Supreme Court New South Wales Medium Neutral Citation: Curnow Consulting Pty Limited v JPD Media and Design Pty Ltd t/a Durie Design [2017] NSWSC 1171 Hearing dates: 1, 2, 3, 4, 9, 14 & 15 December 2015; 13 September 2016 & 4 November 2016 Date of orders: 01 September 2017 Decision date: 01 September 2017 Jurisdiction: Equity Before: Slattery J Decision: See paragraph [438] – [444]. Catchwords: CONTRACT – Construction of written agreement – dispute concerning the terms of an oral agreement – plaintiff company supplies consulting services to the first defendant company for consideration payable by the first defendant to the plaintiff – first defendant carries on business associated with the public profile of an Australian media celebrity – parties' contractual arrangements reflected in two agreements – a written services agreement commences on 1 July 2008 for five years until 30 June 2013 – whether the services agreement was terminated on 28 March 2013 – parties also dispute the terms of an oral Management Agreement, including whether and when the payment of management fees under it terminated, the term of the Management Agreement and whether or not the Management Agreement was validly terminated at or about the same time as the services agreement – issues of quantum reserved by agreement for further consideration Cases Cited: Almond Investors Limited v Kualitree Nursery Pty Ltd [2011] NSWCA 198 Associated Newspapers Limited v Bancks (I951) 83 CLR 322 Australian Blue Metal Ltd v Hughes [1963] AC 74 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Commonwealth v Verwayen (1990) 170 CLR 394 County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 CSR Ltd v Della Maddalena [2006] HCA 1; 80 ALJR 458 Elder's Trustee & Executor Co Ltd v Commonwealth Homes & Investment Co Ltd (1941) 65 CLR 603 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326 Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310 Lantry v Tomule Pty Ltd [2007] NSWSC 81 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 Myers v Ross (1935) 10 F Supp. 409 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 Showcase Video Pty Ltd v Tambali (Court of Appeal - New South Wales, 28 April 1987 unreported) Smith v Butler (1901) QB 694 Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52 State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd's Rep. 277 Summers v The Commonwealth (1918) 25 CLR 144 Wendt v Bruce (1931) 45 CLR 245 White and Carter (Councils) Limited v McGregor [1962] AC 413 White Trucks Pty Ltd v Riley (1948) 66 WN NSW 103 Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592 Category: Principal judgment Parties: Plaintiff: Curnow Consulting Pty Limited ABN 76086618779 First Defendant: JPD Media & Design Pty Limited trading as Durie Design Second Defendant: Jamie Paul Durie Representation: Counsel: Plaintiff: L.S. Einstein, Mr L. Gor First and Second Defendants: B. McClintock SC, D. Neggo Solicitors: Plaintiff: Alistair Woodward Little, TressCox Lawyers First and Second Defendants: Christopher Stephen Frawley, M & K Lawyers File Number(s): 2013/141679 Publication restriction: No Judgment 1. The plaintiff, Curnow Consulting Pty Limited ("Curnow Consulting") provided consulting services to the first defendant, JPD Media and Design Pty Limited ("JPD") for a period of approximately nine years from July 2004 until March 2013. These two companies interacted through their principals. Curnow Consulting provided its consulting services through its sole director, Mr Michael Curnow. And JPD's sole director and shareholder, Mr Jamie Durie, dealt on its behalf with Curnow Consulting. 2. JPD carries on businesses associated with the public profile and professional credentials of Mr Durie, who is a public figure both within Australian and international media. JPD's business activities include landscape design, product design, sales and licensing, product endorsement, publishing and television appearances. 3. Between 2004 and 2008, Curnow Consulting's arrangements for the provision of Mr Curnow's services to JPD proceeded on a mutually satisfactory but informal basis. In 2008, Mr Durie and Mr Curnow sought greater formality in their joint affairs. On 1 November 2008 Curnow Consulting and JPD entered into a written contract described as a "Services Agreement", by which Curnow Consulting would effect the licensing of JPD's intellectual property rights in exchange for defined commission payments. The Services Agreement had a retrospective commencement date of 1 July 2008 and was expressed to run for a period of five years up to 30 June 2013, unless earlier terminated. 4. But the Services Agreement did not cover the whole of the services that Curnow Consulting could supply to JPD. In late 2010, acting for their respective companies, Mr Curnow and Mr Durie negotiated another agreement they called the "Management Agreement", to cover the provision of additional services. The terms of the Management Agreement were left in entirely oral form. Under the Management Agreement Curnow Consulting agreed to provide, through Mr Curnow, management services as JPD's general manager but was also authorised to procure business opportunities for JPD's licensing business beyond those accounted for by the Services Agreement. Curnow was to provide these management and other services in exchange for a monthly fee of $8000 plus GST and commission payments in addition to those payable under the Services Agreement. 5. The plaintiff, Curnow Consulting now sues JPD, the first defendant, for fees allegedly due under both the Services Agreement and the Management Agreement and for the alleged wrongful termination of both agreements. The parties contest the proper interpretation of the written Services Agreement and dispute the oral terms of the Management Agreement. JPD contends that it owes no fees to Curnow Consulting under either agreement and that both agreements were validly terminated in accordance with their terms in March 2013. 6. Both parties accept that the Services Agreement and the Management Agreement were terminated in about March 2013. But beyond that, the parties are in contest about a range of matters relating to the terms of their performance and the validity of the termination of both agreements. 7. The disputes now dividing these parties emerged during a period of intense financial stress that JPD suffered in late 2011 – early 2012. JPD was then facing insolvency. It called in financial and management advice from external accountants, Hall Chadwick. The principal advisers at Hall Chadwick gave strong advice to Mr Durie that for JPD to survive, it had to reduce its costs including the management fees and commissions that it was then paying to Curnow Consulting. 8. JPD accepted Hall Chadwick's advice. JPD stopped paying management fees to Curnow Consulting under the Management Agreement. But Curnow Consulting says that this cessation of payments was not consensual and that it continued to provide management services to JPD in accordance with the Management Agreement and should now be paid for the management services it provided. 9. In early 2012, also under Hall Chadwick's influence, JPD began to insist that the Management Agreement obligations to pay commission to Curnow Consulting that it had agreed orally through Mr Durie in late 2010 to take on were less generous to Curnow Consulting than Curnow Consulting was then asserting as its entitlement. The need to control JPD's costs in early 2012 had revealed a difference of view about what had been agreed orally in the Management Agreement. 10. These main disputes and a number of other lesser differences continued. Curnow Consulting kept providing Mr Curnow's services to JPD. But from March 2012 through until March 2013 Mr Durie's and Mr Curnow's business interactions were accompanied by growing mutual animosity and misunderstanding. The two never talked out their differences to resolution. Finally, these differences spilled over. Mr Curnow absented himself from JPD's offices for reasons that are contested. Shortly afterwards, on 28 March 2013, JPD served notices on Curnow Consulting purporting to terminate both the Services Agreement and the Management Agreement. 11. A more detailed overview of these issues is provided in the next section of these reasons, followed by a narrative of the Court's detailed findings about disputed questions of fact. 12. Curnow Consulting has joined Mr Durie as the second defendant to the proceedings, claiming that by his conduct related to the making and performance of the two agreements, he aided and abetted misleading or deceptive conduct by JPD. 13. Mr L.S. Einstein and Mr L. Gor of counsel appeared for the plaintiff, instructed by TressCox Lawyers. Mr B. McClintock SC appeared with Mr D. Neggo for the first and second defendants, instructed by M & K Lawyers. 14. The Court heard the proceedings over a period of nine days. Seven of those days were in December 2015. The matter was adjourned part-heard until the proceedings returned for a further two days, concluding in November 2016. The Issues for Trial 1. The parties agreed upon the issues for trial. The parties were ultimately only in contest at the present hearing in relation to questions of liability. The many liability issues implied a great number of possible combinations of liability outcomes. In these circumstances the parties agreed to defer all issues of the assessment of the quantum of damage, until the Court's liability findings were known. The narrative of factual findings in the next section of these reasons is best approached after the brief overview of the issues for trial set out in this section. 2. The Services Agreement generated only one issue. That was: whether the Services Agreement was validly terminated by the notice of termination JPD served on Curnow Consulting on 28 March 2013 (the "Services Agreement Termination Issue"). The parties had formerly contested other issues in relation to the Services Agreement but they abandoned these before the hearing commenced. 3. The parties contest four central issues concerning the Management Agreement. These issues embrace a number of sub-issues and are conveniently described as "the Commission Issue", the "Cessation of Management Fee Issue", the "Term of the Management Agreement Issue", and finally, "the Management Agreement Termination Issue". These four Management Agreement issues are now briefly summarised. 4. (1) The Commission Issue. The first issue is whether the Management Agreement included a term: (a) as the plaintiff Curnow Consulting contends, that it would be paid five per cent (exclusive of GST) on any amount paid to two companies Mr Durie controlled (JPD in Australia, and JPD Design Inc. in the USA, henceforth called "the Durie companies") for all revenue received by the Durie companies from any source other than Gross Income (as defined in the Services Agreement); or (b) as is contended by the defendants, that Curnow Consulting would be paid five per cent on income (exclusive of GST) received by JPD from new business introduced by the plaintiff or Mr Durie, but excluding what in the proceedings came to be referred to as "the carve outs", which expression denoted any new business: (i) relating to JPD' s design businesses; or, (ii) which business brought with it a requirement for JPD to also pay commissions to any third parties. 5. (2) The Cessation of Management Fee Issue. The second issue is whether (a) as the JPD/Durie parties contend, (i) that the Management Agreement was varied orally on 23 February 2012 to the effect that JPD would no longer pay the plaintiff a monthly management fee as from March, 2012, or alternatively, (ii) that the Management Agreement was terminated and replaced by a new agreement containing no obligation to pay to Curnow Consulting a monthly management fee as from March 2012; or (b) as Curnow Consulting contends, there was no such variation or replacement. 6. (3) The Term of the Management Agreement Issue. The third issue is whether: (a) as the JPD/Durie parties contend, it was agreed that there would be a "trial period" for Curnow Consulting's performance of the Management Agreement between 1 January 2011 and 31 December 2012, and in any event, whether it was a term that the Management Agreement was terminable by either party at will; or (b) as Curnow Consulting contends, the term of the Management Agreement was to coincide with the term of the Services Agreement. 7. (4) The Management Agreement Termination Issues. The fourth issue is: (a) whether the Management Agreement was validly terminated by the Termination Notice served on Curnow Consulting on 28 March 2013, a Notice which expressly set out a number of specified grounds for termination; or (b) whether the duration of the Management Agreement was to coincide with the duration of the Services Agreement (as Curnow Consulting contends in issue (3)(b)), or whether the Management Agreement was terminable by either party upon reasonable notice (as the JPD/Durie parties contend in issue (3)(a)); and (c), even if the duration of the Management and Services Agreement were to coincide, the JPD/Durie parties contend that the Management Agreement is no longer on foot, as Curnow Consulting has not provided, and JPD had not sought, any services pursuant to that agreement since 28 March 2013. 8. If the JPD/Durie parties' contention on issue (4)(b) above were accepted, it would justify a conclusion of valid termination on the basis of the giving of reasonable notice even if the grounds for termination expressed in the Notice in issue (4) were not otherwise made good: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359. Curnow Consulting's contention on issue (4)(b) is that if the Services Agreement were not validly terminated on 28 March 2013, and if the duration of the Management Agreement coincided with the duration of the Services Agreement, then JPD's termination notice of 28 March 2013 in relation to the Management Agreement was ineffective. 9. JPD claims a set-off based on various matters to be considered when the quantum of the claims is examined. But this liability judgment does not go into such matters. The parties have indicated that they would attempt to undertake quantum calculations based upon the Court's findings on liability. But a further general issue will arise in the quantum hearing: were the Court to make findings in accordance with JPD's contentions as to the content and termination of the two agreements, would JPD be entitled to any set-off against amounts otherwise found due to Curnow Consulting? 10. As earlier indicated, both parties acknowledged that the liability issues which the Court must resolve were sufficiently complex that a number of different permutations as to quantum are possible. So the parties agreed to wait and see how issues in relation to liability are resolved in these reasons. Thereafter, the parties will put submissions in relation to quantum. Both parties observed this division of function and did not put any detailed analysis at this stage in relation to the position of quantum. 11. The Court took this course as the parties did not anticipate that any issue of the credibility of witnesses called in the liability hearing would arise during the quantum hearing. 12. These reasons commence with a narrative of findings and then deal with the legal issues just defined. But first some general observations about the credibility of the principal witnesses are appropriate. Other observations about witnesses' credibility are made during the Court's narrative of findings. Some Credit Issues 1. Mr Curnow gave evidence that was generally reliable. He was very bitter about the circumstances of his separation from JPD Media in March 2013 and the events that had led up to it. He could be stubborn in adhering to his own memory of his dealing with Mr Durie. But this real question is whether his memory of these dealings was accurate. He was able to add consistent detail to the many situations in which he was involved with Mr Durie. He did not deliberately conceal information or distort evidence. He genuinely attempted to answer questions. He did so at times even when the answers did not suit his self-interest. 2. Mr Durie had a tendency to distance himself from the financial affairs of JPD. He generally answered questions co-operatively. He listened closely and scrutinised questions put to him and answered them precisely. He was conscious of his self-interest, he was well aware of the implications for his and JPD's case of the questions being put to him. He made concessions readily on matters that were not obviously (to him) damaging. But he had ample capacity to deflect questions skilfully, giving answers that were at times not direct. Yet he was also capable of great frankness. He was prepared not to answer questions directly that he thought would be uncomfortable for him. He prided himself on being able to turn assets to profitable account but claimed not to be across the detail of some of JPD's financial affairs when knowledge of that detail did not suit him. With the benefit of advice from Hall Chadwick, by 2012 he thought Mr Curnow was overpaid. Throughout his evidence he spoke with confidence and was always articulate. 3. Curnow Consulting mounted a general challenge to Mr Durie's credibility on the basis that he was a person "who was used to being in the public eye and playing to an audience". The argument was that because over the course of his career he had developed a public profile in a wide variety of media and that because he was an accomplished performer, the Court should be cautious about assessing his evidence based upon his apparently controlled demeanour in the witness box. 4. Such arguments can be overstated. Notwithstanding his facility with broadcast media, Mr Durie's responses to the challenges of the witness box, where a questioner can closely press for answers to questions, showed many of the same characteristics as other witnesses faced. Whilst it is true that Mr Durie seemed confident at times, given the firm questioning that he received under cross-examination in the witness box, he had no basis to mistake his circumstances for some kind of media event which he could dominate. He did not obviously demonstrate over-confidence. Moreover, the Court is cautious about over-reliance on the mere demeanour of witnesses and has sought in these reasons to place the desired emphasis upon reasoned conclusion based on contemporary materials, objectively established facts, and the apparent logic of events: Fox v Percy (2003) 214 CLR 188 at [30] – [31] and CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 80 ALJR 458; at [23]. 5. Mr Kenney the principal of Hall Chadwick, was a blunt and direct witness who said he understood numbers. He was sure of himself and of his recollections of events. His self-assurance was mostly justified. His account was little challenged; the proper interpretation of the conversations in which he was involved was the issue. His objective was to ensure that JPD was cash flow-positive. He accepted that this was his role and that his energies were directed to achieving it. He was not as close to Mr Durie as Mr Curnow, whose business relationship was more complex than the finances that were Mr Kenney's concern. This meant, in my view, that Mr Kenney missed a few of the nuances in the Durie – Curnow communication. 6. Deanne Curry was an administration assistant and bookkeeper at JPD from September 2012 through until the termination of Curnow Consulting's contracts with JPD. She gave brief evidence and was cross-examined. She was a witness of substantial truth who was doing her genuine best to recall events in which she was involved. In late 2012/early 2013, she was caught between Mr Curnow and Mr Durie and was uncomfortable Mr Curnow was requesting the payment of invoices which she thought would not be paid. 7. Mr Craig Miller was employed as the financial controller of JPD from October 2008 until May 2012. By the time of hearing he was operating an independent professional business as a chartered accountant. He was a careful witness who gave considered answers that the Court could mostly rely upon. He always attempted to tell the truth. Despite having great financial pressure placed upon him by Mr Durie, he was quite restrained in evidence about criticising Mr Durie. He was not as close to Mr Durie as Mr Curnow. 8. Mr David Knott is a Design Director of JPD. He gave brief evidence about collecting business cards and a laptop from Mr Curnow just before the termination of the Management and Services Agreements. He was a witness of substantial truth. Nothing he said damaged his credit in cross-examination. 9. Mr Nadine Bush is the Group Creative Director of JPD, where she has been employed since 2003. She and Mr Durie had worked together by the time of the hearing for some 17 years. Mr Durie saw her role at JPD as being "to oversee the creative input of the entire operation in a single bound". JPD was sufficiently indebted to her creativity for Mr Durie to say in a document in June 2012 "we'd be lost without her". She was a witness of substantial truth but her long-standing working relationship with Mr Durie meant that on some points of finer detail, her evidence was more favourable to Mr Durie than was probably accounted for by precise recollection. That being said, her evidence was sound and the product of a genuine attempt to tell the truth. Mr Curnow consults for Mr Durie – 2004 to 2013 1. The following is the Court's narrative of findings about the parties' conduct. This narrative represents the Court's findings on the matters covered, except to the extent that the context clearly indicates that only the parties' allegations are being recorded in these reasons. For reasons of economy this narrative does not always include reference to versions of the facts that the Court has rejected in order to make the findings that are made. 2. This narrative is in two parts. This first part deals with the making and performance of the Management Agreement and the Services Agreement. The second part deals with the factual findings relating to the termination of the two agreements. Mr Curnow's Background up to the Services Agreement in 2008 1. Mr Curnow's educational background is in engineering. Upon completing an engineering degree at the University of Western Australia, he worked from 1981 to 1983 in project management in the Middle East and in Perth. In 1984 he joined Marketforce Pty Limited ("Marketforce"), Perth's largest advertising and marketing agency, where he initially worked as an account director. Taking advantage of his interest in sailing, Mr Curnow became Marketforce's account director, responsible for the commercial marketing rights for the 1987 America's Cup hosted and conducted by the Royal Perth Yacht Club ("RPYC"). 2. His national work for Marketforce for the 1987 America's Cup led Mr Curnow into contact with the International Management Group ("IMG"), which the RPYC had appointed to manage the international television and sales for the 1987 America's Cup. He was offered and took up a job with IMG first in Melbourne and then in San Diego, commercialising the marketing rights for the 1992 America's Cup event in the coastal waters near that city. 3. After 1992 Mr Curnow returned to Sydney. There he helped establish a new division of IMG, dealing with product licensing across South East Asia and New Zealand, as well as working on client management, event sponsorship, the sale of television rights and event management. At IMG he worked with sports stars and prominent figures in the performing arts. His day-to-day client management role included the identification of commercial opportunities for personal and event sponsorships, endorsements, speaking engagements, public appearances, television appearances and publicity together with the negotiation and documentation of associated commercial arrangements. He then project managed the relationships with the commercial partners working with the IMG clients for whom he was responsible. 4. He resigned from IMG in 1999 and established Curnow Consulting. Curnow Consulting was initially focussed on event and personality marketing and product and intellectual property licensing. His work for a number of prominent sporting and entertainment personalities and groups continued to be of a similar character to the role he had played with IMG. 5. In 2003 a contact Mr Curnow maintained from his Marketforce days, Mr Stephen Wells, put Mr Curnow in touch with Mr Durie. Initially, Mr Durie appeared to need assistance to renegotiate Mr Durie's existing management contract with IMG and with managing Mr Durie's product and intellectual property and licensing business. 6. By 2003 Mr Durie was a well-established television personality and presenter. He hosted the Channel 9 television programmes "Backyard Blitz" and "The Block". These were two of the domestic living renovation programs that were popular on Australian television at that time. Mr Durie's principal focus for product and intellectual property licensing at that time was for the "Patio by Jamie Durie" ("Patio") brand, which had been on sale through K-Mart Stores throughout Australia since August 2003. Marketed under the brand at that time were various gardening, outdoor furniture and barbeque items. JPD effected this licensing under a licence agreement it had made with K-Mart in March 2003. 7. On 1 June 2004, Curnow Consulting was first appointed the exclusive world-wide licensing agent for JPD for four years, expiring on 31 May 2008. This arrangement was formalised in a written contract dated 5 July 2004 ("the 2004 Services Agreement"), which provided for a commission rate of 15%. Mr Curnow had undercut Mr Durie's existing agent, IMG, who were then stipulating for a commission rate "of 20% on earnings". Mr Curnow says that in 2004 it was common industry practise for a licensing agent like Curnow Consulting to charge a commission rate of between 25% and 35% of all amounts generated through the activities of the licensing agent. Whether or not this is precisely accurate, the Court accepts that this is what Mr Curnow believed the commission agent market rate to have been at that time. 8. This first arrangement between Curnow Consulting and JPD, the 2004 Services Agreement, has some relevance to assessing the probability of Mr Curnow entering some of the later disputed arrangements between these parties. 9. The 2004 Services Agreement was structured with terms that were similar, and often identical, to those in the Services Agreement that operated between JPD and Curnow Consulting between 2008 and 2013. The terms of the Services Agreement made in 2008 are set out later in these reasons. One difference between the two agreements was that the 2004 Services Agreement did not include the automatic renewal clause at the expiry of the agreement that became Clause 14 of the Services Agreement made in 2008 and was the subject of some submissions in these proceedings. 10. Like the 2008 agreement, the 2004 Services Agreement appointed Curnow Consulting as an exclusive agent. Whereas the 2004 Services Agreement appointed Curnow Consulting as a worldwide agent subject to JPD's existing agreements with IMG, the Services Agreement in 2008 appointed Curnow Consulting as an agent for Australia. 11. The 2004 Services Agreement set a commission rate of 15% on gross revenue earned on licensing arrangements procured by JPD or Curnow Consulting. The existing arrangements with K-Mart, which had been made before Mr Curnow's involvement with JPD, were temporarily made subject to a lower commission rate of 10% until August 2006, and thereafter 15%. But Curnow Consulting was guaranteed a monthly fee of $6,000 per month, which was deductible from the percentage commission earned each month. If commission in any month were less than the monthly fee, then the deduction of the shortfall was carried forward to future months, where commission earned exceeded the monthly fee. 12. Mr Curnow's initial work for JPD involved expanding the Patio range. Mr Curnow proposed additional products such as an extended range of plant pots, additional styles of barbeques, a wider range of outdoor decorative items, a full range of plant seeds, additional outdoor furniture items, and a wider selection of gardening tools for each retailer offering the brand. 13. Once items were proposed for addition to the product range, Curnow Consulting was involved in negotiations with the suppliers of the specific products to be produced and the commercial terms of a trademark licence agreement, including the minimum guaranteed royalty to be paid to JPD. It then had to assist in managing the store-end placement of the various products with the supermarket chains through which they were sold, such as K-Mart and Big W. 14. Mr Curnow claims to have been successful in the licensing agent role. There was expansion in the range of products included in the Patio range and the gross earnings for that range after 2004, leading to the signing of the Services Agreement in 2008. Mr Durie's Background up to the Services Agreement in 2008 1. Mr Durie has an associate diploma in horticulture and design from Ryde College, New South Wales. In February 1998 he began a landscape and product design business by opening a retail outlet and design office called "Patio Landscape Design & Collectables". 2. By 2001 Mr Durie was operating a number of businesses which will be detailed below. In November of that year he incorporated JPD, which since then he has used as the vehicle for the carrying on of his various businesses. These various businesses have grown successfully and commensurately with the growth of Mr Durie's public profile. 3. Mr Durie's businesses have expanded beyond Australian shores. Before Mr Curnow became involved with Mr Durie and JPD, Mr Durie conducted businesses in the USA through a company JPD Media and Design Inc. ("JPD Inc."). Both JPD and JPD Inc. conduct much the same business operations but in different geographical areas. JPD's businesses are diverse, as the brief survey below shows. 4. Landscape and Product Design. JPD operates both a landscape and a product design business and has done so since its incorporation. JPD constantly has landscape design projects underway. Mr Durie himself is directly involved in product and landscape design. JPD contracts and employs a number of people in its landscape design and product design businesses. But Mr Durie remains a hands-on figure in this part of the business. There are many recognised "products" in this design side of JPD's business. They include such things as outdoor and indoor furniture, decor and garden care products. 5. Mr Durie and his team have been involved in design projects in 17 countries throughout the world from London to New Zealand to Japan and to the United States. He has received many awards in these countries and has been honoured with a Medal in the Order of Australia for services to numerous charities in Australia, the environment and design. 6. Mr Durie says, and the Court accepts, that JPD's landscape design business is largely self-sufficient. This is perhaps, in part, a product of its long-standing nature. But many landscape design clients approach JPD without the need for any ongoing marketing. Mr Durie says that as a result JPD has never needed to advertise the landscape design business which essentially operates by word of mouth. JPD did not until 2010 use an agent to identify landscape design deals. But as will be seen, the Court does not accept that Mr Curnow's role as an agent was irrelevant to the design business. 7. Television and Endorsement. Mr Durie's more widely recognised television career commenced with his involvement in a program called "Backyard Blitz", a spinoff of the then successful television series "Burke's Backyard". The show was launched in 2000 and became a very successful lifestyle format program on Australian television. Mr Durie won Logie awards for his involvement in the Backyard Blitz program and appeared regularly on Australian television. He also appeared on networks in the United States and Asia. 8. Mr Durie had an exclusive television content deal with the Nine Network between 2000 and 2006, and an exclusive deal with the Seven Network between 2007 and 2010. He returned to the Nine Network between 2011 and 2013. Since 2014 he has been freelancing, without an exclusive arrangement with any particular network. He now appears in programs on a number of different Australian television networks, and he appears on a number of different programs on US television. 9. Mr Durie sources his television work through talent agents. He says that because of these talent agents he has not needed assistance from Curnow Consulting to source television appearances in Australia. Mr Durie says, and the Court accepts, that Australian-based talent agents source work for him in this country, and US-based talent agents source work for him in the United States. Between 1996 and 2001 Mr Durie's Australian talent agent was a Mr Mark Morrissey. Between 2001 and 2009 his Australian talent agent was IMG. From 2009 he appointed Mr Sean Anderson from 22 Management Pty Limited to act as his talent agent, a relationship which continued until July 2013. Now acting as a former employee of IMG, and working through a company known as Bravo Management, Mr Anderson conducts Mr Durie's Australian talent agency class of work. 10. These talent agency relationships are constructed around commercial arrangements by which JPD variously made and makes commission payments to Morrisey Management, IMG, 22 Management and Bravo Management respectively. Mr Durie says, and the Court accepts, that he has not been involved in any television work in Australia which has not required the payment of commission to one or other of these agents. Mr Durie says that he has never needed additional representation beyond these talent agents to source his Australian television contracts. 11. Mr Durie has similar talent agency relationships in the United States. JPD's US agents included a Mr Lance Reynolds in 2006 - 2007, the Endeavour Talent Agency from 2007, the William Morris Endeavour (WME) from 2009 and from 2012 Mr Bill Reishstein in relation to horticulture deals, and Paradigm as a general talent agent from 2013. JPD was required to pay commissions to these agents for the services they provided to JPD's US business. A feature of JPD's Australian and US talent agency arrangements is that they have been continuous. JPD has always had a talent agent for television deals in both these principal jurisdictions in which it operates. 12. Publishing. Mr Durie published his first book titled "Patio" in 2002. Since then he has published widely in the field of gardening and landscape design through publishers such as Allen & Unwin, Harper Collins and Penguin. His publishing deals have mainly been obtained through his talent agents or have been joint ventures with the publishers. 13. Licensing. As earlier indicated, the Patio product range was first licensed to K-Mart in 2003, through IMG-brokered arrangements. Mr Durie says, and the Court accepts, that he anticipated that the licensing business would be a significant source of future revenue for JPD. Acting on that business intuition, in 2003 he began looking for an independent licensing agent who could focus on this aspect of the business. During this search, Mr Curnow was suggested to Mr Durie by an ex-IMG licensing agent, Mr Stephen Wells. 14. After discussions with Mr Curnow and Mr Wells in the first half of 2004, JPD entered the 2004 Services Agreement in July 2004. JPD's licensing arrangement for the Patio product line marketed through K-Mart expired in 2007, and with Mr Curnow's assistance, JPD entered into a new licence agreement with Big W in relation to that product range over the following financial years FY08-FY09, FY10-FY12 and FY13-FY15. The Services Agreement – November 2008 1. The parties signed the Services Agreement on 6 November 2008. Mr Paul Gregory signed on behalf of JPD and Mr Curnow on behalf of Curnow Consulting. The Services Agreement defined "Applicable Licence Agreement", "Commission Fee", "Commission Rate", "Existing Licence Agreements", "Expiry Date", "Gross Income", "Monthly Fee", "Services", "Term" and "Territory" in the following terms: "Commission Fee" means the fee calculated by multiplying the Commission Rate by the Gross Income; "Applicable Licence Agreement" means any agreement between the Licensor and a Licensee in respect of a Licence: (a) entered into after the Commencement Date and which: (i) has been procured by the Agent; or (ii) is part of a Licensor's Arrangement; and (b) that is an Existing Licence Agreement "Commission Rate" means 15%; "Existing Licence Agreements" means the existing Licence Agreements entered into by the Licensor and/or Durie as at the Commencement Date, described in item 3 of Schedule 1; "Expiry Date" means 30 June 2013; "Gross Income" means all gross income payable by Licensees under all Applicable Licence Agreements, including licence fees, royalties and the value of goods or services payable or provided under all Applicable Licence Agreements and any interest payable on such unpaid amounts (but excluding any freight, insurance charges, duties, excises and Taxes payable by Licensees under Applicable Licence Agreements) that is received by the Licensor during a Month and less any advertising or like contribution the Licensor is required to make pursuant to a license agreement; "Monthly fee" means $10,000 per Month; "Services" are described in item 2 of Schedule 1; "Term" means 5 years commencing on the Commencement Date and, subject to Clauses 13 and 14 expiring on the Expiry Date. "Territory" means Australia. 1. Throughout the Agreement, JPD is described as the "Licensor" and Curnow Consulting as the "Agent". The "Services" the agent was to provide were defined in Schedule 1 as follows: Item 2: The Agent shall: (a) act as the Licensor's sole and exclusive marketing representative and licensing agent throughout the Territory; (b) procure third parties to enter into License Agreements with the Licensor; (c) manage, for and on behalf of the Licensor, all Applicable Licence Agreements; (d) explore and develop new and existing opportunities for the commercial exploration of the Intellectual Property Rights and the promotion and sale of the Licensed Products; and (e) provided the Licensor so requests, and the term of the retainer is at least 6 months to provide such other services to the Licensor in the areas of publishing, product endorsement, sponsorship, recruitment and servicing as may be agreed with the Licensor. The Agent shall be entitled to receive a commission of 3.75% of any such product endorsement or sponsorship except that in the event and [sic] agreement is reached with the Harvey Norman Group then the Agent's entitlement to remuneration shall be limited to licensing income generated through the Jamie Durie Signature stores. 1. The Services Agreement provided for the appointment of Curnow Consulting as JPD's agent, in accordance with Clause 3, which provided for Curnow to perform the "Services" as defined, and for JPD to enter its own licensing arrangements independent of the agent's actions: 3. APPOINTMENT OF AGENT 3.1 Appointment The Licensor appoints the Agent for the Term, and the Agent hereby accepts that appointment, to perform the Services in accordance with the terms and conditions of this Agreement. 3.2 Exclusive Agency (a) The Agent's appointment is exclusive. (b) The Licensor agrees not to appoint any other person to act as the Licensor's marketing representative and licensing agent to licence and commercially exploit the Intellectual Property Rights and to promote and sell the Licensed Products in the Territory, or any part thereof. 3.3 Licensor's Arrangements (a) The Licensor may procure and enter into agreements by which third parties are licensed to commercially exploit the Intellectual Property Rights and promote and sell the Licensed Products ("Licensor's Arrangements"). (b) The Licensor shall provide the Agent with copies of all executed agreements relating to the Licensor's Arrangements (c) The Agent shall manage all Licensor's Arrangements and shall be entitled to commission at the Commission Rate on the Gross Income from all such Licensor's Arrangements in accordance with this Agreement. 1. The Services Agreement also provided for a monthly fee, a commission fee of 15%, licensor's reporting obligations and agent's obligations in accordance with clauses 5, 6 and 8. The licensor's corresponding obligations under clause 4 were essentially to provide information and documents to the agent: 5. FEES 5.1 Monthly Fee The Licensor shall pay to the Agent during the Term the Monthly Fee on or about the 20th day of each Month. 5.2 Commission Fee (a) The Licensor shall pay to the Agent during the Term the Commission Fee. (b) The Commission Fee shall be paid in accordance with clause 6.2. (c) The Monthly Fees shall be deducted from, or set off against, the Commission Fees. (d) If the Monthly Fee for a Month exceeds the Commission Fees payable for that same Month, the excess shall not be repaid by the Agent but shall be carried forward to the next Month and applied as described in clause 5.2(c). 5.3 Post-Termination or Fees (a) After the end of the Term the Parties agree that the Commission Fee shall continue to be earned by the Agent for all Applicable Licence Agreements which are then in force and current for the period until the Applicable Licence Agreement is terminated either by expiration of time or otherwise. (b) The Agent agrees that it will not be entitled to earn any Commission Fee for any extension or renewal of an Applicable Licence Agreement after the Expiry Date, unless the Licensor has expressly agreed in writing. (c) The rights and obligations of the Parties in this clause shall survive expiration or termination of this Agreement. (d) This clause 5.3 does not apply if this Agreement is terminated under clause 13.1. 6. LICENSOR'S REPORTING OBLIGATIONS 6.1 Licensing Revenue Reports The Licensor shall provide the Agent, within fourteen (14) days of the end of each Month, with a written report ("Revenue Report") which accurately and fully states for that Month: (a) the Gross Income earned under all Applicable Licence Agreements (even if nil); and (b) the Commission Fee earned by the Agent (after setting off the Monthly Fee for that Month against the Commission Fee); and (c) in respect of each Applicable Licence Agreement, the amount of Gross Income received and Commission Fee earned by the Agent: (i) during the Month; and (ii) accrued (in aggregate) to the end of that Month. 6.2 Payment of Commission Fee With the Revenue Report the Licensor shall pay the Commission Fee for that Month to the Agent net of the Monthly Fee for that Month and any amount carried forward as described in clause 5.2(d). All payments of Commission Fee shall be made by way of cheque or as the Agent may direct the Licensor. 8. OBLIGATIONS OF THE AGENT During the Term, the Agent agrees to: (a) perform the Services to the standard of a professional, competent and experienced licensing agent; (b) pay all costs and expenses incurred in providing the Services and to keep the Licensor indemnified in respect thereof; (c) work in continuing communication and consultation with the Licensor to identify persons and products for the commercial exploitation of the Intellectual Property Rights and the promotion and sale of the Licensed Products throughout the Territory; (d) conduct itself in accordance with all international, national, federal, state and local laws, treaties and regulations and generally in a manner which will not in any way adversely affect or impair the value of the goodwill in the Intellectual Property Rights; (e) not intentionally do or suffer to be done any act or thing which may in any way impair or adversely affect the Intellectual Property Rights and the right, title and interests of the Licensor therein; (f) if it becomes aware of any fact, circumstance, event or report which does or may adversely affect or damage the Licensor's or Durie's reputation or value of the goodwill in the Intellectual Property Rights, notify the Licensor in writing of the fact, circumstance, event or report Licensor; and (g) not make any representation or give any warranty on behalf of the Licensor or Durie unless specifically authorised in writing by the Licensor. 1. The parties are at issue about the termination of the Services Agreement. Contractual termination is provided for in Clause 13 of the Agreement. But Clause 14 also provides for automatic renewal upon the failure to give notice of termination before reaching the Expiry Date. Both these clauses are set out below. 13. TERMINATION 13.1 By Licensor The Licensor may terminate this Agreement if: (a) the Agent at any time: (i) in the reasonable opinion of the Licensor, ceases to be actively engaged in the commercial exploitation and licensing of the Intellectual Property Rights; (ii) is in breach or default of this Agreement and if the breach or default is one which is capable of remedy, fails to remedy such breach or default within 28 days after being requested to do so by written notice from the Licensor; or (iii) suffers an Insolvency Event; (b) Michael James Curnow dies or suffers any total or permanent incapacity or ceases to control the conduct of the affairs of the Agent. (c) The Licensor may terminate this Agreement on the 30 June 2010 if no Agreements are in place for the commercial use of the Trademark Jamie Durie Signature by authorised third parties. 13.2 By Agent The Agent may terminate this Agreement if the Licensor at any time: (a) is in breach or default of any of this Agreement (including failure to pay any monies due and payable to the Agent pursuant to this Agreement on the due date of payment) and if the breach or default is one which is capable of remedy fails to remedy such breach or default within 28 days after being requested to do so by written notice from the Agent; or (b) suffers an Insolvency Event; 14. RENEWAL This Agreement shall be automatically renewed at the Expiry Date for further terms of five (5) years on a rolling basis unless either party has given to the other a notice of termination ninety (90) days prior to the Expiry Date or prior to the end of each five (5) year period. If a notice of termination is given by one party to the other then this Agreement shall expire on the Expiry Date or at the end of the relevant five (5) year period, whichever the case may be. 1. In its general provisions (clause 18), the Services Agreement contains a further assurances clause (Clause 18.2), and a non-waiver clause (Clause 18.3). It also includes a clause defining the relationship of the parties (Clause 18.4) as follows: 18.4 Relationship of Parties Nothing in this Agreement constitutes: (a) a joint venture between the Parties; (b) a partnership between the Parties; or (c) the relationship of employer and employee between the Parties; and this Agreement is not to be construed as creating any such relationship. 1. By clause 19, the Agent acknowledges that Mr Durie individually has rights and remedies under the Services Agreement. Nine existing licensing arrangements, carried over from the 2004 Services Agreement, are listed in item 3 of Schedule 1 of the Services Agreement. 2. The Services Agreement was negotiated on behalf of JPD by its then general manager, Mr Paul Gregory. He retired from this position in November 2008 after appointing Mr Craig Miller as JPD's financial controller. 3. Both parties entered upon performance of the Services Agreement. JPD held out Mr Curnow as its licensing agent. Mr Curnow began to source licensing deals for JPD. Mr Durie formed a high opinion of Mr Curnow as a negotiator. He even encouraged him to negotiate and document a one-off endorsement deal, outside the pure licensing arrangement of the Services Agreement, with Boral in 2009. In July 2010 the parties agreed that the monthly licensing fee of $10,000 per month payable under clause 5.1 would be increased to $13,000 as this higher amount was more than covered under the minimum royalty guarantee provisions of the licence agreement which had by then been negotiated through Mr Curnow's efforts with Big W. He was seen to be paying for himself through the revenue being earned on this deal. 4. JPD's in house lawyer resigned in December 2009. Shortly thereafter, in March 2010, with Mr Durie's concurrence Mr Curnow engaged Mr Chris Frawley of M&K Lawyers to provide general legal services to JPD as required. 5. Mr Durie's judgment of Mr Curnow's capability as a negotiator led him to consider a wider role for Mr Curnow within JPD beyond the pure licensing work of the Services Agreement. This was partly driven by necessity and was partly the product of Mr Curnow's willingness to step up to other duties to increase his family's income. Mr Durie was becoming increasingly busy with his work commitments both in the USA and in Australia. He was working closely with his talent agents in Australia and the US to secure new television and endorsement deals. He was working with Mr Curnow to build the Big W licensing business in Australia and to investigate other potential new licensing deals. He realised that he needed to appoint a new general manager to manage JPD's day-to-day business including the management of JPD's agents. JPD had not had a general manager since Mr Gregory departed late in 2008. 6. At that stage JPD had four separate agents, all working on a commission basis. Mr Durie says, and the Court accepts, that he did not particularly want to add a manager on yet another commission. He was more interested in engaging Mr Curnow on a flat rate. Moreover, much of the additional work he wanted Mr Curnow to do was not at the coalface cutting new deals with third parties, but higher level co-ordination of the work of JPD's other agents. I accept Mr Durie's evidence that this is generally what he had in mind when he approached Mr Curnow, who became Mr Durie's obvious first choice, because of Mr Curnow's familiarity with the business and his sound performance as a negotiator. 7. After Mr Durie raised the issue of Mr Curnow becoming general manager, Mr Curnow said to him, "I'm looking for more money and some more regular income. Ange [Mr Curnow's wife] wants me to bring in more money". The practical backdrop to the negotiation in late 2010 was: Mr Curnow wanted financial stability with increased reliable family income. Mr Durie wanted a general manager who already well understood the business. Management Agreement Negotiations – September/October 2010 1. The parties agree that the terms of the Management Agreement were negotiated in at least one meeting between Mr Durie and Mr Curnow in about September or October 2010. But Mr Durie alleges, and Mr Curnow denies, that there was a second meeting on or around 14 December 2010 devoted to the same subject. Resolution of the issue of the terms of the Management Agreement indirectly involves a decision about whether Mr Durie or Mr Curnow is correct about the occurrence of the second meeting. The alleged second conversation more assists Mr Durie's version of the terms of the Management Agreement. 2. The issue of the number of meetings does not just depend on Mr Curnow and Mr Durie. Mr Miller gave evidence in JPD's case. He says that he was present at a meeting with Mr Curnow and Mr Durie on 14 December 2010. Mr Miller was an employee of JPD in December 2010. His employment ceased in about March/April 2012. 3. There is some common ground about the Management Agreement. Both parties accept that they orally finalised a Management Agreement in about November or December 2010. But they disagree about its terms. Neither party contends that there was no consensus ad idem. The proceedings were conducted on the basis that the Management Agreement was concluded. But the parties asked the Court to determine its terms. 4. But the parties agreed about a number of the Management Agreement essentials: Curnow Consulting's title, the nature of the services it was expected to provide, and the payment of monthly management fees. 5. Upon the provision of his services through Curnow Consulting, Mr Durie and Mr Curnow described in their various exchanges commencing in September 2010 that the role Mr Curnow was to assume at JPD was as a "a full time manager" or "a general manager". 6. The second half of 2010 was close to the high point of Mr Durie's and Mr Curnow's relationship. Mr Curnow was by then a highly trusted confidante of Mr Durie. He had until then, in Mr Durie's perception, proven himself in assisting Mr Durie in the growth of Mr Durie's business. The role that Mr Durie intended to confer on Curnow Consulting covered a broad spectrum of administrative and supervisory services in relation to both Mr Durie's business interests in JPD in Australia and in JPD Media Inc. in the United States. 7. The agreed management services were broadly defined. I accept Mr Curnow's evidence that Mr Durie said to him, "I want you to come on board as a full-time manager to run the whole show for me". And I accept Mr Durie's evidence that he said, "I need someone to help me run the business while I'm away, and make it more profitable…I need an office manager to look after the running of the business and the staff. Call it the general manager…I'm also keen to have you source new deals to grow the rest of the business". Mr Durie said, and I accept, "[you will] pay the staff, hire and fire the staff as needed, deal with the accountant, tax payments and so forth, and reduce overheads where possible". 8. Nor is it in contest that Curnow Consulting was entitled to a monthly management fee from JPD for the provision of these management services. The fee was agreed at an initial $7,000 plus GST per month for the months of November and December 2010 and at $8,000 plus GST per month thereafter. 9. Nor is the payment of management fees of $8,000 plus GST per month for at least 12 months from early 2011 in issue. But one question is whether or not the monthly fee of $8,000 plus GST ceased in March 2012 either after the expiry of an initially agreed trial period, or because on 23 February 2012 the parties agreed the $8,000 monthly management fee would no longer be paid. The JPD/Durie parties contend that JPD's obligation to pay management fees ceased at that time, either on the basis of a variation of the Management Agreement or upon its termination and replacement by a new Management Agreement. Findings about this issue appear later in these reasons. 10. Apart from the issue of whether or not the monthly management fee ceased in March 2012, the parties disagree about the precise basis of the payment to Curnow Consulting of an additional commission fee of five per cent. The contest about these different terms of the Management Agreement reflects differences about what was said in the conversations in relation to the negotiation of the Management Agreement, which are dealt with now in this section. 11. Mr Curnow's version. Mr Curnow says that he met Mr Durie to negotiate the Management Agreement at JPD's Waratah Street, Mona Vale offices. Mr Curnow initially put their meeting date as "in or about September 2010" but later amended his time estimate for the meeting to "the end of October 2010". Nothing in my view turns on this change, although Mr Curnow was cross examined about his reasons for it. Mr Curnow says he had the following conversations with Mr Durie: Mr Durie: I want you to come on board as full time business manager to run the whole show for me. You can still work on your other clients like ET. You can have my office as I'm always away. You can have a monthly fee plus 10% of profit. Mr Curnow: That's great Jamie, but I have been involved in profit share deals in the past and they have never worked out. I would prefer a percentage of revenue as this is easily calculated and it avoids any arguments. Mr Durie: What sort of percentage? Mr Curnow: 5%. Let me think about what's reasonable for the monthly fee and I'll get back to you. Also, I'm not working with ET any more, just Luna Park, which takes about an hour each week. Mr Durie: No problem, let's agree at 5%. Just let me know on the monthly fee. Mr Curnow: It's a big job mate, so I'll let you know once I've given it some thought. 1. At the time of this conversation Mr Curnow was working from an office in Newport Beach. In November 2010 he moved out of this Newport office and into JPD's Mona Vale offices. This move was reflective of the change in Mr Curnow's duties that took place with entry into the Management Agreement. He could not readily manage JPD's business from an external office. 2. This move approximately coincided with Mr Curnow sending Mr Durie an email on 17 November 2010, outlining what he saw as his managerial functions and putting an offer as to the monthly fees that he proposed be payable to Curnow Consulting for this additional role. Mr Curnow's email does not enter upon the issue of commission arrangements but is solely devoted to the monthly fee and the role. It was as follows: Hi Jamie, You asked me to suggest some figures that are commensurate with the role we have been discussing. The role as I see it (pretty much summarized in the chart I gave to you at the restaurant last week) includes: Being across all current relationship [sic] for JPD Media Pty Ltd & JPD Media Inc. Developing a major long term strategic plan Putting the plan into action once signed off Spear-heading the TV push in Australia (eg; today's discussion with Jim Sample etc.) Supervising and pushing the agenda with WME and ACI in the US on all fronts Development of new business as opportunities arise etc. etc. This will be a huge task and plenty of hard work which I am up for! I suggest the following (trying to tie in with what I know of the cash flow whist [sic] at the same time being realistic in terms of what this is worth to you and considering my current arrangements with you!) November & December 2010 - $7K per month January 2011 onwards - $9K per month I really want to get this done ASAP so we can settle the team and push ahead. Let me know your thoughts. Cheers, Mike 1. Mr Curnow's offer evoked a counter offer. Mr Curnow says he had another conversation with Mr Durie after his 17 November email: Mr Durie: I got your email Mike and it's all good. Let's do $7K in November & December and then $8K each month from next year. Mr Curnow: Great, I can live with that. I think it should run in line with the Licensing Agent deal. Mr Durie: Sure, it should line up with that. I'll have Chris [Frawley] do a short letter that we can sign. 1. In circumstances that remain elusive, if Mr Curnow's version is to be accepted it seems that Mr Frawley was never asked to draft that "short letter that we can sign". No such letter is in evidence. But the focus of the 17 November 2010 email, that was undoubtedly sent, is significant: apart from the monthly management fee: what stands out is Mr Curnow's enthusiasm for the quite expansive management role that he was proposing to play: "being across all relationships", "developing a major long term strategic plan", "pushing the agenda …in the US on all fronts", in summary "a huge task" and "plenty of hard work". The email does not mention or acknowledge a trial period for Mr Curnow's management role. 2. Mr Curnow sent invoices for the $7,000 November and December 2010 management fees on 17 December 2010. He sent his first invoice for his 5% commission under the Management Agreement on 6 January 2011, being an amount of $750 plus GST, for part of a commencement fee from the Oakstand Property Group for something known as "the Setai project" 3. Mr Durie's version. Mr Durie had quite a different version. He said that his and Mr Curnow's conversations proceeded thus: Durie: "Mike, I need someone to help me run the business while I am away, and make it more profitable. I basically need an office manager to look after day-to-day running of the business and the staff. Call it a General Manager. For that, I am happy to pay you a monthly retainer. I am also keen to have you source new deals to grow the rest of the business. I am happy to pay some sort of incentive to grow new business. This will help give you some additional cash flow and it will help me run the business while I am away working in the US. Obviously, the TV deals and endorsements, Sean Anderson and our US agents handle, but I would like you to look at new deals that you bring into the business and we can look at paying a percentage. The design business looks after itself in terms of bringing in new work. The margins in the design business are not high enough to pay commissions, so you just need to manage that part of the business as part of the General Manager role. You can still work on the licencing business and you already make a substantial amount from me with the licensing agreement, so look at this as a top-up retainer to manage the day-to-day business and an opportunity to make a few more dollars to help me grow the business. How does 10% of any of net profit of new business sound?" Mr Curnow: "I am not interested in net profits. I have been in that situation before." Mr Durie: "Well, I need someone who is focused on the costs of the business as well as the revenue. That's why I am happy to pay a net profit of new business." Mr Curnow: I am happy to look at reducing overheads as part of a role as General Manager, but what I want is a number that deals with gross revenue, not profits. It sounds like a lot of work." Mr Durie: "You are looking for extra work, you are not doing many deals out of your existing business these days, how about you wind that up and work full time for me? I can give you a guaranteed monthly package and you can look at putting all your efforts into finding new business for my company, and wind down your own. I would prefer you to focus on new business here in my office rather than business in your office, which distracts you from my business. If I'm going to pay a retainer, I want some commitment. I want you to physically be in the office. I will be happy for you to continue to work for your remaining clients out of my office." Mr Curnow: "What kind of role do you envisage?" Mr Durie: "Pay the staff, hire and fire the staff as needed, deal with the accountants, tax payments and so on, and reduce overheads where possible. I would also like you to be the point person to direct traffic for my television agents in America and Australia and filter through the deals that are worth presenting to me. Television and endorsement deals are Sean Anderson's gig, or Endeavour's [WME's] in the US, but I will need you to liaise with them because I can't be in ten places at once." Mr Curnow: "It sounds like a lot of work" Mr Durie: "Well, it's regular money. Have a think about it. I know regular income is something that Ange has been nagging you about so this deal could kill two birds with one stone for us." Mr Curnow: "Let me give it some thought and I will come back to you." Mr Durie: "In terms of a retainer, I am thinking something like $5,000 or $6,000 per month." Mr Curnow: "It will have to be more than that. Something more like $10,000 a month." Mr Durie: "That is way too much. You are already making almost $300,000 a year for yourself out of the licensing business. This is just a top-up, with an incentive that could earn you a lot more. I would be happy to pay 5% on new deals, outside existing contractual arrangements and deals. I am not interested in paying double commissions. Any deal that comes in which already requires a commission payment to someone else, I can't pay you a commission on. Also, since the design business doesn't have huge profit margins, I am not interested in paying any commissions on that business, but what I do need is for someone to help run it. That would be part of your role as General Manager. Why don't you think about the right number for the monthly retainer, and let's come back to it." Mr Curnow: "Okay." 1. Mr Durie's version is far more detailed than Mr Curnow's version. He was criticised for being over-detailed; it was said that the longer version was the product of his acting skills. But on testing, he could reproduce his account of his meeting. But including my preference for Mr Curnow as a witness on these issues, a number of considerations help choose between these two competing versions. 2. First, Mr Durie's version seeks to limit the availability of the 5% commission in a number of ways through the carve outs that invite further discussion or negotiation by Mr Curnow. But Mr Curnow's email of 17 November 2010 does not mention the commission issue at all. It had been discussed by 17 November. But it does seem to have been sufficiently well agreed that it did not warrant further written mention. 3. Secondly, if these carve outs were discussed then, they are just the kind of thing that would need further teasing out with lawyers to get right. Mr Durie was sufficiently sophisticated to see that. Yet the agreement is not documented. It is easier to understand why Mr Curnow's less complex terms of the Management Agreement were not documented. 4. Thirdly, Mr Durie wanted Mr Curnow on board as general manager. Mr Durie raised the idea because he thought he was not coping with managing JPD himself and he needed a quick-fix solution. Much is evident from what did not happen in late 2010. JPD did not advertise for a general manager. Mr Durie went straight for an in-house solution for his need for someone to oversee JPD's management whilst he was away. Mr Curnow was an obvious candidate for a short-cut approach: he was already doing somewhat parallel work with the licencing agreement; he knew JPD's business well; it would not take him long to get up-to-speed; and Mr Durie already judged his skills to be generally suitable to JPD's needs. His approach indicates he was essentially trying to solve a short term problem, which may or may not become a long term solution, if the problem continued. A more structured and well thought out approach to finding a general manager solution might indicate that Mr Durie was thinking long term. But in my view he was not. 5. This feature of the moment indicates that Mr Durie (and for that matter Mr Curnow) were not thinking long term, when discussing the Management Agreement. It is therefore inherently unlikely in my view that they discussed anything to do with the termination of their arrangements. Neither of them was thinking that far ahead. Had they engaged lawyers to negotiate a written Management Agreement they might have thought about the theoretical end of their relationship. But no lawyers were retained on either side in late 2010. 6. This had two incidental results. First, they did not discuss linking and making the Management Agreement and Services Agreement of the same duration and therefore coterminous. Secondly, nor did they discuss a trial period of 12 months for the Management Agreement. In my view, they approached the whole discussion of the Management Agreement with a 'see how it goes' approach and without thinking through the long term consequences of what they were doing. 7. Fourthly, paying of double commission is not inconsistent with the role that Mr Durie was expecting Mr Curnow to play. Mr Curnow was managing the work brought in by others but he still had the capacity to lose it through his own poor co-ordinating management. A commission on the revenue streams he was managing was a strong incentive for him to manage the existing relationships well so that they were not lost. And Mr Durie refers to this wide managerial role in later emails. 8. Fifthly, Mr Durie's later conduct in not confronting Mr Curnow is consistent with a view that Mr Durie believed that Mr Curnow's contentions about the terms of the agreement were right. 9. But I do accept part of what Mr Durie says. He seemed quite firm that he would not pay double commissions on business brought in by Mr Sean Anderson. And in my view at least something like that was said and agreed. It is also probable by reference to the parties' later conduct. A Second Management Agreement Meeting? – 14 December 2010 1. Mr Miller claims he attended a three way meeting with Mr Curnow and Mr Durie on the Management Agreement on about 14 December 2010. Mr Miller's account was that he could be precise about the date of the meeting he attended, and that it had actually been on 14 December 2010. The basis of his certitude was that he had drafted an email relating to the contents of the meeting, at a time that he describes in his affidavit as "immediately afterwards". The JPD/Durie parties asked the Court to accept Mr Miller's account of this claimed second meeting based in part upon this email. 2. The Court generally accepts Mr Miller's account of this conversation. That acceptance is based in part upon the quality of Mr Miller's evidence and in part upon the contemporaneous documents that support his version. 3. Mr Miller recalls, and I accept, that around 14 December 2010 he was working in JPD's offices. On about that day, Mr Durie approached him and asked whether he could come into Mr Durie's office and "speak to me and Mike". Upon being called into the office, he says that he was involved in a conversation with Mr Curnow and Mr Durie. He says that the conversation between the three of them was in words to the following effect: Mr Durie: "As you know, I want Mike to take a bigger role in the business. He is going to be the General Manager of the business. And for that he will be paid a monthly management fee of $7,000. He is going to manage the business interests in Australia and the US." Mr Miller: "How long is this going to go for?" Mr Durie: "There will be a trial period of 12 months. Also, anything Mike brings to the table, he gets 5 per cent." Mr Miller: "Jamie, what about the deals that you bring in? Does Mike get commission on those?" Mr Durie: "Yes, five per cent." Mr Miller: "Really, are you sure?" Mr Durie: "Yes." 1. I accept that Mr Miller had a conversation with Mr Durie and Mr Curnow that day. But I only accept part of what he says as to its content, for the reasons that follow. Mr Miller says he has no recollection of the issue about commissions on JPD's design business being discussed. It apparently occurred to Mr Miller to raise the issue about JPD's design business, but he says, and I accept, that he dismissed the idea because he regarded JPD's design business as self-supporting and it did not rely upon anyone to bring in new deals. He assumed that no commission would be payable to Mr Curnow referable to that business. Mr Miller says, and I accept, that he does not recall the issue of commissions on deals introduced by agents being discussed at this meeting. He says he did not raise the issue because he assumed that any deals brought in by JPD's agents would logically not have been brought in either by Mr Curnow or Mr Durie. So he surmised that no commission would be payable to Mr Curnow referable to work brought in by other agents and he did not seek to raise the matter. 2. But all this really does is to confirm that JPD's claimed carve outs from Curnow Consulting's commission entitlement for the design business and for deals brought in by other agents were not discussed in those terms in front of Mr Miller on 14 December. 3. Why should Mr Miller remember this meeting? He says, and I accept, that he was "surprised and somewhat displeased that Mr Durie has agreed to pay Mr Curnow another $84,000 over the next 12 months, whilst at the same time JPD's cash flow was tight, and I was working in the business trying to save as much money as possible". Mr Miller was mildly resentful about the situation that this meeting revealed to him. 4. Mr Miller went back to his desk after the meeting. He says, and I accept, that he then drafted an email which he sent to Mr Durie. He thought it would be important to, "document what was discussed for the purposes of drafting an agreement at a later time". Mr Miller's evidence has been challenged, in part because he did not send a copy of this email to Mr Curnow. But I accept Mr Miller's explanation that he only sent it to Mr Durie because his simple objective was to confirm with Mr Durie that his understanding of the discussion was correct. 5. The email was sent on Tuesday 14 December 2010 at 15:46:43. The addressees were Mr Durie and a tax adviser. The email itself contains a number of internal signposts suggesting that it followed fairly shortly after a conversation. The email title lines contain the following words, "conversation: Mike's proposal" and "Subject: re: Mike's Proposal" and internally, it uses the words "as discussed". The email deals both with the existing Services Agreement and the new Management Agreement. Excluding subject headings, the email was as follows: Good Afternoon Jamie & John As discussed, in point form: - EXISTING $13,000 + GST monthly Retainer - payable on Friday following receipt of Channel 9 monies / Big W monies Contra'ed [sic] against Big W Commission each quarter 15% on EXISTING deals % 2% Commission on NEW US Licensing Deals NEW Term: 1 January 2011- 31 December 2011 (1 year) $7,000 + GST monthly Management Fee – (total $84k for Term – payable on Friday following receipt of Channel 9 monies No Commission on deals brought to table by Sean Anderson 5% Commission on NEW deals introduced by Jamie. 5% Commission on NEW deals introduced by Mike Quarterly business trips to the US, flying Premium Economy Manage all business interests of JPD Media Pty Ltd, JPD Media Inc. 1. Mr Miller says, and I accept, that what he calls "existing" in the email means "pre-existing" arrangements between Mr Durie and Mr Curnow, as he then understood them. His words "15%" on existing deals referred to commission payable to Mr Curnow from revenue received through the endorsement deal between JPD and Boral. 2. Consistent with the 14 December conversation Mr Miller said he had just witnessed, on 17 December 2010 he received the two invoices from Curnow Consulting, each for $7,000 (plus GST of $700) and respectively for "management fee for December 2010", and "management fee for November 2010". He caused JPD to pay each of these invoices. The timing of receipt of these invoices and his authorisation of the payment is further confirmation of Mr Miller's involvement in this three-way conversation. 3. How is Mr Miller's evidence to be assessed? The starting point is Mr Miller's perspective. As financial controller he certainly wanted to limit the amount that Mr Curnow would be paid under the Management Agreement. And I accept he asked questions on 14 December to achieve this. But on his version of the conversation he did not get any indication from Mr Durie of the carve-outs from the commission payable under the Management Agreement. Yet he does record in the email a carve-out in respect of deals brought to the table by Sean Anderson. This tends to indicate that deals brought in by that particular agent were probably mentioned in the conversation and were excluded by mutual agreement. But no other agents were expressly mentioned in the email, or on Mr Miller's version, were any agents mentioned in the December 2010 conversation as candidates for exclusion from the commission entitlement. It is difficult to comprehend how one agent, Mr Sean Anderson, could have been be mentioned, as the court finds that he was, without triggering a discussion between these parties that deals brought to the table by all other agents were also to be excluded if that indeed was what was agreed. The best inference to be drawn from this is that, although Mr Miller does not seem to remember it, it is probable that at this 14 December meeting that a carve out in respect of deals generated through Mr Sean Anderson was discussed. And I infer this probably was also mentioned in the earlier discussion between Mr Durie and Mr Curnow. This much of what Mr Durie says of the earlier October 2010 conversation - the exclusion of Mr Anderson's deal from double commission can be accepted. 4. Neither Mr Durie nor Mr Miller sent this email to Mr Curnow. There is nothing improper in Mr Miller sending it to Mr Durie for his information without copying it to Mr Curnow. But the email did not so strongly represent Mr Durie's views of what had passed between him and Mr Curnow that he, Mr Durie, was prepared to send it on to Mr Curnow himself for confirmation of its contents, or to give instructions to Mr Frawley to draft an agreement based upon it. The latter was the very thing that Mr Miller had in mind as one of the collateral purposes of his email. 5. Despite the fact the Court accepts that there was a meeting on 14 December, caution is appropriate in assessing Mr Miller's account that Mr Durie used the words "trial period" in the conversation. The words do not appear in Mr Miller's email of the same date. Mr Miller probably wished to be satisfied that the arrangement with Mr Durie would not automatically become permanent. I accept, consistently with the email, that an initial period of 12 months was discussed and that there would be some kind of review at the end of 2011. But I do not accept that Mr Durie said it was a "trial period of 12 months" or anything in the nature of a test period which would not bring the obligation to pay management fees to an end and would thereafter be extended other than by a further agreement. Mr Durie needed Mr Curnow and did not place this kind of restriction on him when seeking to attract him into this new role. 6. There is another odd feature of the email. It does not refer to the step up of the management fee from $7,000 a month to $8,000 a month. The 17 November email from Mr Curnow makes clear that that negotiation about a step up had started by mid-November. In my view it was concluded, as Mr Curnow says, by about the time he moved into JPD's premises. All Mr Miller's reference to the $7,000 a month indicates is that he had only by then been given limited information about what had been agreed between Mr Curnow and Mr Durie. He did not have a full briefing from either of them at that point. 7. What do the words "5% Commission on NEW deals introduced by Jamie" and the words "5% Commission on NEW deals introduced by Mike" mean? Consistent with the lack of a full briefing on the issue, Mr Miller's email does not make clear that the 5% is only on new deals. The Finance Broker Letter – 26 July 2011 1. A letter that Mr Curnow asked Mr Miller to prepare in July 2011 for a third party generated its own debate about the terms of the Management Agreement. Shortly before 26 July 2011, Mr Curnow said to Mr Miller, "Craig, I need an income confirmation for my financial broker for refinancing purposes. Can you put this in a letter for me?" 2. Mr Curnow gave Mr Miller a draft letter with the words that he, Mr Curnow, wanted Mr Miller to put onto JPD letterhead and address to Curnow Consulting. The idea was that Curnow Consulting could use the letter to give it to a finance broker. The letter provided as follows: RE: TO WHOM IT MAY CONCERN INCOME CONFIRMATION FOR MIKE CURNOW Mike Curnow, through Curnow Consulting Pty Ltd has been providing personal services to JPD Media Pty Ltd and its related entities since 2002. Confirming current Income arrangements:- $13,000 monthly Retainer - pursuant to Services Agreement - Licensing Agent Agreement (July 2009 - June 2013) 15% Commission on all JPD Media Royalties under the Services Agreement 5% Commission on all other contracts arranged on behalf of JPD Media Pty Ltd and its related entities $8,000 monthly Management Fee in capacity of Business Manager Do not hesitate to contact the writer should there be any further clarification sought. 1. The terms of the Management Agreement profiled in this letter, generally support the Curnow Consulting case, although it is unspecific in some essentials. The letter does not clearly state that the five per cent commission "on all other contracts arranged on behalf of JPD Media Pty Limited" was only on new deals that Mr Durie or Mr Curnow brought to JPD after the date of the Management Agreement and excluded commission revenue brought in through other agents and the design business. 2. But Mr Miller explains, and I accept, that he was not particularly focused on the exact terms of the commission deals. He understood that the general intent of the letter was that it would be used to confirm Mr Curnow's income to a mortgage broker. Therefore a broad-brush drafting approach was satisfactory from his perspective. 3. Curnow Consulting challenges Mr Miller's evidence. Curnow Consulting says that Mr Miller's evidence is consistent with an agreement for the payment of full commission without the carve outs JPD now claims. But there is no inconsistency in my view. Mr Miller's account is that he really did not attend to the detail of the Finance Broker letter and that he approached his task with a "broad brush". I accept that part of Mr Miller's evidence. Mr Miller's evidence in this respect is quite compatible with him not recognising the precise differences between the letter he was signing in July 2011 to Mr Curnow's finance broker and the deal he had partly witnessed in December 2010 and invoices he was approving for payment under the Management Agreement. 4. Curnow Consulting also argues that Mr Miller's account is inconsistent with his later email to Mr Durie of 29 March 2012 (see below), sent some eight months after the preparation of the finance broker letter, in which Mr Miller declares that he had been mistakenly "paying commissions on deals brought to the table by Sean Anderson". 5. But the answer to this is the same. No inconsistency is made out. Mr Miller did not focus on the precise terms of the finance broker letter. Its precise consequence with the fine detail of the Management Agreement did not concern him. From his perspective the letter sufficiently captured the headline financial terms of the Management Agreement and could therefore be passed for signature. It is quite consistent with this that Mr Miller could still later discuss an earlier mistake in the commission payments he had made under the Management Agreement on account of deals brought to the table by Sean Anderson, a mistake he simply did not notice when approving a "broad brush" letter for a finance broker. 6. But I do not accept Mr Curnow's evidence that he did not provide instructions to Mr Miller for this finance broker letter. Mr Curnow made a request to Mr Miller for the letter, which must have included some basic instructions: for example, to whom it should be addressed and the approximate form of words to be used. As Mr Curnow was the one asking for the favour of this letter for his own purposes, it is logical that he would make the task as easy as possible for Mr Miller by giving him a draft. And he could be expected to bring to mind and to be more familiar with his exact financial arrangements with JPD than Mr Miller. So Mr Curnow could be expected to draw Mr Miller's attention to the essential features of his contractual arrangements with JPD. And he did so in general terms. 7. But these findings also show that Mr Curnow always believed that his Management Agreement did not contain the carve outs that JPD alleges, even if the finance broker letter does not show that Mr Miller himself accepted in July 2011 there were no carve outs. Hall Chadwick become involved – February 2012 1. Mr Durie knew a business advisor, Mr Michael Vardarvas, a principal of PHIQ Group Pty Ltd. Mr Vardarvas learned JPD was having cash flow problems in February 2012, and introduced Mr Durie to Mr David Kenney, an accountant and partner of the firm Hall Chadwick, to see if Mr Kenney could assist in improving JPD's financial position. Mr Durie turned to Mr Kenney for advice in relation to JPD's cash flow and business structure to identify such potential costs savings as were available. 2. Mr Durie quickly appreciated the value of Mr Kenney's professional services. JPD soon engaged Hall Chadwick as its external accountants and business advisers. Mr Kenney had a series of meetings with Mr Durie in which his colleague, Mr Sebastian Bryks, who worked under Mr Kenney's supervision, also attended. 3. Mr Kenney immediately focussed on reducing JPD's costs. He first targeted staff costs, looking directly at Mr Curnow's management fees. Mr Kenney says, and I accept, that some time shortly before 23 February 2012 he had a meeting with Mr Durie in which he expressed what I accept to be his genuine views about the payment of management fees to Curnow Consulting. Mr Kenney advised Mr Durie: "This is unsustainable. You are a life-support unit for Mike. You are not paying yourself and you are not paying your taxes and the reason is because whenever there is any money in your account, Mike or you whip it out. Rather than being an independent agent who sources deals, he is your "mop and bucket" boy earning commissions on deals brought in by you. Plus he is already on a base. You need to stop paying Mike the management fee." 1. Although Mr Kenney's affidavit does not record what Mr Durie said in response, the advice was undoubtedly designed to prompt Mr Durie to take some internal cost-cutting action with Mr Curnow. It appeared to have that effect. A conversation, the contents of which are disputed, took place between Mr Durie and Mr Curnow on 23 February 2012, a conversation prompted by the Kenney advice. 2. Hall Chadwick's advice led to two kinds of cost control relevant to Mr Curnow Consulting: 1. reduction in monthly management fees; and 2. the containment of Curnow Consulting's commissions. 1. Themes concerning both of these issues are inherent in the disputed evidence over the period February/March 2012. Attempts to Eliminate the Monthly Management Fees – February 2012 1. During the first two months of 2012, Mr Durie and Mr Bryks of Hall Chadwick thoroughly analysed JPD's financial position with a view to reducing costs and increasing revenue. In the course of that exercise, Mr Durie asked Mr Miller to prepare an analysis of the fees that had been paid to Curnow Consulting for 2010 and 2011 and to give Mr Durie a forecast for 2012. According to Mr Miller, Mr Durie described the purpose of this request as being, "so we can see the impact on cutting out Mike's monthly management fee?" 2. Mr Durie completed that task on about 14 February 2012. He used JPD's financial records to create an Excel spread sheet. He emailed the documents to Mr Durie and later to Mr Bryks. 3. The email is useful at several levels. The first part of the email gives the result, and not so much of the immediate request, that Mr Durie made to Mr Miller, but it reports to Mr Durie and to John@csttax.com that Mr Miller had found his 14 December 2010 email. Then in 2012 he then gives a view about what that email represents, namely a deal which had been verbally agreed in December 2010. The first part of the email follows: Good afternoon Jamie & John I found the email below dated 14 December 2010 a couple of months ago – it outlines in writing the contents of Mike's deal verbally agreed to in December 2010… Points to note:- Mike has never seen this email, and there has never been anything in writing to formalise this the term of this "NEW" arrangement was only for 1 year and was due to terminate 31 December 2011 the monthly Management Fee was increased to $8,000 per month – the $7,000 per month only related to November & December 2010 I have been mistakenly been paying Commissions on deals brought to the table by Sean Anderson – this amounts to $13,287 for NZ Tourism, Lend Lease speaking, Oz TOR Syndication & "100 Gardens" book 1. I accept that Mr Miller realised upon looking back at the 14 December 2010 email that he thought he had been making a mistake about paying commissions on deals brought to the table by Mr Sean Anderson. The best explanation for his including the subject of his fourth dot point is that in a moment of defensiveness he wanted to correct his error as openly as possible. 2. The email then goes on to deal with Mr Durie's original request, an analysis of Curnow Consulting fees for the last two financial years. To the extent this email gives that analysis, it is dealt with elsewhere in these reasons. The Moss Loan, Commission and the Discussion Note of 23 February 2012 1. During Hall Chadwick's work, important light was thrown on what commission structure had originally been agreed in late 2010 in the Management Agreement. 2. Curnow Consulting contends that Mr Durie was the substantial author of a "Discussion Note" created on or about 23 February 2012 that Mr Durie used as an aide memoire for discussions with an external financier. This Discussion Note document is said to be inconsistent with the JPD/Durie case that the commission payable under the Management Agreement to Curnow Consulting would only be five per cent on income from new business introduced to JPD by Curnow Consulting or by Mr Durie. The defendants' case is that the Management Agreement five per cent commission was only payable in respect of new business brought into JPD after the making of the Management Agreement, not existing business. In contrast, Curnow Consulting's case is that the five per cent commission under the Management Agreement was calculated on any amount payable to either JPD or JPD Design Inc. on all revenue JPD received other than under the Services Agreement. 3. The essential difference (excluding the operation of the carve-outs) between the two contentions is that Curnow Consulting's claim to an entitlement was based on a percentage of all revenue JPD received, whether in respect of business written before or after the making of the Management Agreement. But the JPD/Durie case is that only business brought in after that date could found the calculation of commission. 4. The Discussion Note was one piece of contemporaneous evidence about which this aspect of the commission debate pivoted. 5. The Discussion Note was a record of a discussion between Mr Durie and Mr Bill Moss, a principal of an external secured lender, Boston Financial Services Pty Limited ("Boston Financial"). 6. When Mr Kenney came on board as adviser to JPD on behalf of Hall Chadwick in February 2012, JPD's financial difficulties were serious. Mr Kenney was openly contemplating in discussions with Mr Durie the possibility of voluntary liquidation of JPD, which Mr Kenney perceived was in danger of not meeting its debts. As Mr Bryks himself said of the time, "the business is in a lot of trouble" and that there was "literally no cash to make any payments and we are either getting rid of some supplies and…staff in order to facilitate payments to others". Mr Bryks also indicated that negotiations were underway to lengthen the terms of payment with existing suppliers. All are classic cases of insolvent conduct. One of JPD's most substantial external obligations the subject of Mr Kenney's attentions was a $500,000 loan which was owed to Boston Financial. Because of the dominance of Mr Bill Moss as a figure in relation to this loan, it is sometimes referred to in the proceedings as "the Moss Loan". 7. Boston Financial had advanced $500,000 to JPD in July 2010. The loan terms were evidenced in an email Mr Bill Moss sent to Mr Durie on 27 July 2010. The loan capital was $500,000, the term of the loan 18 months, the lender Boston Management Services Pty Ltd and an interest rate of 10 per cent per annum was charged on the daily outstanding balances and payable at the end of the loan period. Loan security was guaranteed from Mr Durie, supported by an unregistered second mortgage over his Avalon property and a registered charge over JPD. Additional conditions were that Mr Durie was to complete renovations of the Avalon property within 18 months, place the property on the market for re-sale, and in the meantime, continue to make payments to Westpac on the Avalon property and to the ATO in a timely way. 8. By early 2012 the total amount including interest repayable on the Moss Loan was between $600,000 and $700,000. The 18-month term of the loan expired on or about 27 January 2012. JPD could not repay the loan on time. Mr Durie had to negotiate an extension. A Deed of Variation of the Facility Agreement was eventually signed on or about 31 May 2012. But in the meantime, Boston Financial placed considerable pressure on JPD for repayment. JPD's obligations to Boston Financial stimulated enormous pressure on Mr Durie in February 2012. Although Mr Moss did not issue a demand, he made it clear that he wanted to be paid and this had its effect on Mr Durie. Mr Durie appreciated that Mr Moss was a "no nonsense type of guy", for whom, "business is business". JPD's looming obligation on the Moss Loan brought JPD "to the doorstep of Mr Kenney for advice". After his engagement, Mr Kenney met with Mr Durie. 9. Mr Kenney was thoroughly briefed. He accepted he was given a full run-down on JPD's business background and current financial situation. He was given full information about JPD's costs, overheads, relationship with agents, employees and other matters relevant to its financial position. Mr Durie agreed that he thoroughly briefed Mr Kenney about JPD's current cash flow, employee numbers, business overheads and its acquired outgoing under existing contractual relationships. Mr Durie accepted that Mr Kenney wished to have a clear understanding of JPD's financial obligations to its agents, such as a licensing agent, Mr Curnow. Mr Durie vouched for the accuracy of the information given to Mr Kenney about JPD's business. Mr Durie accepted that, to the extent that he personally was involved in meetings, he would have corrected anything said to Hall Chadwick, which did not represent the truth. 10. The Discussion Note takes the form of what it purports to be: a prompt sheet for Mr Durie to remind himself of what he had to say to Mr Moss on the telephone. The objective of Mr Durie's phone call was to placate Mr Moss about JPD's incapacity to repay the Moss Loan when it had fallen due, and to see if Mr Moss would agree to provide an extension. Mr Durie followed the script in the Discussion Note when he spoke to Mr Moss. Here is the Discussion Note in full: JPD Media Pty Limited Jamie's discussion with Bill Moss 1. Hi Bill, other pleasantries. 2. I'm really sorry, but we have had some delays in some very major lucrative contracts and the US legal matter has also put a hole in our cash flow which means we can't meet the loan repayment due to you now. 3. Rather than simply give you some excuses, I've made some extremely tough decisions and know my current team and activities need to be looked at very closely. 4. I know I have also made some bad decisions about buying assets, like Avalon and LA, but you would know they are strategic assets, however, with blow out of costs and delay in some contracts; I've been caught short and am very embarrassed. 5. Another problem I recognise is that, I haven't had someone in my ear telling me commercially, to pull my reins in - whilst Craig has told me, I haven't had someone grab me and say NO. I recognise l am not able to move at the pace you know I want to and haven't stayed within a healthy cash buffer. 6. I am not just making cuts for cuts sake, or making a knee jerk reaction, but am taking a broad look at my whole business and am ensuring I build it within sensible confines. 7. I have engaged David Kenney, of Hall Chadwick, who is the head of their Corporate Services practice - so this Is right up his alley. Really, I need some turn around guidance, as this is exactly what will be done. David says he knows some of your guys, Glenn Willis and Cameron Habler. I realise I now must work with an advisor who isn't a bookkeeper style of accountant, rather someone who can assist me with commercial issues who I can trust, ensure cash flows are right, help manage my bank relationships, also my agents performance. He has also noticed some ideas that might mean I can improve my tax position and cash flow. David is also putting together a 100 day plan, and will utilise Craig where he can, but we will need to improve our communication with the bank, especially as our LVR is out of whack and will need to impress upon them our brand value and real balance sheet position so we can professionally convey how we will perform over the next 12 and 24 months. He has also promised to look after me fee wise. 8. Don't get me wrong, the business and my brand are still very strong, our pipeline has never been better. The Chinese deal, Kmart and the US generally have and will deliver excellent results. Our future looks excellent, but we have to handle the short term. 9. The Avalon property will deliver an excellent return through film shootings, and other follow on benefits. That said, I still need to spend another 350k on this. You and Avalon are my two top priorities. 10. I am taking emotion out of it, I am prepared to sell the US property, but in the short term will be taking on a 6 month lease which will halve my costs on this interest payment and can then look at a discreet agent, if the need be. 11. Every single thing is being looked at. 12. The headcount has been trimmed by half, and more to come. Realistically, we have had some surplus people on a bit of a gravy train and that is stopping now. The key revenue streams will not be affected by the cut backs, and our costs in staff will more than halve. 13. Mike is also going off the payroll. I am renegotiating with him, on only new deals, as I have bought everything in myself, so it's absurd what he has been paid. He knows about this, but am dealing with him by phone shortly, so keep that under your hat. 14. These things will allow me to start repaying you immediately, but I need to do it in a way that protects you and me. The situation with cash flow will be tight for a little while, but I believe for the next 3 months I can make some small repayments to you, and then accelerate it. I don't want to promise exact details just yet, as David and Craig are working on this so I don't break a promise. But I can assure you that this has my 100% attention. 15. I have asked David to put together some more detail on the plan, and that he should meet with you personally to go over the strategy as I am sure you will have some valuable input too. 16. I am confident the future will be good, but we have to take some serious steps to do things professionally in every single way, I appreciate your support and friendship and am putting in place a strategy to ensure I don't let you down, or see the business fold. 17. I will send an introductory email to David for you. 1. The Discussion Note was a collaborative effort. Mr Kenney prepared the draft and sent it by email to Mr Durie on 23 February 2012 so that Mr Durie could use it in the planned discussions with Mr Moss. The framework for Mr Kenney's drafting was that the Discussion Note was to be a "frank account of what's going on with the business", fit to be conveyed to Mr Moss, the secured lender. Mr Kenney had a good idea what Mr Moss would be interested to know, and what would be likely to persuade Mr Moss to extend the Moss Loan. But ultimately the Discussion Note was crafted out of information which Mr Durie had conveyed to Mr Kenney and which Mr Kenney then formed into appropriate language that he thought would appeal to Mr Moss. 2. Although the Discussion Note was an aide memoire and was used in that way, as might be expected in such an important conversation where Mr Kenney's professional advice had been obtained, Mr Durie actually followed the script contained in the Discussion Note when he spoke to Mr Moss. Mr Kenney was not present at the time of the final phone call to Mr Moss, the Discussion Note was his substitute. 3. The critical paragraph of the Discussion Note is paragraph 13. Mr Kenney accepted that paragraph 13 was "a collaborative effort". Mr Kenney said, and I accept, that some of the words in paragraph 13 had come directly from Mr Durie. Mr Kenney said, and I accept that Mr Durie's words, "Mike is going off the payroll", and "I am renegotiating with him on only new deals" and the words "as I have brought in everything myself". Mr Kenney was firm that the contents of paragraph 13 were either what Mr Durie had told him or consistent with that. 4. To the best of Mr Kenney's recollection, he and Mr Durie collaborated in constructing the Discussion Note through phone calls, emails and possibly a meeting. This was necessitated because Mr Durie was busy, as Mr Kenney said, "moved around a bit". 5. In general terms, Mr Kenney's input into the document was to ensure that a clear message was conveyed to Mr Moss that Mr Durie did recognise that "there was too much money being spent" in the business. Mr Durie's input to the document was to ensure that he confessed to Mr Moss, "I made a lot of mistakes". For example, the words in paragraph 5: "I needed someone to pull my reins in and give me a good shake, or grab me and say "no"". Mr Kenney was quite firm with what Mr Durie was conveying to Mr Moss. 6. Mr Durie's account of the origins of paragraph 13 were slightly different. Mr Durie's account was that the words "I am renegotiating with him on only new deals" were written by Mr Kenney and represented Mr Kenney's interpretation of what Mr Durie had said to him during mutual meetings. In other words, Mr Durie puts a little more of Mr Kenney's interpretation into the words than Mr Kenney does. But Mr Durie's evidence was overall less certain about who contributed to or drafted those words. Mr Durie's ultimate view was that he "simply cannot recall who contributed those words or drafted them". In light of that answer, the Court is more inclined to accept Mr Kenney's view that the words are what Mr Durie told Mr Kenney, or are at least consistent with that. 7. There is certainly no document in which Mr Durie in any way corrects Mr Kenney's document before using it externally with Mr Moss. 8. Mr Kenney sent his email enclosing the Discussion Note to Mr Durie and Mr Miller at 6.58pm on 23 February 2012. In that covering email, he took responsibility for such artistry as there was in the document to give the best possible impression to Mr Moss. He said: Dear Jamie and Craig Don't read this and take anything too personally, it is designed to convey the strategy we have discussed. I have attached in soft copy so you can make any suggestions. 1. After this email and before his call to Mr Moss, Mr Durie did not engage further with Mr Kenney to amend the soft copy. Mr Durie used the Discussion Note in the form attached to Mr Kenney's email and set out above. Mr Durie was well aware of the subtleties of its language. 2. What is to be inferred from the Discussion Note? For Mr Durie to plan to declare to Mr Moss that he (Mr Durie) was "renegotiating with him [Mr Curnow]", is to imply that an existing legal arrangement is being sought to be varied. And the subject matter of the renegotiation was "on only new deals". This implies that the result Mr Durie was seeking to achieve was that commission would only be payable in the future to Curnow Consulting on new deals rather than on existing deals. This would convey to Mr Moss that Mr Durie had identified particular savings that could be made to JPD's outgoings. 3. The persuasive force of what Mr Durie was attempting to convey to Mr Moss through paragraph 13 disappears unless commission on "new deals" is a reduction of existing commission arrangements. It is difficult to see how Mr Durie could have made a mistake about what he intended to convey with these words. Both Mr Kenney and Mr Durie perceived that Mr Moss was a highly astute man of business. This was a make or break moment for Mr Durie. He had to be ready to answer any of Mr Moss' questions on any issue. 4. Interpreting this document as Curnow Consulting contends, if Mr Durie genuinely thought that the existing Management Agreement only allowed commission on new deals, the production of this Discussion Note is an improbable document on several levels. First, Mr Durie has to mislead Mr Kenney consistently over their meetings and email exchanges that led to the drafting of the Discussion Note, consistent with maintaining a false impression as to his true beliefs about the existing commission deal. There is no suggestion that Mr Kenney was aware of any falsity in paragraph 13. Then, Mr Durie has to be prepared to receive these recycled untruths and reconvey them to Mr Moss in circumstances where, upon close scrutiny, the objective evidence shows that, if Mr Moss had called for the actual paid invoices, Mr Durie's untruth would have been easily revealed. Mr Durie was not reckless. This was hardly a clever way to secure what was in effect a last lifeline of finance for Mr Durie. 5. And why was this important? It is just one among the many things Mr Durie records in the Discussion Note that were to be said to Mr Moss. It is by no means the most significant in dollar terms of the costs savings he was proposing to Mr Moss that he would be implementing. It is seriously to be wondered why he would mislead Mr Moss on the lesser of several cost savings. 6. Once Mr Durie received the Discussion Note, he made himself very familiar with it, a sufficient familiarity that he didn't look as though he was reading a script to the astute Mr Moss. I accept Mr Durie's evidence that he read through the Discussion Note several times. He could not have mistaken the words of paragraph 13. Failure to Offset Allegedly Mistaken Payments 1. The JPD/Durie case that commission beyond the carve-outs was only paid by mistake, raises a further question: when and how was the mistake discovered? If the payments were truly mistaken, then for some period of time one or more JPD employees were making payments under a misapprehension as to Mr Curnow's true entitlements. One or more of those employees must have realised or been instructed that those payments were mistaken. When that occurred, in the ordinary course of affairs one would expect some internal inquires as to how the mistake was made, who made it, when it was made and how much needed to be recouped in order to overcome the effects of the mistake. In the ordinary course, such internal analysis would usually be evidenced by one or more of the following events: (1) an internal inquiry as to the extent of the mistake, (2) a realisation by one or more employees that they were at fault for what had happened, (3) a plan to fix the relevant JPD systems to ensure the mistake was not made again in respect of this or other agents, (4) an attempt to calculate the total amount outstanding to be recovered by reason of the mistake, and (5) a demand (or deduction from future payments due) for the money calculated to have been paid by mistake. Another reason to infer that there was no mistake of the kind JPD and Mr Durie now allege is that JPD staff took few of these expected steps. 2. But some steps were taken. Mr Miller says that in early 2012, Mr Durie said to him words to the effect, "can you please prepare an analysis of the fees paid to Mike for 2010 and 2011 and a forecast for 2012, so we can see the impact on cutting out Mike's monthly management fee?". 3. Using JPD's financial records, Mr Miller completed the task about 14 February 2012. He set it out in a financial spread sheet which he emailed, first to Mr Durie and later to Mr Bryks at Hall Chadwick (Good afternoon Jamie & John). This certainly seems to be the first discovery by Mr Miller of a discrepancy between his 14 December 2010 email and his payment of some invoices. 4. But what does not then happen is of considerable interest. Once Mr Miller found this mistake, he gave the information to Mr Durie and Mr Bryks. But JPD did not immediately take steps to recover or recoup the apparently mistaken payments. 5. Why? Mr Durie's evidence on the subject was vague. Recouping these mistaken payments in February 2012 was financially important to the cash-strapped JPD. But when asked whether Curnow Consulting was pursued for these mistakenly overpaid amounts, all Mr Durie could say was, "I had hoped so", and that the matter of getting a recovery process underway or some offset against future monies owed, "was discussed with Hall Chadwick, but I myself don't chase money. It's not my job or expertise". 6. When cross-examined about his awareness of any prior demand having been made on Curnow Consulting in relation to those mistaken payments, Mr Durie said was "this was a matter [of] for my accountants [Hall Chadwick]" and, "if it rose to a larger point, my lawyers". When pressed on what Hall Chadwick in turn was doing about offsetting these monies, Mr Durie said, "there were a number of issues that they were taking care of and this was one of them that I assumed that they were taking care of, yes". 7. This evidence is barely credible. Mr Curnow was not just a junior employee of JPD. Any request to offset past allegedly mistaken payments made to him against future payable commission was likely to provoke a dispute about whether the past payments were indeed mistaken and what the financial impact of these deductions would be on Mr Curnow, who continued to be one of the central revenue drivers, as well as general manager, of JPD. It defies belief that Mr Durie could have assumed that Hall Chadwick would pursue upon its own initiative and without consulting him (there is no evidence that it did consult him) the recoupment of overpaid commissions from Curnow Consulting. Mr Durie must have appreciated that the alleged mistaken payments were not being pursued. The question then is why they were not being pursued. The answer to that is complicated. 8. Mr Durie did not pursue the matter informally with Mr Curnow. After 14 February 2012, Mr Durie had the benefit of Mr Miller's calculations about some of the amounts which had been mistakenly paid by Mr Miller. Mr Durie was asked why he did not put to Mr Curnow that JPD had made the mistaken payments and draw to Mr Curnow's attention that JPD had cash flow problems that were well known to Mr Curnow and that the mistaken payments could not continue and there would have to be an adjustment. Mr Durie's response to these questions was not persuasive. He said "well that's a very long and complicated conversation that I assume my accountants would have with him and we would look to recoup that over forward income". For the reasons earlier stated, this was not a conversation Mr Durie could just assume Hall Chadwick was having with Mr Curnow on the side. Mr Curnow was too critical to the business for Mr Durie to delegate this task. 9. But that was only half the problem. Recouping historical over-payments out of future payments could deal with the past. But Mr Curnow also needed to be told that no more mistaken payments would be made. 10. Mr Durie's account of his reasoning on this issue is also unsatisfactory. For the reasons already expressed, any "complicated conversation" was not one which his accountants could have had with such a senior employee without his close involvement. Neither Mr Kenney nor Mr Bryks had developed a strategy for dealing with Mr Curnow to recoup these overpayments, which is what might have been expected, if Mr Durie genuinely thought the accountants were attending to this issue. 11. One aspect of Mr Durie's evidence can be accepted. He says that, "Mr Miller was under an enormous amount of stress and became very emotional over the issues and this was a matter that I thought was much better handled by Hall Chadwick purely because of his personal relationship with everyone in the office". It can be accepted that Mr Durie did not want to place pressure on Mr Miller to be chasing money from Mr Curnow. But after Mr Miller identified what he thought may have been mistaken payments, after relieving Mr Miller of the problem, Mr Durie did nothing with Hall Chadwick to chase the overpayments. Moreover, Mr Durie did nothing to ensure that future overpayments were not made. The schedule of overpayments (according to the JPD/Durie case) after Hall Chadwick's involvement from March 2012 to March 2013 shows that nothing was done. The overpayments continued to be made. 12. Mr Miller alerted Mr Durie to what he thought was the mistaken payment to Mr Curnow in relation to deals introduced by Mr Sean Anderson. He discovered that item and included it in his 14 February 2012 email: a mistake of some $13,200 allegedly overpaid to Mr Curnow in relation to deals introduced by Mr Sean Anderson. But he was not involved in identifying any mistaken payments before he left the company. His opinion was that for a mistake such as the overpayment to Mr Anderson, offsetting it against future invoices would have been "the commercially acceptable way of dealing with that particular oversight". But there was no evidence that that was ever done. 13. Mr Durie had good reason not to have Mr Curnow chased within the office by people such as Mr Miller or the other employees. If there was a problem with mistaken payments, I accept that it was sensible of Mr Durie not to increase stress and anxiety within the office or to exacerbate what Mr Durie regarded as "just bad culture because people could feel the dispute, the constant dispute that was going on within the office and that wasn't the culture that I wanted to breed. It wasn't a positive working environment for the staff". 14. But that excuse does not justify Mr Durie doing nothing himself or through the external channels that he had available with Hall Chadwick, if he genuinely believed that a mistake had been made. One message from Hall Chadwick's evidence is that they were ever-prepared to put unemotional financial necessity ahead of everything else. They could deal with everyone including Mr Curnow objectively to recover money to put JPD's financial house in order. But they did not do so and in my view Mr Durie was well aware that they did not do so. 15. In my view, the reason for this was that Mr Durie had reason to believe that he was on weak ground if a confrontation occurred with Mr Curnow on this issue. Whatever Mr Miller's understanding had been, Mr Durie was not prepared to confront Mr Curnow to assert Mr Durie's version of the conversation, either face to face or through Hall Chadwick, when the circumstances called upon him to do so in his own financial interests. In my view, the best explanation for this was that Mr Durie really accepted in early 2012 that Mr Curnow's contentions about their late 2010 conversations about the Management Agreement were accurate. The monthly management fee reduction conversation – 23 February 2012 1. Curnow Consulting's management fees were also the focus on 23 February 2012. Mr Miller had a telephone conversation with Mr Durie on 23 February 2012, the same day in which Mr Durie claims he had a conversation with Mr Curnow about eliminating the monthly fee payable to Curnow Consulting. By reference to an email that Mr Miller says he received just after this conversation, its date can be fixed at 23 February 2012. I accept Mr Miller's account that Mr Durie said to him "I've just spoken to Mike and we are taking him off the payroll. He accepted it and took it well." Mr Miller replied, "Do you mean we are no longer paying the monthly management fee?" To which Mr Durie said "Yes". 2. I accept Mr Miller's account that just after the conversation, Mr Durie emailed him together with Mr Kenney to report that Mr Durie had done what he had been asked. At just before 7:15 PM that evening Mr Durie's email to them read: Thanks David, In the last hour have called Mike and told him that we are taking him off the payroll and that we will be letting go of half the staff he took it well, the good news is that we will have a new 3 year contract Renewal from Big W post his meeting today, we are also going over our WIP opportunity spreadsheet and will send an updated version through to you soon David. Calling Bill Now Best Jamie Mr Curnow Resists – 28 February 2012 1. The objective contemporaneous evidence strongly suggests that Mr Curnow did not just meekly accept an $8,000 cut in his remuneration. He took the issue up by the end of that month, protesting the obvious, that he was being asked to accept a substantial pay cut without clear diminution in his management responsibility. He emailed Mr Durie (who appears then to have been in the USA) in these terms at 8.43am on 28 February 2012: Hi Jamie, As we have discussed, a cut of $100K in my remuneration is HUGE given there will be no reduction in responsibilities. It will be virtually impossible for me to manage my commitments. I understand the need to reduce costs in your business but I don't think this is justified at this level given that I am the main person generating income and orchestrating with you the generation of income for JPD Media and Durie Design. Can I suggest in the interests of fairness that I accept a reduction of my monthly management fee from $8K to $4K (that is $50K per year) with a commensurate increase in commission from 5% to 10% on all new deals from now on (excluding Big W which is a renewal not a new deal). I have been loyal to the core for a very long time and am not about to change! (I think you know this). Cheers, Mike 1. The email represented a direct challenge to Mr Durie's version of the conversation in February 2012 that the management fees would be reduced. So the question arises: how did JPD respond to this challenge? 2. Mr Durie did not insist on Mr Curnow not coming into the office. He took advantage of Mr Curnow's continuing willingness to provide his services. This was a powerful driver of Mr Curnow's resentment at his situation. Mr Curnow felt he was expected to continue to provide management services as before and Mr Durie did not disabuse him of this. This is reinforced when Mr Curnow wrote his 28 February email that "a cut of $100K in my remuneration is HUGE". But Mr Curnow makes this judgment for a specific reason that he declares "given there will be no reduction in responsibilities". Mr Durie offers a compromise of "that I accept a reduction of my monthly management fee from $8K to $4K". The Durie/JPD parties rely on this as evidence that Mr Durie had insisted on the reduction in their one-to one meeting. And it does prove at least that. But it does not prove Mr Curnow's acceptance of the reduction in circumstances where there was no commensurate reduction in responsibilities. 3. Some staff members were close observers of Mr Curnow's office attendance habits. Ms Bush said, and I accept, that she noticed Mr Curnow not attending the office on a regular basis in March 2013. Those changes in Mr Curnow's work attendance patterns was sufficiently clear to be worthy of remark. But she makes no observation of any change in Mr Curnow's attendance habits a year earlier. I accept his evidence that he continued to work just as he had before. 4. Curnow Consulting says that the Management Agreement was not varied in March 2012. JPD rejects this and says that a varied Management Agreement was reached. But JPD continued to accept all Mr Curnow's Services, as it had before February 2012. It must have appreciated that it had given nothing for the reduction in fees. Mr Curnow's correspondence (offering $4,000 instead of $8,000) should be interpreted as an expression of his continued willingness to renegotiate his existing contract but on fair terms, not on the terms then being demanded. 5. Mr Durie did not insist in writing that Mr Curnow stay away from the office. Mr Kenney backs up on monthly management fees – early March 2012 1. Mr Kenney says that he had a meeting with Mr Durie and Mr Curnow in late February or early March 2012 at Hall Chadwick's offices, at which Mr Bryks was also present. It is highly probable that this meeting took place not in late February, but in early March 2012. Mr Curnow's email of 28 February 2012 is unlikely to have followed the Hall Chadwick meeting. It does not refer to the Hall Chadwick meeting and it invites the kind of resolution that seemed to be the object of the Hall Chadwick meeting. 2. I accept that a meeting took place at Hall Chadwick in early March between these four people. Mr Kenney and Mr Bryks, among others, say the meeting took place. I accept their evidence that it did. But I do not accept their full account of the meeting. But unlike the interested parties, Mr Curnow and Mr Durie, their accounts are generally the more reliable perspectives on this meeting. 3. Mr Kenney's account of the meeting reiterates his central objective in saving JPD from paying the management fees. His account of the meeting is mostly credible, in part because the words he attributes to Mr Curnow coincide with Mr Curnow's actual concerns, as expressed in Mr Curnow's email to Mr Durie of 28 February 2012. Mr Kenney's account is as follows: Kenney: "Mike, you can't keep getting paid the management fee. It's not sustainable. The company cannot afford to pay you $8,000 per month. You need to be bringing in deals and closing deals. The monthly payments are stopped. The management fee is off the table." Curnow: "The only reason the company can't pay me is that Jamie's spending all the money." Kenney: "Well, let's look at the top line. You're getting way too much. The company just can't afford to pay that amount" Curnow: I can't live on the commissions. I've got mortgages. I've got school fees and other commitments. I need to be paid like I'm the CEO. Jamie's overseas and I am doing a lot of work here." Kenney: "Well let's look at it. You [JPD] don't have that many deals at the moment and you don't do the actual work when the deals come in. You need to bring the deals in. There is work in the pipeline. You need to bring it in. There are heaps of potential deals. That is what we need you doing. You're not the CEO, and unlike an agent, your overheads are covered by JPD." Durie: "We need to do what's fair. I can't pay the management fee on top of the commissions. You are still getting the commissions from Big-W and Boral." Curnow: "Well, let's look at it and see what we can do. The important thing is to get more work in." Kenney: "We will look at what we can do with a new deal when the company becomes cashflow positive but the management fee is stopping. Whatever we come up with, it's going to be about what business comes up and your contribution to it." 1. Mr Kenney's account has puzzling features. If it were to be accepted that Mr Durie had a conversation on or about 23 February 2012 with Mr Curnow in which Mr Curnow agreed no longer to receive his management fees, it is a wonder why this meeting had to take place at all. According to Mr Durie, Mr Curnow had by then accepted that he was no longer entitled to management fees. Moreover, even if Mr Durie was right and Mr Curnow had given up his entitlement to management fees but then changed his mind, triggering this meeting, one might have expected Mr Durie to inform Mr Kenney of this. Moreover, one might also have expected that the best point Mr Kenney had at his disposal in the whole discussion to have been deployed upfront: reminding Mr Curnow that he had already foregone his entitlement to management fees. This somewhat strange omission throws doubt either on Mr Durie's version of events or Mr Kenney's version. On the other hand, Mr Kenney was a good witness. In the end, his account of Mr Curnow's responses is accurate in most essentials. But privately with Mr Durie, Mr Curnow always resisted agreement to any reduction and what he said to Mr Kenney must be interpreted consistently with that fact. Further invoices for monthly Management Fees – Mid-March 2012 1. Curnow Consulting continued to send invoices to JPD for the management fees claimed to be due under the Management Agreement. Mr Curnow sent the first of these, for March management fees, at about the same time as his conversation with Mr Durie about the cessation of monthly management fees. In about mid-March 2012 Mr Miller realised that he would soon have to confront the dilemma: pay or dispute this invoice. So on 16 March 2012 he emailed David Kenney (copied to Mr Durie, Mr Bryks and Mr Vardavas) for guidance about what he should do with this invoice. Entitled "Mike's Management Fee (March invoice cancelled)", the email went on: Good Evening David Further to Jamie advising Mike on 24 February that Mike's $8,000 Monthly Management Fee was no longer to be continued, am I right in advising Mike (when asked) that we're not paying the March Invoice (which he invoiced us one day before Jamie spoke to him)? I think I am right in my view, but as I may get a reaction on this, I just want to be sure you guys are on the same page with this one… The main point to note is that this "Management Fee" was only agreed to on a one year trial by Jamie, the trial finishing on 31 December 2011. Thanks Craig 1. This email grounds the inference that Mr Miller in mid-March 2012 genuinely recalled a conversation between himself and Mr Durie on 23 (he says 24) February 2012 about the cessation of the $8,000 monthly management fee. Mr Miller appeared to be anticipating trouble from Mr Curnow. He wanted some backup in the event he had to confront Mr Curnow about payment of the invoice. The email sounds authentically defensive. It represents just what an employee in Mr Miller's position would need to clarify before he held a potentially unnecessary confrontation with Mr Curnow. Importantly, the email somewhat harkens back to the idea that the $8,000 management fee was only for a one-year trial finishing on 31 December 2011 and reflects Mr Miller's understanding that this trial period had been agreed. 2. Mr Miller followed up this email. He telephoned Mr Durie and checked the position. He says that he said to Mr Durie, "Mike has sent an invoice for the monthly management fee for March. I don't think we should pay it". Given the conversations that Mr Miller says he had had with Mr Durie, this was a logical position for him to take. He says that Mr Durie replied to him, "I agree". 3. Mr Miller then had to confront Mr Curnow. They had a conversation shortly afterwards. Mr Miller said to Mr Curnow, "We aren't paying the monthly management fee any more. The March invoice is not going to be paid." Mr Miller says, and I accept, that he did not recall any particular response to this statement from Mr Curnow. Having gained top cover from Mr Durie, Mr Miller had strengthened his hand in taking this stance, a stance that he anticipated he would have to take. 4. Mr Miller stood up to Mr Curnow. Mr Miller did not pay the monthly management fee from March. But Mr Miller's account of these events does not ultimately contradict what had happened in February 2012 between Mr Durie and Mr Curnow that only they knew and understood. Mr Durie was making payment very difficult but he knew, in my view, that Mr Curnow had disagreed from the first with reduction in this management fee. This non-payment supports the inference that these conversations took place, just as Mr Miller claims. The Moss Loan is varied – 31 May 2012 1. On 31 May 2012, the solicitors for Boston Management Services Pty Ltd and Mr Durie/JPD varied the Facility Agreement which had been made on 23 August 2010 (the "Moss Loan Variation"). The Moss Loan Variation provided for progressive reduction of the Moss Loan advance of $500,000 between 17 April 2012 and 31 July 2013 in a series of monthly payments, mostly in amounts of $25,000 and $50,000 with some balloon payments in the order of $80,000 or $90,000. 2. In consideration for this extension of time, the Moss Loan Variation provided for greater security, such as registered second mortgages over the Avalon property, guarantees from all of Mr Durie's companies and greater restrictions on Mr Durie and JPD's capacity to borrow funds or make further draw-downs from their existing bankers, Westpac. The resultant terms imposed on Mr Durie are consistent with Mr Moss actually taking a tough business line in the extension negotiations. The Design Team Structure Email – 22 June 2012 1. The extent of Mr Durie's input into the income confirmation letter and the Moss Loan Discussion Note are debatable. Both documents were finalised with the assistance of intermediaries. But in June 2012, in the context of the addition of another staff member to the JPD Design team, Mr Durie personally composed and sent out an email ("the Design Team Structure Email") which was constructed in part as a team building exercise and in part as an introduction for a new employee to the roles of other employees in the business. 2. The email was addressed to all the principal staff members and the external consultants at Hall Chadwick. It made light-hearted comments about various staff members, commenting upon quirks in their personalities and explaining the roles that they each played to contribute to the business. There is no suggestion that this document was anything other than Mr Durie's own creation. Mr Durie described the purpose of his email in his own words, "in the interest of a smooth running machine and a gentle transition to the new body of work, I thought it may be a good idea to lay out the Design Team structure so that we're all on the same page". 3. Much of the email was devoted to the leaders of the Design Group, Ms Nadine Bush the Group Creative Director, Mr David Knott, the Design Director and a number of other designers, publishers and landscape architects. But in relation to Mr Curnow, described as "Group Business Manager", Mr Durie's email said the following: Mike Curnow……Group Business Manager We have worked together for over 8 years now and Mike has an incredible business mind and together we have negotiated numerous business deals, he has been our business advisor and mentor across all aspects of the business of late during our various changes but continues to focus on all licensing deals globally. In addition to this he is the point person for all agents between the USA, Australia, Asia and Europe and filters all media and Brand alliance projects/proposals. With respect to the design business Mike will negotiate all media or brand use with commercial developments and on occasion by invitation, he will get involved to help negotiate design fee contracts. He is a great business mentor for me and should be for you all so if there are commercial opportunities that you think could be explored please bring then [sic] to his attention. 1. Mr Durie's evidence can be accepted that the primary motivation for this email was to inspire staff to better performance. But as the text composed for Mr Curnow shows, it was also designed to give a new staff member guidance as to which other staff members to talk to about particular issues. To that extent, Mr Durie's description in the email of Mr Curnow's role served a business function, rather than being merely decorative. Mr Durie's description in the Design Team Structure Email does not limit Mr Curnow's role. Words about him such as him being "across all aspects of the business" and "all licensing deals globally" show how limitless his role was described to be. He also received high praise as a "great business mentor" not only for Mr Durie but he "should be for you all". 2. Whilst one would not expect much equivocation in a document of this kind, Mr Durie struck the Court as a sufficiently responsible person that he would not have said such positive things about Mr Curnow unless he had real belief in them. 3. Mr Durie admitted in cross-examination that his statements in the Design Team Structure Email such as "Mike has an incredible business mind" and "together we have negotiated numerous deals" and Mr Curnow, "continues to focus on all licensing deals globally" were neither misleading nor incorrect. Nor was the statement that Mr Curnow "is the point person" for USA, Australia, Asia and European agents misleading according to Mr Durie. 4. This email speaks to JPD's entire satisfaction in mid-2012 with Mr Curnow's performance of his duties. The Court does not accept Mr Durie's attempts to play down the sentiments he expressed in this email. I accept Curnow Consulting's submission that the Design Team Structure Email is inconsistent with any belief on Mr Durie's part up to that time that Mr Curnow was failing to provide services up the standard of a professional, competent and experienced business manager or had failed to serve the interests of JPD in the ways ultimately included in the termination notice for the Management Agreement on 28 March 2013. 5. Mr Curnow's conduct in February and March 2013 is examined closely in more detail below. But between July and December 2012, there is nothing in the evidence that indicates any significant change from Mr Durie's June 2012 view about Mr Curnow's performance of his duties. The events of February/March 2013 are sufficiently complex that they need closer examination. But the foundation for that examination is that nothing significant either in Mr Curnow's demonstrated performance or in Mr Durie's demonstrated attitude to Mr Curnow changed in the last six months of 2012. 6. Finally, the Design Team Structure Email is relevant to another issue: the nature of any carve outs from Curnow Consulting's commission structure under the Management Agreement. The email is remarkable for not quarantining Mr Curnow from any part of the design side of JPD's business. The email's description of Mr Curnow's role across all aspects of the business is at odds with the JPD/Durie parties' case at trial that the revenue from the design business was so self-sustaining that it did not need a boost from Mr Curnow's expert assistance and he was not entitled to any commission from that part of the business. This email is another reason why the Court is not persuaded of the JPD/Durie parties' case that there was a carve-out of commissions on the design business from the Management Agreement commission structure. Mr Curnow returns to the Management Fee issue – 11 July 2012 1. Mr Curnow's 28 February 2012 email went without a written reply for a long time. No email evidence exists that Mr Durie responded in writing before mid-July that year. Apart from the meeting with Mr Kenney whether or not Mr Durie was putting his head in the sand is difficult to tell. 2. Mr Curnow reopened the issue. The internal evidence of the email in which he did so reinforces the inference that arises from Mr Curnow's 28 February 2012 email having gone unanswered. Mr Curnow emailed Mr Durie, Mr Kenney and Mr Bryks on 11 July 2012, at 6.30am. The email covered both sales and management. Under the heading "SALES" he wrote: I thought I would put on record the deals that we have done since March this year With the exception of 1st Home and Imagine Group these have all been exclusively negotiated and documented by me. As I have stated to Jamie and Sebastian, my focus was on immediate income producing opportunities rather than potential slow-burn licensing or collaboration deals that MAY throw off long term passive income into the future. Now that the company can survive we should focus on a mix of the two types of income streams. 1. He then set out the figures for "NEW DEALS" for each of the years, FY 13, FY 14 and FY 15, as follows: JPD Media – NEW DEALS SINCE MARCH 2012 FY13 FY14 FY15 TOTAL 1 Big W 850,000.00 900,000.00 950,000.00 2,700,000.00 2 1st Home 200,000.00 200,000.00 400,000.00 3 Grand Designs 50,000.00 50,000.00 4 PMA 576,000.00 576,000.00 576,000.00 1,728,000.00 5 Geocon – Design 284,161.19 10,080.00 294,241.19 6 Geocon – Marketing 360,000.00 20,000.00 380,000.00 7 Imagine Group TV 70,000.00 70,000.00 8 *LM Investments – Design 841,680.00 317,500.00 1,159,180.00 9 *LM Investments – Marketing 300,000.00 300,000.00 600,000.00 *verbal agreement pending signature TOTAL $3,531,841.19 $2,303,580.00 $1,546,000.00 7,381,421.19 1. Then under the heading "MANAGEMENT" Mr Curnow opened with what he had done from the time of Mr Miller's departure and wrote: In addition to this work, I have undertaken a vastly increased level of administration and management duties since Craig's departure. This includes all invoicing, chasing collections, recruiting and documenting new staff packages, managing agents in the US and Australia, documenting the WME renewal, Bill Reishiein's deal, liaison with Peter Schooley and others regarding the Avalon house, directing and managing the ROAR relationship, forming the China relationship, dealing with Monrovia and VPG issues, True Value etc.. etc. and a myriad of other things all of which I am happy to do. I stepped up because I could see that most of this would not be well attended to if I didn't, and I will continue to do so. Jamie, I know we had a short conversation regarding my management fees, to which I responded to by email – there has been no reply to this, nor any conclusion of the discussion. You know I feel passionate about this business and its potential - that's why I go out of my way to do things with care beyond what others may do in my position. The commission rates on sales that I have agreed to with JPD Media are well below industry standards as we all know. That I can accept, however an arbitrary one-sided approach to the management fees is difficult to stomach. I would appreciate some recognition of the sales above and an agreement regarding management fees commensurate with the duties that I perform in that area. Thanks & best regards, Mike 1. This email is quite inconsistent with the idea that Mr Curnow had already agreed to a reduction in his monthly management fees to zero. Post-Management Agreement Conduct – January 2011 to December 2012 1. The contest about the terms of the Management Agreement spilled beyond the disputed conversations between Mr Curnow and Mr Durie in the last three months of 2010. Each party also contended that its performance of the Management Agreement was consistent with its version of the Management Agreement. The Court has been able to decide the terms of the Management Agreement on the basis of the testimony of the witnesses. But as the parties debated this issue extensively, it is included here. This post- contract conduct also favours Mr Curnow's version. 2. Curnow Consulting contends that between January 2011 and March 2013, it issued 66 invoices to JPD in a total sum of $163,668.94, each of which was wholly consistent with the Management Agreement for which Curnow Consulting now contends and inconsistent with the terms for which the JPD/Durie parties now contend. 3. The Durie parties deny that JPD is liable under the Management Agreement to pay commission to Mr Durie on income brought into JPD through other agents. But Curnow Consulting identifies invoices issued on 21 occasions in the January 2011 – March 2013 period which JPD paid that were based on income brought to JPD by other agents and totalling $50,837.80. 4. Again, Curnow Consulting identifies another 45 separate invoices, all paid by JPD, issued between January 2011 and March 2013, which invoices were calculated on the basis of income brought into JPD from its design business and which totalled $112,831.48. In the period of a little over two years during which these payments were made JPD was suffering some of its most pressing episodes of financial stress. These episodes are discussed elsewhere in these reasons and are the reason why Mr Durie called in Hall Chadwick. 5. Sufficient of the 66 invoices Curnow Consulting identifies, make clear on their face the basis upon which the commission they claim is calculated, whether it be income from other agents or income from the design business. Each invoice signals to the reader that the author of the invoice believes that Curnow Consulting was entitled to income brought into JPD either by other agents or through the design business. 6. JPD contends that any payments it made on these invoices that were inconsistent with its present case were made by mistake. The mechanism of any mistake that could have been made altered on the appointment of Hall Chadwick. Prior to Hall Chadwick's appointment, the payment of Curnow Consulting's post January 2011 invoices was approved by employees of JPD before payment. Mr Miller and Ms Bush had the function on behalf of JPD to approve the payment of such invoices. Mr Durie was clear that in the execution of this task Mr Miller and Ms Bush had been briefed about the terms of the Management Agreement, "so that if any future invoices came in they were very clear". 7. Once Hall Chadwick were appointed in March 2012, Mr Bryks on his own or together with Mr Kenney and Mr Durie became responsible for the payment of all invoices that JPD received. It is necessary to analyse whether or not JPD made a mistake in paying invoices which conformed with Curnow Consulting's version of the Management Agreement into two periods: (1) January 2011 to March 2012 – the Miller/Bush period, and: (2) March 2012 to March 2013 – the Hall Chadwick period. 8. The invoices divide reasonably evenly between these two periods. They are summarised in attachment 'A', to Curnow Consulting's principal final submissions. Their detail is not in dispute. According to that analysis, 45 per cent (or $73,032.37 by value) of the invoices were paid prior to February 2012 and 55 per cent (or $90,636.57) of the invoices were paid after February 2012: 100 per cent of the invoices represents a total figure of $163,668.94. 9. The two periods, before and after Hall Chadwick's involvement, are not logically independent of one another. The fact that Hall Chadwick had taken over and applied their own professional standards to an invoice approval process potentially speaks not only to the instructions that Hall Chadwick were given but to what practices had prevailed within JPD before their involvement was layered over the top of the businesses' existing internal bookkeeping and administration. Thus, although the analysis below separates the two periods, the inferences that may be drawn from the contiguity of one period and the other should not be neglected. 10. (1) The Bush/Miller period – December 2008 to February 2012. Ms Bush and Mr Miller were involved in Curnow Consulting's invoices approvals for payment by JPD from December 2008. They both had roles: Ms Bush reviewed the invoices received and either approved or rejected them; and after her review, Mr Miller arranged for the payment of approved invoices. 11. Ms Bush conceded that she approved for JPD's payment a number of invoices that related to commissions for work brought to JPD through agents other than Mr Curnow. These invoices were (and these are a sample) 1182, 1098, 1095, 1092, 1089 and 1083. Some common patterns emerge among the approvals for these various invoices. 12. JPD's answer to these payments was mistake. Where the invoice related to income from other agents or the design business, JPD offered no explanation for the payments other than mistake. 13. But not all JPD's witnesses perceived that the payments were mistaken. Ms Bush, speaking in her capacity as an approving authority within JPD, could not offer an explanation for the payment of invoices for her approval (which she must have given) to the payment of invoices 1182, 1098, 1095, 1092, 1089 and 1083. 14. But Ms Bush was not flying solo within JPD on this issue. She indicated that when she "had any doubt at all about [payment of] a particular invoice", her practice was to "have actually referred the matter to Mr Durie" and to ask him for instruction. Her practice was, despite occasional delays, to get hold of him and to get a clear instruction for each invoice, which she then followed. 15. Mr Durie, Mr Miller and Ms Bush all give different perspectives on essentially the same process. According to Mr Durie, Ms Bush and Mr Miller would contact him about payment of the Curnow Consulting invoices on "regular occasions". Mr Miller said that he "would on many occasions double-check" invoices with Mr Durie and he would "always connect" with Mr Durie if he thought that Mr Durie needed to see a particular invoice. 16. Both Mr Miller and Ms Bush were senior employees with longstanding associations with Mr Durie. Neither their evidence or that of other witnesses at JPD indicates that they were the kinds of employees who were likely to take the matter of the payment of invoices into their own hands. If Mr Durie was not available, they were quite prepared to wait for him until he was. And in my view they did. 17. Given the system of invoice approval that JPD had set up, it is likely that Mr Durie approved the payment of a significant percentage of Curnow Consulting's invoices. This raises the question of Mr Miller, Ms Bush and Mr Durie's knowledge of the terms of the Management Agreement. Each of them says in different ways that they were aware that Curnow Consulting was not entitled to payment of commission on work brought in through the design business or through other agents. Yet despite that knowledge, among the three of them they approved invoices that provided for those payments. During this period, all of the invoices were approved by Ms Bush and the pattern of her approvals was guided by Mr Durie. It is difficult to see how Ms Bush and Mr Miller could have been mistaken about these payments. How did they make a mistake? Mr Curnow's Invoices 1. Mr Durie did not react as though he was getting false invoice claims. Mr Durie's account is that he was aware that Mr Curnow was putting in invoices under the Management Agreement for monies to which he was not entitled. Mr Durie says he has a clear recollection of agreeing to the commission carve-outs with Mr Curnow. If that is right, then when the invoices were received, Mr Durie must have appreciated that Mr Curnow was putting forward invoices that he knew must have been wrong and making demands for monies to which he was not entitled. If that were so, the objective circumstances would have suggested a much stronger reaction on Mr Durie's part even before Hall Chadwick ever became involved. The Management Agreement was made by December 2010. Mr Durie was aware of Mr Curnow's claims by no later than the time of Mr Miller's email of mistaken payments, and probably earlier. One would have expected an angrier response from Mr Durie upon the continued receipt of unjustified invoices. If Mr Durie believed that Mr Curnow was deliberately making groundless claims for money against JPD, it is strange that Mr Durie does not seem to have reacted strongly. The truer analysis is that Mr Durie was not sure that Mr Curnow's demands were wrong. 2. (2) The Hall Chadwick period – March 2012 to March 2013. Mr Bryks was at the sharp end of approving all invoices received by JPD for payment. Mr Bryks was proud of his and Hall Chadwick's efficiency and fenced strongly at the suggestion that he or other professionals within Hall Chadwick authorised mistaken payments. 3. Mr Bryks administered an account on Hall Chadwick's behalf for their client JPD. He made clear "no money left the account…by mistake [of Hall Chadwick]". He defended Hall Chadwick's administrative systems: once he became involved "it was two to sign, someone from our office someone from the JPD office. No cash left the account by mistake". 4. I accept Mr Bryks's evidence that he could not recall any instance in which he had been involved in intending to make payments to Curnow Consulting but later realising or deciding that some of the payments so made might have been mistaken overpayments. Moreover, after Mr Bryks's involvement, had JPD remitted funds to Curnow Consulting which JPD later regarded as mistaken payments or overpayments then he, Mr Bryks, would have been made aware of it. Given his ground floor involvement in the approval process it is objectively likely that he would have become so aware. But he did not. I infer that Hall Chadwick were never made aware of any mistakes being made either by them or by JPD staff during Hall Chadwick's watch. Management Agreement Terms and the Services Agreement – Legal Analysis 1. This section first sets out some relevant legal principles. Then it summarises the Court's conclusions about the terms of the Management Agreement. Finally, it undertakes the proper construction of the relevant provisions of the Services Agreement. Applicable Legal Principles 1. The Court has been able to resolve the conflict about the conversation that constituted the terms of the Management Agreement. But had it not been able to do so, the conduct of Mr Durie and Mr Curnow, as found in these reasons would probably have been sufficient in itself for the Court to conclude that the Management Agreement had the terms for which Curnow Consulting, not JPD, contends. 2. The relevant legal principles may be shortly stated. If it is not possible to make a finding about what were the particular words of a putative contract that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 at [7] – [8] ("County") per Spigelman CJ. This can be done in the absence of findings about what particular words the parties used to make their agreement, as Spigelman CJ said, at [7] in County: A need to identify the particular subject matter of the contract has often arisen, even in the case of a written agreement where there is a form of words to be interpreted. In the present case, the subject matter and the concomitant terms of the contract must be inferred from a combination of surrounding circumstances including conversations, documents and conduct none of which provide a definitive form of words. The issue is not one of interpretation, because there are no words to interpret. The issue is one of fact: what did the parties agree? 1. Such inferences should be drawn cautiously and with consciousness of the dynamic nature of commercial contracts. In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 ("Brambles Holdings"), at [74], Heydon JA (as his Honour then was) cited with approval the following statement of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR ("Integrated Holdings"): In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117–11,118, McHugh JA (Hope JA and Mahoney JA concurring) said: "It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of 'offer', 'acceptance', 'consideration' and 'intention to create a legal relationship' which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship… Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." 1. Post-contractual conduct may be taken into account to inform the terms of a contract: County at [20]; Brambles Holdings at [25]. But as McHugh JA observed in Integrated Holdings, cited at [77] by Heydon JA in Brambles Holdings: One further observation of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (at 11,117) is relevant: "…it is an error 'to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed'. …Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. …The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract …." 1. In this case these principles potentially inform not only the proper inferences to be drawn as to the making of the Management Agreement in 2010 but also its alleged variation in February/March 2012. In both cases the Court has been able to make findings about the parties' conversations. But even if that were not so, the application of these principles would produce the same result. The Terms of the Management Agreement in Summary 1. In summary, the Management Agreement prevents the earning of double commissions for work brought in due to the agency of Mr Sean Anderson but otherwise permits the calculation of commissions at the rate of 5% on all revenue derived from JPD and JPD Inc. including from JPD's design business and JPD's business derived through other agents. And the $8,000 monthly management fee paid under the Management Agreement was payable continuously right up to the termination of the Management Agreement. 2. JPD and Curnow Consulting did not agree on or about 23 February 2012 either to vary their existing Management Agreement or to make a new Management Agreement upon terms for the provision of the same or similar services by Curnow Consulting to JPD but without the payment of an $8,000 monthly management fee to Curnow Consulting. At best, the parties were in February 2012 in a position of negotiating stand-off about the terms of a new Management Agreement. But in the meantime and after 23 February 2012, Curnow Consulting continued to provide, and JPD continued to accept, the same services as had been provided under the Management Agreement. 3. There was no trial period for Curnow Consulting to perform the Management Agreement between 1 January 2011 and 31 December 2011. Nor was it a term of the Management Agreement that it was terminable by either party at will; rather it was terminable on reasonable notice, which at the time of attempts at termination in March 2013 was 60 days. The duration of the Management Agreement was not agreed between the parties to coincide with the duration of the Services Agreement, such that they were coterminous. The Proper Construction of the Services Agreement 1. The proper construction of Clauses 13 and 14 of the Services Agreement attracted controversy in the proceedings. But the regime that Services Agreement clauses 13 and 14 creates is reasonably clear. The two clauses are directed to different kinds of events. 2. Clause 13 provides for termination by the Licensor (13.1) or the Agent (13.2) on the happening of a number of events. Some of those events require no prior notice to be given: an insolvency event affecting the Agent (13.1(a)(iii)) or the Licensor (13.2(b)), the agent ceasing to be actively involved – in the Licensor's reasonable opinion - in the commercial exploitation of the intellectual property (13.1(a)(i)), the separation of Mr Curnow from the agent (13.1(b)) or there being no exploitation of the Licensor's intellectual property two years into the agreement (13.1(c)). These events may, but do not necessarily, involve breaches of any of the other provisions of the Services Agreement. They nevertheless are agreed circumstances that would permit termination without the requirement of a notice to remedy. Nothing in clause 13 expressly requires a period of prior notice to be given in the exercise of these powers of termination. Nor is there any reason to imply a period of prior notice before these powers are exercised. The provisions operate sensibly without such a notice period. 3. But two of the provisions permit termination for "breach or default" of the Services Agreement with, and in some circumstances without, notice by the Licensor (13.1(a)(ii)) and the Agent (3.2(a)). Notice of 28 days to remedy the breach is required "if the breach or default is capable of remedy". It follows that if the breach or default is not capable of remedy, then 28 days' notice to remedy is not required, and termination without notice is permissible. 4. The party seeking to rely upon the exercise of the power of termination must establish that the circumstances for the exercise of the power exist. Here that is JPD, which did not give notice to remedy and now argues that none of the breaches or defaults alleged in the notice of termination was capable of remedy at the time the notices were served. Much of the debate concerns whether the breaches were capable of remedy but the parties also deployed some legal arguments about the construction of clauses 13 and 14 as well. 5. Clause 14 effects the automatic renewal of the Services Agreement for 5 years from 30 June 2013. The contrary notice that Clause 14 contemplates could in my view be a notice of breach under clause 13. All that Clause 14 requires is that the notice be "a notice" of termination and be given 90 days prior to the Expiry Date of 30 June. In my view, JPD's notice of termination of the Services Agreement of 20 March 2013 satisfies both of these requirements. But for abundant caution, JPD served another back-up notice the same day to ensure that Clause 14 was triggered and that Services Agreement would terminate on the Expiry Date. The setting of a 90 day period in Clause 14 merely indicates at the formation of the Services Agreement in 2008 the parties contemplated that 90 days would probably be required to make other arrangements if one or other of them decided not to renew the Services Agreement. But contrary to Curnow Consulting's submissions, there is no warrant to treat to 90-day notice period in Clause 14 as in any way governing the notice for breach under Clause 13.1. The two are quite separate. Are the two agreements coterminous? 1. The two agreements are not coterminous. The findings set out in the earlier narrative and the analysis of the terms of the Management Agreement make it clear that the termination of one agreement did not automatically terminate the other. Termination of the JPD/Curnow Consulting Relationship – January to March 2013 1. The narrative of findings now resumes. This section sets out the Court's factual findings relating to the period covering the termination of the parties' relationship. This is followed by a legal analysis of these events in the light of the Court's conclusions about the terms of the Management Agreement and the Services Agreement. 2. By January 2013, the relationship between Mr Durie and Mr Curnow was tense. Their unresolved conflict about the payment of Curnow Consulting's submitted invoices raised their level of inter-personal stress. But the issues played out by ending their business relationship in the period January to March 2013. A Meeting at Hall Chadwick – 19 February 2013 1. By mid-February 2013, Mr Curnow and Mr Durie still could not sort things out between themselves. So Mr Durie made plans with Hall Chadwick. As a result, Mr Curnow was invited to a meeting at Hall Chadwick with Mr Durie and Mr Bryks on 19 February 2013. I accept Mr Kenney's general account of this meeting, which he says commenced in the following way: Kenney: "First of all, Mike, you know that there are a number of challenges facing the business. We have done some research as to what is the appropriate remuneration for the general manager role. We have tried to find comparable businesses. You are a bit of a hybrid, you are doing a bit of management work and a bit of marketing work, but you are using our [JPD's] resources to do the agency work. We want to create a solution that is fair to you and the business. We have spent some time researching the right remuneration and we want to provide both a base salary and a bonus component". Durie: "We have been working on something which I hope you see as fair. We want you to be involved in the business". 1. Mr Kenney had a written proposal ready. He and Mr Durie had already discussed it. He handed the proposal to Mr Curnow, who was seeing it for the first time. The proposal, in the form of a letter, was for the restructuring of Mr Curnow's relationship with JPD from one of independent contracting into an employment relationship. The letter, sometimes called the "restructure offer" was as follows: Mr. Mike Curnow Re Your Contract I have been reviewing the financial performance of my company over the last few years. It has, as you are aware been a particularly trying time. Surviving the last 18 months has made me resolute to make some proper decisions about how my business should be run, that is across the board. My financial advisors tell me that in order to reduce costs and make the business profitable, I need to move away from the current commission based arrangement with Curnow Consulting Pty Ltd and look at reducing your overall remuneration. Put simply, the business cannot continue to afford paying Curnow Consulting Pty Ltd at the current rates. At this point in time if I were to draw a highly conservative wage of just $500,000 in respect of my television related contracts, the amounts that you have charged me over the past 18 months equate to 32.78% and 42.84% of the profit of the business, for year to 30 June 2012 and period to 31 December 2012 respectively. This is simply unsustainable. As you know, the current services agreement expires on 30 June 2013. Because of the overall cost of that agreement, I will not be renewing that agreement in its current form beyond 30 June 2013. In that context, what I want to do is put a proposal to you for a new arrangement, which would effectively replace the existing services agreement and other payments being made to you as Business Manager. This would result in you taking a drop in overall pay, but would still provide you with "blue sky" for a share of profit and work that you introduce and provide continuity beyond 30 June 2013 as an employee. It is also worth noting that the current contract has been varied though the key fact it is an Agency agreement, and that is not the true role that you have been fulfilling over the last 12 months or so, when you have also been in the business full time, effectively as a senior manager. Whilst I have been comfortable with some of the changes, some changes should have been incorporated into a modified deal and that is what I am now wanting you to consider. 1. The letter then went on to explain that under the Services Agreement Curnow Consulting was originally engaged as an agent, but that "in the last 12 months or so, since you have been working full time with the business, the role has evolved more into a managerial role". Mr Durie went on in the letter to point out the differences in the roles of agent and a senior manager, and to highlight that the service that Mr Curnow was providing was "more akin to a sales manager, albeit you are a very senior person in this field". 2. The letter then reflects upon the imminent expiry of the existing contract in six months and declares "I would like to renegotiate a new arrangement, which reflects the true nature of the work you do, the responsibilities I would like you to have and the expectations that would befit the remuneration, at an overall cost to the business that is affordable". The letter proceeds to lay out a series of comparable salaries for general managers, or senior sales directors in related industries. And finally, the letter offers a proposal: full-time employment on an annual salary of $150,000; an additional payment of 10% of normalised profit after tax; and the termination of the existing Management Agreement and Services Agreement and their replacement with a contract of employment without future commissions beyond the end date of the Services Agreement. But the letter said nothing about the payment of past management fees or commission under the Management Agreement. 3. The letter accepts that it involves "an overall reduction in your remuneration" but stresses that the offer "means that you will continue to work in the business beyond 30 June 2013 and hopefully contribute to a successful future". The letter then concludes under Mr Durie's signature on a very positive note: Mike, this offer: 1. Takes into account our friendship and loyalty. 2. The experience you possess. 3. Is what I can afford, and a bit more, because of point 1. If we can agree terms, I will ask Chris Frawley to draft a new contract of employment with these conditions. I look forward to hearing from you about this current proposal, so that we can agree on a new arrangement which will continue beyond 30 June 2013 and, hopefully, see us both enjoying the benefits of the success of the business. As the issue of your remuneration has now dragged on for some time, could you please let me know whether this offer is acceptable to you by Monday next week. Yours sincerely Jamie Durie 1. The letter is replete with both express and implied representations that Mr Durie wants a continuing relationship with Mr Curnow and that he sees Mr Curnow as a valuable contributor to the future success of JPD's business. 2. Mr Curnow read through the letter. I accept Mr Kenney's account that the conversation continued in words to the following effect: Curnow: "I don't think this is going to work. I don't think it's reasonable. I can't go backwards." Kenney: "You are in sales. We expect that when you market and sell, when Jamie and you close deals, that you will earn you bonus. This new agreement will provide you with a salary and a bonus payment based on the net profit of the business. This reflects a payment structure for your current role." Curnow: "I'll need to see the company's financials in order to understand the outcome for me". Kenney: "We can provide you whatever you need". Curnow: "I'll come back to you". 1. By February 2013 the Durie/Curnow relationship was already unravelling. Mr Curnow's offer to "come back to you" was a diplomatic nicety he was reluctant to fulfil. By then his own perception of what he saw as Mr Durie's ingratitude for his years of loyalty had distanced him from Mr Durie and made him reluctant to engage in having further discussions with Mr Kenney. 2. When Mr Durie said that he and Mr Kenney had been "working on something which I hope you see as fair" and "we want you to be involved in the business", I accept he was expressing his genuine views. Mr Durie's long-standing relationship with Mr Curnow and Mr Curnow's familiarity with Mr Durie, made it difficult for Mr Durie to be anything other than completely candid with Mr Curnow, and on this occasion he was. What he said to Mr Curnow on this occasion he believed. It may be inferred therefore from this that on 19 February Mr Durie had no reason not to want Mr Curnow to continue his role in the business, a state of mind which is significantly at odds with allegations which followed within six weeks in support of the notices of termination of both agreements. 3. Mr Durie was pressed in cross-examination about his expressions of "friendship and loyalty" toward Mr Curnow and his emphasis on Mr Curnow's "experience" at the end of the letter. Mr Durie's response to this cross-examination was unsatisfactory. He deflected the line of questions by pointing out that the letter "was drafted by Hall Chadwick, as you know" and explaining that "it was meant to repair the relationship and put a new deal on foot". But Mr Durie signed the letter. Mr Durie was not in my view a person likely to sign things that he did not believe in, or which he thought were misleading. But throughout this cross-examination, Mr Durie nominally adhered to his evidence that at the moment he signed this letter, despite its contents, he distrusted Mr Curnow's bona fides. 4. This cannot be correct. It can be accepted that Mr Durie was trying to put the best face on a relationship which had become strained. But the Court does not accept that Mr Durie was anything other than genuine in his expressions of loyalty and friendship to Mr Curnow. It was not in my view a relationship which by then had broken down to the point of Mr Durie mistrusting Mr Curnow's bona fides. If it were, why bother to draft such an elaborately crafted explanation as to why he should stay with the business on a salary? The preliminaries to getting rid of a mistrusted employee would have taken much less effort. The restructure offer was a genuine effort at persuasion. 5. Moreover, Mr Durie was the kind of individual, who if he really did fundamentally mistrust Mr Curnow, would have had no hesitation in taking advice from Mr Kenney then and there in the third week of February 2013, about pursuing his future options for JPD without Mr Curnow's continued involvement. But that is not what he did and he chose to put an offer which, though unlikely to be accepted, was not insulting to Mr Curnow. From the Restructure until Mr Curnow's Leave – 19 February to 18 March 2013 1. JPD specified the following Monday as the time for a response to its 19 February 2013 restructure offer. The document anticipated further discussions in the near term. But Mr Curnow did not reply within time. Mr Curnow did not like the look of the restructure offer. His failure to reply was unsatisfactory. 2. Mr Bryks attempted to provoke a response. On Thursday, 7 March 2013, he emailed Mr Curnow, copying in Mr Durie and Mr Kenney, asking him "how are you going getting back some feedback points to David and Jamie in relation to the remuneration discussion?" Mr Bryks pointed out the obvious, that "we want to move forward with all of these matters as soon as possible". 3. Mr Curnow responded to Mr Bryks within ten minutes. Mr Curnow aimed his 7 March response at separating out the question of his "currently outstanding fees" from "any discussion on future remuneration package" [sic]. He emphasised that the matter of currently outstanding fees needed to be addressed "urgently". He foreshadowed a slower response to the restructure offer, "in due course". Mr Curnow Goes on Leave – 11 March to 18 March 2013 1. JPD waited for Mr Curnow's foreshadowed response to the Bryks 7 March email. In the meantime it did not withdraw the restructure offer, an indication that it was still quite willing to engage Mr Curnow as an employee. 2. Mr Curnow did provide his more detailed response on 12 March 2013, the Tuesday of Mr Curnow's leave week. Mr Curnow's email of that date referred back to the meeting in Mr Kenney's office on 19 February and advised, "that I'm still waiting on the further information promised", which it then set out. He also asked for an indication of the proposed percentage to be included in the restructure offer's remuneration package, "for business that I bring in" and a "full job description of the role" to avoid confusion as to the first of these, the request was a misreading of the restructure offer, which was only offering a 10% share of normalised profit and no percentage of what Curnow "brought in". Finally, Mr Curnow promised that upon receipt and review of this information "I will provide a considered response in a timely fashion". 3. Mr Kenney received the 12 March email. He commented in a reply email to Mr Curnow, copied to Mr Durie and Mr Bryks, "Mike, I'm not sure (and Jamie can correct me) that any of this will effect his offer". Mr Kenney's puzzlement is understandable: Mr Curnow had requested a percentage rate "for work I bring in". As Mr Kenney explained in his answer in the restructure offer, "there is no percentage for anyone else on any sale of assets. That is not in the contract nor is it available going forward". To Mr Kenney, the commission information Mr Curnow was seeking seemed irrelevant to the restructure offer. Mr Curnow was not welcoming this discussion. He was not ready to accept that his commission-based remuneration structure was coming to an end. But, even at that point, there was still no intimation from JPD that the restructure offer would be withdrawn. 4. Mr Curnow continued to work on JPD's business at the time of Mr Curnow's 12 March 2013 response. Mr Durie agreed to this under cross-examination that he understood this to be the case. Moreover, this must have been clear to Mr Durie from the correspondence he was continuing to receive from Mr Curnow, some of which is set out later in this narrative. Mr Curnow Returns to the Office – Monday, 18 March & Tuesday, 19 March 2013 1. Mr Curnow returned from leave on Monday, 18 March 2013. He came into the office for a few hours, did not feel well and took his laptop and some files and business cards home to work on there. 2. The Court accepts that Ms Bush reported to Mr Durie on 18 or 19 March that Mr Curnow had come "into the offices yesterday and took a bunch of business cards in relation to leads that he has been dealing with lately, he has also taken some files and contracts home with him. He has not come back into the office since". Ms Bush could not satisfy Mr Durie's inquiry as to why Mr Curnow had done that. 3. Mr Durie telephoned Mr Curnow a number of times on 19 March and early in the morning of 20 March. Mr Curnow did not return any of these calls. Mr Durie decided to send a text message to Mr Curnow. 4. Mr Durie says he has no recollection of Mr Curnow having been ill at around this time. Some other witnesses say the same. But there was enough stress in Mr Curnow's life at this time. It is not difficult for the Court to accept that he was. Indeed, Mr Curnow's response contains contemporaneous evidence that he was intending to see his doctor that day. I accept he was ill. Wednesday, 20 March 2013 1. At 9.07am on 20 March 2013, Mr Durie texted Mr Curnow: Your [sic] not responding to any calls and have taken property from our office I will assume we are going separate ways unless I hear otherwise? 1. And Mr Curnow replied: I have been ill as you know. Until all my invoices are paid in full I shall be working from home after I have seen my doctor again today. So now you have heard otherwise. 1. This email clarified in answer to Mr Durie's earlier email of the same day that Mr Curnow was "working from home". But he does not suggest he would not stay connected to the office to deal with any queries arising. He continued to keep separate the issue of negotiating a future remuneration proposal from the issue of current outstanding invoices. 2. JPD contends that Mr Curnow's text message statement on 20 March that he was going to see a doctor "today" is false. Mr Curnow did concede in cross-examination that he did not see a doctor that day. But the Court accepts his rejection of the idea that being "sick" was a pretext for leaving the office. The Court accepts his evidence, "I was genuinely not well". Mr Curnow explains, and it is logical in the circumstances, that his illness was partly related to stress. As he said "the stress levels in that office and in me were extraordinary because of the merry-go-round that I had been put on in trying to get my invoices paid". The Court accepts that after he went into the office the morning of 18 March to do invoicing, he realised, "I didn't want to remain in that environment. I took some things home to work on thinking…I'll calm down". 3. Mr Raymond Lee provides technology services to small medium and large businesses through his single purpose company, Raymond Lee Consulting Pty Limited (RL Consulting). Since about 2003 RL Consulting has provided information, technology and communication services to JPD and Mr Durie's related companies in Australia and the USA. Mr Lee has known Mr Curnow since about 2005. As JPD's general manager from late 2010, Mr Curnow asked Mr Lee to provide technology services to JPD. Mr Lee reported to Mr Curnow during that time in relation to the provision of these services. 4. One of RL Consulting's functions was to provide sufficient backups of all JPD's business records and copies of all JPD emails on an email server. All other computer files were backed up with an external hosting service provider to ensure there was full duplication of all the emails and computer files generated by JPD. 5. Mr Lee says, and I accept, that on 20 March 2013 Mr Durie telephoned him and said "Mike has come into the office and taken everything. I need you to make sure that he has no more access to anything in my business." Mr Lee agreed to stop Mr Curnow's email access, server access and to change his Wi-Fi password. Mr Lee prompted Mr Durie to ask for the JPD laptop back from Mr Curnow. Mr Lee had been originally responsible for buying and setting up the MacBook Air laptop that Mr Curnow was using at that time. 6. I accept Mr Lee's evidence that he remotely changed Mr Curnow's password on his email account and the office Wi-Fi password and disabled Mr Curnow's access to the JPD fileserver, which hosted JPD's office documents, files and archives. Later in the afternoon of 21 March 2013 Mr Curnow rang Mr Lee and challenged him, "Why has my email access been cut off?" Mr Lee referred him to Mr Durie. 7. But importantly, in the following week Mr Durie telephoned Mr Lee and authorised him to reinstate Mr Curnow's email access. Mr Lee reversed the steps taken to deny email access to Mr Curnow. This seems only consistent with a view on Mr Durie's part that Mr Curnow continued to be willing to provide services to JPD. 8. Mr Curnow wrote a number of emails later on 20 March that initiated separate chains of response. The first was an email dealing with Mr Curnow's perception he had been denied email access to JPD's servers. It was sent at 6.11pm and was as follows: Jamie, Raymond Lee, your IT consultant, has informed me today that you instructed him this morning to change the password on my mike@jamiedurie.com email account which denies me access and makes it impossible to provide my services as I have indicated I will continue to do. I assume that by cutting off my email access, you are terminating me. If I do not hear from you by email to the contrary by 9am tomorrow I will take that as confirmation of termination. Reagrds [sic], Mike Curnow 1. This led to a response by Mr Durie in which he baulked at the idea of their arrangements being terminated. It founded Curnow Consulting's argument that JPD had elected to continue their arrangements. It was sent at 9.04am the next day and is set out under the next heading. 2. At the same time, Mr Curnow also sent an email dealing with the issue of his unpaid invoices, as follows: Jamie, It is now two weeks since I sent this email and have not had any response - nor have any of the invoices been paid. I will be working from home until all my invoices are paid in full. Regards, Mike Curnow Thursday, 21 March 1. Mr Durie found Mr Curnow's correspondence understandably frustrating. Mr Curnow did not appear prepared to deal realistically with the restructure offer. Just after midnight, on the morning of 21 March, at 12.58am, Mr Durie emailed Mr Curnow with a first response raising the stakes: Mike, Your failure to communicate or respond to our offer in any way after a year of discussion on the matter is unfortunate. Ceasing the email, this was a reaction to hearing you came into the office, took company records and business cards (our property) and would not cooperate with my team in respect of a sales matter. Perhaps this is a misunderstanding? If so please let me know. Please drop the cards back within 24 hours or we can have someone pick them up and provide the details of calls taken to our office recently and we can discuss everything. The proposed invoices that you have been continuing to send through have been in question for over a year now as you know as this deal structure is simply not sustainable for a business of our size or turnover as pointed out previous meetings [sic]. This is why we created a new offer that was fair and realistic for both parties. However if we are to come to an agreement your failure to communicate or work with myself and the team will further inhibit a way forward both financially or in planning a solution together, we should discuss this today when your [sic] able to and create a positive outcome. Best Jamie Durie OAM 1. Mr Curnow responded defensively at 8.08am. By then he had received a voicemail message from Mr Durie proposing a meeting on Friday morning: Jamie, You are incorrect. I have responded to the remuneration proposal which was only first put to me on 19 February 2013 -just some weeks ago. Secondly, I have not taken any company records from the office whatsoever. I do have some business cards in order to continue to provide my services and progress many on-going business matters. You can have someone collect these if you wish. Further, I have responded to every sales matter query from the team in a timely fashion. Once the email access has been restored I can resume the provision of my services as I have previously indicated. In the mean time I will be taking a week's leave, but will answer any queries that the office may have during this time. The invoices that I have issued to date are due and payable. These are not connected with any proposed future remuneration proposal as they are subject to our current arrangements. Can you please let me know later today when these will be paid. I am happy to have a coffee with you in Avalon tomorrow morning (Friday) at 8am at the Cooks Larder. See you then. Regards, Mike 1. Mr Durie emailed Mr Curnow on 21 March at 9.04 am, reaffirming his email just after midnight: Mike, Further to my email sent at 12.58am last night and to avoid any misunderstanding, your company's consultancy has not been terminated. We still need to work through the other matters in my email from last night. I look forward to discussing a way forward as soon as you are able. Best Jamie Durie OAM 1. When Mr Durie's 21 March 9.04am email to Mr Curnow spoke of "your company's consultancy" not being terminated, it was referring to the Services Agreement. It is inapt to describe the Management Agreement as a "consultancy". Mr Curnow's contemporaneous correspondence with his solicitors, Messrs TressCox, showed that he too interpreted the 9.04am email as referring only to a single agreement, the Services Agreement. When the 21 March 9.04am email refers to the "need to work through the other matters in my email last night" it is referring to matters that all fall into the category of issues with Mr Curnow's Management Agreement. 2. Mr Durie's intent in this 9.04am email was to ensure that he could separate out the Services Agreement (which he did not want to disturb) from the more fundamental issues that JPD had with Curnow Consulting from the Management Agreement. The Court does not interpret this 9.04am email as a statement in affirmation of the Management Agreement. The issue of whether the two agreements are coterminous is dealt with elsewhere in these reasons. 3. Mr Durie tried again by text message at 10.44am: Mike If we are going to continue working together we need to speak today let me know when your [sic] ready. 1. Mr Curnow called back and left a message on Mr Durie's mobile phone. 2. Even as late as 21 March 2013 there is objective evidence of Mr Curnow continuing to undertake work for JPD from home. On that day, at 9.08am, under the subject heading "A few things that need to be followed up", Mr Curnow emailed Mr Durie that "the following items need attention" during the next week, "whilst I'm on leave". The email then refers to a series of already scheduled meetings, meetings to be arranged and issues concerning Mr Durie's availability for various functions. Another example of such an email is one sent on Friday, 22 March by Mr Curnow to Mr Durie about conditions for a particular licence agreement under the subject heading "Riva 1920 – License Agreement". These are typical of the kinds of business communications Mr Curnow was continuing to send to Mr Durie in the first three weeks of March 2013. Some that represent genuine performance of the two agreements are sent even as late as 26 March. The Cook's Larder Non-Meeting– 22 March 2013 1. For many years, until it closed in June 2013, The Cook's Larder was a popular gourmet café in beachside Avalon. Mr Durie and Mr Curnow both knew it well. It was the scene of a final misunderstanding between the two. They arranged to meet there mid-morning on 22 March 2013. 2. But the meeting never took place. Instead their speaking relationship ended that day. They used text messages for their final communications that day. Thereafter they corresponded through lawyers. 3. The next morning, 22 March at 7.39, Mr Durie acknowledged Mr Curnow's voicemail message. He apologised for not being able to meet at 8.00am: Got your message, I can't do 8 o'clock as I'm doing radio interviews all morning I can do 10 though. 1. Mr Curnow accepted: No worries – see you then. 1. Mr Curnow arrived at the café by 10.00am and waited. But Mr Durie was delayed longer than he expected. His radio interviews had run over time. But Mr Curnow could not wait. He sent Mr Durie a text message at 10.21am: It's 20 past 10 and I'm leaving. Many things to do. 1. He then left. He felt that Mr Durie had not given sufficient priority to the meeting and was not prepared to wait any longer. It was certainly true that whatever Mr Durie's reasons for being late, he had not given Mr Curnow the courtesy of a text message close to 10.00am to warn him of the anticipated delay. 2. Mr Durie arrived at about 10.30am. He texted back: I'm here. 1. But it was too late. Mr Curnow had gone. Mr Durie's presence did not tempt Mr Curnow back. He texted in reply: I waited for over 15 minutes. I had the business cards to give you. They are in my letterbox for collection. Happy to return the laptop once I have transferred my personal content. I refute your allegations of deliberately deleting emails. 1. Mr Curnow rang Mr Durie and said to him what he thought: that "meeting with me (Mr Curnow) is obviously not a priority for you". Mr Durie greeted him in the circumstances with the somewhat lame excuse "I can't help it if someone calls me". But this was followed with the accusation, "you stole from the Mona Vale office". Mr Curnow denied accusation of theft and returned to a familiar topic, demanding, "When am I going to be paid my invoices?" In turn, Mr Durie circled back to his current topic of interest: "Mike, you have delayed doing your new deal with Hall Chadwick for months". This conversation amounted to little more than the stating of familiar entrenched positions. Had the Cook's Larder meeting gone ahead, it may have taken the same unproductive course. 2. Another attempt was made to meet but failed. Mr Curnow texted Mr Durie at 2.22pm: Can't meet today. Already tried twice. The laptop is in my letterbox with the business cards ready for collection. What's next? 1. Mr Durie replied at 3.37pm: Ok no worries. Thanks for that. We'll have someone pick it up. Will be in touch via email. Shame we couldn't talk it through. Jamie 1. Thus ended a nine year personal and business relationship. This moment led to the irretrievable breakdown in their communications, except through lawyers. The Statutory Demand 1. The first of these lawyer-to-lawyer communications took place at 4.54pm that afternoon. Curnow Consulting served a statutory demand in the amount of $180,501.85 under the Corporations Act 2001 (Cth), s 459E at the registered officer of JPD. The service of this notice later became one of JPD's grounds to justify service of notices of termination of the Management Agreement and Services Agreement. 2. The debt was described in the schedule to the Statutory Demand as "monies outstanding for fees payable for services rendered by the creditor to the company particularised in invoices issued between 23 February 2012 and 19 March 2013". 3. Why did Mr Curnow escalate his demands in this way? His persuasive explanation is that he was not getting Mr Durie's attention to Curnow Consulting's unpaid invoices in any other way and Mr Durie was not giving any priority to discussing it as an issue. Mr Curnow Deletes Material from JPD's Laptop – Friday, 22 March 2013 1. Shortly after the failed Cook's Larder Café meeting, Mr Curnow deleted all of the information on the laptop computer which JPD had supplied to him ("the JPD Laptop"). Mr Curnow had foreshadowed to Mr Durie on 22 March 2013 that he was going to transfer his "personal content" from the JPD laptop. 2. I accept Mr Curnow's evidence about how he effected the transfer off the JPD laptop of his "my personal content". He explained that he resolved to return the computer "after my personal information had been removed from the computer" so he contacted an expert. Reflecting his preference for Apple computers, he visited a nearby computer store, "Mac&Me" at Newport Beach on 22 March 2013. In order to transfer his data onto a device that he wanted to use, he purchased a new computer from Mac&Me, a MacBook Pro Retina. He instructed the technician at the Mac&Me retail outlet to "transfer the information from one computer to the other so that I could maintain the integrity of my personal information that was on the company laptop". And that is the work that was done. All the data on the JPD laptop was transferred onto the MacBook Pro Retina. Mac&Me invoiced Mr Curnow for their data transfer work, charging him $1,649.00 for the purchase of a MacBook Pro Retina and an additional $72.00 for what the invoice describes as "data transfer". 3. I accept Mr Curnow's evidence that he instructed the Mac&Me Newport technician, "I don't want anything left on this computer". Mr Curnow is not familiar with hard disk reformatting. He did not instruct the Mac&Me technician to re-format the computer. He had no idea what reformatting involved; that was beyond his expertise. His general intent was merely to take "all my photos, all my music, all my emails from my two email accounts, all my documents, all my other bits and pieces over there". I accept that he did not know technically, as he said, "whether that [left] anything on the computer or not". The JPD computer's hard drive was reformatted, as Mr Lee says it was. But this was the result of the Mac&Me technician's interpretation of his instructions. 4. The JPD/Durie case is that Mr Curnow deliberately re-formatted JPD's laptop to deny JPD the benefit of company information on it. 5. But this case was answered in two main ways. First, Mr Curnow did not believe that anything that he was doing at Mac&Me that day would render any company information irretrievable. From his experience at JPD, he thought that everything on the JPD laptop had been automatically backed up onto JPD's central server and would for that reason always be available to JPD. The JPD/Durie case does not dispute automatic backing up on its central servers. The legal representatives of the Durie parties did not, and it may be inferred could not, identify any information, confidential or otherwise that had actually been irretrievably lost as a result of the 22 March 2013 reformatting of the hard drive of the JPD laptop. 6. Secondly, Mr Curnow did not intend to cause any harm to JPD when transferring his personal data off the JPD computer. His only intention was to execute what he had already signalled to Mr Durie by text, "to transfer my personal content". He did not intend to achieve the result that the JPD computer hard drive would be completely reformatted. Mr Curnow serves a Clause 13.2(a) Notice – Tuesday, 26 March 2013 1. Mr Curnow made continued use of his legal advice. On 26 March, he served a notice to remedy remediable breaches under the Services Agreement, Clause 13.2(a), as a preliminary to a possible termination of that Agreement. That, plus the statutory demand were the firm notice that: (i) Curnow Consulting intended to pursue its legal rights under the Agreement; and (ii) Curnow Consulting regarded all of JPD's identified breaches as remediable. This notice has the intended effect of alerting JPD to the use of the remediation clause 13.2(a)(ii) qualifying JPD's right of termination 2. The same day, on 26 March 2013, Mr Curnow responded on this issue of termination, accepting that the status of the Services Agreement had been confirmed but seeking similar reassurance about the status of the Management Agreement: Jamie, Thanks for the clarification that the Services Agreement (Licensing Agent) [sic]. Can you please clarify by return email the status of our Management Agreement that we commenced in October 2010. As I have previously advised, once my email address has been reactivated and I have access to a laptop and business cards I can resume these duties. Thanks & regards, Mike Curnow 1. Although this email in presently available form was addressed to Mr Alistair Little at TressCox, I accept that it was sent to Mr Durie. But the reassurance it sought was not forthcoming. Mr Lee examines the JPD Laptop – Wednesday, 27 March 2013 1. Mr Lee next came into the office on 27 March 2013. He was given Mr Curnow's laptop. When he turned it on he noticed it had been reformatted by deletion of all the material and information that was previously on its hard drive. The JPD laptop also contained no other history or data records. 2. This discovery prompted Mr Durie to ask Mr Lee to check the status of Mr Curnow's emails. He checked Mr Curnow's email account via webmail and found that all Mr Curnow's email records had been deleted. On JPD's email server logs, all Mr Curnow's emails from his JPD email account had been deleted. Mr Lee says of such action: "This could only be done by someone who knew Mr Curnow's password". 3. But Mr Lee had full backups. He recovered all the deleted emails from the laptop by resorting to a back-up and relocated them onto JPD's email server. These recovered emails are located at a new email account address entitled "Mike Curnow Recovered", which is still a fully functioning email account. None of Mr Curnow's work emails were lost. As Mr Curnow had himself instructed Mr Lee on behalf of JPD since 2005, Mr Curnow was familiar with Mr Lee's IT work, and aware that Mr Lee had backed up all JPD's data and communications on external servers. The Termination Notices – 28 March 2013 1. JPD sought to terminate both the Services Agreement and the Management Agreement by written notice on 28 March 2013. The notices were served by email at Mr Curnow's email address. 2. The termination notice for the Services Agreement purported to terminate that agreement under clauses 13.1 (a)(i) and 13.1(a)(ii): We refer to the Services Agreement - Licensing Agent Agreement between JPD Media & Design Pty Limited ("JPD") and Curnow Consulting Pty Ltd, dated 6 November 2008 ("the Services Agreement"). You are hereby given notice of termination of the Services Agreement effective immediately: a) Under clause 13.1(a)(i) of the Services Agreement on the basis that, in the reasonable opinion of the Licensor, the Agent has ceased to be actively engaged in the commercial exploitation and licensing of the Intellectual Property Rights; and/or b) Under clause 13.1(a)(ii) of the Services Agreement on the basis that the Agent is in breach or default of the Services Agreement, in respect of: i) failing to perform the Services to the standard of a professional, competent and experienced licensing agent; ii) failing to conduct itself in a manner which would not in any way adversely affect or impair the value of the goodwill in the Intellectual Property Rights; and iii) intentionally doing or suffering to be done acts or things which may impair or adversely affect the Intellectual Property Rights. 1. As has been earlier indicated, JPD served a second notice under the Services Agreement on 28 March 2013. This second notice was served to enliven Clause 14 without prejudice to JPD's rights under the notice under Clause 13.1. In my view both notices were effective for the purpose of Clause 14 and the second notice need be considered no further. 2. Neither side contends that there was any agreed termination clause for the Management Agreement. The JPD termination notice for the Management Agreement alleged material breaches by Curnow Consulting, on what was called the "Business Manager Agreement", as follows: We refer to the services agreement between JPD Media & Design Pty Limited ("JPD") and Curnow Consulting Pty Ltd ("CCPL") pursuant to which CCPL has provided consultancy services for JPD in a business management role ("the Business Manager Agreement"). You are hereby given notice of termination of the Business Manager Agreement effective immediately on the basis of material breaches by CCPL of the Business Manager Agreement, including but not limited to: 1. Failure to provide the services to the standard of a professional competent and experienced business manager; 2. Failure to act at all relevant times to promote the best interests of JPD; 3. Failure to adequately report on, implement and follow-up on contractual dealings and opportunities with counter parties; 4. Failure to act in a manner that would not adversely affect or impair the value of the JPD business; and/or 6. [Sic] Deletion of JPD business records with the intention to harm the JPD business. Please ensure that all JPD property in your possession and any documents containing any JPD confidential information are immediately returned to JPD including the front door key to the office premises at Mona Vale, the security tag for the external door and all filing cabinet keys. 1. Mr Curnow received both notices at the same time. He quickly wrote the words "not true" in capital letters against each of the alleged grounds of termination. Termination of the Management and Services Agreements - Legal Analysis 1. No linkage is established between the duration of the Services and Management Agreements. The valid termination of the Services Agreement would not have terminated the Management Agreement. Nor does the continuation of the Services Agreement imply the continuation of the Management Agreement. The validity of the termination of each agreement is analysed separately here, starting with the Management Agreement. 2. Restrictions on JPD's Right to Terminate the Management Agreement. On 28 March 2013 JPD was incapable by reason of its own breaches of the Management Agreement from giving notice of termination of the Management Agreement for Curnow Consulting's alleged breach. 3. A party who is in breach of contract will not be prevented from terminating for the other party's breach, provided the terminating party has not repudiated the contract. Termination for breach is not prevented where a terminating party has breached a non-essential term, and an essential but independent term of the contract, or a non-promissory term in which there is no causal relationship between the terminating party's breach of the default of the other party: State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd's Rep. 277, at 286, Almond Investors Limited v Kualitree Nursery Pty Ltd [2011] NSWCA 198, Lantry v Tomule Pty Ltd [2007] NSWSC 81 and Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 [170] and [172]. 4. JPD was in substantial breach of the management agreement on 28 March 2013 due to its continuing non-payment of monthly management fees to Curnow Consulting. JPD's obligation to pay the monthly retainer fee of $8,000 was a condition of the Management Agreement. Through the financial stability it implied for Mr Curnow's personal situation, the offer in October 2010 of the $8,000 monthly fee was a major factor, in inducing Mr Curnow to close all other business and move Curnow Consulting to JPD's Mona Vale premises. Mr Curnow's subsequent behaviour in response to the unilateral reduction in this amount in February 2012, is further confirmation of its character as an essential term. 5. By refusing to pay this fee for 12 months from February 2012, a fee which was still due by JPD, notwithstanding its attempts to reduce it to zero that month, JPD evinced an intention to no longer be bound by a condition of the Management Agreement and committed acts of repudiation. Where a promisor's refusal to perform relates to a contractual term which is classified as a condition, there is no need to establish a total refusal to perform in order to establish repudiation: Associated Newspapers Limited v Bancks (I951) 83 CLR 322. Here the refusal to perform a condition of the Management Agreement was sustained over a period of 12 months. 6. From February 2012 JPD on the one side and Curnow Consulting on the other side, had quite different views as to JPD's obligations under the Management Agreement. But this is not a case where JPD just temporarily adhered to an erroneous construction of the Management Agreement, indicating in the meantime that it was prepared to perform the agreement, for example, as correctly declared by the Court. The correspondence at the time shows no such thing. Rather it shows JPD was determined to perform the Management Agreement only in accordance with its view of its contractual obligations. And by refusing to pay the management fee, JPD continued to act only on its view of its obligations, which these reasons show was an erroneous view. This failure not only amounted to failure to perform a condition of the Management Agreement, but it provides a basis to infer that JPD was not ready or willing to perform the contract in accordance with its terms, which amounted to a repudiation: Summers v The Commonwealth (1918) 25 CLR 144. 7. But most importantly for present purposes, there was a direct causal link between JPD's failure to pay the $8,000 monthly management fee and the grounds upon which JPD was purporting to terminate the Management Agreement. All the defaulting conduct attributed to Mr Curnow as a basis for the termination is ultimately characterised as a defensive reaction on his part to his inability otherwise to bring Mr Durie (and thus JPD) to recognize that he was owed the $8,000 monthly management fee that was unpaid from February 2012. 8. JPD argued that this contention by Curnow Consulting was not properly pleaded. But JPD's argument is not persuasive. JPD's Amended Defence [paragraph 8(d)] pleaded that JPD terminated the Management Agreement by written notice on 28 March 2013, "which termination was effective immediately". In its Reply [paragraph 5] Curnow Consulting joined issue with the Amended Defence. 9. In my view, the joinder of issue on this contention was sufficient advance notice of legal argument put and dealt with in final submissions, because the underlying factual contest was clearly in issue on the pleadings and in the way the case was conducted: whether the terms of the Management Agreement required JPD to pay $8,000 per month to Curnow Consulting after February 2012, and if they did whether JPD was therefore in breach of that term by not making payments to Curnow Consulting after that date. 10. But in any event the Management Agreement termination notice was ineffective for other reasons, as the analysis below shows. 11. Alleged breaches do not support Management Agreement termination. The notice of termination of the Management Agreement is set out earlier in these reasons. There is no issue that it was served. These reasons have already concluded that the terms relied upon in the notice are terms of the Management Agreement. There is a contest as to whether the terms relied upon are essential terms, intermediate terms or mere warranties. 12. Even if JPD had not repudiated the Management Agreement and was able to rely upon its 28 March 2013 notice of termination, the breaches alleged in the notice were insufficient in themselves to terminate the Management Agreement. The breaches alleged are not made out in fact. JPD structured its breach case by considering in detail alleged breaches of the Services Agreement and then repeating the analysis in relation to the Management Agreement. These reasons will follow the same structure. The reader is therefore referred to the analysis below under the heading "Termination of the Services Agreement". Because the breaches are not made out in fact it is not necessary for the Court to enter upon the question of whether the alleged breaches were breaches of conditions, or were sufficiently serious breaches of intermediate terms of the Management Agreement. 13. The five allegations of breach set out in the Management Agreement termination notice are as follows: 14. Allegation (i) in the notice is of a "Failure to provide the services to the standard of a professional competent and experienced business manager". This generally corresponds with breach of Services Agreement, Clause 8(a), the analysis of which breach is set out below. 15. Allegation (ii) in the notice is of "Failure to act at all relevant times to promote the best interests of JPD". This generally corresponds with breach of Services Agreement, Clause 8(a), the analysis of which breach is set out below. 16. Allegation (iii) in the notice is of "Failure to adequately report on, implement and follow-up on contractual dealings and opportunities with counter parties". This generally corresponds with breach of Services Agreement, Clause 8(a), the analysis of which breach is set out below. 17. Allegation (iv) in the notice is of "Failure to act in a manner that would not adversely affect or impair the value of the JPD business". This generally corresponds with breach of Services Agreement, Clauses 8(e) and (f), the analysis of which breach is set out below. 18. Allegation (v) in the notice is of "Deletion of the JPD business records with the intention to harm the JPD business". This generally corresponds with breach of Services Agreement, Clauses 8(e) and (f), the analysis of which breach is set out below. 19. The below analysis under the heading "Termination of the Services Agreement" shows that these alleged breaches of the Management Agreement are not made out. 20. Notice of termination repudiates the Management Agreement. In addition to JPD's repudiatory conduct in refusing to pay the management fee, the 28 March 2013 notice itself was a further act of repudiation. As a general rule wrongful termination of the performance of a contract, where a party has no legal right to do so, will constitute a repudiation of obligation because such an act indicates an absence of readiness or willingness on the part of the promisor to perform: White Trucks Pty Ltd v Riley (1948) 66 WN NSW 103, Smith v Butler (1901) QB 694-698 and Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 453. 21. Once a repudiation has occurred, the innocent party will in many circumstances still have to elect to terminate the contract for repudiation: White and Carter (Councils) Limited v McGregor [1962] AC 413 (White and Carter) and Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97, 100, 102 – 113, 114 and 117 and Showcase Video Pty Ltd v Tambali (Court of Appeal - New South Wales, 28 April 1987 unreported). But there is a cooperation limitation in the operation of the White and Carter principle: even if the innocent party continues to tender performance and that performance still requires the repudiating party's cooperation but that cooperation is refused, that refusal may prevent the innocent party earning the contract price unless the innocent party obtains an order for specific performance. 22. An illustration of this doctrine in operation in employment cases is Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 451, 452, 461,465, and 476: the fact that an employee may elect to continue performance of the contract and remains ready willing and able to work does not entitle the employee to recover wages. But here fine distinctions do not arise because Curnow Consulting did not continue to tender performance after 28 March 2013 despite the service of the termination notice. Curnow Consulting should be treated as having accepted JPD's repudiation, by wrongful termination, of the Management Agreement. Termination upon reasonable notice/damages for repudiation. 1. JPD's preliminary contention was that the Management Agreement was terminable at will. Curnow Consulting countered with the contention that, if it were not otherwise coterminous with the Services Agreement that the Management Agreement was terminable only on reasonable notice and that none of the alleged breaches warranting immediate termination were made out. It is convenient now to consider the issue of termination at will, or termination on reasonable notice. 2. The Management Agreement was always terminable on reasonable notice. Even if it is ineffective as notice of breach, the Court can treat the notice of 28 March 2013 as giving notice to terminate the Management Agreement within a reasonable time. 3. But even that is not strictly necessary. Curnow Consulting is entitled to damages for loss of its bargain upon JPD's repudiation through service of the 28 March 2013 notice. The measure of the loss to Curnow Consulting is the probable entitlements under the agreement had the notice not been given. It can be assumed from the circumstances of this case that had a notice of termination for cause not been given that reasonable notice of termination would have been given. It is now necessary to determine what the period of reasonable notice was. 4. High authority makes clear what is to be taken into account and when to determine whether a term of reasonable notice is to be implied into a contract and whether the length of notice actually given was reasonable in the circumstances. In Australian Blue Metal Ltd v Hughes [1963] AC 74 at 99, the Privy Council stated: The question whether a requirement of reasonable notice is to be implied in a contract is to be answered in the light of the circumstances existing when the contract is made. The length of the notice, if any, is the time that is deemed to be reasonable in the light of the circumstances in which the notice is given. That does not mean that the reasonable time is the time during which one party or the other could reasonably wish for the contract to continue. It is unlikely that when the notice is given the parties could agree on that. The reasons which moved one party to desire a long notice would move the other to desire a short one. The implication of reasonable notice is intended to serve only the common purpose of the parties. Whether there need be any notice at all, and, if so, the common purpose for which it is required, are matters to be determined as at the date of the contract; the reasonable time for the fulfilment of the purpose is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated. 1. What is a reasonable notice period here? The findings in the narrative of facts above show that the reasonable notice period for termination of the Management Agreement should not be shortened on account of Mr Curnow's alleged conduct in March 2013 in allegedly not providing meaningful services to JPD. Mr Curnow's non-provision of services was just as much attributable to JPD's conduct as to his own. Nothing in his conduct calls for a shortening of the period that should be assessed as reasonable notice in the circumstances here. 2. The circumstances strongly indicate a requirement of a reasonable notice period should be implied here. When the Management Agreement was formed, Mr Curnow had a period of two months on a reduced fee of $7,000 for the months of November and December 2010, whilst he closed down his office and concluded his independent consulting business and then commencing to work full time as an office manager at JPD's Mona Vale premises. 3. The parties' direct mutual experience at the time of making the contract embedded into the Management Agreement a period of lesser fees, whilst Mr Curnow adjusted his other business and settled into JPD's Mona Vale premises. The parties could both anticipate that a similar period would be required at the end of the Management Agreement for their common purpose: for Mr Curnow to re-establish his private business and for JPD to engage another manager or make alternative arrangements upon his departure. 4. In my view in March 2013 it would still probably take just as long for Mr Curnow to re-establish his independent business and for JPD to find another general manager to replace the services provided by Curnow Consulting as they had both needed at the commencement of the Management Agreement. In my view a period of 60 days was in March 2013 a reasonable notice period for the termination of the Management Agreement under the Agreement's implied term to give reasonable notice of termination. 5. Apart from its accrued entitlements up to the date of repudiation, Curnow Consulting is entitled to damages for JPD's repudiation of the Management Agreement by JPD's service of the notice of termination. These damages are measured in part by the monthly management fees that would have been paid for the duration of the Management Agreement after 28 March 2013. It can be inferred from the parties' conduct that if JPD had not terminated for breach, it would have given the minimum notice possible consistent with what was reasonable. That in my view was 60 days and represents the maximum period for which Curnow Consulting can claim lost management fees. The precise measure of Curnow Consulting's loss for this period will be the subject of the later quantum inquiry. 6. A footnote to this issue should be marked. The conclusion of the implication of a term requiring reasonable notice of termination of the Management Agreement also incidentally gives a fresh perspective to the events of February 2012. The objective evidence of Mr Curnow's email of 28 February 2012 at the least suggests he was resistant to the cessation of his $8,000 monthly management fee, and was not proceeding consensually on the basis of an agreed variation of a fresh agreement. In those circumstances if JPD wished to bring the pre-February 2012 Management Agreement to an end, it could have done so by giving reasonable notice of its termination, which in February 2012 would still probably have been 60 days. But it did not. Nor did it offer to pay Curnow Consulting's management fees for 60 days in lieu of notice. Its failure to do so was itself a breach of the Management Agreement but one which need not be separately considered because of the more serious continuing breach until March 2013. Did JPD elect to affirm the Management Agreement? 1. The next issue is whether JPD elected to affirm the Management Agreement on about 21 March 2013. 2. Curnow Consulting claims that JPD's 21 March 2013 email affirmed the Management Agreement. Before analysing this submission, the relevant principles relating to election may be shortly stated. 3. A right to terminate a contract may be forfeited if the promisee by unequivocal words or conduct evinces an intention to continue with performance of the contract. The High Court said in Wendt v Bruce (1931) 45 CLR 245 at 253: Now, a man who has his option whether he will affirm a particular act or contract must elect either to affirm or to disaffirm it altogether; he cannot adopt that part which is for his own benefit, and reject the rest: he cannot blow hot and cold. And the election once made is finally made. 1. In Sargent v ASL Developments Ltd (1974) 131 CLR 634 (Sargent) at 658, Mason J, in emphasis of the need for the promisee to have knowledge of the relevant breach or entitlement to termination, said: If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected. 1. In Sargent, Stephen J at 646 explained the words or conduct of the promisee founding an election may be described more broadly than the exercise of rights of the contract, but conduct of the following kind: The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; 1. Importantly also, Stephen J emphasises that there need be no expressed intention to elect, nor any actual subjective intention to elect. It is not necessary for a party relying upon the doctrine of election to establish that the other party acted in reliance upon it. In this sense, estoppel and waiver by election are different in that estoppel depends upon what a party causes his adversary to do, whereas waiver by election depends upon what the party itself intends to do and had done: Stephen J at 747, citing Myers v Ross (1935) 10 F Supp. 409 at 411, see also Commonwealth v Verwayen (1990) 170 CLR 394 at 422. 2. Finally, sometimes election can take place as a matter of conscious choice with knowledge of the existence of the alternative right. But in other cases, it may occur when law attributes the character of an election to the conduct of a party: Sargent at 656 per Mason J. 3. Yet another way of putting the act of an election in circumstances where the electing party may not know of his right of election is that the electing party's conduct was such that "it might be considered a natural inference, if he knew that he had a right of election, that he had resolved to affirm: Elder's Trustee & Executor Co Ltd v Commonwealth Homes & Investment Co Ltd (1941) 65 CLR 603 at 618. 4. Dixon J in McDonald v Dennys Lascelles Ltd at (1933) 48 CLR 457 at 476-477 stated: "When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach." 1. The analysis of the various alleged breaches of the Services Agreement and the Management Agreement undertaken below shows clearly that JPD would have been well aware of all of those breaches on 21 March except for those that involve events on the following day, 22 March 2013. The alleged breaches of 22 March were the following: the alleged refusal to meet, the engagement of solicitors and service of the statutory demand and the wiping of the hard drive of the JPD laptop. 2. Analysed according to these principles, JPD did elect to affirm the Management Agreement in the 21 March 2013 email in respect of breaches of which it was aware as at that date. But independently, the 21 March 2013 email further indicates JPD's lack of conviction about any of the breaches (before 21 March) alleged in the 28 March 2013 notice of termination of the Management Agreement. 3. JPD contends that Mr Durie's email of 9.04am on 21 March, read in conjunction with his earlier emails of that day was merely to declare that the revocation of Mr Curnow's email access had not been intended to terminate "your company's consultancy", and that the email was just foreshadowing a process "to work through the other matters", a process that never occurred. 4. This JPD contention is not persuasive. It assumes contrary to authority that for an election to be effective it must intimate that it is electing between inconsistent remedies. JPD characterises the email as JPD "reserving its position pending further discussions with Curnow Consulting". But the email is not reserving its position on whether the Management Agreement is on foot. 5. But in the end, the election issue is not decisive because of the breaches that are alleged to have occurred on 22 March. Termination of the Services Agreement. 1. The proper construction of clause 13 of the Services Agreement has been dealt with earlier in these reasons. Upon that construction the issue is now whether or not the Services Agreement was contractually terminated. 2. The notice of termination of the Services Agreement of 28 March 2013 specified in paragraph (a) termination based on Clause 13.1(a)(i) of the Services Agreement; and in paragraph (b) termination based on clause 13.1(a)(ii), which in turn relies on alleged breaches of Services Agreement, Clause 8. 3. The Services Agreement termination notice paragraph (b) specified three kinds of breach of Clause 8, namely Clause 8(a), (e) and (f). 4. Each of these two paragraphs of the Services Agreement termination notice is dealt with in turn below. The Reasonable Opinion of the Licensor, JPD - Clause 13.1 (a)(i) 1. JPD contends it had sufficient grounds on 28 March 2013 to form the reasonable opinion required by clause 13.1(a)(i) that the agent had "ceased to be actively engaged in the commercial exploitation and licensing of [JPD's] Intellectual Property Rights". JPD thereby seeks to justify its termination of the Services Agreement without prior notice. 2. To establish that JPD did form such a reasonable opinion, JPD relies upon seven matters: 1. Diminishment in JPD's licensing deals; 2. Mr Curnow's absence from JPD's office; 3. Unexplained removal of property from JPD's offices; 4. Mr Curnow abandoned a meeting with Mr Durie which had been set to attempt to resolve their differences; 5. Mr Curnow had wiped the hard disk of his work laptop; 6. Curnow Consulting serves a statutory demand; and 7. Curnow Consulting retains TressCox Solicitors. 1. Each of these grounds is dealt with below. But JPD places particular emphasis on the removal of material from Mr Curnow's laptop, and what is said to be an "act of war" in retaining Messrs TressCox and the issuing of the statutory demand on 22 March 2013 in respect of invoices which were known to be in dispute. 2. (a) Diminishment in JPD's licensing deals. JPD was critical of Mr Curnow's performance in maintaining existing licensing arrangements and in generating new ones. In contrast, Curnow Consulting's case is that this ground for purporting to terminate the Services Agreement under clause 13.1(a)(i) "is a manufactured explanation put forward solely for the purpose of these proceedings". Choosing between these competing contentions requires closer analysis of the arrangements that existed between JPD and the third parties to whom JPD's intellectual property was licensed. 3. The Patio by Jamie Durie licensing arrangement with Big W was a substantial part of JPD's licensing business. Citing Mr Durie's evidence, JPD submitted that the Patio product lines had dropped significantly by about March 2013 from around 300 stock keeping units to around 60 stock keeping units, meaning that the number of products on the shelves governed by this licence had fallen by about 80 per cent, with, it was contended, a corresponding fall in revenue. 4. Before considering Curnow Consulting's answers to this contention, it should be observed that a decline in stock keeping units would not necessarily itself be a basis to infer that Curnow Consulting had "ceased to be actively engaged in the commercial exploitation and licensing of JPD's Intellectual Property Rights". Before a "reasonable opinion" to that effect could be formed, at least some basic understanding of the relationship between the numbers of stock keeping units that were current from time to time and the nature of the agent's work would be required. For example, before a "reasonable opinion" could be formed rather than one based on mere speculation, it would be necessary to establish that other market conditions had not been responsible for the decline in stock keeping numbers. Authority in relation to the words "reasonable opinion" makes this clear. These words imply in the qualifier "reasonable", that there must be a "reasonable foundation" in the sense of "sufficient grounds" for the opinion: Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310 at [96] and [140]. 5. But there was an explanation for the alleged decline in stock keeping units. Mr Curnow provided it. The Court accepts his explanation. 6. Mr Curnow says, and the Court accepts, that until July 2009 JPD had a number of separate licence agreements in relation to the Patio branded products. But on 6 July 2009, this suite of licence agreements was replaced by a master license agreement with Woolworths for Big W to stock those products. The master agreement replaced an earlier set of about 10 separate licence agreements that had been negotiated from about 2007 with individual manufacturers who supplied the Patio products to K-Mart. After Mr Curnow commenced managing JPD's intellectual property, Mr Curnow negotiated and secured an initial heads of agreement between JPD and Woolworths to appoint Big W as the exclusive retailer of the Patio brand. That led to changes to the individual licence agreements, so as to provide for the selling of products through Big W rather than K-Mart. But when the first Woolworths heads of agreement expired, Mr Curnow negotiated another master agreement with Woolworths on 6 July 2009 for a further term of three years, covering all of the product categories that had previously been covered by the separate licence agreements. This gave JPD the advantage of not having to administer multiple licence agreements with each supplier of a branded product. I accept Mr Curnow's evidence that all the categories of products covered by the separate licence agreements were later covered by the Woolworths July 2009 Master Agreement and continued thereafter to produce revenues for JPD under the Master Agreement. A difficulty with JPD's evidence on this issue is its rather bland statement about the reduction of 300 stock keeping units to around 60 is not reconciled in any thoroughgoing way to the take-up of other products under the Master Licence Agreement with Woolworths, as explained by Mr Curnow. JPD's contention is not sufficiently well-founded to be acted upon. 7. Moreover, I accept Mr Curnow's evidence that he was instrumental in the negotiations commencing in about October/November 2006, leading to securing the first Heads of Agreement with Woolworths signed in March 2007 and then again in effecting the 6 July 2009 Master Agreement with Woolworths. Mr Curnow having secured this business, it is difficult to infer that he was thereafter neglecting it. The evidence is to the contrary. In an email set out in the earlier factual narrative, from Mr Durie to Mr Kenney dated 23 February 2012, Mr Durie spreads "the good news" that Big W will be renewing JPD's Master Licence Agreement for three years. 8. Mr Durie seemed quite content with the renewal. There is no evidence that Woolworths terminated or reduced this agreement before March 2013. None of this fits with a picture of a decline in product lines and declining commission revenue. 9. JPD also says Mr Curnow failed to generate new licensing deals in 2012. For example, Mr Durie says that during 2012, "I had referred various potential licensing deals to Mr Curnow". He names four of these referrals, Pro Optics, Uno Pui, Clipsal and RAK Ceramics. He complains that "no deals had eventuated". But the observation that no deals had eventuated does not itself prove that Curnow Consulting had ceased to be actively engaged in the commercial exploitation and licensing of JPD's Intellectual Property Rights. 10. To be "actively engaged" does not always guarantee success. There needs to be a reasonable foundation for the opinion that the failure of various potential licensing deals to bear fruit is a basis to infer Mr Curnow had ceased active engagement in licensing. But the evidence does not permit the Court to infer from Mr Durie's evidence on this subject that it was reasonable for him to hold the opinion that Mr Durie was not longer actively engaged in licensing. 11. JPD's evidence on this subject is vague. Mr Curnow was not asked to explain in cross-examination whether or not and, if so, how he had sought to exploit the opportunities Mr Durie had referred to him. It was unclear one way or the other whether any of the referrals in question were the subject of negotiations but had not yet been finalised as at late March 2013. All of this stands in a background of Mr Durie not complaining to Curnow Consulting in writing before March 2013 that JPD was losing opportunities because of Curnow Consulting's lack of relevant active engagement. 12. And it is almost impossible to reconcile JPD forming a reasonable opinion in March 2013 that Curnow Consulting was not actively engaged in the commercial exploitation of JPD's Intellectual Property Rights, as alleged here, with JPD's non-withdrawal of the restructure offer in the same month. 13. (b) Mr Curnow's absence from JPD's Office. JPD also seeks to justify engaging Service Agreement clause 13.1(a)(i) on the ground that Mr Curnow had absented himself from JPD's office for "almost the whole of March 2013" and that he had before absenting himself, informed Ms Deanne Curry that if certain invoices which he knew to be disputed were not paid, it would "make [himself] unavailable". 14. The findings in the Court's earlier factual narrative are a basis to conclude that Mr Curnow did not say this in threatening terms, as if to indicate that Curnow Consulting would not be rendering performance under the Services Agreement any longer. The comment was really an aside to Ms Curry, borne of justifiable frustration at JPD's failure to honour its liabilities to Curnow Consulting. Ms Curry passed the effect of this statement on through her email to Mr Durie on 7 March 2013 at 1.53pm, "if you can't make [payment] against some of his other outstanding invoices then he will walk out and make himself unavailable". 15. But this does not found the reasonable opinion that Mr Curnow had ceased to be actively engaged in exploiting JPD's Intellectual Property Rights, for several reasons. First, the contemporaneous email evidence makes clear that Mr Durie was continuing to undertake work that was consistent with the exploitation and licensing of JPD's intellectual property. The narrative of findings shows that Mr Curnow was actively involved in improving the terms of JPD's intellectual property licensing agreements and was emailing JPD reporting on this work. Had these emails come to Mr Durie's attention they were clearly a basis for Mr Durie to question that Mr Curnow was about to down tools. 16. Moreover, I do not accept that Mr Curnow said whatever he did to Ms Curry in order to have it passed on to Mr Durie as an act of mutinous defiance. Indeed, the text of Ms Curry's email of 7 March 2013 suggests that it was just one of many matters that she was drawing to the attention of Mr Durie and Mr Bryks. 17. (c) The unexplained removal of property from JPD's offices. The background to this allegation is the Court's earlier findings in the factual narrative about Mr Durie's conversation with Ms Bush on 19 March 2013. 18. The allegation of the removal of property from JPD's office without explanation is not made out. I accept Mr Curnow's evidence that he did take his laptop, a working file and some business cards home. But this was something that he did on a regular basis without comment by Mr Durie. The Management Agreement did not prohibit him working from home in his discretion, provided it did not cause him to otherwise breach the agreement. And it is to be expected that the most senior manager in the business with a marketing role should be able to take business cards and equipment home so that he could continue his "working from home" as he declared he was. The Court accepts he was working from home. 19. Nor did Mr Curnow ignore Mr Durie's query about taking property from the office. Any removal was not unexplained. Mr Curnow's text message in reply was that he was "working from home", which is an explanation for the use of the removed materials from the office: to do further work. 20. JPD submits that Mr Curnow has no intention of working away from the office and that his reference to "working from home" was a euphemism. But he did work from home and was in regular email contact with the office. 21. JPD also contends that Mr Curnow's assertion that he was "working from home" is inconsistent with his other statements that he was taking "a week's leave". But the alleged inconsistency dissolves when the whole email in question is read. Yes, Mr Curnow said that "in the meantime I will be taking a week's leave" but he continued on, "but will answer any queries the office may have during this time". In my view, there is sufficient other evidence that Mr Curnow was continuing to attend to JPD's business in the week he was away from the office, due in part to the stress he was suffering in dealing with this issue. 22. (d) Abandoning a meeting at The Cook's Larder. JPD alleges that Mr Curnow refused to meet with Mr Durie at The Cook's Larder on 22 March 2013, as pre-arranged. Mr Durie contends that the refusal amounted to Curnow Consulting declaring he would not even confer with a representative of JPD to discuss whether he and Mr Durie could "continue working together". 23. The various SMS messages and events that unfolded on the morning of 22 March are the subject of findings in the factual narrative. But The Cook's Larder meeting is weak ground for JPD. Mr Durie's email of the day before, 21 March did put the idea of meeting as something of a make or break issue, "if we're going to continue to work together, we need to speak today". But in response to that Mr Curnow made himself available to meet. In my view, Mr Curnow did not refuse to attend a meeting with Mr Durie on 22 March. The true analysis is that Mr Durie was late for the meeting without advance or contemporaneous explanation. Mr Durie himself says that he did not arrive until 10.30am. This is hardly a ground for JPD to say that Mr Curnow had refused to meet. 24. JPD's case on this issue fails to confront the fundamental issue that Mr Durie was not only late, but discourteous in failing to take advantage of modern instantaneous electronic communication to warn Mr Curnow that he was likely to be late and to ask him to stay. Mr Durie was cross-examined as to why he did not send a text message to Mr Curnow to foreshadow his delay. None of his explanation is very compelling. Mr Durie says he was doing a radio interview, possibly on the telephone while he was in the car, but he could not recall when he finished the interview and could not explain why he had not sent a text message before 10.00am to foreshadow the possibility of lateness. 25. Mr Durie's lack of communication was very likely to result in Mr Curnow's leaving the site of the proposed meeting. But Mr Durie owed Mr Curnow an apology that day, one which was never given. Mr Curnow did not refuse to meet. What happened in the next exchange of communications was instead an unsubstantiated allegation of theft from the Mona Vale office, a denial and a claim by Mr Curnow to be paid his invoices. The better analysis is that Mr Curnow interpreted Mr Durie's demands for the return of business cards and other information literally and was prepared to give them back on 22 March. But that was not because Mr Curnow wanted to cease work, but rather a response to a demand for the return of the property. 26. Mr Durie's text message at 3.37pm was a somewhat self-serving bookend. The statement, "shame we couldn't talk it through, Jamie", is a studied avoidance of Mr Durie's own fault for the meeting not taking place. 27. Without Mr Durie giving an unreserved apology for his discourtesy, there is no reasonable basis to conclude that Mr Curnow was refusing thereafter to meet him. Nor was there a proper basis for Mr Durie to conclude that any refusal on Mr Curnow's part to meet with him meant that Mr Curnow had ceased to carry out work for JPD. Any disabling of Mr Curnow from carrying out work for JPD was a product of the demand for the return of the instruments by which that work should be carried out. Moreover, despite JPD's conduct I accept that Mr Curnow was continuing to carry out work for JPD after 22 March. 28. (e) Mr Curnow wipes the laptop. JPD contends that Mr Curnow's reformatting of the laptop was a basis to infer under Services Agreement clause 13.1(a)(i) that Curnow Consulting had ceased to be actively involved in the commercial exploitation and licensing of JPD's intellectual property. The detailed findings in relation to Mr Curnow's instructions for the reformatting of the hard drive of the laptop are set out earlier in the factual narrative. 29. But JPD's allegation must be assessed by looking at the instructions to reformat the laptop in its correct place in the narrative. By that stage JPD had demanded the return of the laptop. This was not some spontaneous act of destruction on Mr Curnow's part. A series of messages to Mr Curnow over a number of days had reaffirmed the demand for return of the laptop. The decision that faced Mr Curnow on the afternoon of 22 March was in what form the laptop should be returned. 30. He had received it in blank and decided, not unreasonably, to return it the same way. But the Court accepts his evidence that the contents of the laptop computer were wholly transferred to the new computer that he purchased from Mac&Me on 22 March. The information on JPD's laptop was therefore not destroyed. JPD has never requested that Mr Curnow furnish the transferred contents of his own laptop back to JPD. Mr Curnow's own explanation for this, which the Court accepts, is that JPD was able to recover any lost data. JPD contends that it was possible that there may have been emails related to JPD's business on the laptop which were not replicated at JPD's office, as Mr Curnow admitted. On this issue what Mr Lee said to Mr Durie and JPD's subsequent conduct is the more powerful fact. JPD's lack of follow up indicates that it did not believe anything of any value was missing. 31. This is consistent with Mr Raymond Lee's reassurance to Mr Durie: "don't worry I think I know how to retrieve this". Mr Durie concluded that he did not need to ask Mr Curnow to give back data that JPD probably still had. 32. Mr Durie reacted badly to this. He characterised it as "a deliberate act to destroy company property and it was very clear to me at that point that he was our enemy". In my view that accurately reflected Mr Durie's attitude to Mr Curnow at that point. But it was an overreaction and a misconstruction of Mr Curnow's intent in reformatting the computer. 33. To the extent that Mr Curnow's reformatting of the computer hard drive and its return showed he was no longer actively engaged in the commercial exploitation and licensing of the Intellectual Property Rights, that was solely because JPD had asked for the return of the computer. 34. (f) Service of the Statutory Demand. The Statutory Demand was served at approximately 5.00pm on 22 March at the end of a day of drama. The Cook's Larder meeting had failed. JPD was persisting with its demand to return the laptop and other business equipment. Mr Durie was persisting in allegations of theft and not apologising for the failed meeting that morning. In the circumstances, Mr Curnow was not prepared as yet to meet again. 35. JPD's case colourfully labelled the Statutory Demand as a "stab in the back". But the present question is whether it gave JPD a basis to form a reasonable opinion that Curnow Consulting had ceased to be actively engaged in the commercial exploitation and licensing of JPD's intellectual property. 36. It does not provide such a basis. The Statutory Demand should be taken for just what it is: a demand for monies due upon invoices rendered on account of the provision of past services to JPD. Mr Curnow had tried to initiate discussions about unpaid invoices on several occasions in the previous 12 months but Mr Durie had not directly engaged. Mr Curnow could not get Mr Durie's attention by any other reasonable method. Mr Durie had just treated him brusquely by failing without warning to attend a meeting on time that morning. Mr Curnow genuinely believed that he had a contractual entitlement to be paid the outstanding invoices. Moreover, this judgment finds that he did have such an entitlement. JPD's failure to pay any part of the invoices is not justifiable. JPD's characterisation of the Statutory Demand as Curnow Consulting declaring an intransigent refusal to cooperate with JPD or to be actively involved in JPD's licensing business only makes sense if the Statutory Demand is wholly unjustified, which it was not. These reasons find, there was a sound basis behind it, at least to the extent of non-payment for a year of a monthly fee of $8.000 under the Management Agreement which would alone account for about half the value of the demand. 37. Finally, additional steps needed to be taken before the company, JPD, could be wound up if there were no response to the Statutory Demand. Indeed the Demand was withdrawn as soon as JPD's solicitors notified Curnow Consulting's solicitors on 5 April that the debt was disputed. 38. (g) The Retainer of TressCox. JPD submits that a combination of the service of the Statutory Demand and Curnow Consulting's retainer of TressCox Lawyers to represent the company and Mr Curnow was sufficient for Mr Durie and JPD reasonably to conclude that Curnow Consulting had ceased to be actively involved in the commercial exploitation and licensing of JPD's intellectual property within Services Agreement clause 13.1(a)(i). JPD submits that "it beggars belief" that Curnow Consulting could contend that "it would continue to be actively engaged in JPD's product licensing business" whilst issuing a Statutory Demand through lawyers. 39. In my view, JPD is not in any position to complain about the engagement of TressCox Lawyers. Any party to an agreement is entitled to engage lawyers and take advice about legal rights without that, on its own, grounding an inference that the contracting party had somehow ceased to be engaged in the performance of the contract. Indeed if anything, the engaging of lawyers tends to base the opposite inference: adherence to the terms of a contract sufficiently seriously that, the party was not prepared to take action that may be a breach without legal advice. And JPD engaged lawyers at this time without breaching either agreement. 40. When one analyses JPD's submissions under this heading it is not complaining about the engagement of TressCox lawyers but about the service of the Statutory Demand, which has been dealt with under the previous heading. Curnow Consulting Breaches Services Agreement Clause 8 Obligation -Clause 13.1(a)(ii) 1. By paragraph (b) of its notice of termination, JPD seeks also to justify the immediate termination of the Services Agreement under Clause 13.1(a)(ii). It claims Curnow Consulting was "in breach or default" of the Services Agreement, where such breach or default was not one that "is capable of remedy" and therefore it was not required to serve a 28-day written notice requesting a remedy of the breach. JPD contends that at least some of the allegations that would otherwise found "the reasonable opinion" under Clause 13.1(a)(i) also found a conclusion of breach under Clause 13.1(a)(ii). And in addition to the matters relied upon under Clause 13.1(a)(i) JPD brings other miscellaneous allegations of irremediable breach, which are dealt with in section. 2. JPD repeats three of the Clause 13.1(a)(i) grounds, as irremediable breaches of Clause 8: (a) diminishment in JPD's licensing deals, (b) Mr Curnow's absence from JPD's office; and (e) Mr Curnow wiping his work laptop. 3. JPD's contentions on this ground fail. Not only are the actions identified not irremediable breaches, the Court's analysis does not justify a conclusion of any relevant breach of the Services Agreement. 4. The Services Agreement Clause 8 obligations are generally directed towards the licensing agent delivering quality services to a professional competent and experienced standard (a), not to intentionally do or suffer an act which may impair or adversely effect the Intellectual Property Rights (e), and to report adverse circumstances and events to JPD, (f). 5. There is no basis to conclude that any performance of the Services Agreement by Curnow Consulting which was less than professional or competent, or which had permitted any impairment or adverse effect on JPD's Intellectual Property Rights, led to diminishment in JPD's licensing deals. And even if it had, the diminishment of licensing deals over time, amounting to a contractual breach, is a classic candidate for remedy by notice. If JPD had observed any falling away of Curnow Consulting's standards or Curnow Consulting allowing any intentional impairment of the Intellectual Property Rights, notice identifying the conduct or the acts should not have been difficult to formulate and could readily have identified for Curnow Consulting the matters to be remedied. And one would expect, once identified, that a professional and competent agent would remedy them and perform its duties under Services Agreement, Clause 8(a) and (e). 6. As to Mr Curnow's absence from JPD's office, nothing in the Services Agreement required Mr Curnow to be present in the office. This is one of the key distinctions between the two agreements. The Management Agreement did require Mr Curnow to be based out of JPD's Mona Vale offices. But Curnow Consulting had performed the Services Agreement out of an office in Newport for many years before the Management Agreement accounted for Mr Curnow's move to JPD's offices. Moreover, if absence from JPD's office had become a breach of Services Agreement, Clause 8 due to some changed circumstances, such absence was by its nature readily remediable by simple notice and does not found a basis for the immediate termination of the Services Agreement without prior notice. 7. The Court's previous analysis of Mr Curnow's conduct in reformatting JPD's laptop was not a breach of the Services Agreement. It is difficult to see how it could be a breach of Clause 8(e) or (f). Moreover, without intent to deprive JPD of its electronic data (Mr Curnow had no such intent), and in performance of a request to return the JPD laptop (as Mr Curnow judged, in the form in which he had received it), it is difficult to see that that his conduct falls short in any way of the standard of "a professional, competent and experienced licensing agent". 8. Nor has JPD established that if this was a Clause 8 breach, that it was irremediable. To establish that it was irremediable, JPD would have to have proved that it irretrievably lost data by reason of the reformatting of the laptop. As the Court's earlier analysis shows, JPD has conspicuously failed to do this. 9. Finally, JPD relies upon other alleged breaches of Services Agreement, Clause 8. Mr Curnow accepted in cross-examination that part of his role was to protect the integrity of Mr Durie's public image. This admission went further than the precise form of his obligations in the Services Agreement, Clause 8(f), which was that if he became aware of "any fact, circumstance, event or report", "which does or may adversely affect or damage" JPD's or "Durie's reputation", or the "value of the goodwill in the Intellectual Property Rights", then he had obligation to notify JPD in writing of that fact, circumstance, event or report. His obligation was to draw to JPD's attention matters within his knowledge that may adversely affect Mr Durie's reputation. But he did not have an obligation to ensure the integrity of Durie's reputation or to take steps to ensure that there were no attacks on Durie's reputation. For obvious reasons, Clause 8(f) does not make Curnow Consulting's obligations as onerous as this. Similarly, Curnow Consulting's obligations under Clause 8(e) are "not intentionally to do or suffer to be done" anything which may in any way impair or adversely affect the Intellectual Property Rights. This involves a degree of conscious act or neglect, leading to damage. 10. Curnow Consulting involved JPD in a deal with a company, LM Investments, which led to major reputational damage for Mr Durie. Mr Durie did suffer significant negative coverage on Four Corners and Twitter through JPD's licencing agreement with LM Investments. In cross-examination Mr McClintock, counsel for JPD effectively highlighted the extent of that damage. In a report in early March 2013 in a Four Corners program broadcast under the heading "A Betrayal of Trust" presented by Mr Kerry O'Brien, LM Investments is profiled as a company accepting investors' funds and "promising competitive returns in a business that seemed like a winner", before Four Corners alleged that what its investors did not know was that the company's "founder was removing millions of dollars from the company in fees that he had paid to himself". Four Corners offered the opinion that "to many of the investors this looked like fraud but to their dismay no criminal charges have been pursued." Four Corners offered the final view that "the company [LM Investments] went into liquidation leaving them with nothing". 11. But I accept Mr Curnow's evidence that at the time the LM Investments contract was made he did not believe or expect it may affect Mr Durie's reputation. Moreover, the contract that he negotiated with LM investments was of a limited kind and one which he subjected to an appropriate degree of due diligence. Mr Curnow's evidence, which the court accepts, was that the licensing agreement in question was not to commit generally to the reputation of LM investments but simply for Mr Durie to promote an LM Investments property development called "Maddison Estate", which Mr Durie and Mr Curnow had visited. As part of their due diligence, Mr Curnow and Mr Durie had done site visits together and Mr Curnow had checked the LM Investments balance sheet and some of the characters involved within that company. 12. But I accept that without Mr Curnow's knowledge, that Mr Durie did "a piece to camera for LM investments without showing [Mr Curnow] the script or potential storyline". Much of the consequent reputational damage that followed came from Mr Durie's decision to go beyond the requirements of a conventional licensing deal and to associate his image with LM Investments general reputation. In my view Mr Curnow did enough due diligence on the Maddison Estate project consistent with the professionalism to be expected of him. 13. This is also to be inferred from his past conduct. When the nature of the high-pressure sales being pushed by one JPD client, PMA, came to Mr Curnow's attention, Mr Curnow said, and the Court accepts: "the minute I got a sniff of any problem I alerted the guys and said we've got a get out of this deal". Mr Curnow's attitude to looking after Mr Durie's reputation was pro-active and generally effective. 14. Also Mr Curnow's years of experience before his full-time commitment to managing JPD well prepared him to be alert to risks to his clients' reputations. It would have been foolhardy for him consciously to take a risk with a company such as LM Investments, if he knew it might impair Mr Durie's reputation. He certainly did not intentionally permit the deal to go ahead in mid-2012 in a way that he anticipated might impair Mr Durie's reputation. JPD has not established that a competent agent would have made more inquiries than Mr Curnow did before committing JPD to the LM Investments deal. And any damage that followed was thoroughly mixed with the effects of Mr Durie's own conduct. 15. In my view, no lack of professionalism or competence has been demonstrated on Curnow Consulting's part in perfecting the LM Investments contract with JPD. 16. Finally, the use of an invalid Clause 13.1 termination notice to attempt to bring the Services Agreement to an end was a repudiation of the Services Agreement, which had now been accepted by Curnow Consulting. But the Services Agreement would have expired on 30 June 2013. But one consequence of the invalidity of the Clause 13.1 notice is that Clause 5.3 of the Services Agreement, allowing trailing commissions, continues to apply. Those commissions will need to be calculated in the quantum hearing. The Quantum Hearing and Mr Durie's liability 1. The principal purpose of the quantum hearing will be to calculate, on the basis of the findings in these reasons, what fees have accrued as payable to Curnow Consulting under the Management Agreement and the Services Agreement up to the dates on which the Court now has found that those agreements were terminated, and deducting therefrom any amounts overpaid by JPD to Curnow Consulting. 2. Curnow Consulting is entitled to remuneration in respect of amounts accrued and owing to it up to the moment of termination of each of the agreements: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477 per Dixon J, considered with approval by Keane J in Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592 at 637 and referred to in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52 at [79] in the joint judgment of their Honours Kiefel, Bell, Gageler, Keane, and Gordon JJ. 3. The findings set out earlier in these reasons should be sufficient to enable that calculation to be made. But if any gap appears in the Court's findings, which inhibits completion of this calculation, the parties will be granted liberty to apply to re-list the matter to request the Court to make necessary supplementary findings to facilitate a final calculation. 4. The parties did not focus sufficiently in their final submissions on the issue of Mr Durie's liability, if any, separately from that of JPD. This issue is reserved for further consideration. If it is necessary to determine that question before the quantum hearing then the parties may approach the Court for further directions. Conclusions and Orders 1. The effect of these reasons may be briefly summarised. 2. The terms of the written Services Agreement are not in dispute. But there are substantial disputes about the terms of the oral Management Agreement. Except in a number of limited respects which will be identified briefly here, in these reasons the Court prefers Curnow Consulting's contentions as to the content of the Management Agreement. Curnow Consulting was entitled to 5% commission on amounts paid to JPD and JPD Design Inc. for all revenue received from any source other than pursuant to the Services Agreement, but no commission was payable upon revenue derived from sources introduced to JPD by Mr Sean Anderson or entities through which he provided services. There were no other "carve outs" from Curnow Consulting's entitlement to commission under the Management Agreement so as to prevent either the charging of double commissions, or in respect of JPD's design business. 3. JPD and Curnow Consulting did not agree on or about 23 February 2012 either to vary their existing Management Agreement or to make a new Management Agreement upon terms for the provision of the same or similar services by Curnow Consulting to JPD but without the payment of an $8,000 monthly management fee to Curnow Consulting. At best, the parties were in February 2012 in a position of negotiating stand-off about the terms of a new Management Agreement. But in the meantime and after 23 February 2012, Curnow Consulting continued to provide, and JPD continued to accept, the same services as had been provided under the Management Agreement. 4. There was no trial period for Curnow Consulting to perform the Management Agreement between 1 January 2011 and 31 December 2012. Nor was it a term of the Management Agreement that it was terminable by either party at will; rather it was terminable on reasonable notice, which at the time of attempts at termination in March 2013 was 60 days. The duration of the Management Agreement was not agreed between the parties to coincide with the duration of the Services Agreement, such that they were coterminous. 5. The issue of termination of both agreements is also in contest. That contest is resolved as follows. The factual basis for the termination notices served by JPD on 28 March 2013 is not made out and the serving of the notices of termination was a repudiation of both agreements. Curnow Consulting accepted that repudiation and is entitled to damages for JPD's wrongful termination. But those damages so far as the Management Agreement is concerned are limited by the right that JPD otherwise had to terminate that agreement on 60 days' notice. And the Services Agreement would otherwise have expired by effluxion of time on 30 June 2013, because although the notice of termination of the Services Agreement was invalid to effect a termination for breach, its intent was nevertheless quite sufficient as a "notice of termination" within the meaning Clause 14 of the Services Agreement, as was the intent of a back-up notice JPD served the same day. 6. The issue of costs cannot be determined in this case in the absence of a result from the quantum hearing and any surviving issues about Mr Durie's liability. Subject to hearing from the parties, the Court does not propose to deal with issues of costs before then. 7. The parties will need a mutually convenient date to consider the further course of these proceedings in the light of the Court's published reasons. The parties should contact my Associate to set a date for directions in relation to the quantum hearing. But the parties are encouraged to attempt to agree upon the substance of those directions. 8. The Court therefore orders: 1. Direct the parties to bring in short minutes of order to give effect to these reasons. 2. Grant leave to the parties to approach my Associate to find a date for a further directions hearing to meet the mutual convenience of the parties. 3. Grant liberty to apply. ********** Amendments 04 September 2017 - Coversheet Decision: See paragraph [441], changed to [438] – [444]. [93] fifth line, "management fee," changed to "management fee:" [104] first line, add "part of" after "do accept" Last line, "probably" to "probable" [117] second last line, "place these kind" to "place this kind of" [129] second line, "learned of JPD's" to "learned JPD was having" and "problems in February 2012," [130] second line, "JPD quickly" to "soon" [143] second line, add "this aspect of" after "which" [156] first line, "Curnow" to "Durie" [159] second last line, "than existing deals" to than on existing" Above para [183] deletion of heading [185] second line, "March 2013" to "2012" [187] fourth line, "March" to "February" [190] third last line, "essentials but" to essentials. But" and "resisted any" to "resisted agreement to any" [195] second line, "these does" to "these events", third last line, "knew in my view" to "knew, in my view,", last line "he" to "Mr Miller" [206] fourth line, Durie to Curnow, ninth line, "persuaded that" to "persuaded of" [212] fifth line, "unable" to "able" [218] fourth line, "of" to "in" [229] eleventh line, aware "of Mr Curnow's claims", last line, of "unjustified invoices" [232] fifth line, "but" to "which" and delete "them" [236] second line, delete "other" [242] third line, "creates" [243] sixth line, delete "agent ceasing due to", ninth line, "may, but not necessarily," [246] second line, "The contrary notice" [314] first line, "28" to "26" [328] seventh line, "Curnow consulting" to "Curnow Consulting" and "mobile" to "Mona Vale" [330] fifth line, "indicating in" [336] first line, "were" to "was" [345] third and seventh line, italicise "White and Carter" [349] third line "2013", "Curnow Consulting", second last line "not" to "now" [356] fourth last line, "Curnow Consulting's" [382] seventh line, move "from about 2007" after the word "negotiated" in sixth line, eighth line lower case of Intellectual Property", eleventh line, "for the selling" [383] second line, after 2006",leading to" [384] second line, delete "this" [388], third line, lower case of intellectual property rights [389] fourth line, delete "had" before "informed" [390] third last line, after "email" add to Mr Durie [391] lower case of intellectual property [401] third last line, before 22 March delete words "the information of" [404] fourth line, lower case of intellectual property [406] sixth line, "Durie's" to Curnow's", third last line, "admitted. On this" [411] last line, lower case of "intellectual property" [412] tenth line, "pay any part" [413] first line, "company, JPD, could" [414] sixth line, lower case of intellectual property [421] tenth line, delete "whether" after Rights [424] first line, delete "But", last line change "had" to "has" [429] second line, "a" to "one JPD" client [430] fourth line, "LM Investments" [441] third line, delete "20 and" to "28" and "notice" to "notices", sixth line "Agreement is" 12 December 2017 - throughout- Mr Kenney has been misspelt as Mr Kenny. [29], line 1- missing 'to' between the words 'challenge' and 'Mr Durie's credibility'. [105], line 4 - date should be 14 December 2010, not 14 December 2014 [117], last - 'Restrictions' should be 'restriction' [149], first line of quoted paragraph - should read 'repaying' rather than 'replaying' [171], line 2 - should read 'Mr Durie' not 'Mr Curnow' [171] line 3 - should read 'by Mr Miller" not 'to Mr Miller' [175], 1, 3, 5- references to 'to Mr Sean Anderson' should read 'to Mr Curnow in relation to deals introduced by Mr Sean Anderson' [186], line 1-should read 'Mr Curnow stay away from the office' not 'Mr Durie stay away from the office' [195], line 6 - should read 'management fee' not management fees' [214], line 4 - should read 'in the January 2011 - March 2013 period which JPD paid that were...' not 'in the January 2011- March 2013 period in which JPD paid invoices that were...' [219], line 2 - should read 'attachment 'A'' not 'attachment, A' [241], line 2- should read '31 December 2011' not '31 December 2012' [246], line 4 - should read 'of a 90 day period' not 'of 90 a day period' [279], line 2 - should read 'Mike has come into the office and taken everything' not Mike has come into the office had taken everything' 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: 12 December 2017