be offerd $55K, etc and also a handsome 15% nett profit share for him to ensure Karin, Kathy and himself do their best to bring the customers home. To drive this home I believe the third year profit should increase to 20% and then we renegotiate. This will spurr Geoff on as they can really see some $$$$$ by then. Then retire to Perth (Karin's dream) I also suggested to Geoff that we could offer support to assist him in liquidating the SCA stocks, utilizing PGI market knowledge by indicating potential NAGS customers on a National basis. No Mercedes Benz company cars but one Falcon ute (Karin) and one Hilux Canopy Ute (Geoff). Both ex SCA. James Rankine could be offered a driving position after he has helped Geoff move the stock with our assistance / guidance. Food for thought, look forward to suggestions. 70Also on 20 February 2009 Mr Amirbeaggi, as solicitor for NMA, Geoff and Karin, sent an email to the special purpose liquidators' solicitor which included: We note that in your letter to Protector Glass Industries Pty Limited dated 24 December 2008, you state: Our clients' investigations are continuing, but from the evidence so far obtained, we are prepared to advise our clients that there now appears to exist substantial evidence that would enable our client to take action seeking to set aside the Charge on a variety of grounds." Our clients' have now suffered significant loss in the trade of their enterprise by reason of your clients' interference in their commercial affairs, and we are in the process of preparing a Statement of Claim seeking Orders against your clients for damages. As earlier requested of you, might we kindly have you provide particulars of the evidence available to you and your clients at the time of writing of the 24 December letter that satisfied you there were a variety of grounds upon which your clients could have the Charge set aside. Might we have any such particulars from you within 7 days of this correspondence. This is an "open" communication. Should our client receive the particulars from you after the time stipulation given, and once proceedings are on foot, they will tender a copy of this, and earlier correspondence on this issue, before the Court in support of their application for Order and without limitation for costs. 71During the day of 20 February 2009 Mr Lindell sent an email to Aarne, Asko and Mr Robertson which commenced: All, Please find attached a summary document of the key points I believe need to still be agreed with Rankines if the proposal no.2 will work for all parties concerned. If you can please review this document and provide your views, that would be great. Also, please let me know if there are key points I have missed and we can incorporate these. Asko - I believe that at Monday's meeting it will be imperative that you discuss each of these points and then get Rankines to sign this document so that they indicate their understanding. 72Mr Lindell's summary of key points was: The key points that need to be agreed by all parties involved are: (1) The previously signed, yet not completed, Asset Sale Agreement will be mutually cancelled by PGI, Southern Cross and the Rankines and all parties release each other from any further and future obligations. All parties agree this agreement is no longer valid. (2) As already indicated, Southern Cross will be ceasing to trade on 28 February 2009. PGI will be taking on any appropriate ex-Southern Cross employees at its own independent branch in Arndell Park. Some ex-Southern Cross employees (i.e. Geoff, Karin, Kathy) will be offered employment contracts on the basis that they will be trying to entice as many ex-Southern Cross Customers to be serviced by PGI. (3) The Rankines will not be required to make any financial contribution to setting up Arndell Park. They will be renumerated as appropriate through employment contracts with PGI. (4) The employment contracts for Geoff and Karin will still include restraints of trade clauses. This is still appropriate because as PGI employees they will still be able to maintain contract with the customers and PGI needs some assurances that the customers that they are able to entice to be serviced by PGI will remain with PGI. (5) The customer base from Southern Cross will need to be serviced at PGI set prices. As the branch at Arndell Park is likely to initially be top-heavy in terms of senior personnel, it would be detrimental to be providing ex-Southern Cross customers lower prices than loyal PGI customers (i.e. PH Jennings) (6) Rankines acknowledge the fact that they have an on-going legal case that is related to Nielsen & Moller. If the impact of this legal matter becomes too severe and impacts productivity of Geoff or Karin as employees, the parties will mutually agree to review the employment contracts in light of what is best for all concerned. (7) The stock from Peakhurst, which will remain property of Southern Cross, will be liquidated in such fashion as to cause minimal disruption to the Arndell Park operation. 73On the evening of 20 February 2009 Mr Lindell circulated by email to Aarne, Asko and Mr Robertson further draft employment contracts for Geoff, Karin and Ms Kiernan and invited comments. 74On 22 February 2009 (a Sunday), the deadline given by PGI in the 23 January Letter expired. At no time thereafter did PGI purport to terminate the ASA by reference to the 23 January Letter or for any other reason. 75On 23 February 2009 Ms Kiernan commenced work with PGI. 76On the morning of 23 February 2009 Asko met with Geoff and Ms Keirnan at the Arndell Park Premises. He prepared a set of minutes, which I accept as accurate save that they are dated "22/2/09", which included: AV met with GR at 7.15am to reconfirm the timeline agreed last week for employment and the transition of customer service operations. Followed by discussions regarding the primary terms of his and KR's employment contracts. It was agreed that KR would commence employment with PGI on 1, 3, 09 on a normal employment contract of $50k as operations manager, focussing on accurate administration, inventory management and customer service. GR would commence employment on 1/5/09 on a normal contract of $60k and an incentive bonus of 15% of nett profit to be paid biannually. GR will liquidate his stock to non PGI or current SCA customers and PGI would assist him in doing this, not only in NSW but interstate. I had suggested that PGI could continue to supply GR untill 1/5 but AMV thought not. AMV suggested that after the 1/5 we may purchase remaining saleable products. GR offered PGI a similar rental agreement for his small truck come Monday 1/3 and has allowed Kathy to drive the Falcon ute until PGI come up with a four door sedan. Discussions were held between Kathy, GR and AV regarding pricing, service levels and operational requirements to successfully transition the SCA customer base. Detailed listings of all the individual runs and Metro delivery opportunities were drawn up commensurate with the operational detailed plan and timeline. Pricing is the most significant point of conjecture with GR and KK suggesting that we do not change the current SCA price to the Sydney Metro customers. ... 77Mr Lindell's suggestion that his "key points" document be discussed and then signed at the meeting was not taken up. Termination of the ASA was not discussed at the meeting, the bulk of which after dealing with the matters set out in the preceding paragraph was devoted to discussing pricing issues. The reasons for this finding are set out in paragraph [109] below. 78Early on the afternoon of 23 February 2009 Mr Amirbeaggi spoke to PGI's solicitor, Mr Sweeney. Shortly after their conversation, Mr Amirbeaggi sent an email to Mr Sweeney under the subject "Southern Cross Autoglass Pty Limited and Protector Glass Industries Pty Limited - Asset Sale Agreement": Further to our telephone conversation earlier this afternoon, might we firstly have your advice as to whether your client will allow ours a further period of say 7 days in which to consider and respond to the letter dated 23 January 2009 (noting that the writer has been away for most part of the 30 day period, and the lack of attention given to it may in no way be attributed to our client). Secondly, might we have your advice as to whether your client is prepared to adopt a status quo whilst our client brings an application before the Court to clarify the concern over the threats made by the Liquidator (whilst may consume a period of up to 6 months, even with expedition). In the absence of some response today, noting it is the last day under the notice issued by your client, we will seek our client's instructions to prosecute an application for Specific Performance of the Asset Sale Agreement (noting that the threat alone by a Liquidator to bring an action does not materially effect title to the Assets, and moreover that your client was on notice of the concern it now complains of prior to entering into the Asset Sale Agreement). 79Later on the evening of 23 February 2009, Mr Lindell sent an email to Geoff attaching Mr Amirbeaggi's email to Mr Sweeney: As promised and discussed, below is the email that Farshad had sent to our lawyers. Please can you clarify this email and explain to PGI what it is alluding to given that it was our understanding that we were looking to move on from this deal and are well advanced with Option 2 as you have been discussing in detail with Asko. Just give me a call tomorrow once you have had clarification from Farshad and let me know what kind of communication PGI should have with Farshad. 80Geoff did speak to Mr Lindell (on the afternoon of 25 February 2009) and confirmed the plaintiffs had legal advice that they could compel PGI to complete the ASA (see Mr Lindell's email set out in paragraph [84] below). 81On 24 February 2009 Aarne emailed Mr Lindell: Asko hasnot been very clear on the new details after the last discussions with Rankins and Kathy. However, Kathy's contract is as previously and can be confirmed' Karin is on Doll 50,000, duties as Asko defined plus some from my suggestions. Let me have a look at the final contract. Geoff's contract can be drawn somewhat later. He will be on Doll 60,000 plus profit share on 15% per annum for first two years and thereafter 5% and negotiable. Other terms as suggested in my previous proposals and perhaps other considerations. I like to see a draft. Other key points related to Rankins Deal you could plainly confirm or advice by letter to SC and Geoff as appropriate and as we see them. Let me have a look at the contract and letters before sending them out. 82On the same day Mr Lindell responded to Aarne: In relation to your email below, since Asko has now taken over the negotiations and leading this deal, I am also not clear on all the new details. As discussed with Asko, there is nothing substantial on paper yet, especially related to any new "deal or arrangement" with Rankines. The latest document I have seen was Asko's minutes this morning. I have attached Kathy's contract and Karin's as per you instructions below. Any comments, please let me know. In terms of the key points going out in a letter to Southern Cross and Rankines about new arrangements, I view the situation as such that Asko is in the best position to complete these. I am still very much involved in getting rid of the Asset Sale Agreement as it is unlikely to be completed. However, as I understand, Asko, as per your instructions, is responsible for finalising this Option 2 deal and the majority of the details that go into the deal. Naturally, I can assist in all ways possible if Asko provides drafts and all of the information he has discussed face-to-face with Rankines and Kathy to ensure that all information is in the best business interest of PGI. Additionally, there has been indications that PGI will be trying to service any ex-Southern Cross customers that wish to buy from PGI starting Monday, 2 March 2009 with Karin's and Kathy's help as they will be PGI employees then. Since I have not been part of the detailed discussions with Rankines and have not had all of the information (but have been privy to significant amounts), I have not been in control of this deal going through in the proposed Option 2 format. From this position, I see that there is a significant amount of detail that still needs to be finalized in the proper manner before PGI could start to service any ex-Southern Cross customers. Just as an example, my understanding is that we are still negotiating the details on other employees who would be required to do deliveries. I know Asko has mentioned a driver but I believe no package has yet been detailed under this new arrangement. Also, since only now we are getting any sensible detail on this Option 2 deal, we may struggle to have vehicles and other things properly arranged by Monday (i.e. properly in PGI's name for insurance purposes, etc). I just want to make a note of these points as naturally all the management team members can assist as required in any way to ensure we get things moving with Rankines but without proper communication and direction from Asko (as he knows what is truly being said between Rankines and him), we cannot simply guess what needs to be done by other PGI staff if things are to get going in an effective and quick manner. ... 83On 25 February 2009 Aarne responded to Mr Lindell's latest email, copied to Mr Robertson and Asko. Before giving some specific instructions about the terms of new employment contracts, Aarne wrote: I am not either clear on the new deal with Rankins. Thanks haven that we have Asko on the spot in Sydney to drive this through. I do not think anyone else could do it for us considering the ways Rankins are doing business. We just need to keep in close touch with Asko and assist him to drive this through. The Deal No. 2 with Rankins is really no deal at all. We merely attempt to employ them utilising their talents to get all their previous customers and built up the vitally important volume of sales for PGI. The original Asset Sale Agreement is now lapsed and canselled and we should not waste any more time for it. 84On 26 February 2009 Mr Lindell forwarded further drafts of the proposed employment contracts to Aarne as attachments to an email which included: I understand and hopefully that has been coming through in my previous emails that Option 2 is not really a 'deal' but as part of Rankines and Kathy becoming employed, we specify certain goals that they need to achieve when they become PGI employees. However, I believe even in this case at the very least the new employment contracts should be signed to ensure Rankines are on board with Option 2. As a point of clarification, the Asset Sale Agreement has not lapsed. It is still awaiting formal completion or cancellation. In terms of the latest information that you should know is that I spoke with Geoff yesterday afternoon and he indicated that he was still discussing the options with his lawyer. He feels that Option 2 is the way forward but at the same time he made it very clear to me that the advice Rankines have received from their lawyer is that they can make PGI go through with the Asset Sale Agreement. Thus, this agreement still needs a formal cancellation letter to be signed by both sides to ensure there are no further complications in the future. In the last few conversations, Geoff has been very non-committal about getting the Asset Sale Agreement cancelled. I believe it is absolutely vital that we get Geoff and Karin to sign this document in the next few days to ensure we are all clear. Please let me know your comments. 85On 27 February 2009 Mr Lindell emailed Geoff (copied to Mr Robertson and Mr Amirbeaggi) what he described as "a document in relation to cancelling the Asset Sale Agreement as part of going ahead with the plans you have discussed in detail with Asko. The operative parts of the attached "Deed of Termination of Agreement" (the "Termination Deed") were: 2. TERMINATION OF EMPLOYMENT 2.1 The parties agree that the Asset Sale Agreement is terminated with effect from the date of this document. 2.2 The parties acknowledge that termination of the Asset Sale Agreement discharges all liabilities and obligations of the parties in relation to the Asset Sale Agreement. 3. EMPLOYMENT 3.1 The parties acknowledge that PGI intends to enter into employment agreements with Karin and Geoffrey. 86On 27 February 2009 Mr Lindell wrote to Aarne, copied to Asko and Mr Robertson, giving what he described as a "detailed report about where I perceive the Rankine deal currently deals". The acuity of this email warrants its reproduction in full: Attached is a detailed report about where I perceive the Rankine deal currently stands. I have raised my concerns with you earlier in the week, and received your response. I understand that you have probably been discussing this matter with Asko and its likely that his interpretation of this matter differs from my viewpoint. I am sure you are as frustrated by this matter as me. I am letting you know my thoughts and concerns as a course of action to look after PGI's interests and future. I may be wrong and thinking too far but at the same time I am strong believer of getting all thoughts/concerns out and then deciding on the next best course of action. The 30 day notice letter alluded to the fact that if we get no resolution in that time period, we would then assess if we still want to complete the agreement. As everyone realized that this is too risky and complicated from a legal perspective, we have already been working on an alternative arrangement (Proposal No.2). As long as this is suitable to all, we would then as I have noted previously sign a document which officially and legally cancels the Asset Sale Agreement. Thus, the Asset Sale Agreement is still awaiting completion or cancellation. The problem which has arisen in the conversations with Rankines in the days after the notice period ended has been that Geoff is clearly adamant that if we cancel without his consent, he can still make us go through with the Asset Sale Agreement. The view I have on the matter is that if we had now after the 24th February sent out a letter cancelling the agreement, he would probably instruct his lawyer to sue PGI for not going through with the Asset Sale Agreement. Geoff is very firm in his belief that there is nothing wrong with his charges and that this will be proven to be the case and thus he can still make us complete the original agreement. This is even alluded to in an email our lawyer, Charles Sweeney, had received from Geoff's lawyer earlier in the week. This has been noted in the management meeting minutes. From analyzing Geoff's comments and his stance, he fears that he will be screwed over and that he will get nothing for his business. I would take his comment that he fears he will not be employed by PGI as the indication as to why he is still so strongly saying that he is discussing with his lawyers whether or not to make PGI go through with the Asset Sale Agreement. He did say he does not want to cause any harm to PGI and thus he views that if we can avoid being dragged into any legal matters by not completing the Asst Sale Agreement, then this is better for all and he views that Rankines being just employees of PGI is a better option. To me, Geoff's comments are somewhat confusing and I am not sure where he is going with all of this at the moment. I get the sense that he is trying to keep PGI on the ropes by saying he has been advised that everything is ok with his legal matters and this will be proven in time. Thus, he has good grounds to enforce the agreement and then even sue PGI if we just cancel the agreement. At the same time though, he speaks about not wanting to drag PGI into this mess and let's just do it the simple way. I must say these sorts of mixed messages from Geoff leave me unsure about what he is actually thinking about doing in terms of his legal matter with NAGS and intentions with PGI. I then asked Geoff straight up that what is he now expecting in terms of the arrangements going forward. Thus, I have attached new employment contracts for Karin and George after speaking with Geoff today. They are based on the fact that Geoff noted that: ● They both want $55k (up to now it has been Goeff = $60k & Karin = $50k) and no profit share for either one. ● Both to start employment on Monday, 2 March 2009. Geoff feels he should not be disadvantage because he has to close Southern Cross in the mean time and should being paid by PGI starting Monday. ● They want company cars but this has already been discussed in previous meetings. My assessment would be that Geoff and Karin are likely to sign the attached cancellation deed and their employment contracts if it is all in front of them and ready to be executed. I believe they are getting quite stressed and annoyed with all the legal matter they have to deal with in relation to Maggie. Please let me know your comments. I have also attached the deed of cancellation to this email. Additionally, I may not have been clear enough in relation to my concerns with the current arrangements as well. As noted, I have not been in control nor had the responsibility in terms of what is going on in Arndell Park at the moment in relation to this arrangement to try to get as many ex-Southern Cross customers to use PGI as their supplier. To be frank, I am not sure in what position PGI currently stands as we have the Asset Sale Agreement still going on yet at the same time all these plans are being made to start servicing ex-southern Cross customers next week. On the face of it, this is simply PGI realizing that Southern Cross has closed their business, we have taken on some employees and potentially if possible, take over some operating leases for trucks to be able to fill a gap in service left by Southern Cross leaving the market place. However, for an outside observer, they could see that PGI has taken all key employees, some equipment and customer info provided by Southern Cross employees to enable PGI to service those customers. This is a significant advantage and I must honestly say I am not sure how this would be viewed by a 3rd party to the arrangement. It could be seen as a takeover still without anything formally exchanging hands other than employment contracts. My point is that I am not sure and without professional advice/assistance, if PGI has now caused some other issue by not clearly separating itself from Southern Cross and as a separate company trying to capture some of the gap left by Southern Cross leaving the market place. I am merely raising this as a concern as I do not have the answer without asking someone more knowledgeable than myself in such matters. I am very aware of the fact that we should not be scared of NAGS or Maggie Lo and what she may do but at the same time I would say this is a very valid consideration given that Rankines are in a legal battle with her and she may now associate PGI as supporting Rankines side of the battle when in fact we have taken no side in their argument and have no idea who is right or wrong from those two parties. Also, given that all these new arrangements have been happening even before the 30 day notice period was over and the Asset Sale Agreement still stands, Geoff may look for another angle to get something out of PGI if he feels we have taken his business for nothing. 87On 28 February 2009 Aarne emailed Mr Lindell: I have learned from Asko that Rankins have acknowledged that the Asset Sale Agreement is now canselled. Geoff and Karin want to be employed by PGI as previously agreed except that the contract should be for 12 months and renewable annually, salaries for both $55K, no profit-share bonus at all and termination clause omitted entirely. I accept all except that there should be a modified termination clause perhaps stating that if the duties as listed are not performed satisfactorily, the sales targets are not fullfilled substansially and PA NSW operates at loss, in these circumstances the employment may be terminated by an advance notice of three months. I am somewhat conserned [sic] that the Rankins have lost their feith in the success of PA NSW when they have given up the profit-share opportunity. We need some written obligations from them as we are investing in them quite heavily. 88For the reasons set out in paragraph [110] below, I am unable to determine what the nature of this "acknowledgement" was. 89On the morning of 2 March 2009 Mr Lindell (who was in PGI's Brisbane office) emailed to Asko and Greg (who were in Sydney) the Termination Deed and what he described as "the Rankines' latest employment contracts". He did so "as per Aarne's instructions". In his email Mr Lindell requested that at least two original copies of the various agreements should be signed by the Rankines. 90Late in the afternoon on 2 March 2009 Mr Lindell emailed PGI's solicitor, Mr Sweeney, copied to Mr Robertson. Despite Geoff's denial of what is attributed to him in the first paragraph (he says he told Mr Lindell he needed the letter referred to in the email to give to Mr Amirbeaggi), I accept it as an accurate contemporaneous record of the conversation between Geoff and Mr Lindell: Geoff Rankine rang me a short while ago about the Deed of Termination of Agreement. Geoff told me that he had spoken with Farshad and that they would be happy to sign the Deed provided that PGI issues a letter stating why we wish to cancel the agreement. As I understood from Geoff, this is to their benefit as I guess if they instigate some kind of legal action against the Special Purpose Liquidator and Maggie, such a letter would show that their business interests were also hindered by the actions taken by the Special Purpose Liquidator and the various parties involved. I would have thought it would be in PGI's best interest that if such a letter was issued that it would be state a mutual understanding in relation to cancelling the agreement. Thus, on that basis I have drafted a letter that could potentially go with the Deed of Termination. Do you see any particular risk for PGI in this case and issuing such a letter? Any future considerations we need to be wary of in terms of what this letter may be used for? Should the letter have disclosure to say it cannot be shown or provided to any 3rd parties without PGI's prior written consent? I am just trying to think of all scenarios here. Please can you let me know your thoughts as soon as possible as we will try to meet with Geoff again tomorrow and get all documents finalised. Just me a call on the mobile if that is easiest. 91An hour or so later Mr Lindell emailed Geoff with a copy to Mr Amirbeaggi: As per my discussion with Geoff earlier, please find attached a letter from PGI in relation to the Deed of Termination of Agreement concerning the Asset Sale Agreement. Hopefully this letter is alright. PGI will sign the letter at the same time as all other documents are being signed. 92The letter attached to Mr Lindell's email was drafted to be signed by Mr Robertson on behalf of PGI and said: In relation to the Deed of Termination of Agreement concerning the Asset Sale Agreement, we wish to confirm our mutual understanding about the cancellation. As you know, Protector-Glass Industries Pty Ltd ("PGI") received a letter dated 24 December 2008 from Greg McInnes at McInnes Attorneys. The main point in this letter as per Greg's words was that they "...are prepared to advise their clients that there now appears to exist substantial evidence that would enable our client to take action to set aside the Charge on a variety of grounds." PGI quickly obtained legal advice on the above matter and this led to a notice being issued to you and Southern Cross Autoglass Pty Ltd ("Southern Cross") on 23 January 2009. The issue put forward in this notice letter related to the concern that was raised by the letter received by PGI from McInnes Attorneys. To PGI, it seemed that there is still uncertainty over the ownership of the assets and the letter from McInnes Attorneys indicated that if PGI were to complete the Asset Sale Agreement without appropriate evidence to show that Southern Cross held good title over its assets, PGI may have been drawn into this legal matter. As you very well know, this is exactly what PGI has said it would want to avoid at any stage in the deal process. Thus, based on the fact that PGI is still uncertain as to the ownership of the assets and the potential litigation it could face if the Asset Sale Agreement was completed, it is in the best interest of PGI, you and Southern Cross to execute the Deed of Termination of Agreement in relation to the Asset Sale Agreement. 93Later still in the evening of 2 March 2009 Mr Lindell sent an email to Asko and Mr Robertson copied to Aarne: Attached are the latest versions of: a) Deed of Termination of Agreementb) PGI letter to Geoff and Karin about the cancellationc) Geoff's Employment Contract (with only the title changed to NSW Business Development Manager as per your and Greg's suggestion on the phone to reflect Geoff's role and also reporting structure in relation to Dave's position in Newcastle so that Dave reports to Greg)d) Karin's Employment Contract All of the above should be signed at the same time. Further, the signed letter from PGI (b) should not be given to Rankines and Southern Cross until we have received an original signed copy of the Deed of Termination. 94While Mr Lindell said that PGI's letter should not be given to the plaintiffs until they had signed the Termination Deed (which was in the terms set out in paragraph [92] above), at no time did Mr Lindell or anyone else suggest (whether within PGI or to Geoff and Karin) that Geoff and Karin had to sign the Termination Deed before they would receive their new offers of employment. 95On Tuesday, 3 March 2009 the Arndell Park Premises opened for business. Asko and Mr Robertson met with Geoff at the Peakhurst Premises. Geoff signed his new employment contract, initialled Karin's contract and said she would sign it as well. I shall refer to these as the "March Employment Contracts". However, Geoff declined to sign the Termination Deed. Geoff told Asko and Mr Robertson that he (Geoff) would have to consult his lawyer before signing the Termination Deed. He attempted to call Mr Amirbeaggi from the meeting without success. However, Geoff did not give Asko and Mr Robertson any indication when he might return the executed Termination Deed or whether he would execute it at all. The reasons for this finding are set out in paragraphs [111] to [120] below. 96The relevant provisions of Geoff's and Karin's March Employment Contracts are respectively set out in Schedules 5 and 6 to these reasons. 97After 3 March 2009 Geoff commenced liquidating Southern Cross' stock at discount prices to third parties. PGI personnel knew this was happening. 98PGI never pursued Geoff and Karin to execute the Termination Deed. 99Geoff and Karin both commenced employment under the March Employment Contracts. 100By letter dated 28 April 2009 Mr Robertson, as Managing Director of PGI, terminated Karin's employment with immediate effect: Dear Karin Notice of Termination - Effective Immediately We give notice that your employment is terminated effective immediately and without notice, in accordance with clause 8.1(a) and 8.1(c) of your employment agreement (copy enclosed). Clause 8.1 (a) Since you commenced employment on 1 March 2009, you were absent from work without permission or explanation on several occasions. On the 25th March, Asko Valkama, motivated by the best of intent, requested you to return to your previous business premises to prepare a list of windscreens, which potentially could assist Southern Cross Autoglass (NSW) in reducing its debt to PGI. This request realistically should only have taken two to three days to complete. Over two weeks later you had still not returned to your place of employment. We understand that during this two week period you undertook a private trip to Perth without consultation with, or permission of, a senior member of PGI management. Clause 8.1 (c) We have reports from PGI staff and customers that during your employment you have: ● Made comments to customers designed to divert business from PGI to Southern Cross; ● Made comments to other staff and customers which are derogatory of PGI, its management and business practices and designed to cause PGI damage in the marketplace. We consider that these behaviours and complaints constitute misconduct on your part which entitles us to immediately terminate your employment with notice. We reserve our rights in all respects in relation to these breaches. 101On 13 May 2009 PGI commenced the debt recovery claim against Southern Cross and Geoff in the Local Court which has been transferred to this Court. 102By letter date 25 May 2009, Mr Robertson as Managing Director of PGI terminated Geoff's employment with immediate effect: Dear Geoff Nearly three months (3) have lapsed since you have been on the Protector-Glass Industries (PGI) payroll. Since your commencement of employment with PGI on March 2 2009, we have observed several aspects of your management and communication style that are far from conducive to standards of performance and behaviour expected from our employees, let alone that of someone occupying an executive role. There have been too numerous examples of this behaviour for us to ignore any longer. On April 14 2009, we met to resolve a number of these issues. At that meeting you signed an agreement to contact me every Friday morning at 9.00am to provide an update of your activities. Since then, you have only complied twice, (and neither of those calls were on time). Another aspect of your performance to date of significant concern to us has been your conflicting versions of recent factual events. After consideration, we have opted not to list examples in this letter, but will say, that the ability to accurately recall and follow through with commitments, particularly made to customers is a substantial element of the role you were to fill at PGI. We no longer have the confidence in your capacity to fulfil this aspect of that role. Another major concern that PGI has about your performance to date has been your lack of commitment thus far and what we consider is your inability to transition from a business owner-operator to that of being an employee. Supporting this claim are the following examples: i) Your choice to not participate in a generous incentive scheme as part of your remuneration package. ii) Your verbal concerns that PGI is too adherent in managing our business within the law and within guidelines of normal ethical business practices in the Australian market. iii) At no time have you offered to contribute to any of the many business projects underway at your new place of employment at Arndell Park. In fact, after the public announcement that you had decided to close your windscreen business, a staff member was allocated to you for the sole purpose of compiling your inventory holding so that PGI could review that list to assist you in its swift liquidation. Three weeks later that list was still incomplete because you had been "too busy" finding alternate means of clearing the stock from your trading premises at Peakhurst. iv) Breaching of clause 10.1a by selling product in competition to your new employer, PGI. v) Taking leave to conduct private business without seeking approval from the relevant personnel at PGI. vi) At our meeting on April 14 2009, you expressed feelings of being "hard done by" during your employment thus far with PGI. We however, believe that we have been more than accommodating and tolerant in having paid you three months salary for a zero to low contribution. In that same meeting, on your own admission you stated that you felt there wasn't a role for you at the new PGI Branch at Arndell Park, and it was your opinion that it already was too "top heavy". These examples of your management style and performance, since being on the PGI payroll we find unacceptable and therefore it is our view that you cannot make the contribution to our company that we were lead to believe at the time of offering you employment. Therefore your employment with PGI is terminated effective immediately. Contested matters of fact 103I have no doubt that each of the witnesses was doing their best to tell the truth as they believe they recollected it. All of them, with varying degrees of reluctance, eventually made concessions under cross-examination that seemed to me to be as inevitable as they were appropriate. However, it was also apparent that over the course of this long-running dispute, everyone had reached deeply entrenched positions reflecting their views of who was in the right. Each witness' evidence was heavily coloured by their respective interest. Geoff and Karin clearly believed they had been deprived of their livelihood. The depth of their feeling was demonstrated by each of them breaking down in tears during the course of giving evidence. On the other hand, Aarne, Asko and the former PGI employees displayed an equally firmly held belief that PGI had done nothing wrong because, whatever the terms of the ASA, they had at all times made it clear to the plaintiffs that there would be no deal if there was the slightest chance of PGI becoming involved in a dispute over Southern Cross' assets with Ms Lo or the special purpose liquidators. 104These entrenched positions were particularly manifested when it came to evidence about PGI's attitude to Ms Lo and the special purpose liquidators and what was to happen to the ASA. In relation to these and other areas of disputed evidence I was left with the impression that all of the witnesses, while honestly believing what they said, protested far too much in the interest of their side of the record. Therefore, with no disrespect to any of the witnesses, in areas of dispute I have only accepted their evidence where it is supported by contemporaneous records, is inherently probable or is against interest. 105[Paragraph [29] above] In the course of the hearing much forensic energy was directed to the question of whether and, if so, with what frequency and vigour PGI's representatives (Aarne and Asko, in particular) told Geoff and Karin prior to entering into the ASA that PGI could or would not proceed with any transaction if there was any threat or challenge by Ms Lo or the special purpose liquidators in relation to Southern Cross' assets that had come from NMA. I accept that representatives of PGI said such a thing to the Rankines more than once prior to the execution of the ASA. PGI was aware of and concerned about the special purpose liquidators and the potential threat to Southern Cross' assets that were the subject of the ASA. Clause 9 of the ASA was inserted by PGI's lawyers to meet the risk or contingency posed by Ms Lo and the special purpose liquidators. 106[Paragraph 54 above] Geoff denied such a conversation took place and I accept his denial. It is not referred to in any contemporaneous evidence. It is also improbable given the vigour with which contemporaneous evidence demonstrates Geoff and Karin always asserted their confidence that the Charge could not be successfully challenged by Ms Lo or the special purpose liquidators. 107[Paragraph 66 above] There was a dispute between the parties about whether the "termination" of the ASA was discussed at the meeting on 18 February 2009. Geoff (who mistakenly placed the meeting on 14 February) gave evidence that he said words to the effect "we can't agree to terminate the ASA". Asko gave his account of the conversation from the witness box (emphasis added): Q. I'm not asking what it meant, I am asking if your evidence is what was said on the subject of what this new arrangement meant for the asset sale agreement? A. That the asset sale agreement would be terminated, could not be completed. Q. Was the word "terminated" use on this occasion? A. Specifically I could not say, but the meaning of termination or non-completion, we could not go through with it was discussed. HIS HONOUR Q. Who said what to whom, the best you can recall on this topic. Please don't look down at your affidavit. I am interested to know what you now recall what occurred at that meeting. A. Well, we were talking about the second option which was for Southern Cross and Geoff Rankine to liquidate his stock and that we would then employ him and Karin in our ongoing operations in New South Wales, and by doing so that would, that would mean that the asset sale agreement was terminated because we could not buy the product. ABADEE Q. Is that the best you can, the extent of your recollection? A. Yes. 108I accept the plaintiffs' submission that the critical evidence is the words I have emphasised. The last part of Asko's answer to the Court's question is commentary rather than what was said. On the basis of Asko's evidence and his minutes of the meeting, I have no doubt that what was discussed was that PGI would not go through with the ASA in the absence of the requirements of the 23 January Letter being met. As was made clear at the start of Asko's minutes, failure to satisfy the requirements of the 23 January Letter was the stated premise of the meeting. If Geoff had expressly indicated that he agreed (or did not agree) with the ASA being terminated, that is a matter of such critical importance that it would have been noted in Asko's minutes. Although I have no doubt that Geoff believes his version of events, for the same reason I am not satisfied that his evidence is correct. 109[Paragraph [77] above] As to the meeting on 23 February 2009, Geoff's evidence was he could not recall the meeting at all and otherwise denied all discussion of termination of the ASA. By reference to Asko's minutes, the meeting clearly occurred. I accept Geoff's evidence about not recalling the meeting. His denial, therefore, has no weight. Asko's evidence in the witness box was that at the meeting Geoff agreed that the ASA would be terminated and that they would enter into the new employment contracts with PGI. I do not accept that evidence insofar as it refers to termination of the ASA. If something as important as that occurred, it would have been recorded in Asko's minutes or, in accordance with Mr Lindell's suggestion, the parties' agreement would have been recorded by signing the "key points" document. 110[Paragraph [88] above] As to the acknowledgement referred to in Aarne's email to Mr Lindell of 28 February 2009, there is no direct evidence from Asko of what Geof and Karin did or said, and when, that would have caused him to say what he did to Aarne, or what he actually said to Aarne. Nor is there direct evidence from Aarne as to what Asko told him. It may, for example, have been a conclusion drawn by Asko from Geoff and Karin's willingness to enter into new employment agreements with PGI rather than anything they may have said. I therefore do not take the "acknowledgement" into account in my analysis of the facts. 111[Paragraph [95] above] The evidence about what occurred in relation to the Termination Deed on 3 March 2009 is confused. Asko's affidavit evidence was that, "When Greg and I asked Geoff Rankin to sign the Deed of Termination he said words to the effect of "This shouldn't be a problem but I ought to just get Farshad to have a look at it. We should have it signed by Friday." ... I responded by telling Geoff that we were unhappy with this delay." He adhered to that version of events in cross-examination and it was not put to him that Geoff had tried to speak to Mr Amirbeaggi during the course of the meeting. 112Mr Robertson's affidavit evidence was that when he gave the Termination Deed to Geoff to sign, Geoff told him that he wanted to speak to his lawyer briefly before signing the Termination Deed and that Asko and he (Mr Robertson) left the room to allow Geoff to call his lawyer. When they re-entered the room a discussion took place to the following effect: Geoff: "I wasn't able to reach Farshad. We're still waiting on him to finish reviewing the deed." Asko: "Aarne wants this matter resolved. He wants to go on with the deal and he thinks this has gone on long enough." Geoff: "It won't be a problem. You'll have it (the deed) in the next two days." 113Furthermore, Mr Robertson reported on the events of 3 March 2009 to Mr Lindell, who in turn sent an email to Aarne on 4 March 2009: To provide you with an update, Greg and Asko went to see Geoff yesterday. He has now signed his employment contract (with the title being NSW Regional Manager - he advised Greg and Asko that 'titles' mean nothing to him, that getting NSW to support PGI was his main goal), he initialled Karin's contract and she will sign it as well. At the meeting yesterday, Geoff did not sign the Deed of Termination of Agreement. He rang his lawyer, who advised him that the matter would be finalized by Tuesday afternoon. ... 114Under cross-examination, Mr Robertson continued to insist that Geoff had said, after saying that he wanted to speak to his lawyer, that PGI would have the Termination Deed "in the next few days signed". However, Mr Roberston also conceded that Mr Lindell's email to Aarne of 4 March 2009 was incorrect because he (Mr Robertson) knew that Geoff had said he had been unable to reach his lawyer so that Mr Lindell's email was therefore incorrect in suggesting that Mr Amirbeaggi had told Geoff that "the matter would be finalised by Tuesday afternoon". 115Geoff agrees that he was unable to reach Mr Amirbeaggi by telephone on 3 March 2009. However, he denies that he said that PGI would have the executed Termination Deed "in the next two days". 116Curiously, Mr Amirbeaggi's affidavit evidence was: 15. In or around February/March 2009, I received a call from Geoff Rankine. A conversation ensued to the following effect: GR: The guys from PGI (I recall there being two of them however I cannot recall whether it was Niko or Asko or Greg) are here at our office, and want us to sign the Deed of Termination. What should we tell them? FA: Have you agreed on a deed? GR: No, they just turned up and are pressuring us to sign it. FA: Tell them you are not signing anything without me first seeing it, and advising you on it. Tell them you'll send it to me to have a look at and it won't be today. Tell them to go away. GR: Okay. I'll do that, and come back to me straight away. We need to sort this out. 117Under cross-examination, Mr Amirbeaggi adhered to his evidence that there had been such a conversation, but accepted that he was unable to say when it occurred. He also acknowledged that that he did not have a filenote of the conversation and that there was no record of an attendance on Geoff on 3 March 2009 on an invoice subsequently sent to the plaintiffs. As to the latter, Mr Amirbeaggi stated, and I accept, that it may not have been the sort of attendance of which he would have made a note or for which he would have charged. 118Insofar as Mr Amirbeaggi's evidence is concerned, I have no doubt that at some stage he did advise Geoff not to sign the Termination Deed. I also accept that Mr Amirbeaggi was doing the best he could to recall what was said to him without the assistance of a filenote. In those circumstances, and where Mr Amirbeaggi's own recollection has almost certainly been affected by his role in taking instructions from Geoff, I am unable to rely on Mr Amirbeaggi's evidence in relation to this incident. 119Eliminating Mr Amirbeaggi's evidence, the evidence of the various participants persuades me on the balance of probabilities that Geoff told Asko and Mr Robertson that he would have to consult his lawyer before signing the Termination Deed. He attempted to call Mr Amirbeaggi from the meeting but was unsuccessful. 120However, because it is PGI that wishes to deploy this fact to its advantage in its case, PGI bears the onus of satisfying me that Geoff gave Asko and Mr Robertson an indication of when he would return the signed Termination Deed. I am not so satisfied. In the absence of any contemporaneous record of what occurred, I find it inherently unlikely that Geoff would have given any indication whether, and if so, within what time frame, he might return the signed Termination Deed. Having been unable to reach Mr Amirbeaggi, Geoff would have had no basis for saying when he might have obtained the latter's advice. Furthermore, in circumstances where he had signed his March Employment Contract and there was no suggestion from PGI that his employment was conditional on him signing the Termination Deed, he would have had no reason at the meeting to "string PGI along" in the expectation that the Termination Deed would be signed in order to ensure his ongoing employment. The issues for determination 121On the basis of the views to which I have come, the issues for determination are: (1)Was the 23 January Letter a repudiation of the ASA? (Paragraphs [122] to [142] below.) (2)Was proffering the Termination Deed a repudiation of the ASA? (Paragraphs [143] to [144] below.) (3)Did the plaintiffs accept PGI's repudiatory conduct so as to terminate the ASA? (Paragraphs [145] to [153] below.) (4)Should PGI be permitted to amend the Defence? (Paragraphs [154] to [179] below.) (5)Was the ASA terminated by abandonment or agreement? (Paragraphs [180] to [201] below.) (6)Are the plaintiffs estopped? (Paragraphs [202] to [205] below.) (7)The November Employment Contracts - rectification and termination. (Paragraphs [206] to [207] below.) (8)PGI's Cross-Claim. (Paragraphs [208] to [218] below.) (9)The significance (if any) of the non-satisfaction of a condition precedent. (Paragraphs [219] to [226] below.) Was the 23 January Letter a repudiation of the ASA? 122The plaintiffs submitted that PGI breached the ASA by repudiation. Two acts of repudiation were relied upon: the 23 January Letter (set out in paragraph [53] above) and proffering the Termination Deed on 3 March 2009 (see paragraphs [85] and [95] above). 123The relevant legal principles are not in doubt (for what follows see Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623 at 634, 643, 658 and 664-7; Foran v Wight (1989) 168 CLR 385 at 441). A party will be taken to have repudiated a contract if it manifests the intention no longer to be bound by it or to fulfil it only in a manner substantially inconsistent with that party's obligations and not in any other way. That manifestation may occur before performance is due (known as anticipatory breach) and does not depend upon the existence of an actual intention to repudiate. Rather, the Court looks to how a reasonable person, in the position of the "innocent" party, would view the allegedly repudiatory conduct. 124The plaintiffs submitted that the letter which had been received from the special purpose liquidators' solicitors on 24 December 2008 (see paragraph [49] above) did not give rise to an entitlement in PGI to terminate the ASA. Nor did PGI have a contractual right to demand the matters which it sought in the 23 January Letter as a precondition to its obligation to complete the ASA upon satisfaction of the conditions precedent. Those two submissions are undoubtedly correct. In those circumstances it was submitted that the terms of the 23 January Letter manifested an intention not to be bound by the ASA. The plaintiffs also pointed to concessions by Mr Lindell and Mr Robertson in cross-examination of their respective understanding that PGI had no right to terminate the ASA for non-satisfaction of the requirements which the 23 January Letter sought to impose. 125PGI submitted that on its proper construction the 23 January Letter did not constitute a repudiation of the ASA by PGI. Rather, the letter was a statement of a present intention. It was submitted that the very purpose of a notice period was to try to resolve the "legal matter" before deciding whether the ASA was capable of completion. While PGI accepted that the stipulation of a 30 day period to bring about certain results was not an entitlement derived from the ASA (it could not possibly have suggested otherwise), PGI submitted that all the letter did was to convey a prospective course of action if the "legal matter" could not be resolved in the way that PGI had indicated. Furthermore, it was said that any concessions by Mr Lindell and Mr Robertson as to their state of mind or understanding of PGI's rights under the ASA were irrelevant because the test for repudiation was an objective one turning on the effect of their words or conduct on a reasonable person. Matters internal to PGI personnel and uncommunicated to the plaintiffs could not be taken into account. 126It will be apparent from the summary of legal principles in paragraph [123] above that I accept PGI's submission that its conduct must be viewed objectively so that the internal, uncommunicated views of PGI personnel about their entitlement to make the demand set out in the 23 January Letter must be disregarded. However, I do not accept that a reasonable person in the position of the plaintiffs receiving the 23 January Letter would interpret it in the way contended for by PGI. Rather, I am satisfied on the balance of probabilities that such a reasonable recipient would infer that PGI no longer intended to be bound by the ASA in accordance with its terms, or alternatively, was thereby manifesting an intention to fulfil the ASA only in a manner substantially inconsistent with its obligations under the ASA and not in any other way. 127In explaining why I have reached this conclusion it is necessary to identify what the hypothetical reasonable recipient in the position of the plaintiffs would be entitled to take into account. The 23 January Letter was written in a context and not a vacuum. A letter such as the 23 January Letter is, at least in its general purpose of notifying a state of affairs, indistinguishable from a more formal contractual notice. For this reason the principles governing interpretation of contractual notices provide guidance in the present situation. Those principles were summarised by Lord Steyne in Mannai Investment Co Ltd v Eagle Star Life Insurance Co Ltd [1997] AC 749 at 767-768: The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual sense. ... the enquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of clause 7(13) the question is simply how the reasonable recipient would have understood such a notice. 128Although his Lordship's analysis was concerned with a notice determining a lease, the principles have been accepted in Australia as applying in other circumstances, contractual and non-contractual: e.g. Richards v Cornford [2010] NSWCA 99; (2010) 76 NSWLR 572 at 584; MLW Technology Pty Ltd v May [2005] VSCA 29 at [78]-[79]. 129Taking this approach, an objective analysis of how the reasonable recipient in the position of the plaintiffs would view the 23 January Letter must take into account that the plaintiffs would have done so with knowledge and in the context of: (1)The terms of the ASA (in particular Clause 9.1 and the warranties given in Clause 12 in relation to what had been NMA's assets); (2)The 24 December 2008 letter from the special purpose liquidator's solicitors (see paragraph [131] below); (3)PGI's 5 January 2009 letter to Southern Cross (see paragraph [50] above); and (4)The terms of the 23 January Letter itself. 130Insofar as the ASA is concerned, the reasonable recipient in the position of the plaintiffs would be aware of the following matters: (1)The ASA did not give PGI an entitlement to make the demand and specify the notice period stipulated in the 23 January Letter. (2)The possibility of a claim by the special purpose liquidator in relation to what had been NMA's assets had been dealt with by the insertion of clause 9 of the ASA: 9. THIRD PARTY CLAIM 9.1 If, after Completion, the Stock (or any portion of the Stock, or any proceeds from the sale of the Stock) becomes subject to a Claim of any nature by a third party, the Purchaser may deduct the quantum of the Claim (Stock Claim) from the value of the remaining instalments of the Purchase Price (Remaining Instalments). Its significance in assessing the 23 January Letter is not diminished by the fact that, in its terms, it only relates to a "Claim" after completion of the ASA. (3)PGI had the benefit of the warranties set out in Clause 12 and Schedule 2 of the ASA. Those warranties applied as at the date of the ASA and included (Schedule 2, Clause 1.2) that Southern Cross was the beneficial owner of the assets the subject of the ASA. (4)The ASA did not confer in its terms on PGI any express right of termination of the ASA in the event of a breach of warranty. While a reasonable recipient in the position of the plaintiffs might not understand that generally, as a matter of law, a breach of a contractual warranty gives rise to a right in damages and not to terminate, such a recipient would understand that while a valid claim by a third party such as the special purpose liquidator might mean that there had been a breach of warranty in relation to good title to Southern Cross' assets, the ASA did not give PGI a right to terminate the ASA for such a breach. 131The 24 December 2008 letter from the special purpose liquidators' solicitors came to Southern Cross' attention in two ways. First, the letter itself was copied to Mr Amirbeaggi. Secondly, it was attached to PGI's letter of 5 January 2009 to Southern Cross. Its key section is its last three paragraphs: In Examination proceedings undertaken by our clients pursuant to Sections 596A and 596B of the Corporations Act 2001, conducted on Thursday and Friday, 18th and 19th December 2008, Mr Geoffrey Rankine, gave evidence that an arrangement in writing had been concluded, involving your Company or an Associate, for the sale, disposition or other dealing with certain assets. Mr Rankine's evidence specified those assets as being the customer base of the business. The purpose of this letter is to advise you that your Company has been mentioned in evidence in circumstances outlined above. Our clients' investigations are continuing, but from the evidence so far obtained, we are prepared to advise our clients that there now appears to exist substantial evidence that would enable our client to take action seeking to set aside the Charge on a variety of grounds. If that action is successful, it would have the consequence that we would advise our client each or any of the Fund, Southern Cross or Mr Rankine are, and at all relevant times have remained, to the extent of their involvement, Trustees for Nielsen & Moller of the former assets of that Company, including for present purposes its customer base and all profits derived from trading in that business. 132For the purposes of assessing the 23 January Letter, it is important to note that the letter of 24 December 2008 does not threaten immediate action against anybody. Its self-proclaimed purpose is to advise PGI that it had been mentioned in evidence. In particular, even read at its highest it does not refer to the possibility of an action to recover the assets of NMA (for example, by way of a tracing claim) or for any action to which PGI might be a defendant (for example, as being knowingly concerned in a breach of trust). It says that "investigations are continuing" and, while affirming that there appeared to be a basis upon which the special purpose liquidator could seek to set aside the Charge, it does not suggest such action was about to be commenced. It then specifies that "if that action is successful" further advice would be given. Again, read at its highest, the letter implies the possibility of action against the Fund, Southern Cross or Geoff, but not against the assets themselves or PGI. 133Turning to Mr Lindell's letter to Geoff of 5 January 2009, a reasonable recipient of the 23 January Letter in the position of the plaintiffs would have in mind two statements from the 5 January 2009 letter: Thus, it would be the position of PGI at the moment that we cannot move forward with the deal until this legal matter is resolved or we receive full assurance that we will not be drawn into legal actions between Southern Cross, Nielsen and Moller and any other third party ... In the meantime, we want to continue to work in harmony with Southern Cross, both helping each other until any encumbrances that may exist as a result of legal action are satisfactorily resolved. 134At first blush those two statements are not entirely consistent. However, a reasonable reader would interpret that letter as saying that PGI was not prepared to complete the ASA until the resolution or assurance referred to had been achieved, but that commercial co-operation would continue until resolution of the "encumbrances". Notwithstanding the emollient reference to continuing to work in harmony, a reasonable reader would be left in no doubt that PGI's position as at the date of the 5 January 2009 letter was that it would not move to complete the ASA until the "legal matter" was resolved or the requested assurance given. 135Against the background of the matters to which I have referred to in paragraphs [130] to [134] above, a reasonable recipient of the 23 January Letter in the position of the plaintiffs could have been left in no doubt that the letter was intended in some way to affect the contractual relationship between PGI and the plaintiffs. The letter identified itself as "a formal letter" and was expressly addressed to the parties to the ASA ("you personally and [Southern Cross]"). The 23 January Letter demanded that something be done within a specified notice period, failing which there would be a consequence for the ASA. 136However, finding that a reasonable recipient in the position of the plaintiffs would have understood the letter as being intended to have a legal significance is not enough. The question is whether such recipients would understand the letter as manifesting an intention on the part of PGI no longer to be bound by the ASA or to fulfil the ASA only in a manner substantially inconsistent with PGI's obligations and not in any other way. 137The Court is well satisfied that a reasonable person in the position of the plaintiffs would view the 23 January Letter as manifesting an intention on the part of PGI to fulfil the ASA only in a matter substantially inconsistent with ASA's obligations and not in any other way. This is because the reasonable recipient would read the 23 January Letter against the background of the statement in PGI's 5 January 2009 letter that it was "the position of PGI at the moment that we cannot move forward with the deal until this legal matter is resolved or we receive full assurance that we will not be drawn into legal actions between Southern Cross, Nielsen & Moller and any other third party". The 23 January Letter, by making its demands and specifying a notice period, formalises the position set out in the 5 January 2009 letter. The 23 January letter makes it clear ("If either one of the above is obtained within the notice period, PGI would then be happy to proceed with the [ASA] ... if at the end of the notice period you have been unable to resolve the legal matter ... we will have to terminate the [ASA]") that PGI would only complete the ASA if it were satisfied that the "legal matter" had been resolved. 138It does not matter for this analysis whether the two ways specified in the 23 January Letter to resolve the "legal matter" are an exhaustive list. The point, rather, is that the 23 January Letter unequivocally states that PGI would only complete the ASA if the demand made in the letter was satisfied in the notice period. The language of the letter makes it abundantly clear that PGI would not complete the ASA in any other way. The scheme proposed in the 23 January Letter is substantially inconsistent with ASA's obligations. The inconsistency in substance is the 23 January Letter's attempt to create or assert rights in relation to the completion of the ASA that are to be found nowhere in the ASA and are not capable of being derived from it whether as a matter of construction or implication. 139Alternatively, while accepting that there is some force in it, I do not accept PGI's submission that the reference in the 23 January Letter to resolving "the legal matter before we decide whether the [ASA] is capable of completion" (emphasis added) means that a reasonable recipient in the position of the plaintiffs would not understand the letter as manifesting an intention not to be bound by the ASA. Those words, in the context of the entire 23 January Letter and particularly when read with the later words "PGI would then be happy to proceed with the [ASA] because PGI still views that a potential business opportunity exists", would be understood by the reasonable recipient as an indication that PGI did not consider itself bound by the ASA and would choose for itself whether or not it would complete the ASA by reference to a consideration or requirement not provided for in the ASA. A party which says that it will choose whether or not to complete a contract by reference to non-contractual criteria is necessarily manifesting an intention that it does not regard itself as bound by that contract. 140Two final observations are necessary. 141First, in reaching these conclusions, I have not overlooked the paragraph of the 23 January Letter commencing "Naturally, in the meantime PGI is ready to fully cooperate with you so that the business assets will be saved for mutual benefit". It is clear from the context that, as with PGI's letter of 5 January 2009, the emollient reference to co-operation refers to matters outside the scope of the ASA and contingent upon the ongoing existence of the ASA. This latter point is expressly made in the 23 January Letter when it goes on to say "However, PGI believes that if at the end of the thirty (30) days your legal matter has not been resolved, we will need to review the support arrangements with you". 142Second, as at 23 January 2009 only one of the conditions precedent to its completion set out in Clause 4.1 of the ASA had been satisfied (ACCC approval). As such, the repudiation of the ASA which I have found to be constituted by the 23 January Letter falls into the category of an anticipatory breach. Was proffering the Termination Deed a repudiation of the ASA? 143The plaintiffs also relied upon PGI's conduct in proffering the Termination Deed on 3 March 2009 as a further repudiation of the ASA. PGI submitted that the request to execute the Termination Deed did not manifest an intent by PGI not to be bound by the ASA, as the deed was prepared in the context of communications regarding an agreement to terminate the ASA and to proceed with what was referred to as Option 2 after the ASA had been abandoned or already had been impliedly terminated. 144Setting aside PGI's arguments about the abandonment or implied termination of the ASA (see paragraphs [180] to [201] below) and having regard to the principles set out in paragraph [123] above, PGI's proffering of the Termination Deed would and can only have been understood by a reasonable recipient of the Termination Deed in the position of the plaintiffs as manifesting an intention on the part of PGI not to be bound by the ASA. Such a conclusion must almost necessarily follow in any case where a party is the moving party and proffering a deed to terminate an agreement. If the deed is accepted by the other party then no question of the acceptance of the offeror's repudiation arises because the agreement is terminated by consent. Did the plaintiffs accept PGI's repudiatory conduct so as to terminate the ASA? 145PGI's fundamental submission is that there never was any clear or unequivocal statement by Geoff or Karin in early March 2009 (or at any other time prior to the commencement of these proceedings) to PGI that Southern Cross elected to terminate the ASA because of PGI's repudiation. The plaintiffs submitted that they accepted PGI's repudiation of the ASA by selling the stock that was the subject of the ASA and entering into the March Employment Contracts. 146PGI submits that neither of the acts of repudiation (as I have found them to be) was accepted by the plaintiffs. It submits that neither the plaintiffs nor their lawyers, in response to either the 23 January Letter or the proffering of the Termination Deed, expressly said that PGI had repudiated the ASA and that the plaintiffs accepted that conduct as terminating the ASA. On the contrary, Mr Amirbeaggi sought an extension of the notice period referred to in the 23 January Letter and (so it was alleged) Geoff agreed to execute the Termination Deed. 147PGI further submitted that the plaintiffs' assertion of an acceptance of PGI's repudiatory conduct was inconsistent with the case the plaintiffs subsequently sought to make against the special purpose liquidators. PGI also called in aid evidence of Mr Lindell's confusion as a result of Geoff's "mixed messages". These two matters may be disposed of immediately. The plaintiffs' proceedings against the special purpose liquidators were commenced in September 2009. Such an assertion in the pleading cannot assist with an objective assessment of what occurred in March 2009. Similarly, the objective nature of the assessment (see paragraphs [148] to [151] below) means that subjective confusion on the part of Mr Lindell, if it were such, is irrelevant. 148PGI's submissions, in their demand for a clear or unequivocal statement by the plaintiffs to PGI electing to terminate the ASA, do not reflect the applicable legal test. The determination of whether an innocent party has accepted the other party's repudiation involves an objective inquiry as to whether the innocent party has acted in a way which makes it plain that the innocent party treats the contract as at an end. Actual communication of that state of affairs is not necessary, although in almost all cases the party which has repudiated the contract will be made aware either directly or indirectly of the circumstances from which an election to terminate the contract are objectively determined. 149The starting point is the judgment of Dixon CJ in Holland v Wiltshire (1954) 90 CLR 409. In that case, after a purchaser had failed to settle on a sale of land, the vendor gave the purchaser a notice requiring settlement by a particular date and informing the purchaser that if settlement was not made by that date, the vendor would take proceedings for breach of contract. The date passed. While Kitto and Taylor JJ reached the same result by different routes, Dixon CJ concluded (at 416): In these circumstances, the vendor was entitled to treat the contract as discharged by breach. He himself was ready and willing up to the expiration of the notice. His election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale, and by his selling it. 150I respectfully agree with and adopt the summary of the law set out by McColl JA in Ryder v Frohlich [2004] NSWCA 472 (Hodgson and Ipp JJA agreeing): 116 That anticipatory breach was ineffective to terminate the partnership agreement unless accepted by Mr Frohlich. A long line of authority establishes that an innocent party confronted with repudiatory conduct which includes anticipatory breach amounting to repudiation may accept the repudiation and elect to terminate the contract: Heyman v Darwins Limited, above, at 399; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 at 250 per Kitto J, at 261 per Taylor J; Holland v Wiltshire, above; Foran v Wight, above, per Mason CJ at 407; per Brennan J at 421; per Dawson J at 441; see also Chitty which, when dealing with "anticipatory breach" (at para 25 - 020) in the section dealing with "Renunciation", states that the injured party may elect to accept the renunciation and treat it "as discharging him from further performance". 117 Where the innocent party proposes to "accept the repudiation", that acceptance is manifested by "so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end": Heyman v Darwins Limited, above, at 361 per Viscount Simon LC. The innocent party does not have to recite a mantra such as "I accept your repudiation" or the like to communicate acceptance of the termination. 118 In Lakshmijit v Sherani [1974] AC 605 at 616, Lord Cross, delivering the judgment of Lord Diplock, Viscount Dilhorne and himself, said: "No particular form of communication is needed. It is sufficient if the vendor makes it unequivocally clear to the purchaser that he is treating the agreement as being at an end: see Car & Universal Finance Co Limited v Caldwell [1965] 1 QB 525." 119 As McHugh JA (as his Honour then was) explained in Wood Factory Pty Limited v Kiritos Pty Limited, above, at 146, it is not even necessary that the defaulting party receive direct notification from the person rescinding. Thus in Holland v Wiltshire, above, at 416, Dixon CJ said that the vendor's "election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale and by his selling of it". These propositions were accepted recently in Karacominakis v Big Country Developments Pty Limited [2000] NSWCA 313 at [155]; [2000] NSWCA 313; [2001] ANZ ConvR 513; [2001] ANZ ConvR 577, where Giles JA (with whom Handley and Stein JJA agreed) said: "It is not necessary that the communication of acceptance of a repudiation be in those terms, or by direct notification. Words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract (Sargent v AFL Developments Pty Limited [1974] HCA 40; (1974) 131 CLR 634 at 646) and it is enough to make the election manifest to the relevant party (Wood Factory Pty Limited v Kiritos Pty Limited) ...". 120 The question of whether the innocent party has elected to terminate is determined objectively. It is "an effect which the law annexes to conduct which should be justifiable only if an election had been made one way or the other ... ": Tropical Traders Limited v Goonan [1964] HCA 20; (1964) 111 CLR 41 at 55. 151Finally, the passage noted by her Honour from a judgment of McHugh JA (as his Honour then was) in Wood Factory Pty Limited v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 146 should be referred to in full: In his judgment Samuels JA draws attention to the necessity for the plaintiff not only to have elected to accept the repudiation but also to have communicated it to the defendant. His Honour refers to the statement in Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655-656 where Mason J said that essential "to the making of an election is communication to the party affected by words or conduct of the choice thereby made". But I do not think that Mason J meant that the defaulting party must always receive a direct notification from the person rescinding. In Holland v Wiltshire (1954) 90 CLR 409 Dixon CJ said (at 416) that the vendor's "election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale, and by his selling it". No doubt this was what Mason J had in mind when he referred to the communication of the election "by words or conduct". In Tropical Traders v Goonan (1964) 111 CLR 41 at 55, which was one of the two statements to which Mason J referred, Kitto J said: "... Not that election is a matter of intention. It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other ...." Moreover in the present case the facts which constituted the surrender by operation of law and the acceptance of the repudiation were known to the defendant. Mr Callum and the defendant's solicitors were well aware that Insul Fluff had entered into occupation of the premises as tenant. 152Applying these principles to the present issue, I conclude that approaching the matter objectively, the plaintiffs sufficiently manifested their election to treat the ASA as at an end, as a result of either or both of PGI's repudiatory acts which I have identified, by: (1)Entering into the March Employment Contracts. The November Employment Contracts were integrally bound up with the ASA. The March Employment Contracts were on different terms to the November Employment Contracts and were unconnected to any obligation on the part of PGI to purchase Southern Cross' assets. (2)Proceeding to sell what remained of Southern Cross' assets. This step was completely contrary to the fundamental requirement of the ASA for Southern Cross to sell its assets to PGI. It is on all fours with the wronged vendor in Holland v Wiltshire who by proceeding to readvertise and sell the land was found by Dixon CJ to have thereby sufficiently manifested acceptance of the purchaser's repudiation without any suggestion that actual communication of the decision or knowledge on the part of the defaulting purchaser of the readvertising and sale was required for effective acceptance of the repudiation. 153Even though not strictly required at law for an effective acceptance of PGI's repudiation, PGI was undoubtedly aware of both of these matters. Should PGI be permitted to amend the Defence? 154Late in the proceedings, PGI sought to amend the Defence to allege that Southern Cross was not entitled to terminate the ASA because, at the time of the alleged termination (3 March 2009), Southern Cross was itself not ready, willing and able to perform its obligations under the ASA. It was alleged that because of the circumstances in which NMA's assets had come into the possession of Southern Cross, Southern Cross could not comply with its obligations under Clause 2.2 of the ASA that the relevant assets were sold "free from all charges, encumbrances, options and adverse interests of any kind". 155PGI was content for me to deal with its amendment application in these reasons. The application is refused. Because, if allowed, the proposed defence would have been considered at this point of the judgment, it is convenient instead to give my reasons for that refusal. 156The Claim alleged: 7. On 23 January 2009, the Defendant sent written correspondence to the Plaintiffs, wherein the Defendant provided notice of its intention to terminate the Agreement within 30 days of the said notice. Particulars Letter from the Defendant to the First Plaintiff, dated 23 January 2009. 8. Further, on 27 February 2009, the Defendant issued a Deed of Termination to the Plaintiffs for its execution and return. 9. The actions of the Defendant referred to in paragraphs 7 and 8 above constituted a breach by it of the terms of the Agreement. 10. As a consequence of the Defendant's conduct as referred to in paragraphs 7 and 8 above the Defendant evidenced an intention not to be bound by the terms of the Agreement and thereby repudiated the terms of the Agreement. 11. As a consequence of the Defendant's repudiation of the terms of the Agreement the Plaintiffs treated the Agreement at an end. 157PGI denied paragraphs 9-11 of the Claim. The proposed additional defence (the "proposed defence") was to be part of a series of defences said to be in further answer to paragraphs 9-11: 13(n) (n) Further in the alternative, as at the date (3 March 2009) that the first plaintiff alleges that it purportedly elected to terminate the Agreement, it was not ready, willing or able to perform its obligations under the ASA, in that: (i) the first plaintiff was obliged to sell the Business Assets (including the 'Stock', as defined in cl 1.1 of the Agreement) to the defendant free from all charges, encumbrances, options and adverse interests of any kind (pursuant to cl 2 of the Agreement): (ii) as at 3 March 2009, all or part of the Business Assets (within the meaning of the Agreement) were the assets and undertaking of Nielsen & Moller Autoglass (N&M) that were the subject of and secured under a charge (entered into on 20 October 2006 and registered on 1 December 2006) from that entity to Mr and Mrs Rankine in their capacities as trustees of the Rankine Family Superannuation Fund: (iii) on or about 4 September 2007, Mr Rankine became sole director of N&M: (iv) on or about 31 December 2007, Mr Rankine became a controller of N&M and accordingly became an 'officer' of N&M within the meaning of s179(2) of the Corporations Act 2001 (Cth); (v) in the premises, from 4 September 2007, Mr Rankine was in a fiduciary relationship to N&M and, accordingly, when exercising powers as a director and/or a controller of N&M, Mr Rankine became subject to fiduciary and statutory obligations to N&M, including obligations: (A) not to allow his self-interest, or the interests of some other entity in which he was interested, to conflict with his duty to the corporation; (B) not to misappropriate the corporation's property for the benefit of himself or for some third party; (C) not to improperly use his position to gain an advantage for himself or someone else (per s 182(1) of the Corporations Act); (D) to act in good faith in the best interests of the corporation and for a proper purpose (per s 181(1) of the Corporations Act); (E) not to improperly use information received because he was an officer of N&M, to gain an advantage for himself or someone else (per s 183(1) of the Corporations Act); (F) not to purchase the property over which he was appointed to control; nor sell it to his appointor or a purchaser associated with the appointor, at least other than for the best price that was reasonably obtainable; and (G) after selling property of N&M (in accordance with his equitable and statutory duty of care to N&M under s 420A of the Corporations Act), to distribute, or account to N&M, for any surplus of assets remaining after the appointor's debt had been discharged. (vi) At no time did Mr Rankine ever arrange for the sale of N&M's assets and undertakings; (vii) instead, in breach of his fiduciary and statutory obligations to N&M, in 2008, Mr Rankine permitted the first plaintiff, an entity in which he was the sole director and shareholder, to use, for its own purposes, the N&M assets and undertaking: (A) without any agreement as to the terms by which the first plaintiff acquired possession; (B) for no consideration, such that the first plaintiff was, at most, a volunteer; and (C) to advantage the first plaintiff and thereby, indirectly himself (through his membership of the first plaintiff,) without conferring any corresponding benefit to N&M through a reduction or extinguishment of its indebtedness to Mr Rankine's appointor. (viii) the first plaintiff received and/or used the N&M assets and undertaking as volunteer and, by reason of the knowledge of its sole director and shareholder (Mr Rankine) with which it was affixed, the first plaintiff: (A) received such property with notice of a breach of Mr Rankine's fiduciary obligations to N&M; or (B) instigated, procured or participated in the breach by Mr Rankine of his fiduciary obligations to N&M. (ix) in the premises, as at 3 March 2009 (when it alleges that it elected to terminate the Agreement): (A) Southern Cross held possession of the N&M assets and undertaking on constructive trust for N&M; (B) Southern Cross was not ready, willing or able to discharge its obligation to sell all of the Business Assets the subject of the Agreement to the defendant free (inter alia) of encumbrances and adverse interests of any kind; and (C) Southern Cross was not entitled to terminate the ASA on the date it alleges it elected to terminate the ASA. Particulars (i) The defendant repeats and relies upon the matters referred to in paragraph 13(a) to 13(1). 158The hearing of these proceedings commenced on 3 June 2013 with an estimate of five days. It quickly became apparent that much longer would be required. Cross-examination of the plaintiffs' witnesses was completed on the fourth day. On the fifth day the proceedings were adjourned part heard to 17 September 2013. The evidence concluded on 19 September and the proceedings were stood over again for submissions on 3 and 4 October 2013. 159Submissions in support of the proposed defence were included in PGI's written submissions dated 2 October 2013. This was the first time the proposed defence had been raised. Those submissions said: It is acknowledged that PGI's Defence does not expressly plead that Southern Cross was not entitled to terminate the ASA when it was not able to perform its obligations, although the question of Southern Cross' ability to pass good, or unimpaired title to assets has clearly been put in issue. Further, the point is made in the cross-claim when PGI asserted that Southern Cross breached a warranty that some or all of the 'Business Assets' were property in which [N&M] had an interest. Southern Cross has relevantly been on notice of the point. To the extent necessary, PGI seeks leave to further amend its Defence to raise the point in that document. 160During final addresses submissions were put in relation to both the amendment application and the substantive arguments raised by it. However, that took place in the absence of an amended pleading. At the conclusion of the hearing I directed PGI to file and serve its proposed amended defence. This was done on 11 October 2013. The plaintiffs subsequently informed the Court that they opposed the amendment for the reasons which they had given during the course of final submissions. 161In considering PGI's application it is necessary to identify the applicable legal principles in relation to amendment of a pleading. I considered those principles in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2013] NSWSC 764: 48. The parties, correctly, agreed that I had power to permit Macquarie's amendment under s 64 of the Civil Procedure Act 2005 (NSW) ("the CP Act"), which provides: (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. ... 49. Section 58 of the CP Act provides: (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and ... (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, ... (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case. 50. Pausing there, I therefore proceed on the basis that the prima facie mandatory requirement for all necessary amendments to be made under s 64(2) is to be exercised subject to the requirements of s 58. In doing so it is mandatory for the Court to have regard to the provisions of ss 56 and 57 of the CP Act and permissible for the Court to have regard to the matters listed in s 58(2)(b). I have reproduced above those permissive matters listed in s 58(2)(b) which I consider to be relevant to the present application and which I have in fact taken into account. 51. Section 56 requires the Court, in an application of this kind, to give effect to the overriding purpose of the CP Act, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. 52. Section 57(1) of the CP Act requires the overriding purpose to be effected having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. 53. The enactment of the CP Act has meant that the case law developed before that legislation relating to matters such as amendment of pleadings is no longer directly relevant. Nevertheless, that case law can provide a useful guide, particularly as to discretionary considerations of the kind which fall within s 58(2)(b)(vii) of the CP Act. 54. In the course of argument before me there was discussion as to the applicability, by analogy, of cases dealing with, for example, applications for leave to reopen proceedings following the delivery of judgment (e.g., Smith v NSW Bar Association (1992) 176 CLR 256 at 266-267) or where, on appeal, matters not raised below are sought to be relied upon for the first time (e.g., Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438). However, while cases of that kind may point to discretionary considerations which could be relevant to the present case, I do not propose to seek to apply such cases by analogy. I respectfully agree with the observation of the Court of Appeal in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 ("Walker Corporation") (upholding a decision of Biscoe J in the Land and Environment Court refusing a party leave to amend its points of claim after the matter had been remitted to his Honour from the Court of Appeal) where at [92] Basten JA (with whom Beazley and Young JJA agreed) said: ... The danger of relying upon analogy is that it will distract attention from the specific circumstances of the particular case. Appropriate guidelines promote uniformity of approach and are desirable; guidelines adopted by analogy may be helpful in some situations, but not in others. 162In determining this application I have applied the provisions of the CP Act to which I have referred. Nevertheless, drawing upon considerations which have been identified as relevant in some of the cases, I have identified the following matters which I consider to be relevant in the circumstances of this case pursuant to s 58(2)(b)(vii) of the CP Act: (1)The reasons for the amendment application and why the subject matter of the application had not been pleaded earlier, including whether a forensic decision had been made not to do so; and (2)Whether the plaintiff would have taken a different forensic course (including raising different legal issues, calling additional evidence and pursuing other lines of cross-examination) had the proposed defence been raised before the matter had been heard. 163As I have set out in paragraph [159] above, PGI's submissions were directed to the proposition that there was no injustice to the plaintiffs in allowing the amendment because it went to an issue (Southern Cross' title to the assets) of which the plaintiffs were already on notice as an issue in the proceedings. PGI further submitted that the question of readiness, willingness and ability to perform was a matter about which the plaintiffs bore the onus of proof in any event if they were to make good their claim for damages. 164The plaintiffs objected to the amendment on the basis that it was too late and that they would have made further inquiries and advanced more detailed evidence if they had been aware that the proposed defence would be an issue in the proceedings. I assume (without deciding) in favour of PGI that the proposed defence is a "necessary" amendment within the meaning of s 64(2) of the CP Act. In this case, the mandatory matters which I am required to take into account under ss 56 and 57 of the CP Act resolve into the same issue: the just resolution of the proceedings. The particular aspect of justice which I consider to be relevant is whether the plaintiffs will have had a fair opportunity to deal with the matters raised in the proposed defence when measured against the degree to which, if at all, it can be said that they were properly on notice of the point. This same issue finds expression in the discretionary consideration referred to in s 58(2)(b)(vi) of the CP Act. 165Counting against the exercise of the Court's discretion in favour of PGI is the extraordinary lateness of the application (during the course of final submissions) and the lack of an explanation as to why it was being made at that time and not earlier. However, those considerations would, in and of themselves, be insufficient to persuade me if there was otherwise no injustice to the plaintiffs by allowing the amendment. 166As appears from the extract of PGI's final submissions set out in paragraph [159] above, it was submitted that there could be no relevant prejudice to the plaintiffs because they were already on notice of the subject matter of the proposed defence. Reliance was placed on parts of PGI's defence, as well as its Cross-Claim. I do not accept PGI's submission because, for reasons which I will now set out, those passages do not support the proposition for which PGI contends. 167First, PGI relies on paragraphs 13(d) - (k) (incl) of the Defence. Those paragraphs must be considered in the context of the conclusion to which they lead, set out in paragraph 13(l): 13. In further answer to paragraphs 9-11 (incl) of the second further amended statement of claim, the defendant says: (A) (a) a condition precedent to completion of the Agreement was that the parties would obtain the consent of the landlord to an assignment of the lease of the Business Premises (in Peakhurst) (cl 4.1(c) and Sch 1, Item 3). (b) The defendant had the right to waive satisfaction with the condition by written notice to the plaintiff (cl 4.2 and 26). (c) At all material times: (i) the condition precedent referred to in sub - paragraph 8 (a) above was not satisfied; (ii) the defendant had not exercised the right to waive the condition by written notice to the plaintiff; (iii) the Agreement had not been completed. (d) A condition of the Agreement (cl 6.2(b)) was that on the Completion Date, the plaintiff would deliver to the defendant possession of and title to the Business Assets (as defined) free from all mortgages, charges, liens and encumbrances. (e) The plaintiff and the covenantors (Mr Geoff and Mrs Karin Rankine) represented and warranted (cl 12 and Sch 2, item 2) to the defendant (inter alia) that the Business Assets were in its possession and were free from any bill of sale, lien or other encumbrance. (f) On or about 24 December 2008, the defendant received correspondence from solicitors for a third party, the liquidator of Neilsen & Moller (Autoglass) (NSW) Pty Ltd (In Liquidation), in which that third party asserted a claim to property in the plaintiff's possession, which property constituted the Business Assets that the plaintiff had agreed to sell to the defendant pursuant to the Agreement; (g) If the claim by the liquidator of Neilsen & Moller (Autoglass) (NSW) Pty Ltd (In Liquidation) was substantiated: (i) the plaintiff (and the covenantors, being Mr Geoff Rankine and Mrs Karin Rankine) would be in breach of the said warranties; (ii) the plaintiff would be in breach of its obligation to deliver possession of and title to the Business Assets free from all mortgages, charges, liens and encumbrances; and (iii) the plaintiff and Mr and Mrs Rankine would be liable to indemnify the defendant from all claims that the defendant suffered or incurred by reason of or in connection with the warranties being untrue or inaccurate in any respect. (h) On or about 5 January 2009, the defendant sent the said correspondence (dated 24 December 2008) from the liquidator of Neilsen & Moller (Autoglass) (NSW) Pty Ltd (In Liquidation) to the plaintiff, and requested it to prove that it had title to the Business Assets. (i) On or about 23 January 2009 the defendant sent the letter that is referred to in paragraph 7 of the second further amended statement of claim (upon which the defendant relies for its full force and effect). (j) The said letter of 23 January 2009 indicated (inter alia) that the defendant would consider its position as to whether the Agreement was capable of completion upon the plaintiff furnishing proof of title to the Business Assets. (k) Between 23 January 2009 to early February 2009, Mr Geoff Rankine, a covenantor under the Agreement and controller of the plaintiff: (i) did not (adequately or at all) furnish proof of title to the Business Assets (by way of the options suggested by the defendant in its 23 January 2009 letter, or otherwise); (ii) verbally acknowledged to Mr Lindell (on behalf of the defendant) his potential liability to the defendant under the Agreement if the liquidator of Neilsen & Moller (Autoglass) (NSW) Pty Ltd (In Liquidation) substantiated its claim to the Business Assets; (I) Between 23 January 2009 and early February 2009, and before its completion, the plaintiff and defendant terminated the Agreement, and any employment contracts allegedly signed by the second and third plaintiffs in or around November 2008, by consent and entered into a substantially different arrangement. Particulars (i) As consideration for terminating the Agreement and any employment contracts entered into in or around November 2008 the parties agreed to relinquish rights to require performance by the other party of obligations under the Agreement. (ii) The agreement was partly verbal, arising from conversations in or about February 2009, between Mr Geoffrey Rankine (for the plaintiff) and Mr Niko Lindell, Mr Asko Valkama and Mr Greg Robertson (for the defendant) in the said period. (iii) The different arrangement consisted of the following terms: (A) The plaintiff was permitted to sell its stock to third parties; (B) Mr and Mrs Rankine would enter contracts of employment with the defendant, on terms different to those proposed in November 2008, (and were offered bonuses to maintain and grow the defendant's NSW client base, which they did not ultimately accept); (C) Mr and Mrs Rankine's son, James, would also be employed by the defendant. (D) Catherine Kiernan would resign from her employment with the first plaintiff and commence employment with the defendant. (E) The third plaintiff would be provided with financial support by the defendant (or alternatively paid salary by the defendant) whilst he attended, on behalf of the first plaintiff, to disposition of the first plaintiff's stock by sale for a period from 3 March 2009 to 1 May 2009. (iv) The agreement to terminate and entry into the different arrangement is also inferred from the plaintiff's conduct in selling stock to third parties and the entry by Mr and Mrs Rankine, and James Rankine into contracts of employment with the defendant. 168The proposed defence asserts a breach of warranty because by reason of specifically particularised breaches of fiduciary duty by Geoff, Southern Cross held what had formerly (on one view) been NMA's assets on constructive trust for NMA (presumably invoking the principles of accessory liability derived from Barnes v Addy (1874) 9 Ch App 244). By contrast, paragraphs 13(c) - (k) set out the matters relied upon in support of the allegation in clause 13(l) of the Defence that the parties had terminated the ASA by agreement. Most importantly, none of those paragraphs invited a determination of whether, in fact and law, there was a breach of any warranty and the basis upon which the breach would be alleged. So much is made clear by the opening words of clause 13(g) "if the claim by the liquidator of Nielsen & Moller (Autoglass) (NSW) Pty Ltd (in liquidation) was substantiated" (emphases added). So understood, both the legal issues and forensic considerations raised in clauses 13(d)- (k) of the Defence are so materially different from those raised by the proposed defence that they do not support PGI's submission that the latter meant the plaintiffs were already on notice of "the issue". 169The same result follows in relation to the paragraphs of PGI's Cross-Claim upon which it relied in its amendment application: 12. By the Agreement, the cross-defendants jointly and severally represented and warranted to the cross-plaintiff that as at the date of the Agreement; ... (c) the Business Assets were free from any bill of sale, lien or other encumbrance; and ... 16. The warranties provided by the cross-defendants were untrue or inaccurate in some respect and/or were breached in that: (a) contrary to the warranty in cl 2.3 of Schedule 2, some or all of the Business Assets were not free from any encumbrance but were property in which Nielsen & Moller Autoglass (NSW) Pty Ltd (Nielsen & Moller), by its liquidator, had an interest in some or all of those assets: Particulars The part of the 'Business Assets' (as defined in the asset sale agreement) referred to are the assets and undertaking of Nielsen & Moller that were the subject of and secured under the charge from that entity to Mr and Mrs Rankine (date 20 October 2006 and registered on 1 December 2006); which property was thereafter licensed by Mr and Mrs Rankine to Southern Cross Australia in the period from December 2007 to January 2008. This part of the 'Business Assets' were 'encumbered' in the sense that Southern Cross Australia did not acquire legal title and the full rights of ownership to those assets from Mr and Mrs Rankine and that part of the Business Assets which Southern Cross promised to sell to Protector Glass was burdened to that extent. Nielsen & Moller, by its liquidators, had a beneficial interest in this relevant part of the Business Assets. ... (c) In breach of the warranty in cl 1.1 and 1.2(b) of Schedule 2 to the Agreement, at the date of the Agreement, the first cross-defendant did not have power to perform its obligations under the Asset Sale Agreement and/or the power to transfer title to the Business Assets to the cross-claimant that were wholly or partly owned by Nielsen & Moller; Particulars Southern Cross' obligations (cl 2.2) were to sell the Business Assets (in their entirety) 'free from ... adverse interests of any kind' and 'together with all rights and privileges attaching to the Business Assets ' (in their entirety). As at 16 or 19 November 2008, Southern Cross was a licensee, who did not have the power to transfer title, free from adverse interests and with all rights and privileges attaching to that part of the Business Assets which represented the assets and undertaking of Neilsen & Moller Autoglass. 170While those allegations in the Cross-Claim do put in issue the question of whether or not Southern Cross had breached the relevant warranty in relation to what it said were its assets, the basis or theory on which the breach depended as particularised only raised an issue as to whether or not Southern Cross was a licensee of those assets. The plaintiffs had adduced evidence on that question to lay the factual basis for the legal conclusion that the assets had been transferred without encumbrance to Southern Cross. While it is clear that these paragraphs of the Cross-Claim raise the issue of breach of warranty, the equitable hypothesis invoking fiduciary duty and constructive trust which underpins the proposed defence again raises materially different legal and forensic considerations from the case at law (contractual licence) in the Cross-Claim. 171Finally, PGI submitted that there could be no relevant prejudice to Southern Cross by the proposed defence because, at all times, Southern Cross bore the onus as part of its claim for damages to prove that it was ready, willing and able to perform the ASA. 172Southern Cross first sought to answer this by referring to UCPR Part 14, r. 14.11: If it is a condition precedent necessary for a party's case in any pleading that: ... (d) the party is ready and willing, or was at all material times ready and willing, to perform an obligation, a statement to the effect that the condition has been satisfied is taken to be implied in the party's pleading. 173Insofar as Southern Cross intended to suggest that the rule relieved it completely from the obligation of having to prove that it was ready and willing to complete the ASA, the submission does not correctly capture the effect of the of implication. I respectfully adopt as correct the analysis by Dawson J in Foran v Wight (1989) 168 CLR 385 at 451-452 (see also Brennan J at 424-425): In any action for breach of contract, the readiness and willingness of the plaintiff to perform those mutual obligations remaining to be performed on his part under the contract is a condition precedent to his right to recover: see Hensley v Reschke. Under the old rules a plaintiff was required to plead that he was ready and willing but under the present rules that fact is implied with the effect that he is not required to prove it unless the defendant puts it in issue. In that event, the burden of proving readiness and willingness rests upon the plaintiff. See Supreme Court Rules 1970 (NSW) Pt 15, r. 11. But what if the breach is anticipatory rather than actual? The authorities have given conflicting answers to this question, but it is now clear that in cases of repudiation as well as actual breach, readiness and willingness on the part of the plaintiff is part of his cause of action. The position was clearly stated in D.T.R. Nominees Pty Ltd v Mona Homes Pty. Ltd.: "A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach ..." 174Applying this statement of the law, Southern Cross had no obligation to prove that it was ready and willing to complete its obligations under the ASA at the time it accepted PGI's repudiation unless that matter had been put in issue by PGI. Southern Cross' readiness and willingness to perform its contractual obligations was a material fact which, but for UCPR r. 14.11, would have to be specifically pleaded. Because it does not have to be specifically pleaded, to put it in issue a defendant must specifically traverse it by pleading, in terms, that the plaintiff was not ready and willing. A bare denial of any or all of the specific elements of the cause of action in damages for contract which the plaintiff has pleaded (including an allegation of valid termination) will not be sufficient to put the plaintiff on notice that readiness and willingness is in issue. 175The same result may be reached by the application of UCPR Part 14, r. 14.14(2): In a defence or subsequent pleading, a party must plead specifically any matter: (a) that, if not pleaded specifically, may take the opposite party by surprise, or (b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or (c) that raises matters of fact not arising out of the preceding pleading. 176Each of those sub-paragraphs supports the conclusion that it was necessary for PGI to put Southern Cross' readiness and willingness specifically in issue so that it would become a matter which Southern Cross had to prove. In some cases it will be sufficient in a case of anticipatory breach for a defendant to include in its defence a plea to the effect "denies that the plaintiff was ready and willing to perform its obligations under the contract at the time the plaintiff purported to accept the defendant's alleged breach". That would then require the plaintiff to meet the relatively undemanding test of proving that at the relevant time it was not under a "substantial incapacity" or a "definitive resolve or decision" against the performance of the plaintiff's obligations (Foran v Wight (1989) 168 CLR 385 at 454 per Dawson J). 177However, in other cases such a general denial might suffer from the old pleading deficiency of being a "negative pregnant", i.e. containing a positive assertion by the defendant of which the plaintiff must be specifically on notice in order to be able to meet. That would apply in the present case if all PGI had done was to deny specifically that Southern Cross was ready and willing because, as the proposed defence makes clear, PGI wished to advance a quite specific basis on which it alleged Southern Cross was not ready and willing. 178Until it propounded the proposed defence, PGI had not specifically denied that Southern Cross was ready and willing to complete its obligations under the ASA. Consistently with the principles which I have identified, this meant that Southern Cross did not have to prove that it was ready and willing. That conclusion is enough to dispose of PGI's submission. However, it is the detailed and quite specific factual and legal assertions contained within the proposed defence, based around assertions of fiduciary duty and constructive trust, that make out the injustice which I find would be suffered by Southern Cross if I were to allow the proposed defence to be filed. I have no doubt that if the plaintiffs had been on notice of the specific matters pleaded in the proposed defence, they would have made further inquiries and advanced more detailed evidence than they in fact already had in relation to the circumstances surrounding Southern Cross coming into possession of what had been NMA's assets. Amongst other things, this would have extended to further examination of and evidence about the value of those assets in comparison to the size of NMA's debt and the adequacy of such consideration as Southern Cross gave for the transfer of those assets. While the lateness and lack of explanation for the proposed defence is relevant, but not decisive, the injustice which I have identified is therefore the fundamental reason for the refusal of PGI's application to rely upon the proposed defence. 179Finally, and for completeness, I record that the plaintiffs also submitted that to allow the proposed defence would also give rise to unfairness because while, for example, Geoff was cross-examined about Southern Cross being a licensee of the assets, PGI had not put to the plaintiffs' witnesses the various matters relied upon in the proposed defence. I accept that submission and rely upon it as a further reason for refusing PGI's application. Was the ASA terminated by abandonment or agreement? 180PGI submits that the ASA was terminated by abandonment or agreement, such that the plaintiffs have no right to sue PGI for damages in circumstances where I have found PGI had committed an anticipatory breach of the ASA. It says that while there may be conceptual differences between termination by abandonment and by agreement, the facts in this case will lead to the same result. 181I would put the matter a little differently, namely that the correct legal analysis ought not be driven by trying to fit what has occurred into one of those, or some other, categories of termination. What is common to both categories is the need to determine objectively the intention of the parties about their rights and obligations under the ASA. That way of looking at things is drawn from an examination of the principles in relation to the relevant categories of termination. 182If PGI was able to demonstrate that the ASA had been terminated before 3 March 2009 then that termination would have pre-empted what I have otherwise found to be the plaintiffs' acceptance of PGI's repudiation of the ASA. PGI's secondary obligation implied by law to pay damages would never have been enlivened (see Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 849). 183So understood, the analysis is straightforward. However, what if the termination by acceptance of a repudiation by anticipatory breach and termination by abandonment are simultaneous? This is what the Court of Appeal held in Ryder v Frohlich [2004] NSWCA 472 at [151]-[152] per McColl JA; Hodgson and Ipp JJA agreeing. The fact that that case concerned a partnership does not detract from its application in a more general contractual context. 184If that were the case at bar, would PGI's secondary obligation to pay damages arise? This focuses on what, if anything, might be discerned objectively about the parties' intention in relation to the wrongdoer's obligation to pay damages. Although again writing in the context of a partnership dispute, the possibility of abandonment (so described) having different consequences was recognised in Fazio v Fazio [2012] WASCA 72 at [71]-[75], where the Court of Appeal (Pullin, Newnes and Murphy JJA) said: 71 Some caution, however, may be required in using the word 'abandonment' with respect to an inferred agreement for dissolution, as the word may connote two different types of agreement. One is in the usual sense of abandonment, or abrogation, as an inferred agreement for the discharge of the contract involving the mutual release of future, unperformed obligations: DTR Nominees Pty Ltd v Mona Homes Proprietary Ltd [1978] HCA 12; (1978) 138 CLR 423; 434; see also Carter J W, Carter's Breach of Contract (2011) [12-18] and the cases there cited. Such an abandonment of the executory obligations and promises of the partnership agreement does not effect, in itself, a release of the outgoing partner's interest, and the outgoing partner may enforce such existing rights as he or she has consistent with the terms, ascertained and properly construed, of the agreement for retirement and subject to any statutory or equitable constraints on relief: see, for example, Walker v Melham [28]. In that case, the plaintiff and the defendant became partners in about 1979 and carried on a business of house cladding and window fitting. In 1984, they purchased an area of land as tenants in common in equal shares, upon which they constructed, and operated, a ski lodge. It was a term of their agreement that both partners would contribute towards the day-to-day management and control of the ski lodge business. They did so up to and including the 1993 ski season. However, prior to the commencement of the 1994 season, their relationship deteriorated and the plaintiff decided to embark on a new business in Sydney. In May 1994, the parties had an acrimonious meeting, following which they went their separate ways. The judge, in the circumstances of that case, inferred an abandonment or abrogation of the contract with respect to future performance, but not an abandonment of the plaintiff's interest. 72 The second type of agreement involves not just the mutual release of future performance, but also an agreed release of the outgoing partner's existing equitable chose in action represented by his or her interest in the partnership - see, eg, Jorgensen v Boyce; Palmer v Moore. In the latter case, at (297), the Privy Council referred to the relevant abandonment in terms of the outgoing partner having 'totally abandoned his interest in favour of his co-adventurers' (emphasis added). 73 Where the outgoing partner's chose in action is 'released' in favour of the 'continuing partners', pursuant to an agreement, the effect is to enlarge the interests of the 'continuing partners' in the assets to be applied by them in the conduct of the business of the new partnership: Commissioner of State Taxation v Cyril Henschke Pty Ltd [28] - [29]. 74 The abandonment of a contract, in the sense of the mutual release of future obligations, being an inferred agreement, does not depend upon the subjective intention of the parties, but upon whether their conduct (both acts and omissions) viewed objectively manifests an intention to discharge the contract: Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144; 151 - 152; Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279 [2], [40], [57]; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (434); Marminta Pty Ltd v French [2003] QCA 541 [21] - [22]. The length of the term of the agreement is a matter of some relevance in assessing the likelihood of abandonment: Wallera Pty Ltd v CGM Investments Pty Ltd [50] (Kiefel J (as her Honour then was), Ryan & Gyles JJ agreeing). It seems to me that the formalities of a particular agreement may also be a relevant factor. It may, depending on all the circumstances, be more difficult to infer an agreement of abandonment where the parties have, in setting up their contractual relationship, expressed in detail in a formal instrument, the terms of their relationship, including the terms as to termination. 75 Similarly, whether there is an abandonment involving an agreement for release will depend upon the inference to be drawn from the conduct of the parties, viewed objectively. The topic of inferred agreements is discussed more generally in [188] - [195] below. 185Because they are referred to in the passage which I have extracted and contain a convenient summary of the relevant principles, I also respectfully adopt what their Honours said about the establishment of agreements by inference (at [188]-[195]): 188 As to the latter, it is well established that strict adherence to the classical theory of contract formation is not necessary; a contract may be inferred in the absence of an identifiable offer and acceptance: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [1] Mason P; [74] Heydon JA (as his Honour then was); Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110, at 11,117, McHugh JA; Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) [2008] WASC 239; [2009] WASC 107; (2008) 39 WAR 1, [2653]; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520 [90], [204] - [205]; Branir Pty Ltd v Owston Nominees (No 2) [369]; Marist Brothers Community Inc v Shire of Harvey (1994) 14 WAR 69, 74 - 75; Vroon BV v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32, 79 - 80. For example, an agreement by a creditor of the firm to release a retiring partner (who stands, as between himself or herself and the 'continuing partners' as a surety for the debt), may be inferred from conduct: s 24(3) of the Partnership Act and see ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue [2012] HCA 6 [32] and Morison C B , Rescission of Contracts (1916) at 26 - 27. 189 A contract may be inferred from the acts and conduct of parties, as well as or in the absence of their words: Integrated Computer Services v Digital Equipment Corporation (11,117); Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, Lighting by Design v Cannington [21], [90], [204]. The parties' dealings with each other are relevant both 'for what was said and not said': Branir Pty Ltd v Owston Nominees (No 2) [369]. 190 The question is whether the parties' conduct, viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations: Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) [2659]; Lighting by Design v Cannington [204]; Branir Pty Ltd v Owston Nominees (No 2) [369]. 191 In Brambles Holdings v Bathurst City Council [81], Heydon JA (in observations adopted by Le Miere AJA in Lighting by Design v Cannington [205]) posed the following question for determination: In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of [one party] and a reasonable person in the position of the [other party] think as to whether there was a concluded bargain? 192 In relation to the admissibility of subsequent conduct, the general principle is that subsequent conduct is not to be used as an aid in the construction of an instrument or written agreement: The Administration of the Territory of Papua and New Guinea v Daera Guba [1973] HCA 59; (1973) 130 CLR 353, 446 per Gibbs J, citing James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603; Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [35]. 193 Where, however, an informal agreement (oral or inferred) is alleged to have been made on or by a certain date, the conduct of the parties, including conduct subsequent to the postulated date, may be considered in deciding whether a contract has been concluded: Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528, 532 - 533; Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; (1908) 5 CLR 647, 669; Brambles v Bathurst [25]. Such conduct may be considered for the purpose of inferring not only whether a binding agreement had been reached, but also its subject matter and the identification of its necessary terms: Bell Group [2665] - [2672]; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 [7] - [27], [45] (Spigelman CJ); Australian Estates Ltd v Palmer (Unreported, NSWCA, 22 December 1989). In the last-mentioned case, Samuels JA (with whom Kirby P and Meagher JA agreed) said: While it is true that a court cannot have regard to the subsequent conduct of the parties as an aid in the interpretation of a term in a written contract (see James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, Wickman Machine Tool Sales Ltd v L Schuler AG [1973] UKHL 2; [1974] AC 235), this is merely an application of the parol evidence rule. Thus, as Stephenson LJ (with whom O'Connor LJ and Sir Stanley Rees agreed) said in Meares v Safecar Security Ltd [1983] QB 54 at 77, dealing with an oral contract: 'There is nothing in those authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Commonsense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean;' 194 The above passage was cited with approval by Moore J in Intelmail Explorenet Pty Ltd v Vardanian (No 2) (2009) FCA 1018; (2009) 82 IPR 281 [53]. 195 The quote from Meares v Safecar Security Ltd [1983] QB 54 referred to in Australian Estates Ltd v Palmer was also cited with evident approval in Bell Group at [2668] and [2672]. See also in this context the discussion by Heydon J in Cross on Evidence [39,290] and the cases cited at footnotes 307 - 311. 186Further, in relation to abandonment I respectfully adopt as correct the summary of the law given by McColl JA in Ryder v Frohlich [2004] NSWCA 472: 135 Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 - 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them ... What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that ... 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. 136 Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas 61 - 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] - [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. 137 The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution. 187To similar effect is the decision of Finkelstein J in CGM Investments Pty Ltd & Ors v Chelliah & Ors [2003] FCA 79; (2003) 196 ALR 548 at [17]-[18]: 17 Whenever parties make a contract it is possible that they have conducted themselves in such a way that it can be said by implication that they have agreed to rescind their bargain: Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 114; Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520, 534. This was dealt with by Isaacs J in Summers v Commonwealth [1918] HCA 33; (1918) 25 CLR 144. In that case the parties had entered into a contract for the supply of a specified number of blocks of marble each of a certain dimension. For some time neither party took any step to perform the contract. It was held that the parties had abandoned or abrogated the contract. Isaacs J said (at 151-152): "Whatever the terms of contract may be, it is possible for the parties so to conduct themselves as mutually to abandon or abrogate it. A position not too altogether dissimilar arose in the case of De Soysa v De Pless Pol [1912] AC 194. There, neither party had repudiated or refused to perform the contract, nothing in the nature of recision had occurred, but, said Lord Atkinson for the Privy Council: - `One party to a contract is not bound to give the other unlimited time after a day named to do that which the other has contracted to do. There must be some point of time at which delay or neglect amounts to refusal ... In truth, the project seems to have been, to a great extent, if not altogether, abandoned by all the parties concerned.' In my opinion, that is the legal position here. Informally, but effectively, the parties have so acted in relation to each other as to abandon or abrogate the contract." Summers v Commonwealth has been applied by the High Court in D T R Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423. This case concerned a contract for the sale of land. The purchaser purported to rescind the contract on the basis that the vendor had repudiated the contract by not complying with a condition. The vendor asserted that the purchaser's rescission constituted a wrongful repudiation and that the contract was thereby at an end. Stephen, Mason and Jacobs JJ (with whom Aickin J concurred) said (at 434): "[T]here can be no doubt that ... when these proceedings were commenced, neither party, whatever may have been their reasons, regarded the contract as still being on foot. Neither party intended that the contract should be further performed. In these circumstances the parties must be regarded as having so conducted themselves as to abandon or abrogate the contract." 18 In my view, the authorities to which I have referred establish not only that an agreement can be abandoned by conduct, but also that the question whether an agreement has been abandoned does not require one to examine whether the parties actually had the intention of abandoning the agreement; only whether their conduct, when objectively viewed, manifests that intention. This conclusion accords with the objectivist theory of contract which is now irrevocably entrenched in our law: Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422. See also Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, where McHugh JA (as his Honour then was) said (at 336) that "[t]he weight of authority in favour of the objective theory is too great". 188In relation to termination by agreement, it is trite to observe that in order to establish such an agreement the ordinary rules of contract formation apply, including as to the intention to enter into legal relations. Whether the later contract (if made) has the effect of terminating the earlier contract is a question of construction. 189Finally, insofar as PGI was preparing formal agreements to give effect to "Option 2", the principles set out by the High Court in Masters v Cameron (1954) 91 CLR 353 as to parties' intention to be bound must also be borne in mind. 190My intention in setting out this lengthy series of legal principles is that they all demonstrate that the fundamental inquiry for the Court in a case such as this is whether, viewing the conduct of the parties objectively, the Court is satisfied on the balance of probabilities that the parties had manifested a mutual intention to alter their existing legal relations in a particular way. Given how PGI has put its case, the period of the inquiry is from on or about 18 February 2009 to 3 March 2009, the latter being the date when Geoff signed his March Employment Contract and initialled Karin's. The period between those dates remains relevant to provide the factual context. 191PGI submits that by 3 March 2009 (if not as early as 18 February 2009), the parties had reached a position so inconsistent with the ASA that it must have been abandoned. Without disrespect to PGI's detailed analysis, by way of summary it points to matters such as: (1)The ASA remained executory; (2)Southern Cross' premises were to be closed and the parties agreed that the stock would be sold to third parties; (3)Geoff and Karin had entered into employment agreements substantially different to their November Employment Contracts; (4)Geoff was to remain at Peakhurst to sell Southern Cross' stock but would still receive a salary from PGI; (5)Some of these matters would involve breaches of the ASA by the plaintiffs if the ASA was still on foot; and (6)Southern Cross was removed from the risk of breaching the ASA by being unable to sell the stock for Southern Cross free from encumbrances. 192PGI submits alternatively that the ASA was terminated by agreement. It says that agreement is to be inferred from Southern Cross' conduct that was inconsistent with an intention to perform its obligations under the ASA. That conduct is the same as PGI relies upon for its abandonment argument. PGI also submits that the termination agreement was express or to be implied from what occurred between Geoff and Asko on 18 February 2009 when it was agreed that Southern Cross would close down its Peakhurst Premises and sell down the stock to third parties. This was completely inconsistent with the ASA remaining on foot. By fixing on this conversation, PGI submitted that Mr Amirbeaggi's threat on 23 February 2009 to seek specific performance of the ASA or Mr Lindell's concerns about terminating the ASA, did not have legal significance because a new agreement fundamentally inconsistent with the ASA had arisen between the parties. 193PGI had originally submitted that the agreement to terminate arose: (1)Partly by conduct (from about 18 February 2009) by Southern Cross that was inconsistent with an intention by it that PGI perform its obligations pursuant to the ASA; and (2)Partly expressly (or by implication) from conversations Geoff had with PGI personnel between 18 February and 3 March 2009. 194However, as it developed through the course of submissions the timing became more precise. As PGI put it, the "train had left the station" after the events of 18 February 2009. 195Alternatively, PGI submitted that the agreement to terminate arose from this exchange between Mr Robertson and Geoff at the meeting on 3 March 2009: Greg: "What we're proposing is that the current arrangement would be at an end and instead PGI simply engage you, Karin and James as employees." Geoff: "We understand that and we're happy to come and work for PGI." 196PGI submits that the only "current arrangement" being referred to in that conversation is the ASA. This is a clear statement of Geoff's understanding that the ASA had come to an end and a statement of intention that he and his wife were happy to enter into new arrangements. PGI submits that Geoff went on to tell Mr Robertson that the Termination Deed would be "finalised" next Tuesday. These statements by Geoff constituted a verbal (and implied) agreement to terminate the ASA. The fact that the Termination Deed was ultimately not executed is, PGI submitted, irrelevant. Nor does it matter whether execution of the Termination Deed was a condition to Geoff and Karin's March Employment Contracts. Even if there was such an implied condition, it could have been otherwise waived by Southern Cross for whose benefit it subsisted. 197In response, the plaintiffs submit that Southern Cross' approach takes matters out of their context, in particular that having repudiated the ASA by the 23 January Letter, Southern Cross had a right to accept that conduct and to terminate the ASA and sue for damages. So far as the case for abandonment was concerned, the Court would have to be satisfied that there had been an abandonment by Southern Cross of its right to damages. That was never the subject of discussion on 18 February 2009. 198Furthermore, in relation to the termination said to have arisen on or about 18 February 2009, Southern Cross submitted PGI's case was highly artificial. It was clear that at the meeting of 18 February 2009 there was no intention to enter into legal relations. Rather, the parties were discussing what could occur if the ASA was ultimately terminated because the requirements of the 23 January Letter had not been satisfied. Furthermore, it was said to be plain from Asko's acceptance that it was necessary to formalise what was to occur in relation to the ASA and the proposed new employment agreements, that there was no intention on the part of the parties to enter into legal relations other than through the execution of formal written agreements. 199In relation to what occurred on 3 March 2009, the plaintiffs submitted that PGI was content to have Geoff and Karin sign the March Employment Contracts without signing the Termination Deed. PGI's personnel well understood that there was a possibility that the plaintiffs would not sign the Termination Deed. In those circumstances, it was submitted that there was no basis for finding an agreement on some other basis that the ASA had been terminated. 200I will first consider the issue of whether the ASA was abandoned or terminated by agreement as a result of what occurred on 18 February 2009. I am unable to find that the parties manifested a mutual intention to alter the legal relations between them with immediate effect from that date for these reasons: (1)The parties were still within the notice period give by the 23 January Letter. The ASA had not been terminated by PGI. There was nothing to suggest that at the 18 February 2009 meeting the parties accepted that the requirements of the 23 January Letter would never be satisfied and that they should proceed (and did proceed) as though the ASA had been or would be terminated by PGI. (2)Conformably with the preceding sub-paragraph, the 18 February 2009 meeting was expressly premised, as the minutes noted, upon being a meeting "to discuss the details of 'option B' presuming no acceptable assurance are forthcoming regarding the asset sale agreement". The parties were negotiating about what they would agree to if the ASA was terminated, presumably in accordance with the threat contained in the 23 January Letter. (3)On the basis of their original arrangements having been in writing and that Clause 28.4 of the ASA provided that "no amendment to this document has any force unless it is in writing and signed by all the parties to this document", I find that the parties had no intention to enter into legal relations or affect their existing legal relations other than through the execution of further formal written agreements. (4)In the context of the parties' rights and obligations under the ASA and November Employment Contracts, any new agreements would have to reach certainty over three matters: the obligation to buy and sell Southern Cross' stock, the terms of employment of at least Geoff, Karin and Ms Kiernan, and what was to happen to the ASA including in regard to damages the plaintiffs might have been entitled to against PGI for its alleged breach of the ASA. The 18 February 2009 meeting did not resolve all those matters, including the basis on which PGI could sell its stock ("we may assist Geoff"); no terms were agreed to for Ms Kiernan beyond a start date; Karin had a start date and salary but no other terms (such as a restraint of trade); the terms of Geoff's employment were not certain even as to the start date and salary; and there was no discussion about what was to happen to the ASA. (5)PGI's argument overreaches by requiring what happened between 19 February 2009 and 3 March 2009 to be ignored. The parties continued to negotiate (including as to the terms of employment) after PGI moved to document the arrangements such as they believed or proposed them to be, culminating in the intended signing on 3 March 2009. These ongoing negotiations, involving insistence on the signing of written agreements, are completely inconsistent with a finding that the parties had reached an immediately binding new agreement on 18 February 2009. (6)Geoff and Karin's communication to Southern Cross' customers on 20 February 2009 does not detract from the conclusions I have expressed. Commercial parties will, in a sense at their own risk, often act unilaterally in accordance with what they expect will be the outcome of a contractual negotiation. The action is in any case equivocal: whether under the ASA or some other arrangement Southern Cross' business was going to come to an end. 201Turning to the submission that abandonment of or agreement to terminate the ASA occurred on 3 March 2009, again I do not accept that the parties manifested a mutual intention at that time to bring about the result contended for by PGI. PGI's analysis ignores both what occurred before 3 March 2009 and on the day. My reasons are: (1)The parties engaged in negotiations between 18 February 2009 up to 3 March 2009. The proffering of the March Employment Contracts and the Termination Deed for execution makes it clear that they intended that their new legal relations would arise upon execution of and be in the terms specified in the formal documents prepared by PGI. (2)PGI's focus on the exchange between Mr Robertson and Geoff (quoted in paragraph [195] above) cannot be considered in isolation from everything else that occurred at this meeting, in particular Geoff's refusal to sign the Termination Deed and PGI's failure to suggest that the March Employment Contracts were conditional upon the Termination Deed being signed. What occurred must be considered in its totality, including, as I have found, that there was no promise by Geoff to sign or return the Termination Deed by some specified date or at all. Just as the court will not imply a term which is expressly rejected in negotiations (see Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-353 per Mason J), the court will not imply an agreement in this case for the termination of the ASA where a party does not sign a written agreement which is intended to have precisely that effect. (3)Nor can there be an abandonment when one party is considering whether or not to execute an express termination of the contract said to have been abandoned (although non-execution over a period of time could permit a finding of abandonment at some later time). Are the plaintiffs estopped? 202By paragraph 14 of the Defence, PGI alleged that "the plaintiffs are estopped from asserting that they terminated the Agreement and any employment contracts entered into on or about 16 November 2008 by its [sic] acceptance of an alleged repudiation by the defendant". By the time of PGI's final submissions the estoppel was said to derive from a representation of fact "that neither party to the ASA was bound to continue to perform obligations under the ASA". No point was taken about this development by the plaintiffs. However it was framed, it was clear that the gravamen of the estoppel was intended to be such as to prevent the plaintiffs from suing for damages for breach of the ASA by PGI if, as has occurred, the Court found that the ASA had been terminated by the plaintiffs' acceptance of PGI's repudiatory conduct. 203PGI submitted that the estoppel was both a conventional estoppel (derived from conduct by Southern Cross and Mr Rankine) and estoppel by representation (the plaintiffs' representations inducing action by PGI). In its final submissions, PGI put its case in this way: 143. The conduct constituting that representation of fact was partly express, partly implied and partly to be inferred. In this respect, PGI relies upon the same conduct it cites as evidence of abandonment and the agreement to terminate. That includes Mr Rankine readily communicating to Mr Lindell (on 2 March) and Mr Robertson (on 3 March) that he was happy, in essence, to move on from (either side's) performance of the ASA towards entry into "option 2". The representation is also to be inferred from: (a) The conduct of the parties on 18 February 2009 when it was agreed that PGI would (with PGI's assistance in supplying stock to it) assist Southern Cross to sell its stock to other third parties; (b) By Mr and Mrs Rankine abandoning their 2008 employment agreements, thereby also abandoning the ASA; (c) Southern Cross' notice to its customers of its decision to close down its business. 204In response, the plaintiffs submitted: (1)There was never such an unequivocal representation; (2)Any reliance by PGI on such a representation was unreasonable in the light of Geoff's assertions at various times that the plaintiffs could sue for specific performance or damages; (3)At various relevant times PGI personnel well understood that the ASA remained on foot (with the consequential possibility for PGI being sued for damages) unless and until the Termination Deed was executed; and (4)There was no detrimental reliance by PGI on any representation in that PGI would have (and did) employ Geoff and Karin whether or not they signed the Termination Deed. 205I accept the plaintiffs' submissions. My reasons are: (1)Insofar as PGI relies upon the same conduct it cites in relation to the abandonment and agreement to terminate, the same reasons for my conclusion that there was neither an abandonment nor agreement to terminate inform my conclusion that the conduct does not support a finding on the balance of probabilities that an unequivocal representation at the time alleged by PGI was in fact made. The parties were engaged in a series of negotiations directed towards the conclusion of written agreements that would both give rise to and evidence whatever alteration of existing legal rights they intended to effect. Against that background, statements by one party or the other as to what they would do were not representations of the kind that would establish an estoppel but could only be reasonably understood as steps along the way in negotiating, if possible, a new legal relationship between the parties. (2)While I accept that on 2 March 2009 Geoff said that he would be happy to sign the Termination Deed provided PGI issued a letter stating that PGI wished to cancel the ASA, there are at least three reasons why that conduct does not support the representation alleged. First, it must be viewed as part of the negotiations in the way I have referred to in the preceding sub-paragraph. Second, and this may be a slightly different way of making the first point, it reflects what each party, viewed objectively, intended, namely that legal relations between them would only be altered or effected by the entry into the Termination Deed and new employment agreements. Third, to the extent that Geoff's comment might give rise to the representation alleged by PGI, it was negatived by Geoff's conduct the next day in refusing to sign the Termination Deed and (as I have found) not making any statement about when, or if at all, it would be signed and returned by the plaintiffs. (3)Contrary to PGI's submissions, I have found that on 3 March 2009 Geoff made no statement to Mr Robertson that could found a representation of the kind alleged. (4)Insofar as the parties' conduct on 18 February 2009 is relied upon, it does not support the representation alleged because the meeting on that day had been called to consider possibilities if the requirements of the 23 January Letter were not satisfied by the end of the notice period. As at 18 February 2009 PGI must have been conducting itself on the basis that if the requirements of the 23 January Letter were satisfied, it would complete the ASA. (5)Any "abandonment" by Geoff and Karin of the November Employment Contracts occurred when they entered into the March Employment Contracts on 3 March 2009. Given Geoff's refusal to sign the Termination Deed on that occasion, it cannot be said that by signing the March Employment Contracts Geoff and Karin also "abandoned" the ASA. (6)Southern Cross' notice to its customers and its decision to close down its business does not support a representation of the kind alleged. As far as PGI is concerned, Southern Cross' notice was an equivocal act. Southern Cross' business was going to have to close down either pursuant to the ASA or, if it came to be agreed, by another arrangement. In and of itself, Southern Cross' notice and decision to close the Peakhurst Premises says nothing about whether either party to the ASA was bound to perform their obligations under it. (7)It remains the law that to make out either a common law estoppel or an estoppel by representation, the party relying on the estoppel must demonstrate detrimental reliance (MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 at [72] per Hodgson JA; Beazley and McColl JJA agreeing). PGI has failed to establish any detrimental reliance. To the extent that PGI gave up its rights and obligations under the ASA it cannot have done so in reliance upon a representation of the kind alleged given Geoff's refusal to sign the Termination Deed on 3 March 2009. Nor did PGI enter into the March Employment Contracts with Geoff and Karin in reliance on any such representation. There was never any express or implied indication by PGI that entry into the March Employment Contracts was conditional on the plaintiffs executing the Termination Deed. (8)Asko accepted in cross-examination that after the meeting on 18 February 2009 there was still the need to formalise in writing the terms of any agreement under which Geoff and Karin would be employed. On 23 February 2009 Mr Amirbeaggi foreshadowed the possibility of a suit for specific performance of the ASA (see paragraph [78] above). Mr Lindell's email of 27 February 2009 (see paragraph [86] above) noted that "in the days after the notice period ended...Geoff was clearly adamant that if we cancel without his consent, he can still make us go though with the Asset Sale Agreement...Geoff is very firm in his belief that there is nothing wrong with his charge and that this could be proven to be the case and thus he can still make us complete the original agreement." Mr Lindell had already made similar observations in his email of 26 February 2009 (see paragraph [84] above). Aarne acknowledged in cross-examination that in February and March of 2009 it was his view that to achieve certainty it was necessary to record the agreement to terminate the ASA in writing. Finally, both Greg and Asko accepted that as a result of the events on 3 March 2009, they understood that it remained possible that Greg would not sign the Termination Deed. Aarne also accepted in cross-examination that he understood it was a possibility after the 3 March 2009 meeting that the plaintiffs would not execute the Termination Deed. This evidence makes it clear that PGI did not act upon any assumption or representation attributable to the plaintiffs that neither party to the ASA was bound to continue to perform its obligations thereunder such that PGI did not remain at risk of being sued for damages by the plaintiffs. (9)Niko acknowledged in cross-examination that he understood as at 3 March 2009 that Geoff and Karin were going to be offered employment whether or not they signed the Termination Deed. That is consistent with PGI's position throughout its dealings with the plaintiffs that PGI's focus was to have, in particular, Geoff's sales skills at their disposal. The November Employment Contracts - rectification and termination 206By the time of their closing submissions the parties agreed that the November Employment Contracts had been entered into and that they should be rectified to delete the possibility of being terminated upon three months' notice without cause. 207The parties also ultimately agreed that the ASA and the November Employment Contracts were so integrally connected that any repudiation or termination of the ASA was similarly a repudiation or termination of the November Employment Contracts. That analysis is correct, not least having regard to the condition precedent in Clause 4.1(b) of the ASA that each of the "Key Employees" had to sign an employment contract with PGI on terms satisfactory to it. As a matter of both commercial reality and legal analysis the ASA and the November Employment Contracts were part of the one "package". Therefore the conclusions I have reached in relation to the repudiations and terminations of the ASA apply equally to the November Employment Contracts. Geoff and Karin are entitled to damages for breach of their respective contracts with PGI. PGI's Cross-Claim 208PGI's Cross-Claim barely featured in argument before me. It was referred to in two paragraphs of PGI's opening outline of submissions. In its final written submissions PGI confined its case on its Cross-Claim as follows: 148. By its cross-claim, PGI sought relief, amongst other things, to set aside or avoid the ASA on account of breaches of terms and warranties in the ASA and misleading conduct. 149. PGI repeats here its submissions under the sub-heading "Southern Cross was not ready, willing nor able to perform its obligations under the ASA", above. For the reasons stated in that section, Southern Cross breached a warranty or made a misrepresentation that vitiated entry into the ASA. PGI relied upon the representation, such that the ASA should be avoided or set aside in equity or under the consumer protection legislation pleaded in the cross-claim. 209It will be recalled that the submissions to which PGI was referring under the heading "Southern Cross was not ready, willing nor able to perform its obligations under the ASA" were devoted to supporting the case which PGI wish to make to introduce its proposed defence. I have refused that application. Nevertheless those submissions do also deal with the case pleaded in the Cross-Claim. The relevant parts of PGI's submissions are: 125. In this case, Southern Cross had no ability to convey title to the Business Assets to PGI in accordance with its obligation under cl 2.2 of the ASA. ... 127. Such steps were never undertaken by the critical moment, being either on 23 January 2009 (when PGI sent its letter to Southern Cross) or on 3 March 2009 (when PGI asked Southern Cross to execute the deed of termination) when Southern Cross says PGI repudiated the ASA. Rather Southern Cross merely took the assets as licensee. This meant that: (a) N&M retained an entitlement to repay the monies secured by the charge and thereby recover the assets. (b) Southern Cross could not comply with its obligations under cl 2.2 of the ASA; and (c) It was not Southern Cross that suffered loss as a consequence of the non-completion of the ASA. 210PGI's Cross-Claim deploys the allegation that Southern Cross was only a licensee of the assets to sustain allegations that the plaintiffs were in breach of the warranty in Clause 2.3 of Schedule 2 of the ASA that "the Business Assets are free of any bill of sale, lien or other encumbrance" and warranties 1.1 and 1.2(b) of Schedule 2 of the ASA, in particular that Southern Cross had power to transfer title to the assets to PGI. 211PGI's claim fails from the outset. It has failed to demonstrate on the balance of probabilities, or at all, that Southern Cross was only a licensee of the assets so that any of the relevant warranties was breached. All parties before me eschewed any close factual or legal examination of the circumstances surrounding the taking of the Charge and what occurred thereafter which on the evidence, prima facie, had brought the assets into the absolute and unencumbered possession of Southern Cross. All PGI could point to was some rather curious evidence from Mr Amirbeaggi that he had told Geoff that the correct legal analysis of how Southern Cross had obtained the N&M assets was a licence. That evidence cannot bind Southern Cross as an admission and cannot be determinative of the legal question before me. 212PGI bears the onus in relation to its Cross-Claim of proving the falsity of the relevant warranties by establishing, in accordance with its pleaded and particularised case, that Southern Cross was only a licensee of the assets. It has failed to do so either by evidence or submission. 213Furthermore, insofar as PGI's breach of warranty case is based in contract upon the ASA, even if the alleged breach of warranty would have been made out, Southern Cross would not have been liable to PGI by reason of Clause 13.2 of the ASA: The Vendor is not liable for any alleged breach of a Warranty to the extent that the breach is based upon any fact, matter or circumstance: (a) fully and fairly disclosed in or provided for in this document;... 214This is because (on this hypothesis) the "fact, matter or circumstance" is Southern Cross' inability to convey good title to the assets to PGI, which circumstance was relevantly provided for in the ASA because the issue would only be crystallised by a claim to those assets from a third party. What was to happen in the event of such a claim was the subject of Clause 9 of the ASA. 215Insofar as PGI's Cross-Claim seeks indemnity (presumably under Clause 13.1 of the ASA) in respect of the plaintiffs' claims in these proceedings, even if those claims are "Claims" within the meaning of the ASA (as alleged in PGI's Cross-Claim) they do not give rise to an entitlement to be indemnified under Clause 13.1. This is because that clause only operates in relation to a "Claim" which arises as: a consequence of: (a) A Warranty being incorrect or misleading; (b) A breach of any Warranties or other provisions of this document by the Vendor or Covenantors; or (c) Failure by the Vendor to fully perform the Vendor's obligations under this document. The plaintiffs' claims in these proceedings do not arise as a consequence of any of those matters. 216PGI's claim for misleading and deceptive conduct depends upon the same warranties to which I have already referred being treated as representations. Those representations are alleged to have been false, misleading and deceptive for the same reason that the warranties are alleged to have been breached. For the same reasons given in paragraph [211] above, PGI has failed to demonstrate that the warranties, insofar as they may be considered representations, were false, misleading or deceptive. 217There were other matters alleged in PGI's Cross-Claim which were alleged to entitle PGI to relief. Those matters were not subject of any submission by PGI and I accordingly infer that a decision was taken not to press them. Having reviewed the balance of PGI's Cross-Claim I need do no more than observe, without any disrespect, that PGI's decision not to press those matters was well taken. 218PGI's Cross-Claim will be dismissed. The significance (if any) of the non-satisfaction of a condition precedent 219Clause 4 of the ASA provided: 4.1 Completion of this Agreement is subject to and conditional upon: (a) the Purchaser obtaining clearance of the Transaction from the ACCC; and (b) each of the Key Employees signing an employment contract with the Purchaser on terms satisfactory to the Purchaser; and (c) the parties obtaining the consent of the Lessor to assign the Lease on terms satisfactory to the Purchaser. 4.2 The conditions precedent are for the sole benefit of the Purchaser which may waive its right to require satisfaction of any of the conditions by giving notice to the Vendor. 4.3 The Purchaser and Vendor must each use reasonable endeavours to procure satisfaction of the Conditions Precedent by the due date, having regard to the nature of the condition and the extent to which the party has the capacity or power to procure satisfaction of the condition. 4.4 If the Conditions Precedent are not satisfied or waived within the time frames required under this clause 4, the Purchaser or Vendor may terminate this contract at any time prior to Completion by notice to the other in which case: (a) each party must return immediately all documents provided by the other party which contain confidential information; (b) the parties: (i) will be released from the obligations to further perform their obligations under this document except those obligations imposing obligations of confidentiality but (ii) retain any rights they have against any other party in respect of any breach of this contract occurring prior to the termination date. 220PGI drew attention to the fact that Clause 4.1(c) had never been satisfied and, given that Southern Cross did not have a lease of the Peakhurst Premises, could never be satisfied. Nor had PGI ever waived that condition precedent. It therefore submitted that it was entitled to terminate the ASA on account of the non-fulfilment of that condition precedent. 221It is not entirely clear what legal significance PGI seeks to attribute to the alleged non-satisfaction of that particular condition precedent. It is pleaded in paragraph 13 of PGI's Defence as part of the material facts leading to the conclusion that the ASA and November Employment Contracts had either been abandoned or terminated by agreement (see paragraph [167] above). In paragraph 14 of the Defence there is a reference to Southern Cross' failure to procure the landlord's consent to the assignment of the lease of the Peakhurst Premises as part of PGI's estoppel case. Finally, the allegations made in paragraph 13 are incorporated by reference in paragraph 16 of the Defence as part of a general allegation that "the plaintiffs had no right to damages for the loss or damage they claim to have suffered". 222In the light of the way it has been pleaded, I understand PGI to be raising the non-fulfilment of the condition precedent in general answer to the plaintiffs' claim for damages. Before dealing with that, I should observe that all of the parties proceeded on the basis that because PGI did not in fact have a lease of the Peakhurst Premises then the condition precedent would never be able to be satisfied and, for the ASA to be completed, it would be necessary for PGI to waive compliance. As that is the way the case was argued before me, I will approach this aspect of the matter on that basis. However, I have some misgivings as to whether the assumption is well made. For example, there was no debate before me whether, in the admitted circumstances that PGI never had a lease of the Peakhurst Premises, on the proper construction of the ASA the reference a "lease" might be interpreted in some other way having regard to the objective background facts. 223I will nevertheless proceed on the basis the parties have assumed, namely that the condition precedent in relation to the lease of the Peakhurst Premises could never be satisfied. Assuming that to be the case, and assuming (without deciding) that at all relevant times PGI had a right under Clause 4.4 of the ASA to terminate the ASA, the first point to be made is that PGI never sought to exercise that right. In the events which happened, as I have found them, the fact that PGI may have had an unexercised right to terminate the ASA does not detract from the conclusions I have reached about its valid termination by the plaintiffs. 224Although not pleaded with precision, the parties approached the significance of the non-satisfaction of the condition precedent as going to the plaintiffs' entitlement to damages if such an entitlement was otherwise found to arise (as I have). In order to establish if their entitlement to damages had real value the plaintiffs had to demonstrate that they had lost the benefit of a contract which would in fact have been completed by PGI waiving compliance with the condition precedent requiring assignment of the "lease" of the Peakhurst Premises. 225I am satisfied on the balance of probabilities that PGI would have waived the need for compliance with that condition precedent for the reasons advanced by the plaintiffs: (1)On 21 January 2009 PGI entered into a lease of the Arndell Park Premises for a three year term commencing on 1 January 2009 with an option to renew for a further three years. The Arndell Park Premises were at the heart of the commercial arrangements embodied by the ASA and the November Employment Contracts. In a very real, commercial sense PGI had committed itself to the transaction by entering into the Arndell Park Lease in anticipation of obtaining the Southern Cross employees and Southern Cross' customers. (2)Each of the relevant PGI personnel accepted in cross-examination that the ASA would otherwise have gone ahead, notwithstanding the unavailability of the Peakhurst Premises. Mr Lindell accepted that he probably would not have recommended that PGI give up on the transaction just because the Peakhurst Premises could not be secured. Aarne accepted that it was far more important to employ Geoff and Karin than it was to have access to the Peakhurst Premises, not least because PGI intended to close the Peakhurst Premises after a period of time in any event. Asko also ultimately accepted that PGI "would have forged on" if PGI had suffered what he described as a "setback" in not obtaining a lease to the Peakhurst Premises. 226While PGI submitted that it was entitled to terminate the ASA for non-satisfaction of the condition precedent, it stopped short of submitting that it did or would have done so. It never purported to terminate the ASA for any reason (including non-satisfaction of either the requirements of the 23 January Letter or the condition precedent). Nor, in light of the concessions sensibly made by PGI's personnel in evidence, could PGI have credibly argued that it would have terminated the ASA if it could not get the Peakhurst Premises. Given the effort both parties had put into the transaction, including PGI taking the Arndell Park Lease, it would have been a commercial nonsense to suggest PGI would not have proceeded for want of the Peakhurst Premises. Matters not required to be decided 227Because of the conclusions I have reached, it is unnecessary for me to decide the various alternative claims raised by the plaintiffs. These are Southern Cross' claims of unjust enrichment or restitution and Geoff and Karin's claims for termination of the March Employment Contracts without notice. However, as to the latter, I would have accepted their submissions that they were wrongfully dismissed under the March Employment Contracts, particularly having regard to Mr Robertson's concessions that they were terminated immediately at the direction of Aarne irrespective of the requirements of the March Employment Contracts themselves. Conclusion and quantum 228When Geoff and Karin became parties to the ASA and the November Employment Contracts they committed their entire enterprise and future livelihoods to PGI. The 23 January Letter, which signalled a radical departure from the ASA, put them in an impossible position. Even before the expiry of the deadline set by the 23 January Letter, PGI pressed ahead on the assumption that the ASA would never be completed. Although they were the subjective analysis of a non-lawyer (and therefore not part of the material on which I have relied for my legal conclusions), it happens that Mr Lindell's emails of 26 and 27 February 2009 (see paragraphs [84] and [86] above) correctly reflect the commercial and, as I have found it to be, legal position between the parties. 229While Geoff and Karin had no alternative but to negotiate to save something from the situation created by the 23 January Letter, they never agreed to the termination of the ASA or the abandonment of such rights as the plaintiffs had arising from PGI's repudiatory conduct. Their failure to sign and return the Termination Deed is the final proof of that. In entering into the March Employment Contracts and proceeding to sell Southern Cross' stock to third parties, the plaintiffs simultaneously accepted PGI's repudiation of the ASA and the November Employment Contracts and moved to mitigate their losses. 230Southern Cross is entitled to damages for loss of the bargain constituted by the ASA. Geoff and Karin are entitled to damages for loss of the bargain constituted by the November Employment Contracts. Those contracts should be rectified as the parties have agreed. PGI's Local Court claim should be set off in reduction of the amount which PGI otherwise owes Southern Cross and Geoff. 231I did not understand there to be any dispute between the parties as to how quantum should be calculated if the Court reached the result which it in fact has reached. I will stand the proceedings over to enable the parties to bring in orders giving effect to these reasons or, if necessary, identifying any further legal questions which they consider the Court must determine before the amount of the plaintiffs' damages is able to be calculated. Subject to any special application, costs should follow the event. ********** Schedule 1 Schedule 2 Schedule 3 Schedule 4 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 March 2014