FEDERAL COURT OF AUSTRALIA

Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited [2018] FCA 174

ORDERS

THE COURT ORDERS THAT:

1.    The claims of the applicants for relief in terms of prayers 1A, 1, 2(a) and (b), 2A, 2B and 2C of the amended application (claims) be dismissed.

2.    The applicants do pay the respondents’ costs of the claims.

3.    The respondents’ costs of the claims be fixed in the amount of $140,140.55 inclusive of GST.

4.    There be liberty to the respondents to apply within 14 days for an order varying the order for costs to provide for costs to be awarded on an indemnity basis.

5.    The orders as to costs of Justice Lee dated 21 December 2017 be vacated.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

COLVIN J:

1    For some years, a particular species of micro algae indigenous to Australia known as Dunaliella selina algae or DSA was cultivated in saline ponds on a property at 1 Millers Road, Gap Ridge near Karratha in the Pilbara region of Western Australia (Site). Other algal species were also cultivated on the site which was the subject of two Crown leases.

2    In 2010, Aurora Algae Ltd became the lessee of the Site. In April 2014, Rainstorm Dust Control Pty Ltd entered into an agreement with Aurora to take an assignment of the leases which were due to expire on 26 April 2015. The terms of Rainstorm’s agreement with Aurora included a restraint upon Rainstorm using the Site for production of algae. Rainstorm’s interest was in using the ponds and other infrastructure which had been established on the Site for the processing of waste bitterns (sourced from an adjacent landowner, Dampier Salt) into a dust control product. Rainstorm also had a small aquaculture component to its business, but that was not its core business.

3    After entering into the agreement with Aurora, Rainstorm immediately commenced steps to arrange for the transfer of the leases and to seek new long term leases to commence upon the expiry of the existing leases. In due course, the existing leases were transferred to Rainstorm.

4    InterClinical Laboratories Pty Ltd, a company controlled by Ian Tracton, was involved in the production of DSA at the Site prior to 2014. Mr Tracton also controlled Plankton Australia Pty Limited.

5    From April 2014 there were dealings between Mr Tracton, on behalf of Plankton Australia, and Robert Kerr, the managing director of Rainstorm, concerning arrangements whereby DSA might be produced at the site. Prior to those dealings, Mr Tracton had approached Aurora concerning whether there would be any issue with production of DSA (as distinct from other forms of algae) on the Site and, despite the restraint agreed with Rainstorm, was advised that there would be no issue in relation to DSA.

6    Thereafter, in the course of dealings between Rainstorm and Plankton Australia, a further company, Plankton Farms Pty Limited, was incorporated for the purpose of undertaking the cultivation of DSA on the Site.

7    In these proceedings, Plankton Australia, Plankton Farms and Mr Tracton claim that a legally binding joint venture agreement was concluded between Plankton Australia and Rainstorm as to activities on the Site including the cultivation of DSA by Plankton Australia and the production by Rainstorm of its dust suppression product.

8    It is claimed that by the terms of the joint venture agreement, amongst other things, Plankton Australia and Rainstorm agreed to establish Algalfields Pty Ltd, a company in which Rainstorm and Plankton Australia would be the shareholders and Algalfields would become the holder of the “master lease” in respect of the Site and would grant sub-leases to each of Plankton Farms and Rainstorm. It is common ground that these are steps which could not be taken without the consent of the Minister for Lands.

9    Claims are also made, in the alternative, that Rainstorm and Mr Kerr engaged in misleading or deceptive conduct and that an estoppel by representation operated to prevent Rainstorm denying the existence of the alleged joint venture agreement. Each of these two alternative claims and the claim in contract is made to support an application for relief recognising the existence of a binding joint venture agreement between Plankton Australia and Rainstorm and requiring Rainstorm to complete the establishment of Algalfields and to seek the consent of the Minister to the transfer to Algalfields of the leasehold interest in respect of the Site held by Rainstorm.

10    The issue in the proceedings is not whether Plankton Australia and Rainstorm intended to create legal relations. It is evident that they participated in a process of negotiation where the ultimate object was to conclude a contract. Rather, the principal issue is whether, prior to the disavowal of the existence of an enforceable contract by Rainstorm in June 2015, the parties had reached a consensus of a kind that the law would regard as an enforceable contract or alternatively whether Rainstorm had led Plankton Australia to believe that such an agreement had been concluded and Rainstorm had acted in reliance upon that state of affairs.

The relevant contractual princIples

11    The formation of a legally enforceable contract usually requires the communication of an offer to be bound to specified terms (which deal with all essential matters) and an unequivocal acceptance of those terms communicated to the offeree. However, the law is not rigid in its approach. The relevant principles were summarised by Allsop J (as the Chief Justice then was), with Drummond and Mansfield JJ agreeing, in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369] in the following terms:

… a number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting "i"s and crossing "t"s or where they think they have done so. … Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able … to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: ‘and we hereby agree to be bound’ in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.

12    Whether a contract has been entered into is to be judged on “an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour)”: Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [25]. See also, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].

13    Where the claim made is that a contract was concluded by the oral communication of terms or the oral communication of assent to written terms, one matter to be considered is the magnitude and complexity of the subject matter of the alleged contract because such matters bear upon the likelihood that the parties intended to reach legally binding terms in an informal manner: Uranium Equities Ltd v Fewster (2008) 36 WAR 97 at [224].

14    Also, there can be no legally binding agreement if there is not mutual assent as to all of the essential matters necessary to form a complete agreement having regard to the subject matter of the agreement: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604 and Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at [25], [28]-[30]. In any case where it is alleged that a contract has been concluded, there is an implicit contention that the terms that have been assented to deal with all essential matters. An agreement to agree or an agreement that deals with only part of the subject matter required will not manifest the necessary mutual assent, which must bespeak “an intention to be legally bound to the essential elements of a contract” (emphasis added).

15    It is not necessary for a binding agreement that there be “meticulous detail”: Terrex Resources NL v Magnet Petroleum Pty Ltd (1998) 1 WAR 144 at 159. Rather, what is required is agreement as to those matters that are necessary in order for there to be an effective governance of their actions by contractual assent having regard to the subject matter of their agreement.

16    Conduct that occurs after the point at which it is alleged that a contract has been formed is admissible for the purpose of determining whether a contract was indeed formed at that earlier time: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-8 and Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25]. However, not only must such conduct point to the existence of a contract but it must point to the existence of a contract in the terms alleged in the proceeding: Laidlaw v Hillier Hewitt Elsey Pty Ltd [2009] NSWCA 44 at [9]. (Conduct after the conclusion of the contract is not admissible when it comes to determining the meaning of the terms of any contract found to have been concluded: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [35]).

17    Where terms have been assented to and there is a manifest intention to prepare a formal document recording the agreement there remains an issue whether there was an intention that there will be no concluded bargain unless and until a formal contract has been executed: Masters v Cameron (1954) 91 CLR 353 at 360. Or whether the parties intended to be bound immediately, but also expected to make a further contract in substitution for their initial agreement containing, by consent, additional terms: Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628.

18    If the conclusion is reached that the parties have manifested the requisite mutual assent then the courts will be astute to adopt a construction that gives effect to that intention: Meehan v Jones (1982) 149 CLR 571 at 589.

19    With those principles in mind, I now consider the evidence as to the chronology of dealings between the parties.

Mr Tracton’s past connection with the Site

20    In 2010, Mr Tracton and InterClinical entered into a business sale agreement to purchase, amongst other things, all of the stock of dried product that had been produced from DSA cultivated at the Site. InterClinical supplied customers with that product over the following years. By 2014, that stock was running down. By the time of trial, the stock was very low.

21    It is only possible to grow DSA at a handful of locations throughout Australia. The intrinsic characteristics of the Site provide the perfect habitat to grow DSA. DSA is fragile and is not able to be moved readily from the Site.

22    When the opportunity arose to acquire the leases for the Site, Mr Tracton was interested in doing so because of the existing infrastructure and his past connection with the Site. However, he did not have the funds to do so.

Initial dealings between the parties

23    On 4 April 2014, Mr Tracton contacted Aurora, the former lessee of the Site, stating that Plankton Australia was very keen to work with the new owners of the Site for the production of DSA.

24    On 8 April 2014, Rainstorm wrote to Murray Raven, the manager for the Pilbara region at the Department of Lands, seeking the transfer of the Crown leases for the Site to Rainstorm. The letter also stated that Rainstorm wished to make a formal application for a long term lease of the land to be used for manufacturing dust suppression products and conducting an aquaculture business to commence immediately following the expiration of the then existing lease.

25    Attached to the email was a letter dated 8 April 2014 from Rainstorm to Mr Raven. It concluded in the following terms:

Finally, as you know, the Leases expire in April 2015. Leaving aside the issue of Aurora’s application for Ministerial Approval to the transfer of the Leases to Rainstorm, Rainstorm wishes to make a formal application for a long term (30 years would be ideal) lease of the Land for the purposes outlined above, which lease would commence immediately following the expiration of the current term of the Leases. I would appreciate your assistance and advice on what is necessary to initiate this process.

26    On 11 April 2014, Aurora informed Mr Tracton that it had no objection to InterClinical and Plankton Australia operating to produce DSA at the Site.

27    On 27 May 2014, Mr Tracton sent an email to Mr Kerr stating:

Further to our discussions, we are keen to finalise arrangements with your company to continue to use the existing Aurora algae aquaculture site at Karratha for the growth and harvesting of micro algae.

28    Mr Kerr responded:

I am knocking up some suggested wording for you to put on to your letterhead. Please amend as you feel fit and get it back to me ASAP as I need to get my email off to the Ministry of Lands with some urgency.

29    Later that same day, Mr Kerr sent an email to Mr Tracton setting out the draft terms of the letter to be sent by Plankton Australia to Mr Raven at the Department of Lands. Mr Kerr’s email commenced:

As discussed, competing parties are trying to overturn the deal Rainstorm struck with Aurora on the grounds that we don’t have a ‘big enough’ aquaculture component to our proposed use of the leases. What I require from you is a letter on your letterhead stating something along the lines of: …

The email then set out the draft terms of the letter.

30    This early communication reveals a concern on the part of Mr Kerr that the transfer of the leases of the Site might not be approved by the Minister unless it could be demonstrated that the Site would be used for substantial aquaculture activities. Further, Mr Kerr considered that an arrangement with Plankton Australia would assist Rainstorm in securing a transfer of the leases.

31    Mr Tracton responded to Mr Kerr’s email as follows:

As per our discussions and to move the project along, please find attached our letter which you are welcome to forward to the W.A. government regarding finalization of the new lease required for the Karratha aquaculture site.

32    The attached letter, which subsequently was sent to Mr Raven, included the following:

Plankton Australia Pty Ltd and … Rainstorm Dust Control Pty Ltd have a mutual interest in the use and development of [the leases for the Site] … for the conduct of aquaculture and related activities. Plankton Australia in (sic) involved in the growth, harvesting, development and research of the micro marine species Dunaliella salina.

… It is anticipated that the complementary nature of both company’s businesses will mean full utilization of the potential of the lease sites, provide employment in the Karratha and Pilbara area and bring in export dollars to Australia. Myself and key personnel from Plankton Australia, along with key personnel from Rainstorm are intending to fly to the site within the next few weeks to inspect the facilities so the arrangement between Rainstorm and Plankton Australia can be finalized. We see the site as a unique opportunity to maximize the value of the existing algae production infrastructure, which will allow us to relocate our existing business development plans from Queensland to Western Australia and would appreciate any assistance in finalizing the lease transfer to Rainstorm, so we have a legal basis to finalize our own sub-lease arrangement with Rainstorm.

33    Having regard to the manner in which the letter to Mr Raven of 27 May 2014 was prepared, I can be confident that at that time no agreement had been concluded and the parties were in discussions about a sub-lease arrangement between Rainstorm and Plankton Australia. At that time, the prospect of such a sub-lease arrangement was being presented to the Department of Lands to support Rainstorm’s application for a long term renewal of the leases of the Site. What the letter does reveal is a perspective that it was necessary to finalise the position of Rainstorm in respect of the lease of the Site before any sub-lease arrangement with Plankton Australia might be concluded.

34    It appears that before the letter from Mr Tracton was provided to Mr Raven, Mr Kerr telephoned Mr Raven to discuss the matter. Towards the end of the day, Mr Kerr sent an email to Mr Raven which commenced as follows:

As discussed on the phone, when Aurora Algae put out the remaining period of its leases to tender, there were 5 or 6 companies bidding. Australian Plankton actually outbid Rainstorm, Murujuga and the others but did not have financing in place at the time so subsequently the deal was made with Rainstorm. Since that time, Rainstorm and Australian Plankton have been negotiating arrangements for both companies to share the site. Rainstorm with its bitterns processing and aquaculture supplements business while Australian Plankton would expand its existing business of growing salt water algae …

35    The email then stated:

The ponds and facilities which AP [ie Plankton Australia] require are not required by RDC [ie Rainstorm] and the infrastructure required by RDC is mostly not required by AP. Rainstorm has already purchased all the physical assets onsite but are still waiting for the actual transfer of the lease(s). There might need to [be] a bit more pondage constructed but that is one of the issues I’m discussing with Mr Ian Tracton of Australian Plankton later this week when he flies in from Sydney. In the following weeks, representatives of both companies will be flying to the site to finalize the sharing arrangements. Unfortunately, with the unexpected hitch in transferring the lease to Rainstorm from Aurora, we aren’t in a legal position to finalize any contracts with Australian Phytoplankton. And, naturally, any long term commitments between the two companies will depend heavily upon Rainstorm securing the long-term lease after the exploration of the current lease held by Aurora.

36    The reference to “Australian Phytoplankton” appears to have been intended to be a reference to Plankton Australia. Significantly, this contemporaneous communication is also consistent with an approach whereby the finalisation of any contracts is to abide the outcome of dealings with the Minister to secure a long term lease.

37    On 30 May 2014, Mr Kerr sent a further email to Erin Kelly at an email address which appears to be at the Department of Premier and Cabinet. The email included the following:

I thought it would be timely to let you know, that myself and Mr Ian Tracton of Plankton Australia have agreed on arrangements to share the facilities at the Aurora Algae site. Mr Tracton first contacted me 2010 looking for sources of bitterns … when Rainstorm signed the lease transfer agreement with Aurora Algae, I intended to discuss with Mr Tracton whether his companies (Plankton Australia and InterClinical Laboratories) would be interested in utilizing the algae growing infrastructure on the site. I had intended to finalize the lease transfer and extensions first before commencing negotiations with Mr Tracton, however, given the current circumstances and the passing of time I initiated contact fairly recently. Yesterday, after initial telephone and email discussions, Mr Tracton flew to Perth and we have agreed that the arrangement is viable and mutually beneficial. Perhaps, most importantly to the Ministry of Lands, our arrangement now provides continuity of the original lease requirements for aquaculture over and beyond Rainstorm’s own activities in that space.

38    The email went on to state that Rainstorm had already hired the site manager from Aurora with his extensive aquaculture experience. This was a reference to Owen Bunter. Subsequent dealings between Rainstorm and Plankton Australia concerning the allocation of the cost of employing Mr Bunter are dealt with below.

39    The email from Mr Kerr to Ms Kelly paints a slightly different picture to the earlier communications with Mr Raven. It states that arrangements to share the facilities have been agreed. It appears this occurred at a meeting on 29 May 2014. Importantly though, no claim is made by Plankton Australia that an enforceable contract was concluded between the parties at this time. Mr Kelly deposed that the original arrangement he discussed with Mr Tracton was that Plankton Farms would be incorporated and Rainstorm would sub-lease the algal growing portion of the Site to Plankton Farms for an annual fee of $200,000 or, in lieu of lease fees up to 20% equity. This appears to be the nature of the “arrangements to share the facilities” that were agreed at this time.

40    In early June 2014, Mr Kerr sent an email to the Pilbara Development Commission (PDC) which was expressed in very similar terms to his email to Ms Kelly. In particular, it included the same statement to the effect that Rainstorm and Plankton had agreed on arrangements to share the facilities at the Site. Mr Kerr copied the email to Mr Tracton.

41    In his evidence, Mr Tracton agreed that the discussions he had with Mr Kerr at that time were about Plankton Australia becoming a sublease-holder and that no binding agreement had been reached at that point. He accepted that the detail was still to come. Nevertheless, it is evident that the parties described the outcome of their early discussions as an “agreement”, albeit not a binding one at law.

42    Mr Tracton gave unchallenged evidence about a meeting that he attended with Mr Kerr and Ken King, the CEO of the PDC. Mr Tracton said that during that meeting there was a conversation in which he said words to the effect that:

Plankton and Rainstorm are currently in negotiations to secure mutually beneficial commercial agreements. Prior to finalising that agreement we will need to ensure that a new long-term lease for the Site is granted by the Minister.

43    Mr Tracton said that Mr Kerr then said:

It is the intention of the parties that if Rainstorm is awarded a further long-term lease, it will enter into a sublease for the duration of the period of the long-term lease with Plankton Australia.

44    In June 2014, Mr Tracton and Mr Kerr continued to discuss the terms on which Plankton Australia and Rainstorm may be able to coexist on the Site. There came a point when Mr Tracton was not willing to advance negotiations further and disclose his business plans until Mr Kerr signed a confidentiality agreement. It was put to Mr Tracton that he was not prepared to take Mr Kerr at his word and wanted a formal legal document about confidentiality. He responded that he had only known Mr Kerr for about three weeks. Nevertheless, the fact that at the instigation of Mr Tracton the parties recorded their confidentiality agreement in a formal manner provides some context to their ongoing dealings and the extent to which they may have contemplated that a legally binding agreement may be reached between them concerning activities at the Site without the terms being recorded formally in writing.

45    On 19 June 2014, Plankton Australia and Rainstorm entered into a confidentiality agreement. It recited that each party had agreed to provide the other access to confidential information “as a pre-requisite for the provision of developing a new on-going business relationship between the parties”.

46    On 24 June 2014, a letter was sent to PBC on the letterhead of Plankton Australia, but signed by Mr Tracton, Managing Director of Plankton Australia and Mr Kerr, Managing Director of Rainstorm. It referred to a meeting “in Karratha last week”. It confirmed a number of points including:

4. Rainstorm will be taking an equity position in Plankton Australia’s farming arm. The details of the equity arrangements cannot be completed until the new long-term lease arrangements for the site is (sic) finalised.

5. When Rainstorm is awarded a suitable long-term lease, Plankton Australia will be granted a lease of the same duration for the purpose of algae aquaculture farming. Due to the significant capital investments required for algae aquaculture farming and production, a long-term lease arrangement is vital to the project being viable.

…

7. Once the leases are in place, Plankton Australia algae growth and production will occur in the Pilbara Region rather than North Queensland, as originally planned.

47    The letter concluded “We hope to finalise all leasing arrangements as soon as possible to maximise the current growth season which commences in August”.

48    Significantly, the letter contemplates the completion of the details of the equity arrangements as between Plankton Australia and Rainstorm after new long-term lease arrangements for the Site have been finalised.

49    On 14 July 2014, the Department of Lands informed Mr Kerr (and Aurora) of the Minister’s consent to the transfer of the two Crown leases. Whether those leases, which were to expire in April 2015, would be renewed remained an outstanding question. Mr Tracton was not copied in on the communication from the Department of Lands.

Plankton Australia moves onto the Site

50    In late July, Mr Tracton commenced steps to engage Mr Bunter to do work for Plankton Australia on the site. In due course, Mr Tracton and Mr Kerr agreed to split the cost of Mr Bunter for the period between August and the beginning of December 2014.

51    Plankton Australia took occupation of the Site at the beginning of August 2014. Thereafter, significant expenses associated with occupation were incurred by Plankton Australia.

52    Mr Tracton said he went onto the Site to evaluate it for the purposes of re-establishing the algae farm, to work out how much it was going to cost to set it up and to do “reconnaissance” before finalising any arrangements. He accepted that his intention in doing so was also to show to Mr Kerr that he was genuine about his intention to set up an algae farm on the Site. He also accepted that if he was able to showcase his abilities he anticipated it would be easier to reach an agreement with Mr Kerr.

53    Also in August 2014, Mr Kerr raised with Mr Raven the possibility of a meeting with him and Mr Tracton to consider “the next phase of leasing” of the Site.

54    On 8 August 2014, Mr Tracton, having been sent a copy of an email from Mr Kerr to Mr Raven, sent an email to Mr Kerr in the following terms:

FOOD FOR THOUGHT

I believe if we work together as one enterprise, we will have the best chance of securing the future tenure of the site.

My suggestion is that we set up a co-owned PTY LTD company for the lease renewal.

This company would be owned and backed by Greg Kerr from Rainstorm Pty Ltd and Ian Tracton from Plankton Australia/InterClinical Laboratories – a group of long-term, established and successful Australian company’s (sic).

We need to give the new company an attractive name; eg; AQUATEN PTY LTD.

If you are in favour of my suggestion, we can bounce this idea off Murray at our meeting in Perth.

55    The reference to Murray is clearly a reference to Mr Raven. This email appears to be the first point at which there was a suggestion about the lease of the Site being taken over by a company in which each of Rainstorm and Plankton Australia had an interest. Up until this point, the communications indicated that the parties were considering only a sub-lease from Rainstorm to Plankton Australia’s “farming arm” in which Rainstorm would take an equity interest.

56    Mr Kerr forwarded the email to his co-director Mr Keenan together with the following email message:

Ian is suggesting a co-owned company with no suggested structure. So it is odd to bounce ideas off of a blank wall.

I understand that you were looking at a three prong strategy:

1)    We go it alone. RDC (ie, Rainstorm) owns the site and Plankton is a secondary lease owner. Plankton rents or purchases assets that it needs.

2)    We partner in a co-owned company which owns the master lease. Plankton pays us $600k to own half the site.

3)    We partner in a co-owned company which owns the master lease. Plankton pays RDC or the new company a lease rate ($100k) a year.

If we go into a co-owned company we need to protect our ownership of the long-term lease. I don’t want to find RDC in a situation where the other 50 percent share is up for grabs. It has to revert back to RDC so we have 100 percent ownership. I don’t know how to structure this. Need a lawyer to set the articles of the co-owned company. May-be some type of ‘First Right of Refusal’ clause, but I don’t want to colour the outcome of the structure.

57    This communication suggests that as between the directors of Rainstorm there had been some discussion of the possibility of the lease of the Site being held by a company in which each of Rainstorm and Plankton Australia held an interest. It is not clear if this had commenced before the email from Mr Tracton on 8 August 2014 or was prompted by the email.

58    What is evident from the sequence of events up until this point in time is that the decision by Mr Tracton on behalf of Plankton Australia to go onto the Site in August 2014 was not influenced by any belief that there was an agreement in place.

59    Mr Kerr deposed to a meeting in around late August 2014 with Mr Raven which he attended with Mr Tracton. Mr Kerr said that at that meeting, Mr Raven said words to the effect that it would slightly improve chances of renewing the leases if the application for renewal was made jointly by Plankton Australia and Rainstorm because it was anticipated that Plankton Australia would be performing the aquaculture component of the permitted use of the leases in respect to the Site.

60    Mr Kerr deposed to what was said during the meeting with Mr Raven. His evidence was that he said words to the effect “what would give the best chance of a new lease: an application in Rainstorm’s name, a joint application by Rainstorm and Plankton?” Then, after a pause, Mr Raven said words to the effect “probably joint”. Mr Kerr further deposed that after the meeting he said to Mr Tracton words to the effect that he didn’t like the idea of the lease being jointly held, but if it was going to improve the chance of a new lease then “we would make a joint application”.

61    Therefore, the chronology suggests that the prospect of the “master lease” being held by a company in which each of Plankton Australia and Rainstorm held shares was being considered before the meeting with Mr Raven at which it was suggested that it would improve the chances if the actual application for renewal was made jointly by those parties.

62    The documents show that in the period up to the end of October 2014, Mr Tracton and Mr Bunter took steps in relation to the production of DSA at the Site that went beyond “reconnaissance”. In particular:

(a)    two generators were purchased to be shipped to the Site;

(b)    batches of algae were received from Flinders University;

(c)    plans were made to purchase fuel storage tanks for the generators;

(d)    steps were taken in relation to obtaining an aquaculture licence for production of DSA;

(e)    arrangements were made to have the existing centrifuges on the site sent off-site for service and any necessary repair; and

(f)    Mr Tracton communicated with a prospective customer on 20 October 2014 advising that he was well into setting up new DSA growth ponds to be used for commercial production and hoped to have some regular DSA concentrated slurry product available for sale in early 2015.

63    The extent of steps taken by Mr Tracton and Plankton Australia is revealed by the terms of an email dated 30 October 2014 from Mr Tracton to Mr Bunter (copied to Mr Kerr) which included the following:

Please ensure these matters have been addressed and we will be soon ready for race upon culture growth:

1/    AquaCulture Licence: we need to ensure that we are compliant in all regards. We need to either have the previous Aurora aquaculture licence to grow Dunaliella salina (and other algae’s (sic)) transferred over to Plankton Australia. Alternatively, we can simply apply for a new licence …

2/    All growth ponds to be ready asap for our growing cultures, whereby all ponds have been washed out and flushed with clean sea water and cleaned of debris, with no artemia, shrimp or unwanted sea creatures remaining in any of our ponds, as they will eat and interfere with our growth cultures …

3/    Ocean water and bitterns intake pumps require a filter, ie; to prevent artemia (etc) getting on to our site and into any of the ocean water retention, bitterns and growing ponds …

4/    Ensure a raceway growth and all other production ponds and tanks are operational, with all pumps and water jets working properly.

64    Notations to the email were added by Mr Bunter and sent back to Mr Tracton. The notations included:

Working on this. The ERP’s by and large are ready (with the above caveat) and electrically we should be okay. The final testing and re-commissioning of the ponds/raceways will not be able to be achieved until

(a)    The waste disposal system is back in place with waste water being directed to the evaporation ponds.

(b)    The pumps to do so – re-installed.

(c)    The methodology for the delivery and nutrient source (itself) is decided upon.

The next major project being processing and re-configuration.

(a)    This requires electrical and control work, pipe re-configuration, filtration and settlement systems and of course the centrifuge is to come back and be installed.

65    It is evident from the terms of this email that the steps taken by Plankton Australia went well beyond any process of “reconnaissance”.

66    In his oral evidence, Mr Traction was reluctant to accept that he had already committed to a commercial operation at the site by the end of October 2014. What is clear is that by the end of October 2014, Mr Tracton had caused substantial steps to be taken at the Site towards producing DSA. These steps could not be said to have been taken pursuant to any agreement or in reliance upon any representation because it is not until the end of November, at the earliest, that Mr Tracton says that an agreement was reached and the alleged representational conduct relied upon by the applicants occurred after that time. Mr Tracton had a keen interest in producing DSA at the site. He was trying to demonstrate his capabilities to Mr Kerr and he needed a supply of DSA for when his existing stocks needed to be replenished.

67    Finally, the evidence establishes that by the end of November 2014, Plankton Australia had expended about $200,000 in respect of activities on the Site.

Negotiations in November 2014

68    It was not until November 2014 that the parties resumed negotiations about the terms upon which Plankton Australia or Plankton Farms might be allowed to cultivate DSA on the site on an ongoing basis. The negotiations seemed to have arisen out of steps being taken to make a submission to the Department of Lands to support securing a long term lease for the Site.

69    Mr Kerr deposed that on the basis that Plankton Australia and Rainstorm would be making a joint submission for a new lease he began negotiating the terms to a potential long term agreement between the parties around the time of November 2014.

70    The relevant events appear to begin with an email from Mr Kerr to Mr Tracton which concluded:

I’ve been absolutely flat out the last fortnight but intend to make a big push on the lease renewal this coming week. Rainstorm’s Financial Year End is today so hence the invoice. Hopefully I can poke my head above water and give the renewal the attention it deserves.

71    On 5 November 2014, Mr Tracton sent an email to Mr Kerr in response in which he said:

I also plan to re-visit the Crown Lease submission letter again tomorrow. The time is right – not to (sic) early and not too late. The lease still has about 5 months to run and lease renewals are usually done between 3-6 months prior to expiration.

72    Then, on 13 November 2014, an email was received by Mr Kerr from the Department of Lands explaining that Mr Raven had taken long leave and requesting the submission of a concise Business Case (and referring to a discussion of the submission of such a document at a meeting with Mr Raven on 27 August 2014).

73    On 18 November 2014, Mr Kerr sent an email to Mr Tracton (with a copy to Mr Keenan) with the subject “ALGALFIELDS”. The email began:

To summarize our discussion, this is how I see the structure coming together:

•    Algalfields Pty Ltd is formed as a holding company with 1,000 shares – 950 to Rainstorm and 50 to Plankton Australia.

•    Algalfields then provides to RDC [Rainstorm] and to PA [Plankton Australia] subleases of the same duration of the Algalfields Master Lease, i.e. 21 years for all leases.

•    The annual charge for each of the subleases will be 50% of the cost of the Master Lease (currently unknown) plus $2,000 to cover admin and ancillary costs.

74    The email then dealt with other aspects of a proposal and concluded:

There will be lots of cooperation between RDC and PA because we have a joint vested interest in making the site work. Happy to talk this through further with you but ultimately, Plankton Australia is going to get a heck of a good site with most of the expensive infrastructure already in place for algal production. We should each continue writing up PA’s and RDC’s business plans for submission to the Dept of Lands under the umbrella of a submission from Algalfields. I’ve asked my solicitor to begin drawing up some of the necessary documentations but even though it won’t all be in place we’ll have enough to tell the Dept of Lands the general plan. I’ve attached one document already but more shall be forthcoming.

75    The document attached was a consent to be executed by Plankton Australia for it to become a member of Algalfields Pty Ltd.

76    It can be seen that the proposal from Mr Kerr was for Plankton Australia to have a 5% interest only in Algalfields which would be the holder of the “master lease”.

77    Notably, the email does not link the summary of the discussion about the structure to the need for a joint company to improve the prospects of securing a long term lease of the Site. Rather, the summary indicates a broader cooperative joint interest in making the Site work.

78    The email of 18 November 2014 provides an important context for the communications that followed. I note in particular two aspects. First, the reference to necessary documentation to be drawn up by Rainstorm’s solicitor. Second, the statement that even though all would not be in place there will be enough to tell the Department of Lands “the general plan”.

79    Mr Tracton forwarded the email from Mr Kerr to Bruce Coode of Coode & Corry solicitors together with the following email message:

Hi Bruce,

Please find attached my REVISED PROPOSAL for Greg at Rainstorm:

Please add suggestions and comments.

I want to send this document to him ASAP.

Until we agree on the basis on our business arrangements, we cannot progress to the WA Crown Lease submission.

Thanks

IAN

80    Attached to the email was a completely reworded proposal headed “Revised Proposal Summary” which commenced “Further to our discussions, I would like to propose the following …”

81    On 24 November 2014, Mr Tracton sent an email to Mr Kerr in the following terms:

Please find attached my revised proposal. I hope you will find it fair and reasonable. Happy to discuss further.

In the meantime, can you please forward me what you’ve prepared so far regarding the WA lease renewal submission document. This will assist me in completing my part.

82    The email attached an expanded version of the Revised Proposal Summary document. Significantly, the document concluded with a list of matters described as “Additional notes and clauses to be added into the agreements and company documents” (emphasis added).

83    Later that same day, Mr Tracton sent an email to Mr Kerr with the subject “Plankton Australia – how I want to complete the lease renewal presentation document and my Dunaliella selina promotional product information brochures”. The email said:

I was working on our lease renewal presentation document over the weekend and it is driving me crazy. I have decided to employ a professional business proposal writer to help prepare the lease renewal submission document, which will include: business plan and outline, corporate identity profiles, background, product summaries, benefits to the community, WA and Australia, etc. It will be fast-tracked and ready within 2, 3 or 4 days. The cost will be between $500 and $700. I am happy to pay for it. If you send me what you’ve prepared, I will co-ordinate all the information accordingly so that we can quickly to have it finished (sic).

84    At the time, the parties considered that there was a need to proceed with some urgency in providing the business case that had been requested by the Department of Lands. The preparation of the business case was being undertaken at the same time as the discussions between the parties.

85    At this point, the context shows that the parties were engaged in discussions about their business arrangements and also seeking to advance the submission document to be provided to the Department of Lands. There is no express language manifesting an intention to reach a concluded agreement. On the contrary, the documents used the language of discussions and the establishment of common ground. There is no invitation for particular terms to be accepted, agreed or concluded in some way. None of the proposal documents provided for the terms to be agreed or adopted by a signature on behalf of the parties.

86    On 25 November 2014, Mr Tracton sent a further document entitled “Revised Proposal Summary (V2)” as an attachment to the following email:

Further to our discussions, I have revised the proposal accordingly.

In summary, the new trading/business company “Plankton Farms Inc” could generate extremely high returns for all involved. This is a rare opportunity.

In regards to Algafields as the leaseholding/management company - Plankton Australia together with Plankton Farms Inc, as an ongoing trading/business concern, will add significant value to the overall worth and value of the crown lease.

Please find revised proposal attached, as per our discussion.

Please let me though (sic) your thoughts and comments.

If this arrangement is suitable, I would like to work [to] having both new entities, ie; Algafields Pty Ltd and Plankton Farms Australia or Plankton Farms Inc registered as WA companies.

Kind regards and speak soon.

87    Version 2 of the Revised Proposal Summary expanded upon the section “Additional notes and clauses to be added into the agreements and company documents”.

88    On 26 November 2014, Mr Kerr sent to Mr Tracton a marked up version of the Revised Proposal summary that had been sent to him the previous day. The covering email stated:

I’ve made my amendments to your revised proposal with Track Changes on so you can see. Would appreciate any comment and feel free to call me.

89    The marked up changes included some changes to the section “Additional notes and clauses to be added into the agreements and company documents”. It also changed the proposal as to the shareholding in Algalfields to be held as to 85% by Rainstorm and 15% by Plankton Australia (the earlier version referring to 80% and 20% respectively).

90    On 26 November 2014, Mr Tracton sent an email to Mr Kerr in the following terms:

The proposal’s looking good and taking shape.

I am trying to cover as many contingencies as possible, so that we are all on common ground when moving forward.

The last set of points was suggested by my accountant/business adviser.

Please review the attached revised V4 proposal for discussion.

91    Two aspects of this email should be noted. First, the reference to a set of points suggested by Mr Tracton’s “accountant/business adviser”. Second, the invitation was to engage in further discussion in respect of the attached version of the document.

92    The enclosed V4 proposal, added a section at the end of the proposal as follows:

Further points for consideration:

•    Expenses and Income to be reviewed and emailed on a quarterly basis upon completion of each BAS with ATO …

•    Accounts to be reviewed yearly upon lodgement with ATO … (with Profit and Loss and Balance Sheet)

•    Dividend distribution to be at 25% (or whatever you feel is appropriate) of net profit after company has achieved $400,000 profit … estimated 2/3 years … May be put in a contingency to reconsider altering this percentage to a higher amount if feasible.

•    All other surplus funds to be reinvested in the growth of the company with worldwide plan of distribution …

•    All government grants and funding obtained remains in the company and is spent appropriately for business expansion and development …

•    All funds and surpluses to be advised on quarterly and planned spending budgets in Marketing, Research and Development etc …

•    All these items need to be in the agreement (ie: shareholders agreement and the Memerandum (sic) of understanding) …

93    I note the following aspects of these additional words. First, they are headed “points for consideration”. Consistently with the course of communications in respect of the earlier proposals, this introductory language suggests that the list is of additional items for discussion, not the finalised terms of a formal offer for acceptance. Second, the language used within the dot points is consistent with ongoing discussions. Third, the final dot point expressly contemplates that there will be both a shareholders agreement and a memorandum of understanding to be prepared at a later stage. This language, together with the language about the notes and clauses “to be added into the agreements and company documents”, viewed objectively, manifests an intention that any agreement is to be recorded in subsequent formal instruments comprising at least a shareholders agreement and a memorandum of understanding.

94    By way of affidavit in these proceedings, Mr Tracton referred to his email to Mr Kerr dated 26 November 2014 and then deposed as follows:

A short time after sending that email, I telephoned Greg Kerr and had a conversation with words to the following effect:

I said:    “Would you consider my amended proposal increasing the equity position in Algalfields?”

Greg said:    “No. What I emailed yesterday is the deal. That’s it.”

I said:     “Okay, I can live with that. Well let’s move forward with it then. What do we need to do in relation to the WA crown for the master lease.”

Greg said:     “We need to finalise the dossier for them.”

I said:    “Okay. Well I will get my business writer to write it up for us so that it looks and reads well.”

Greg said:    “Okay. Great.”

95    I note the introductory words saying that the conversation was a short time after sending the email. There was some conflict on the evidence as to precisely when the parties spoke following the transmission of the V4 proposal. However, there was no real dispute that there was a conversation and that it occurred within no more than a day of the V4 proposal being sent (see below).

96    Mr Tracton then deposed to his understanding, based on that conversation and email, that Plankton Australia and Rainstorm had entered into a joint venture agreement.

97    In response to that affidavit, Mr Kerr deposed that the proposals from each side were never agreed and did not result in a legally binding agreement. In a later affidavit, Mr Kerr said that he never communicated to Mr Tracton that Rainstorm offered to enter into an agreement with Plankton on the basis set out in the emails exchanging the proposals, or that Rainstorm accepted the terms of those proposals. In the words of Mr Kerr “The only thing I told Ian Rainstorm would do is make a joint application for the new lease”.

98    In re-examination, Mr Tracton was asked to clarify the telephone call he was referring to when he said, at one point of his evidence, “the telephone call on the 28th”. He gave the following answer:

The – a phone call that I made to Greg regarding the proposal agreement negotiations that were on 26 November asking him about the one – one major point, being the – the percentage breakdown of Algalfields, and I was requesting – I was agreeing with him. He – he gave me a final proposal. I’m saying to him, “look, I’m happy with everything in there. Would you consider 20% for Plankton Australia rather than 15%?” Greg said: “No. My final proposal is what I’ve offered you there” and I said, “Alright. Well, I – I’m happy with that. Let’s – what do we have to do to move forward? Do we agree on this?” “Yes” both parties agreed and – and we – we moved forward.

99    This version of the telephone conversation is materially different to that which Mr Tracton stated in his affidavit (quoted above). In particular, in his affidavits Mr Tracton at no point suggested that he asked Mr Kerr “Do we agree on this” and Mr Kerr said “yes”. The absence of any such evidence in his affidavit is striking because it is both the key conversation upon which the applicants rely in bringing their contract claim and it is the main factual issue in dispute in these proceedings. In those circumstances, I do not accept the evidence as to the version of the telephone conversation given by Mr Tracton in his oral evidence. I find that the evidence about the parties having agreed is no more than Mr Tracton’s conclusion or characterisation of the consequence of the conversation and reflects the case that he advances in these proceedings. I mean no criticism of Mr Tracton in finding that the words “do we agree on this?” were not spoken by him and the response “yes” was not given by Mr Kerr. No doubt he now believes that an agreement was reached. However, whether there was a concluded contract that is legally enforceable requires a consideration of two separate matters. First, what did the parties actually say and do? Second, what is the correct legal conclusion to be drawn as to whether a contractual liability arose from those dealings?

100    I do accept that there was a telephone conversation between Mr Tracton and Mr Kerr after the V4 proposal. I do so recognising that there is some inconsistency as to the evidence of Mr Tracton as to precisely when that telephone conversation occurred. Mr Kerr accepted that it was possible that such a conversation occurred. Having regard to the course of the communications between the parties it is likely that such a communication occurred. As I explain below, subsequent communications by Mr Tracton and Mr Kerr with third parties referred to the shareholding in Algalfields as being 85% on the part of Rainstorm and 15% on the part of Plankton Farms. Indeed, information to that effect was included in the business case submitted to the Department of Lands shortly after the exchange of the proposals. Therefore, it is likely that it was the subject matter of a telephone conversation. Further, I find that the conversation was substantially in terms of that deposed to by Mr Tracton in his affidavit.

101    However, viewed objectively, what occurred in that conversation was a discussion about the aspect of the proposal then being considered that concerned the equity position in Algalfields, not the proposal as a whole. For the purposes of the proposal and ongoing discussions between the parties (and matters to be communicated to the Department of Lands to advance securing long term lease for the Site) the parties reached a consensus as to an 85%/15% split for equity in Algalfields. However, what was not communicated in the conversation was any final and binding commitment to the terms of the proposal which was, at that time, still a matter of discussion between the parties in anticipation of agreeing terms to be recorded in written documents.

102    By the time of the conversation in late November, the last written document exchanged between Mr Tracton and Mr Kerr had come from Mr Kerr in the form of the V4 proposal. It included a number of additions at the end as further points for consideration as well as an expression of the need for various items to be included in a shareholders agreement and memorandum of understanding. There was no suggestion in the evidence that these matters were discussed. It is unlikely, given the terms of the V4 proposal, that there was an intention on the part of Mr Tracton to simply go back to an earlier version and accept the 85%/15% split for equity without any discussion of all the additional matters he had raised in the V4 proposal.

103    In context, and given subsequent events, I accept that the parties reached a consensus concerning the equity to be held in Algalfields. However, I do not accept the oral evidence of Mr Tracton to the effect that there was a communication of any agreement in respect to the matters addressed in the proposals being exchanged. Viewed objectively, the parties were taking care to record matters in a formal way as their discussions progressed. In that context, it is most unlikely that the exchange of proposals concluded with an oral commitment.

104    Rather, the parties engaged in discussions for the purposes of reaching sufficient consensus to enable the joint submission to the Department of Lands. Otherwise, the question of finalising their agreement was held over until the outcome of the application was known. The parties proceeded on the basis that any agreement would be concluded once the outcome of the application to secure long term tenure of the Site was known.

Joint submission to Department of Lands

105    On 1 December 2014, Mr Kerr and Mr Tracton signed a joint letter to Department of Lands. It began by saying that Rainstorm and Plankton had “a mutual interest in the commercial use and development” of the Site. It then said:

The two companies have agreed to form a partnership and have created a new business enterprise called, Algalfields Pty Ltd.

106    The letter enclosed a detailed submission which included the following statements:

In anticipation of the current leases expiring in April 2015, a new business entity named Algalfields … has been created with joint ownership by Rainstorm … and Plankton Australia (Figure 1). As the incumbent leaseholder, Rainstorm is willing to relinquish its rights to apply for a subsequent 21 year lease … in favour of Algalfields doing so. In exchange, it has been agreed that Rainstorm shall gain a minority equity position in the newly formed Plankton Farms Pty Ltd … who will hold the Aquaculture Licenses and subsequently all commercial stakeholders will have an economic interest in both Rainstorm and Plankton Farms achieving maximum utilization of the site in continuing commercial success.

…

Plankton Farms and Rainstorm have a mutual and complementary interest in the commercial use and development of [the lease of the Site] for the conduct of aquaculture and bitterns related activities. To continue with the primary usage of the site, as well as working to expand and maximize the existing usage of site and improving its commercial viability, Algalfields will be the Master Lease holder and manager, see Figure 1. It is anticipated that the lease of the Site will be transferred from Rainstorm to Algalfields under a new Lease agreement with simultaneous approval being sought for Algalfields to sublease the Site to Plankton Farms and Rainstorm to conduct their respective complementary commercial activities.

107    Figure 1 depicted Algalfields Pty Ltd as the “Lease Management Holding Company” with an ownership structure of Rainstorm as to 85% and Plankton Australia as to 15%. It then depicted subleases to each of Plankton Farms and Rainstorm.

108    The document contained a detailed explanation as to how the Site would be utilised by Plankton Australia in cultivating DSA and Rainstorm in extracting bitterns.

109    On 1 December 2014, Mr Tracton informed Mr Kerr that the “new company for the algae farming operations is now registered as Plankton Farms Pty Ltd”.

110    Also on 1 December 2014, Plankton Farms submitted an expression of interest for State government funding as a “royalties for regions” project. Both Mr Kerr and Mr Tracton had provided input into the submission.

111    The royalties for regions submission concluded with the following statement:

To date Rainstorm has $1.2 M to buy the site and its infrastructure from Aurora Algae Pty Ltd. Rainstorm has spent further money on other site inputs and improvements. To date, Plankton Farms and Plankton Australia, on speculation, without any long term lease in place, have inputted $100,000+ in wages, equipment repairs and purchases, infrastructure modifications, laboratory set-up and so on. Plankton Australia has three employees currently on the site.

112    There was an issue raised as to whether these words were, in effect, a statement by Mr Tracton that his presence on the Site was speculative both as to the risk concerning a long term lease and a risk that the parties would not conclude an agreement. I doubt that the document intended to convey the latter. The parties expected to conclude an agreement. They knew that there was uncertainty as to whether there would be a long term lease. Part of what needed to be demonstrated was sufficient proposed aquaculture activities on the Site to justify a new lease for that purpose (being the purpose for which the existing lease of the Site had been granted). It would be inconsistent with the evident purpose of the expression of interest to introduce doubt as to whether Plankton Australia was likely to conclude an agreement with Rainstorm.

113    However, that is not to say that there was a concluded agreement. Rather, the statement in the expression of interest for a royalties for regions grant simply did not address that issue.

114    On 3 December 2014, Mr Kerr sent to Mr Tracton a form of consent for Plankton Australia to become a shareholder in Algalfields. The consent was executed and returned. Documents for the registration of Algalfields were also prepared. However, the company has never been incorporated.

Activities on the Site in December 2014

115    In early December 2014, Plankton Farms employed Mr Bunter as general manager “for our Karratha algal cultivation and production site”.

116    On 9 December 2014, Mr Tracton followed up in relation to the centrifuges stating:

We want and need them back in Karratha ASAP for our test productions (Dunaliella salina algae harvesting) commencing early in the new year.

117    Mr Kerr was allocated an email address for Plankton Farms in December 2014.

118    On 12 December 2014, Mr Kerr sent an email to the Lands Department following up on the submission of 1 December 2014 and concluding:

I know we took quite a while to get our submission in as it is of burning importance to us and we took forever to tweak and edit it. I am not seeking to hold you to any specific date but we have spending, and more importantly employment decisions to make and at this point we don’t have any certainty beyond next April.

119    From December 2014, Mr Bunter was engaged by Plankton Farms as the full-time general manager at the site. Thereafter, Mr Bunter communicated by email with both Mr Tracton and Mr Kerr concerning steps being taken in relation to establishment of DSA production and progress of matters such as the aquaculture licence, the centrifuges and production trials.

Dealings with Department of Lands for lease renewal

120    On 8 January 2015, the Department of Lands sent to Mr Kerr and Mr Tracton an email stating that it was prepared “to refer the issue of a new lease to appropriate agencies for comment and approval”.

121    On 12 January 2015, the Department of Lands followed up with a further email as follows:

Further to my email below and as discussed with Greg last week – if the Minister for Lands agrees to the issue of a new lease as per your application, it is the Department of Lands preference that the new lease be issued to the current leaseholder Rainstorm Dust Control Pty Ltd. Subject to the approval of the Minister for Lands (under delegated authority), the lease could then be transferred as required.

122    Thereafter, plans were prepared by the Department of Lands showing the area essential for the proposed business activities and asking for confirmation that there was no objection to the new lease (if approved) being issued to Rainstorm. That communication was forwarded by Mr Kerr to Mr Tracton.

Dispute arises between the parties

123    Mr Bunter continued to communicate with both Mr Tracton and Mr Kerr concerning steps being taken to establish DSA production on the site and Mr Kerr actively engaged in those communications. There appear to have been considerable dealings in this regard indicating involvement by both Mr Tracton and Mr Kerr in the activities of Plankton Farms in advancing DSA production. They included taking steps to prepare and submit a business case proposal when Plankton Farms expression of interest for a royalty for regions grant was successful. On 15 May 2015, Mr Kerr responded to a draft of that proposal in the following terms:

I’m sorry but I’ve been flat out on other projects (writing legal opinion type stuff to the Dept. of Lands re: The Lease) and haven’t given this as much time as it deserves. The main changes I’d like to see are in Section 2.4.2 – are we sure we need any reference to Algalfields? It seems like an unnecessary complication at this point. I would also like to remove reference to how much Rainstorm paid to Aurora Algae – it isn’t really anyone else’s business. Can we say “substantial investment” or “seven figures” or just remove it entirely?

124    On 21 May 2015, Mr Tracton sent a document headed “Heads of agreement” to Mr Kerr. It is a document which is an amended form of the V4 proposal. It begins:

For current on-going business, subsequent shareholder agreements and basic memorandum of understanding

Based upon mutual discussions and email correspondence to date

Creating a strategic operating alignment for specific business arrangements between Rainstorm and Plankton Australia

125    Unlike the proposal documents exchanged in November 2015, at the end of the document there was provision for signature by Mr Kerr on behalf of Rainstorm and Mr Tracton on behalf of Plankton Australia.

126    Mr Kerr responded immediately with an email stating:

I received your draft Heads of Agreement. We’re going to have to have a serious talk about the role of Algalfields and the Master Lease.

127    The following day a draft of the business case for the royalty for regions submission was sent by Mr Tracton to various parties including Mr Kerr. It included the following statement:

In 2014 Plankton Farms was formed for the purpose of subleasing the Karratha Site from its new leaseholder, Rainstorm Dust Suppression Pty Ltd …, to farm, harvest and produce the Dunaliella salina biomass.

Rainstorm will contribute to and invest in the Plankton Farms Project by way of providing the use of the existing site infrastructure …

The joint partnership between the two successful entities, Plankton Australia and Rainstorm, augers well for commercial success of the Plankton Farms initiative.

128    There was then inserted a figure described as “Relationship Structure” in which Rainstorm was described as “Site Leaseholder”. In my view, no significance should be attached to the fact that the draft described Rainstorm as the holder of the master lease. The language used in the figure reflected the terms of the request made by Mr Kerr in his email of 15 May 2017.

129    The draft submission continued:

Plankton Farms via it’s (sic) holding company Plankton Australia – will be contributing an estimated $1.5 million in cash and kind into the project. Plankton Farms and Plankton Australia, on speculation, without any long term lease in place, have invested over $400,000 in wages, equipment repairs and purchases, infrastructure modifications, laboratory set-up and site development. Plankton Farms has full-time employees currently on the site to assist the set-up of the Plankton Farms Project …

To date Rainstorm has invested the capital to secure the leasehold and the existing site infrastructure from Aurora Algae. The value of the leasehold and replacement cost of the existing site infrastructure is estimated at $5 million.

130    The language used in the document referring to “on speculation” appears to be an updated version of the language that had been used in the expression of interest.

131    On 27 May 2015, Mr Kerr, Mr Keenan and Mr Tracton met in Perth. Mr Keenan’s evidence as to what occurred at that meeting was not challenged. It was as follows:

At that meeting, Greg said words to the effect that:

(a)    the Department of Lands had rejected the proposal for the lease to be in the name of Algalfields Pty Ltd, and therefore the lease was going to be in Rainstorm’s name; and

(b)    as a result, Rainstorm was prepared to revert back to the original proposal of Rainstorm giving a sublease to Ian’s company, and the parties would need to negotiate the terms of that deal.

132    On 29 May 2015, Mr Tracton sent an email to Mr Kerr:

Continuing on from our conversation in Perth, I understand that you and I have an arrangement/agreement in place. We made a deal and have been working together as a team. We negotiate a business arrangement based on receiving a renewal and new lease for the site. In November, 2014, this agreement was confirmed through various discussions and emails. On December 4, 2014, we jointly made a formal submission to the W.A. Department of Lands based on those discussions. When you told me in Perth this week that things have changed – I don’t know what. Our business arrangements were put in place 6 months ago. Algalfields and Plankton Farms were created accordingly. As consideration, I have put a substantial amount of monies into our business project to date.

I have put 110% effort into everything to value add and ensure you, (ie; Rainstorm) and me (ie; Plankton Australia), would be able to secure a future lease for the site.

I have really enjoyed working with you to date and look forward to a mutually successful and rewarding future.

133    On 3 June 2015, Mr Kerr responded with an email that included the following:

The return to the original plan where Rainstorm owns 100 percent of the main lease, and Plankton receives a sublease from Rainstorm seems to have been a surprise to you. We are only going back to the original agreement where Rainstorm has the lease and subleases the main portion of the algae growing areas to Plankton Farms. This has been my intention for the entire time of our dealings accept for the several month period between the time Murray Raven suggested a joint application would improve our chances and when you were subsequently advised that a simple Rainstorm renewal was best. I have certainly never been ambiguous about not wanting any partnership on the master lease which is something that Rainstorm already bought and paid for. It was only when you and I first met face to face with Murray Raven and asked him flat-out would it improve my chances of lease renewal if it was a joint application rather than Rainstorm only. When he said he thought it would be better to make a joint submission, I didn’t like it one bit but – I sucked it up and agreed to use that tactic if it improved the palatability of our renewal application. This was despite my expression to you that I figured it would only add a few % increase of our chances which I rates (sic) as already being greater 90% chance of renewal.

Yes, we made a joint submission to the Dept. of Lands in Dec 2014 but things change and one month later you had a conversation with Dept. of Lands in late January who said their opinion now was that a straightforward renewal kept in Rainstorm’s name was the way to go. This to me merely adjusted things back to the original plan: Rainstorm has the Master Lease and sub-lets the algal growing portion of the site to a new entity, Plankton Farms, which is either paying monthly lease fees or, in lieu of paying lease fees, grants 20% ownership to Rainstorm. (I did originally ask for 30% as you will remember). … We changed to a joint application to December 2014 only after Murray said it would increase our chances and back to a simple Rainstorm renewal in January 2015 after to (sic) Dept. of Lands said that would be best.

134    Having regard to the documentary record of the chronology that I have summarised, there are aspects of the above email that are not accurate. However, it does not matter whether the justification being provided by Mr Kerr for disagreeing with the matters stated in the email from Mr Tracton is correct. What is apparent is that from this point on, Rainstorm maintained that there was no binding agreement and insisted upon only discussing with Plankton Australia on the terms of a sublease. It refused to accept that there was an agreement which required Rainstorm to seek a transfer of the “master lease” to Algalfields. The issue in these proceedings is whether this was a course that Rainstorm was free to adopt or whether it was bound by contract (or should be treated as being bound by reason of the fact that Mr Kerr signed the submission to the Lands Department at the beginning of December 2014).

135    On 16 July 2015, Coode & Corry, solicitors acting for Mr Tracton wrote to Mr Kerr recording instructions that Mr Kerr had purported to unilaterally alter the terms of the agreement reached with regard to a joint enterprise to obtain a lease and conduct activities on the land including commercial farming of algae. The letter rejected the assertion that the terms of the agreement could be altered and rejected proposed new terms and asked for an acknowledgement of the existence of an agreement.

The nature of the contract claim

136    The case for the applicants concerning the existence of an enforceable contract is advanced in two ways. First, it is said that in a telephone conversation at the end of November 2014 the parties agreed to be immediately bound to all the terms in an offer made by Rainstorm on 26 November 2014 (being the version before the final V4 proposal from Plankton Australia to Rainstorm). The agreement was to have the terms stated in a form which would be fuller or more precise but not different in effect or was made by the parties expecting to make a further contract in substitution for the first containing, by consent, additional terms. Second, if there was no agreement reached in the telephone conversation the assent to those terms may be inferred from the acts and conduct of the parties in the period thereafter until late May, early June 2015.

137    After June 2015, the competing positions of the parties had been established. Plankton Australia said there was a binding agreement. Rainstorm denied that was the case, but was willing to continue negotiations. Thereafter, there were very extended discussions and negotiations between the parties to resolve their dispute during which time Plankton Farms remained on the Site undertaking substantial activities to progress the production of DSA and incurring very significant costs. However, that conduct took place in the context of the ongoing disavowal by Rainstorm of the existence of a contract in the terms alleged. Mr Le Plastrier, for the applicants, relied upon the conduct up until 5 June 2015 to establish the existence of the contract and relied upon the conduct thereafter to support the claim to relief in the nature of specific performance on the basis that the conduct of the parties in occupying the Site together over a considerable period demonstrated that there was no reason to think that there would be difficulty in constant supervision if the orders sought were made.

No concluded contract at the end of November

138    For the following reasons, there was no concluded contract between the parties arising from the telephone conversation at the end of November 2014.

139    The conduct of the parties prior to the exchange of the proposals provided important context for the events in November 2014. By that time, Plankton Australia had gone on to the Site and had taken substantial steps towards advancing the production of DSA on the Site. This was done even though it was clear that there was no agreement in place. It was speculative behaviour both because there was no agreement between the parties and there was a risk that no long term lease would be secured. This behaviour was consistent with a course (generally reflected in the documents) of waiting until there was certainty concerning a long term lease before finalizing the terms of an agreement. The parties had agreed the terms of an arrangement or overall plan. They had committed to a “partnership” in the sense that they would work together to secure the long term lease so that both Plankton Australia and Rainstorm could undertake activities on the Site. However, they had not worked through any of the details or terms that would apply.

140    Despite Plankton Australia having been on the Site from the beginning of August 2014 until the beginning of November 2014 incurring substantial costs, there had been no discussion or negotiations between the parties as to the terms of an agreement to govern their ongoing relationship. As Mr Tracton accepted, his conduct in going onto the Site in August 2014 and undertaking work in relation to DSA cultivation was partly to show that his intentions were genuine and to showcase his abilities so it would be easier to reach an agreement with Mr Kerr.

141    Even though Mr Kerr had committed to the course of making a joint application for a new lease in August 2014, the parties had not taken any immediate steps to discuss the terms of their long term agreement. This was also consistent with leaving the final terms until the outcome of the application was known.

142    The immediate context for the exchange of the proposals in November was the need to formulate with sufficient detail the business arrangement that would be put in place if a long term lease was secured to enable the urgent preparation of a business case to support the application for a long term lease. The parties did not need to conclude an agreement at that time. Plankton Australia had already entered onto the Site and was advancing the DSA side of the planned activities. Engaging in ongoing discussions was consistent with the course that had been adopted up until that time which was to leave the finalisation of the terms of an agreement until after the position in relation to the long term lease was known. If the parties were to move to finalising the terms of an agreement that would govern their relationship over a very long term then it is to be expected that there would have been some explicit mention of a deviation from the course that they had been following up until that time.

143    The exchange of proposals began with a brief email which attached a consent for Plankton Australia to become a member of Algalfields and a statement by Mr Kerr that “I’ve asked my solicitor to begin drawing some of the necessary documentations but even though it won’t all be in place we’ll have enough to tell the Dept of Lands the general plan”. Mr Kerr was taking steps to establish Algalfields even though there had been no response from Mr Tracton. This too was consistent with the parties taking steps to advance their relationship, even though they had not concluded an agreement.

144    The response from Mr Tracton was to prepare a document entitled “Revised Proposal Summary”. It was not couched as an offer. It did not invite any form of response by which the contents were to be accepted or agreed. It did not provide for any signature or invite endorsement of consent or acceptance. It was sent under cover of an email that included the statement “Happy to discuss this further”. Before sending the Revised Proposal Summary, Mr Tracton took legal advice about its contents, but there is no evidence that this was known to Mr Kerr.

145    The next proposal was the V2 proposal which was sent to Mr Kerr with a covering email from Mr Tracton referring to “our discussions” and asking for “thoughts and comments”. It also stated that “if this arrangement is suitable, I would like to work [to] having both new entities” registered. The use of the term “arrangement”, in context, indicated to a reasonable party in the position of Mr Kerr that Mr Tracton was also working on the basis stated by Mr Kerr at the outset, namely that they were engaging in discussions that would result in enough to tell the Department of Lands “the general plan” in the joint submission that was being advanced at the same time.

146    Mr Kerr responded with a marked-up V2 proposal (in effect, V3). His covering email says “Would appreciate any comment and feel free to call me”. The main change was to the equity in Algalfields which was amended to show 85% to Rainstorm and 15% to Plankton Australia.

147    The form of the response from Mr Tracton is significant. It included the V4 proposal with a considerable number of marked-up changes one of which asked Mr Kerr to reconsider 20% equity for Plankton Australia in Algalfields. It included a detailed comment about how to deal with existing stock of DSA product. It raised issues about how to deal with the allocation of the raceways and ponds on the site as between Plankton Australia and Rainstorm. It asked a question about what the document should say in relation to the expertise being provided by Plankton Australia. It inserted a long comment about conflicts of interest. It added six “Further points for consideration” and concluded that all these items “need to be in the agreement” referring expressly to a shareholders agreement and memorandum of understanding.

148    Objectively viewed, in the context of what had gone before, the form of these changes invited an ongoing discussion as to what would be in the agreement and then the preparation of formal documents whereby the agreement would then take effect.

149    Also significant was the covering email for the V4 proposal sent by Mr Tracton. It said that “The proposal is looking good and taking shape”. It also said Mr Tracton was trying to cover as many contingencies as possible “so we are all on common ground when moving forward”.

150    The compound term “moving forward” is a modern colloquial expression or buzz word devoid of much meaningful content. Often it is added, somewhat redundantly, to a statement concerning actions to be taken, or events to occur, in the future. It may be used to convey a sense of advancement or progress. The reference to being on common ground when “moving forward” conveys a desire to have more detail than indicated by Mr Kerr at the outset when he indicated an intention to have enough in place to be able to tell the Department of Lands the general plan. However, what it does not convey is an intention that the V4 proposal was to be binding in any way. At its highest it manifests an intention on the part of Mr Tracton to increase the areas of consensus concerning matters that would ultimately be addressed in documents which would be the means by which any agreement was concluded.

151    After the V4 proposal, there was the telephone conversation in late November. Despite the extent of the additional matters raised in the V4 proposal, the claim made is that a concluded agreement was reached on the terms of the V3 proposal (in which Mr Kerr had marked up changes to the V2 proposal). The only specific matter discussed in the conversation was the equity position for Algalfields. I have found that the equity shares were agreed at 85% and 15%. In context, the reference by Mr Kerr to “the deal” in that conversation was the deal about the equity in Algalfields. Objectively viewed, in a context where the V4 proposal had been sent and there was no discussion of any of the changes proposed in that document and there was no withdrawal of those changes and there was a need to advance the joint submission, the use of words to the effect that “let’s move forward with it then” were not words manifesting an assent to a binding legal agreement on the terms of the previous proposal. They were words indicating a consensus that the parties would “move forward” with the submission to the Lands Department on the basis of an 85% and 15% equity split for Algalfields.

152    The applicants rely upon the fact that there were no further proposals after the telephone conversation as indicating that an agreement had been concluded. On the contrary, the absence of any further communication about the terms of an agreement until Mr Tracton sent the heads of agreement document on 21 May 2015 suggests that an agreement was not concluded. Given the terms in which the proposals were expressed, if agreement had been reached it would be expected that the parties would have proceeded with the preparation of a written agreement as expressly contemplated.

153    The applicants also rely upon the evidence by Mr Kerr that a consensus was ultimately reached that the shares would be in a ratio of 85%/15% and that Mr Kerr instructed his solicitors to create Algalfields with that split. These matters are equivocal. They are consistent with the parties taking steps to facilitate their joint submission to the Lands Department and leaving the conclusion of any agreement to the point where the outcome of the application for a new lease is known and they are also consistent with performing an agreement on the terms as alleged by the applicants. Importantly, the evidence does not place the dealings concerning the exchange of the proposals in a different contextual light.

154    Mr Kerr did give oral evidence that he believed that the parties had “reached consensus on the broad strokes of things that were necessary but not sufficient to create a binding agreement at a later time”. He described the parties as being under time pressure and that if they hadn’t agreed on the broad strokes, then there was no hope of a binding agreement being formed at a later date. The proposals and their context provide a substantial foundation for such a belief. I deal separately below with submissions as to whether the proposals dealt with the necessary essential terms. However, even if the proposals did address the essential terms, for the reasons I have given, the conduct of the parties did not result in a concluded agreement.

155    There is one further aspect that supports the conclusion that no legally binding agreement was reached as a result of the dealings in November 2014. The subject matter of the proposals was the establishment of two new businesses in which minority shareholding interests would be held. The financial commitments required for those businesses were substantial. The parties expected that the businesses would be ongoing for a considerable period, at least for the duration of the proposed long term lease of the Site. The principal actors, Mr Tracton for Plankton Australia and Mr Kerr and Mr Keenan for Rainstorm had not previously been in business together. Both parties had engaged lawyers in the background to advise about matters to be addressed in their discussions. They expressly contemplated the preparation of agreements. In order for the proposed structure to be implemented, it would be necessary for Algalfields to enter into a lease agreement, but it had not yet been incorporated and was not a party to the proposals being exchanged. Likewise, Plankton Farms, though incorporated, was not a party to the proposals.

156    In all the circumstances, these matters weigh against the likelihood that the parties intended to conclude a binding agreement as to these new business relationships without detailed formal documentation to which the new entities Plankton Farms and Algalfields were parties and agreements had been concluded governing the rights to be exercised by shareholders given the minority interests.

No consent manifested by subsequent conduct

157    Shortly after the November telephone conversation, the joint submission was provided to the Lands Department. However, the contents of that document were not prepared to record or manifest an agreement. The contents of the joint submission should not be considered divorced from the course of dealings between the parties. It is true that the terms of the submission and covering letter reflect the extent of the consensus reached through the exchange of the proposal documents. However, the language used in the submission and covering letter is hedged with qualifications consistent with the parties not yet having concluded an agreement.

158    The letter says that Rainstorm and Plankton Australia “have agreed to form a partnership and have created a new business enterprise called, Algalfields Pty Ltd”. It does not say that they have formed the partnership. Nor does it say they have entered into a joint venture agreement or a shareholders agreement or indeed that they have concluded any form of agreement. It is one thing to agree to form a partnership and create a new business enterprise. It is a different thing to reach a binding agreement as to the terms that will govern the partnership and the new enterprise. The general statement in the letter is akin to the statements made by the parties as early as May 2014 that they have agreed on arrangements to share the facilities. There is no suggestion that those statements reflected the existence of a binding agreement.

159    The submission states that a new business entity named Algalfields has been created with joint ownership by Rainstorm and Plankton Australia. In fact, as I have noted, that had not occurred. However, as I have said, the creation of Algalfields is equivocal. Equally so, a statement that Algalfields had been created. The submission then says that Rainstorm “is willing to relinquish its rights to apply for a subsequent 21 year lease … in favour of Algalfields doing so”. This statement does not indicate that the parties have entered into an agreement to that effect, subject to the consent of the Minister. It simply expresses a willingness on the part of one party, Rainstorm.

160    The submission also states that Algalfields will be the master lease holder and manager and sets out an ownership structure consistent with the structure set out in the proposals. It then says that it “is anticipated that the lease of the Site will be transferred from Rainstorm to Algalfields under a new Lease agreement with simultaneous approval being sought for Algalfields to sub-lease the Site to Plankton Farms and Rainstorm”. Again, this language is consistent with the parties’ expectation as to the nature of the agreement that will be concluded between them given their then current plan if the Minister’s approval is obtained. The language used is not of a kind to indicate that a different view should be taken concerning the exchange of proposals and the effect of the telephone conversation.

161    It was submitted for the applicants that the form of expression used in the submission and covering letter can be explained by the fact that the submission was seeking the consent of the Minister and the parties did not wish to present the matter to the Minister by stating that an agreement had been reached. However, it would be commonplace for parties to conclude an agreement subject to Ministerial consent. If that had occurred, you would expect the submission to say so in terms.

162    Therefore, the content of the submission and covering letter does not support the conclusion that a binding agreement had been reached between the parties in the terms alleged.

163    The applicants also rely upon ongoing activities on the Site by Plankton Farms. It is the case that Mr Kerr was involved in a significant way with dealings and decisions concerning the advancement of the activities in relation to cultivation of DSA. However, this conduct must be viewed in the context of what had occurred between August and November 2014. In that period, substantial activities had been undertaken on the Site at a time when there is no claim that there was an agreement. After November 2014, the involvement of Mr Kerr in those activities appears to have increased. However, that involvement must be considered in the context of the overall approach of Mr Tracton which was to demonstrate his capability with a view to increasing the prospect of concluding an agreement. Also, Plankton Australia had gone onto the Site without any agreement being in place and had undertaken considerable steps to establish the product of DSA. The conduct from December 2014 was likely to be viewed as a continuation of that activity.

164    Further, there are two other aspects of the conduct at this time which are significant.

165    First, Mr Tracton did not cause Plankton Farms to issue shares to Rainstorm as provided for in the proposal documents. The failure to take this significant and obvious step by way of implementation counts against the applicant’s claim. Indeed, it is precisely the kind of step that would not be implemented if an agreement had not been concluded.

166    Second, it was not until May 2015 that any further document was presented to record any alleged agreement. Further, the document that was presented at that time was not a form of shareholders agreement or other more detailed agreement (as contemplated by the proposals) but rather a varied form of the V3 proposal.

167    As I have noted, in May 2015, a draft business case to be presented in support of royalties for regions funding was provided to Mr Tracton and Mr Kerr for their review. The document was provided by Mr Tracton to the PDC for comment on 22 May 2015. This was at about the same time that Mr Tracton sent the “Heads of agreement” to Mr Kerr.

168    The draft submission said that Plankton Farms and Plankton Australia “on speculation, without any long term lease in place, have invested over $400,000 in wages, equipment repairs and purchases, infrastructure modifications, laboratory set-up and site development”. Similar language had been included in the expression of interest document submitted on 1 December 2014. However, it referred to a figure of $100,000+. Clearly, the document had been updated.

169    Mr Tracton maintained that the reference to “on speculation” was confined to the absence of a long term lease, not any view on his part that there had been no concluded agreement with Rainstorm. As I have found, I accept that the words are capable of the construction maintained by Mr Tracton. For that reason, I place no weight upon them in concluding that there was no manifestation of mutual assent to the terms of the V3 proposal by conduct occurring after November 2014. In any event, I note that the terms of the submission were provided to Mr Tracton and Mr Kerr very close to the point at which the dispute arose between them. Therefore, the contents of the document could have little significance for the applicant’s case which depends upon demonstrating the manifestation by conduct of an assent to the terms recorded in the V3 proposal prior to the dispute which emerged in late May or early June 2015.

Alleged lack of essential terms

170    The defence advanced by Rainstorm included an argument that the essential terms had not been agreed. Given the view that I have reached that the parties did not form a legally enforceable agreement by offer and acceptance or by objectively manifesting an intention to be legally bound it is strictly not necessary to deal with the argument based upon a lack of essential terms.

171    However, there is at least one difficulty for the applicants in relation to the terms alleged to comprise the essential terms. The agreement, as alleged, is an agreement to which only Plankton Australia and Rainstorm are parties. It is said that they agreed to form Algalfields. Further, they agreed that they would do all that was necessary to cause Algalfields to become the holder of the master lease including, if necessary, for Rainstorm to apply to transfer the lease to Algalfields.

172    An agreement in those terms might support a claim requiring Rainstorm to do all that which was necessary to form Algalfields and, in its capacity as a shareholder of Algalfields, to not exercise its rights to interfere with Algalfields taking the master lease. Further, it might support relief whereby Rainstorm could be compelled to seek the consent of the Minister to a transfer to Algalfields. However, beyond that, no aspect of the agreement as alleged, could require Algalfields to take up such a lease.

173    In those circumstances, if the nature of the transaction contemplated by the parties was one in which Algalfields could be required to enter into the master lease as lessee if the necessary ministerial consent was obtained, then the agreement would lack an essential party, namely Algalfields.

174    Further, the form in which the proposals were expressed contemplated commitments on the part of Algalfields not only to take the master lease, but then to grant the necessary sub-leases to each of Pankton Farms and Rainstorm. The agreement as alleged not only benefitted Algalfields, but also required it to do things.

175    Therefore, having regard to the nature of the subject matter of the alleged agreement, all essential terms had not been agreed because there were fundamental aspects of the contemplated agreement that required Algalfields to be a party to the agreement and to agree to the essential terms that required performance by Algalfields.

176    Therefore, although one might contemplate an agreement of a kind that operated only as between Rainstorm and Plankton Australia, the subject matter of the dealings between the parties in this case went further. As a result, the essential terms of the proposed subject matter of the agreement could not be concluded unless and until Algalfields was incorporated and became a party to the agreement and itself agreed to the necessary essential terms.

Abandonment and other defences

177    Rainstorm claims that even if there was a binding agreement, by the conduct of Plankton Australia and Plankton Farms after June 2015 there was an abandonment of any agreement or the rule that a party may not approbate and reprobate applies or there was an election to accept any repudiation. Therefore, it was submitted, even if I was to find that there was an enforceable agreement, I should not grant relief on that basis.

178    Each of these claims depends upon a factual allegation that Plankton Australia participated in a course of conduct whereby a sub-lease from Rainstorm to Plankton Farms was pursued after June 2015 rather than an insistence upon the master lease being held by Algalfields.

179    As I have concluded that there was no binding agreement and that the alternative claims based upon misleading and deceptive conduct and estoppel have not been established (see below), it is not necessary for me to consider this aspect of the case. I note that the argument as to abandonment depends upon documentary materials rather than contested oral evidence about which there is a need for findings as to contested fact. This matter has been brought on for urgent determination. Therefore, I do not delay the publication of these reasons by considering the various alternative defences raised by the respondents.

Misleading or deceptive conduct claim

180    The applicants claim that by signing the submission to the Department of Lands in December 2014, Rainstorm made representations to Plankton Australia.

181    In the statement of claim, the alleged representations were pleaded in the same terms as the alleged express terms of the joint venture agreement, namely:

(a)    Rainstorm would take all necessary steps to incorporate a company in the name of Algalfields with the shareholding to be held 85% by Rainstorm and 15% by Plankton Australia;

(b)    Rainstorm would transfer to, and Algalfields would hold, the master leases for the Site;

(c)    Plankton Australia would take all necessary steps to incorporate Plankton Farms with the shareholding in that company to be held 80% by Plankton Australia and 20% by Rainstorm;

(d)    Rainstorm and Plankton Australia agreed to appoint Plankton Farms as the aquaculture research, farming, manufacturing and trading company for DSA;

(e)    in exchange for shares in Plankton Farms, Plankton Australia would provide to Plankton Farms up to $300,000 by way of loan without interest and certain other matters;

(f)    in exchange for shares in Plankton Farms, Rainstorm would provide to Plankton Farms up to $300,000 in the form of in-place infrastructure to be paid back with any monies advanced to Plankton Australia, expertise in operational aspects on-site and management;

(g)    upon approval, Algalfields would provide Plankton Farms and Rainstorm separate sub-leases;

(h)    the annual charge for the sub-lease would be 50% of the cost of the master leases plus an additional $2000,000 to cover administrative and ancillary expenses; and

(i)    Plankton Farms would acquire the right to use certain infrastructure on the Site.

182    It was also pleaded that there was a representation by signing the submission to the Department of Lands that there existed a joint venture in the form of the joint venture agreement.

183    In their opening and closing written submissions, the applicants formulated the representations in different terms which reflected the language used in the submission. It was said that the matters represented were that:

(a)    a new business entity named Algalfields had been created;

(b)    Algalfields was owned jointly by Rainstorm and Plankton Australia;

(c)    Rainstorm would relinquish its rights to the master leases on the basis that Algalfields would take up the rights;

(d)    Plankton Farms would maintain the aquaculture licenses required under the master leases;

(e)    Plankton Farms and Rainstorm have a mutually complementary interest in the commercial use of the Site and the conduct to aquaculture and bitterns related activities;

(f)    the joint partnership opportunities provided complementary and commercial efficiencies for both Plankton Australia and Rainstorm;

(g)    Algalfields would seek the Minister’s consent to sub-lease the site to both Rainstorm and Plankton Farms;

(h)    upon receiving Minister’s consent, Plankton Farms and Rainstorm would each be granted a sub-lease by Algalfields;

(i)    the sub-lease details of both Plankton Farms and Rainstorm “were as stated”;

184    It was also said that it was represented that there existed a joint venture in the form of the joint venture agreement as described in the submissions (which I take to mean the agreement as alleged to have arisen from the exchange of the proposals and the telephone conversation in late November 2014).

185    The representations in the submissions as listed at (c), (d), (g) and (h) above are said to be representations as to future matters in respect of which reasonable grounds did not exist.

186    As I explain below, at this stage of the proceedings, the question is whether the statutory relief other than damages, should be granted. The statutory relief sought, other than damages, is a declaration as to the existence of the alleged joint venture agreement and otherwise orders to perform the matters allegedly represented at (c), (g) and (h). Indeed, the applicants summarised their misleading or deceptive conduct case as involving representations “principally, that a binding JVA existed, and that material obligations under the JVA had been or would be satisfied”. Accordingly, I will focus upon the claims that support the relief that recognises the existence of the joint venture agreement and seeks to require the incorporation of Algalfields and an application by Rainstorm to the Minister to transfer the master lease to Algalfields.

187    The representation alleged at (c) concerns what Rainstorm would do in the future, namely relinquish its rights to a lease of the Site so that Algalfields could take up those rights.

188    The representation alleged at (g) concerns what Algalfields would do in the future, namely seek consent to subleases to each of Plankton Farms and Rainstorm.

189    The representation alleged at (h) concerns what Algalfields would do in the future, namely grant sub-leases to Plankton Farms and Algalfields upon receiving the Minister’s consent.

190    The representation alleged at (j) concerns whether there existed a joint venture in the form of the V3 proposal (amended to reflect the change to equity in Algalfields discussed in the telephone conversation at the end of November 2014).

191    As I have noted, the representations at (c), (g) and (h) are formulated in terms that reflect the language used in the submission to the Department of Lands. It is alleged that the act of signing the submission gave rise to the representations which were then relied upon by Plankton Australia in what it did thereafter on the Site.

192    However, the submission was not directed to Plankton Australia. Rather, it was directed to those advising the Minister concerning the grant of a new long term lease. The claim made is not that the Minister or the Minister’s advisers were misled. Rather, the claim is that the submission misled Plankton Australia. That is to say, the operative conduct said to be misleading and deceptive is conduct as between Plankton Australia and Rainstorm that was the consequence of Rainstorm subscribing to the content of the submission.

193    The representation at (j) appears to be a claim that by reason of the conduct of Rainstorm in subscribing to the language used in the submission there was some general representation that there existed an agreement in the terms alleged by the applicants in their main claim that there was a binding contract.

Principles to be applied

194    Whether there has been misleading or deceptive conduct is a question of fact that requires a contextual inquiry. The conduct must be assessed against the background of all surrounding circumstances: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202, approved of in Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at [100]. In determining whether there has been a contravention of the statutory standard the task of the court is to examine the relevant conduct as a whole. The question whether there has been misleading or deceptive conduct is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. “It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the course of a single course of conduct must be deduced from the whole course of the conduct”: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [109] quoted with approval in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102].

195    Further, where the conduct is alleged to represent something about what will happen in the future, for the purposes of evaluating whether there has been misleading or deceptive conduct it is necessary to consider whether the conduct amounts to a promise, a prediction, a plan, or a present opinion as to what will happen. Where the alleged representation arising from the conduct concerns a future act or event the occurrence of which is in the hands of the party alleged to have made the representation then it is also necessary to consider whether it is a statement of present intention as to future actions. Issues may also arise as to what is conveyed concerning the likelihood of the future event occurring.

196    When the misleading or deceptive conduct that is alleged is a representation that there is in existence an enforceable agreement a number of issues arise; see, for example, Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486 at [35]-[40], [102]-[105] (although the case was concerned with alleged representations to a wider audience, the same considerations arise where the claim made is that the representations were directed to a particular party). Does the conduct communicate that an agreement in fact has been concluded or an opinion or judgment that there is a legally enforceable agreement or a form of assurance or warranty that there is a contract that is enforceable and that it will be performed. All depends on the circumstances.

No misleading or deceptive conduct

197    In the manner in which the case for the applicants was presented at the hearing, the relevant claims of misleading or deceptive conduct are of three kinds. First, there was a representation allegedly made about what Rainstorm would do in the future which lacked reasonable grounds. Second, there was a representation allegedly made about what Algalfields would do in the future which lacked reasonable grounds. Third, there was a representation allegedly made about the present existence of an agreement in the terms of the V3 proposal (amended as to the equity in Algalfields). I will deal with these three claims in reverse order because it is the final claim that was the focus of the submissions by the applicants and it is the only representation in respect of which an express declaration is sought.

No representation of an enforceable agreement

198    The statements in the December 2014 submission to the Lands Department cannot be divorced from their context, namely the dealings as between Plankton Australia and Rainstorm. Mr Tracton, the guiding mind of Plankton Australia, participated in all of those dealings. In considering the effect upon Plankton Australia of the signing by Mr Kerr of the submission, it must be born in mind that Mr Tracton knew the facts concerning the point that has been reached through the exchange of the proposals. The impression that would have been created for Plankton Australia by the conduct of Rainstorm in subscribing to what was said in the submission must be evaluated in that context.

199    I have already examined in some detail the course of dealings between the parties up until the submission. I have concluded that the dealings between the parties were undertaken to reach a consensus as to their overall plans for the purpose of making the submission. Viewed objectively, those dealings did not culminate in the manifestation of assent to terms that were to be legally binding. It is necessarily implicit in the findings I have made that a reasonable party in the position of Mr Tracton (the guiding mind of Plankton Australia) would not have concluded that there was a binding agreement.

200    The additional step of subscribing to the particular statements in the submission to the Department of Lands does not alter the impression created for a party in the position of Mr Tracton. The submission is not a statement directed to Plankton Australia. It is a communication to the advisors to the Minister. In considering the impression created by those words for Plankton Australia, there must be due regard to this aspect.

201    It is evident from the terms of the submission that the parties are stating to the Minister their plans and intentions if the Minister accedes to the application for the grant of a new lease to Algalfields. The submission does not depend upon the existence of a binding agreement of the kind alleged nor is any statement made that such an agreement exists. There is a statement in the covering letter that Rainstorm and Plankton Australia “have agreed to form a partnership and have created a new business enterprise called, Algalfields”. However, a person in the position of Mr Tracton would understand that statement to reflect the nature of the dealings between the parties up to that point. It does not have the character of a statement adding to or developing or changing the nature of the discussions that the parties had as between themselves.

202    I have already found that the parties had reached a consensus as to the matters that were addressed in the submission. The manner in which the statements are expressed in the submission accurately reflects that position.

No misleading statement concerning Algalfields future conduct

203    The claim as advanced is that there was an absolute and unconditional statement as to what Algalfields would do in the future, namely seek the consent to sublease the Site to Plankton Farms and Rainstorm that lacked any reasonable basis at the time.

204    However, the statement actually made in the submission was “Algalfields is proposing to sub-lease…to Plankton Farms and Rainstorm”. A figure depicting the sub-leases was also included. This was an accurate statement of the proposal at that time. There was a reasonable basis for the statement because it reflected the consensus that had been reached in the discussions between the parties. It may be that there was an implicit representation that the matters stated represented then then present intentions or expectations of Rainstorm. However, there is no evidence to suggest that Mr Kerr or Mr Keenan (being the directors of Rainstorm) did not intend as at December 2014 to proceed in the manner set out in the proposal.

205    On the evidence, they changed their position by late May 2015. The explanation they provided at that time was that the Minister was willing to issue a new lease to Rainstorm and there was not a need for Plankton Farms to have an interest in the lessee. However, there is no suggestion in the course of events that as at December 2014 the matters stated in the submission were matters that Rainstorm, by its directors, did not expect would occur or did not intend to cause to occur.

No misleading statement concerning Rainstorm’s future conduct

206    The alleged representation concerning the future conduct of Rainstorm was that it would relinquish its rights to the master leases on the basis that Algalfields would take up the rights. Again the representation alleged is in unqualified terms as to what would happen in the future and is said to have been made without reasonable grounds.

207    As to this matter, there may be inconsistent statements in the submission. It first says “Rainstorm is willing to relinquish its right to apply for a subsequent 21 year lease…in favour of Algalfields doing so”. Later in the submission it says “It is anticipated that the lease of the Site will be transferred from Rainstorm to Algalfields”.

208    In context, the statements made reflect the plans of the parties. The proposals that the parties exchanged in November did not say how Algalfields would become the holder of the master lease. They simply recorded that Algalfields will be the designated holding company to maintain and manage the master lease. Therefore, given the plans of the parties at the time, there is a reasonable basis for the statement. It reflects the discussions between the parties as to what would occur in the future.

The claim concerning the incorporation of Algalfields

209    One of the representations alleged to have been made by the submission is that Algalfields had been created. The submission states “In anticipation of the current leases expiring in April 2015, a new business entity named Algalfields…has been created with joint ownership by Rainstorm…and Plankton Australia”. This statement was not correct. Indeed, Algalfields has still not been incorporated.

210    However, no submission was advanced by the applicants as to how the falsity of this particular statement supports the grant of relief in the form sought. If there was no binding contract in the terms alleged and there was no misrepresentation as to the existence of such a contract and there was no misleading conduct of the kind alleged in (c), (g) and (h) above then the fact that Algalfields has not been incorporated is of no moment.

Conduct in trade or commerce

211    The respondents argued that the December 2014 submission was not made in trade or commerce because it was made to statutory authorities as required by legislation. Reliance was placed upon the decisions in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281, Glaxosmithkline Australia Pty Ltd v Pharmacor Pty Ltd [2014] FCA 1202, Glueck v Stang [2008] FCA 148, Interpharma Pty Ltd v Commissioner of Patents [2008] FCA 1283 and Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330.

212    However, as I have noted, there is no claim that the content of the submission misled the Minister. Rather, the claim made is that the act of signing the submission was conduct as between Rainstorm and Plankton. It is not the statutory character of the submission that gives rise to the claim. Rather, it is the alleged conduct as between the two companies in their commercial dealings in joining in the joint submission by signing the document.

213    In those circumstances, the authorities relied upon may be distinguished. The claim as formulated is the claim concerning conduct in trade or commerce.

Reliance

214    The respondents also claimed that if the representations as alleged had been made then there was no reliance upon the conduct of Plankton Australia in making those representations. It was said that Plankton Australia was already committed to the expenditure of the substantial funds well before the submission was made. This is correct. However, after December 2014 there was further substantial expenditure by Plankton Australia.

215    It was argued, in addition, that Plankton Australia had been willing to embark upon the enterprise on a speculative basis without any guarantee of a long term lease. This was the case in the period from August until November 2014. However, after that time, Mr Tracton’s evidence was that he believed there was a legally binding agreement. Indeed, that was a proposition put to Mr Tracton in cross-examination and it is a proposition with which he agreed.

216    In those circumstances, if I am wrong in my view that there was no misleading or deceptive conduct by Rainstorm signing the submission and that conduct did (contrary to my finding) represent that there was a legally binding agreement then the evidence establishes reliance on the part of Mr Tracton up until June 2015.

217    After that point in time, it was clear that any such representation was not continuing. Yet, on the evidence, Plankton Australia increased its expenditure after June 2015. In those circumstances, had I formed the view that the representation as to the existence of a binding agreement as alleged was established, it would have been necessary to consider whether the fact that the contravening conduct came to an end in June 2015 weighed against the grant of statutory relief of a kind which would, in effect, enforce the terms of an agreement which had been disavowed since June 2015 (and which had not been established to exist as a matter of contract law).

Effect of non-existence of Algalfields on statutory relief

218    Further, if I had found that there was misleading or deceptive conduct as to the existence of a binding agreement, there would be an issue as to the nature and extent of relief that could be granted having regard to the fact that the relief sought would extend to obliging Algalfields, a company not yet incorporated and therefore not a party to these proceedings to do things. In particular, it would be burdened with the consequences of a representation by one of its shareholders (Rainstorm) by being required to grant sub-leases in respect of the master lease.

The claim against Mr Kerr

219    The claim against Mr Kerr was made on the basis that he was knowingly concerned in the misleading and deceptive conduct of Rainstorm. In order to be knowingly concerned, a person must have knowledge of the essential facts constituting the contravention: Yorke v Lucas (1985) 158 CLR 661 at 670. It is not necessary to know that those facts are capable of characterisation as misleading or deceptive conduct or to recognise in some way that the contravention has occurred: Rafferty v Madgwicks (2012) 203 FCR 1 at 254.

220    In this case, the essential facts constituting the contravention comprise the signing of the December submission to the Department of Lands, the contents of that submission and the context of the dealings between the parties concerning the Site in which the submission came to be prepared. Mr Kerr was a knowing participant in all of that conduct.

221    If I had found that those facts should be characterised as misleading or deceptive conduct then it would have followed that Mr Kerr was liable as a party who had been knowingly concerned in that conduct. However, there is no liability on his part given my conclusion that there was no misleading or deceptive conduct.

The estoppel claim

222    The applicants advanced an estoppel claim based upon a representation allegedly made in the same terms as that relied upon for the claim of misleading or deceptive conduct.

223    On the findings I have made, there are at least two reasons why the estoppel claim cannot succeed.

224    First, the representation as alleged was not made.

225    Second, it has not been shown that Rainstorm knew or should have known in all of the circumstances that Plankton Australia was acting on the basis that there was an agreement in place that governed the relationship between Plankton Australia and Rainstorm. Given the course of events, it was reasonable for a party in the position of Rainstorm to conclude that the activities of Plankton Australia (and Plankton Farms) on the Site were undertaken in the hope or expectation that ultimately an agreement would be concluded between the parties if and when a long term lease of the Site was secured.

226    Had I been of the view that the estoppel claim was made out, there would have been a further question as to the nature of the relief that should be granted. Since June 2015, any representational conduct by Rainstorm as to the existence of a binding agreement has been at an end. Therefore, the considerable expenditure since that time has not been encouraged by any conduct on the part of Rainstorm. The relief sought by the applicants would result in the transfer of very long term and valuable leasehold interest. It would require the grant of a long term sub-lease to Plankton Farms and for Rainstorm to become a minority shareholder in that company. On the other hand, the detrimental reliance up until June 2015 involved an identifiable amount of expenditure in the hundreds of thousands of dollars.

227    In Sidhu v Van Dyke (2014) 251 CLR 505, French CJ, Kiefel, Bell and Keane JJ said at [85]:

The appellant’s argument, rightly, sought no support from the discussion in cases decided before Giumelli v Giumelli of the need to mould the remedy to reflect the “minimum relief necessary to ‘do justice’ between the parties”. There may be cases where “[i]t would be wholly inequitable and unjust to insist upon a disproportion that making good of the relevant assumption”; but in the circumstances of the present case, as in Giumelli v Giumelli, justice between the parties will not be done by a remedy the value of which falls short of holding the appellant to his promises. While it is true to say that “the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct”, where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise (footnotes omitted).

228    In this case, if the estoppel claim had been upheld, before granting the relief sought it would have been necessary to consider whether it would be disproportionate to make good the relevant assumption because the relief would operate to an extent that would be “wholly inequitable and unjust”. Had I concluded that the claim in estoppel has been made out, I would have been inclined to invite the parties to make further submissions on this question before determining whether the relief sought by the applicants making good the representation should be granted.

Orders

229    These proceedings were commenced on 27 November 2017. An application was made for an interlocutory injunction. On 15 December 2017, orders were made programming the matter for an urgent hearing of those aspects of the application which supported the claim to injunctive relief.

230    The urgency in this matter arose because the activities of Plankton Australia and Plankton Farms in respect of the Site had reached a point where substantial capital investment was planned for the Site and certainty as to the position between the parties was required before proceeding with that investment.

231    The orders made for an urgent trial provided for the Court to determine separately the following claims to relief by the applicants (adopting the numbering in the application):

1A.    A declaration that on and from 26 November 2014 the First Applicant, Plankton Australia Pty Ltd, and the First Respondent, Rainstorm Dust Control Pty Ltd, became bound and remain bound, to perform a joint venture agreement (the JVA) in relation to the occupation and development of 1 Millers Road, Gap Ridge, in the state of Western Australia.

1.    An order that the JVA be specifically performed.

2.    Alternatively:

A.    a declaration that on and from 26 November 2014 the First Applicant, Plankton Australia Pty Ltd and the First Respondent, Rainstorm Dust Control Pty Ltd, became bound, and remain bound, to perform the JVA in relation to the occupation and development of 1 Millers Road, Gap Ridge, in the state of Western Australia;

B.    a declaration that the First Respondent breached the JVA by failing to perform in accordance with its terms.

2A.    A declaration that the First Respondent, Rainstorm Dust Control Pty Ltd contravened s 18 of the Australian Consumer Law being Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the Contravention).

2B.    A declaration that the Second Respondent, Robert Gregory Kerr was knowingly involved in the Contravention.

2C.    Declarations that:

(a)    the First Respondent, Rainstorm Dust Control Pty Ltd represented to First Applicant, Plankton Australia Pty Ltd that the JVA operated between Plankton Australia and Rainstorm on and from 1 December 2014 (the JVA representation);

(b)    Plankton Australia relied on the JVA representations to its detriment;

(c)    at all times subsequent to 1 December 2014, Rainstorm has been aware that Plankton Australia relied on the JVA representation to its detriment;

(d)    it is unconscionable for Rainstorm to resile from the JVA representation.

232    Separate claims to damages, alternatively equitable compensation, were not the subject of the separate hearing.

233    In those circumstances, it is appropriate that the orders on the application reflect the terms of the order for a separate hearing and provide for the above claims for relief to be dismissed.

Costs

234    After the hearing of this matter, I directed the parties to inform the Court of the lump sum amounts of costs that each of the applicants and the respondents would seek in the event that the outcome was determined favourably to that party and costs were assessed on a lump sum basis. I also directed the parties to file short submissions of no more than two pages on the question whether a lump sum order should be made and if so, whether it should be made by reference to the lump sum amounts notified by the parties.

235    In Paciocco v Australia & New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146, the Full Court (Allsop CJ, Besanko and Middleton JJ) considered the circumstances in which it was appropriate for a lump sum costs award to be made. The Court approved statements to the effect that the purpose of the rule that allows for the making of an award of costs in a specified sum is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation. Reference was made to the central practice note: National Court Framework and Case Management (CPN-1) and the Costs Practice Note (GPN COSTS). It was noted that the Costs Practice Note now makes clear that the Court should now proceed on the basis that taxation should be the exception and confined to matters which are unable to be determined otherwise. Reference was also made to steps being taken to ensure that the Court has the requisite level of detail to make a costs determination that is fair, logical and reasonable.

236    The principles to be applied in making a lump sum costs determination were helpfully summarised by Markovic J in Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 at [7]-[14].

237    Usually, the determination of the appropriate quantum of a lump sum costs order involves a broad brush consideration and review of the level of charges actually rendered. However, in my view, in the particular circumstances of this case, there are reasons why it is appropriate to determine a lump sum primarily by reference to the estimates of the claims to costs given by each of the parties at a time when they did not know the outcome of the proceedings.

238    This matter has been dealt with on an urgent basis within three months of commencement. The issues raised are not legally complex. Determination of the issues raised requires the application of established principles to a chronology of events that extended over just more than a year. There was one main witness for each of the applicant and the respondent. Each of those witnesses was cross-examined. The areas of factual dispute were relatively confined. The parties were each represented at trial by junior counsel and the matter required the attendance of a senior instructing solicitor at the hearing for the applicants and for the respondents.

239    In these circumstances, it is likely that the reasonable costs of the applicants and the respondents relating to the conduct of the trial would be similar.

240    The conduct of the hearing and the preparation of reasons were both aided by the preparation of written open and closing submissions and the preparation of a full court book with all relevant documents cross-referenced to the affidavit materials. In determining an appropriate approach to costs, regard should be had to the time at trial saved by the effort in producing these materials which is likely to have fallen relatively equally on both parties.

241    Otherwise, the matter involved discovery, usual conferences with counsel, the preparation of a number of affidavits and attendance at directions hearings as well as preparation for the application for an interlocutory injunction the hearing of which ultimately did not proceed on the basis that the matter would be determined finally at an urgent hearing.

242    It is not uncommon for the costs of an applicant in preparing a matter for trial to be greater than the costs of the respondent. The applicant must make the case on all issues. The respondent can choose the issues on which it defends the matter. Further, the costs of complying with interlocutory directions for which the applicant usually has carriage can fall to a somewhat greater extent upon the applicant.

243    In their submissions, both parties supported an award of costs on a lump sum basis.

244    As to its costs, the applicants sought an amount of $205,000 if it was successful. The applicants said the amount claimed had been calculated by applying a 25% discount on professional fees incurred by the applicants and a 10% discount on disbursements incurred by the applicants. Counsel’s fees as rendered were said to be $66,975.50. It is not clear whether these figures included GST although the indication was that they did.

245    The respondents, though supporting the appropriateness of an award of costs on a lump sum basis, sought to reserve their rights to make an application for indemnity costs after judgment is pronounced. They said that the actual costs to the respondents of the proceedings totalled $186,854.07, including GST. The respondents did not indicate any other amount that should be ordered if they were successful in defending the claims. Given the terms of my direction, I take this to be the amount that the respondents claim. Of these costs, counsel’s fees were said to be $52,618.50 inclusive of GST (although I note that counsel was not briefed until January 2018).

246    On 19 December 2017, Lee J ordered the respondents to pay the costs of an interlocutory application to transfer these proceedings to the Western Australian District Registry of the Court. The amount of $186,854.07 for the respondents’ costs does not include any of the respondents’ costs referrable to that application.

247    In Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) [2017] FCA 1469 McKerracher J reviewed the relevant authorities and recorded submissions concerning lump sum costs orders recently made by this Court: at [34]. The submissions made were that lump sum costs orders are typically in excess of 65% of total costs and have been up to 85%, with a number being of the order of 70-75%.

248    I am satisfied, in the circumstances, that a lump sum costs award should be made.

249    Taking a broad brush approach, I have had regard to:

(a)     the higher amount of costs that would have been sought by the applicants if they had been successful;

(b)     the additional costs that might be expected to be incurred by an applicant compared to a respondent;

(c)     the fact that the applicant proposed a fixed costs award based on 75% of its actual costs;

(d)     the range in which lump sum cost orders have been made by this Court in recent decisions when expressed as a percentage of actual costs;

(e)     the costs the applicants might have recovered under the terms of the order by Lee J.

250    I am satisfied that the amounts incurred by the respondents are generally reasonable and I would allow 75% of those costs and vacate the order of Lee J. It seems to me that it would run counter to the purpose of making a lump sum order if those costs were treated separately.

251    Accordingly, I allow costs to the respondents, inclusive of GST, in the amount of $140,140.55.

252    I reserve to the respondents the liberty that they seek to apply for indemnity costs. There would need to be a basis for such an application outside the matters known to me in respect of the course of proceedings because, I am not aware of any aspect of the manner in which the proceedings were conducted that would justify such an order.

Associate:    

Dated:    27 February 2018