FEDERAL COURT OF AUSTRALIA

Neptune Hospitality Pty Ltd v Ozmen Entertainment Pty Ltd [2020] FCAFC 47

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant file submissions on costs not exceeding 3 pages within 7 days.

3.    The respondent file submissions in reply not exceeding 3 pages within 7 days thereafter.

4.    Unless the Court otherwise determines, costs be determined on the papers.

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

REASONS FOR JUDGMENT

TABLE OF CONTENTS

THE COURT:

OVERVIEW

1    In January 2016, Neptune Hospitality Pty Ltd entered into a joint venture agreement (JVA) with Kanki Sea Tourism Hospitality & Entertainment Pty Ltd to operate a hospitality Business and joint venture aboard a vessel, ‘the Vessel or Seadeck’, owned by Ozmen Entertainment Pty Ltd. Neptune and Kanki took possession of Seadeck under a Charter Agreement (CA).

2    The genesis of the venture was a loose arrangement negotiated in 2014 between Mr Ozmen, a Turkish businessman and three Australian businessmen, Messrs Gavin Douchkov, Mel Como and Scott Robertson. The idea was that the Australians would pay a hire premium for a new build 42.55m vessel, the Seadeck, to sail from Turkey to Sydney. Mr Ozmen caused Entertainment to be incorporated to hold his interest in Seadeck and Messrs Douchkov and Como caused Neptune to be incorporated to hold their interest. Mr Ozmen also caused Kanki to be incorporated later that year.

3    In January 2016 by demise charter (the CA), Entertainment chartered Seadeck to Kanki and Neptune jointly for the JVA between those parties. The parties planned to use Seadeck to offer luxury day or night cruises on Sydney Harbour for 800 or more passengers.

4    The parties had projected that the joint venture would earn a net profit of over $10 million per annum on the basis of a liquor licence for Seadeck carrying 800 passengers. On the expectation of such large profits, Neptune guaranteed that Kanki would be paid no less than $5 million net profit annually for the full term of the JVA.

5    A fundamental difficulty with the vessel’s passenger numbers was encountered on 25 October 2016 when the liquor licence was granted permitting Seadeck to carry only 450 passengers pursuant to a survey obtained by Neptune. This had a significant impact on the profitability of the venture. Difficulties surrounding finances and profitability were occasioned from the early days of the joint venturers’ business and the parties clearly lost confidence in one another. On 11 July 2017 Kanki served on Neptune a Breach Notice under the JVA requiring certain alleged breaches to be remedied within 14 days. Kanki says they were not remedied.

6    On 14 August 2017 Kanki and Entertainment commenced proceedings against Neptune. It was contended that the pleaded and un-remedied breaches entitled them to termination of the JVA and the CA. In a detailed judgment the primary judge, after making numerous factual findings, concluded that the breaches were established and in a subsequent judgment granted relief.

7    Neptune says the breaches were not established but accepts that the joint venture should be wound up due to the breakdown between the parties. Kanki contends that the judgment was correct.

8    On 26 September 2018, Burley J appointed Messrs Brian Silva and Ian Currie as receivers and managers of the joint venture.

THE JOINT VENTURE

9    Much of the dispute turns on the terms of the JVA having regard to the facts that were found or facts that Neptune argues should have been found. It is necessary to outline some of the key provisions of the JVA particularly with reference to the arguments which follow.

10    By cl 10(n) of the JVA, Neptune guaranteed that, Kanki’s share of the net profit at the conclusion of the first full season of trading on 3 September 2017 would be at least $5 million. It further guaranteed this sum for every season thereafter, while the JVA was in force. Secondly, if Kanki received a lesser annual total of fortnightly payments as its share of net profit, Neptune would pay Kanki the difference between $5 million and what it had received (the $5 million guarantee). However the $5 million guarantee was subject to conditions including that the Seadeck be fully licensed by the Independent Liquor and Gaming Authority of New South Wales (the ILGA) ‘with a legal capacity of 800pax’.

11    Other terms of the JVA provided that:

(a)    each party was to nominate a firm of accountants and a person to sign all cheques on its behalf (cl 2(b) and (c));

(b)    each party was to appoint a representative to manage on its behalf the affairs of the joint venture (cl 3);

(c)    the Business of the parties was defined as the hospitality, entertainment or other business as the parties might conduct jointly on or from Seadeck ‘from time to time whether in Australian waters’ [sic] (cl 1(c));

(d)    the JVA proposed that the Business would be conducted under the business name ‘Seadeck’ which name would remain the shared property of the parties after the JVA came to an end or was otherwise terminated (cl 4 and cl 9);

(e)    Kanki and Neptune were to be ‘equally responsible for the day-to-day running of the Business’ (cl 6(a));

(f)    the parties were to ensure that each:

(i)    did everything possible to warrant that decisions were made promptly and that full cooperation was given so that the Business was successfully managed and profitable (cl 6(b)(i));

(ii)    at all times acted in the best interests of the Business in good faith (cl 6(b)(iii));

(iii)    would not be directly or indirectly involved in any undertaking or venture, joint or otherwise, that might compete with that of the Business on Sydney Harbour (cl 6(b)(iv)); and

(iv)    complied with all applicable laws relating to the Business and its assets (cl 6(b)(vi));

(g)    the only relationship between Kanki and Neptune was to be that of joint venturers under the JVA (cl 6(c));

(h)    each owed the other a duty of trust and ‘must immediately inform the other of any conflict of interest, must not profit separately from the Business unless otherwise agreed to by the other party’ (cl 6(d));

(i)    Neptune was to keep Kanki reasonably informed of all corporate and private bookings, pricing for general admission, and ‘the quality of beverages and food served on [Seadeck]’. Each party was to jointly operate and manage the Business. Those arrangements were to be constantly discussed and finalised by both parties so that ‘all decisions are made jointly’ (cl 6(e));

(j)    neither party ‘may unilaterally incur debts or commit another party to liabilities’ (cl 6(f));

(k)    if Seadeck required maintenance or repair Neptune was to notify Kanki which could request Neptune to obtain a minimum of three written quotations for the work that Kanki had to consider and if it could provide a comparable quotation for the same work and quality it had the discretion to select that provider ‘in the interest of saving the expenses incurred by the Business’ (cl 6(g));

(l)    the parties had to ensure that ‘the joint venture has sufficient working capital to conduct the Business at all times’ (cl 7); and

(m)    the Business and its assets would be the shared property of the parties except that Seadeck, including all fixtures and attachments as listed in Sch 3 of the JVA, remained the property of Entertainment (cl 9(b)).

12    Kanki acknowledged in the JVA that Neptune had paid both a hire premium which was not to be repaid and 100% of shared costs (a defined term by reference to Sch 1 of the JVA). Kanki was to pay 50% of the shared costs plus interest. Each party agreed to pay 50% of the costs of an awning that would be constructed in Sydney over the vessel’s deck areas.

13    The shared costs included an initial loan by Neptune of some $250,000 to meet the unexpected operational costs associated with Seadeck’s journey to New South Wales and four categories of costs in connection with the set-up of the joint venture. This included the costs of a lengthy detention in Egypt and repairs made in Indonesia. Kanki was not obliged to contribute to the shared costs unless proof of payment and an itemised bill were provided for the same. As at 22 October 2015 the total of the shared costs was some $938,000 or about $470,000 for each party.  Thereafter, costs such as berthing fees in Sydney would be an ongoing shared joint venture expense.

14    By cl 10(a) and cl 10(b) of the JVA dealing with payment of the net profit share, Neptune agreed to pay Kanki 50% of the net profit of the Business (such amount plus any GST payable). In the event there was a loss, Neptune ‘will bear the said Net Loss of the Business (such amount plus any GST payable)’.

15    By cl 10(c). within five business days of each fortnight throughout the term of the JVA Neptune was required to:

calculate the Net Profit of the Business for the preceding fortnight, and provide all related details to [Kanki] regarding:

(1)    A calculation of the Net Profit and/or Net Loss; and

(2)    The share of the Net Profit payable to [Kanki] and [Neptune].

16    By cl 10(d) and cl 10(e), Kanki had three business days within which to advise Neptune in writing whether or not it accepted Neptune’s calculations. A failure to give notice within three days deemed the calculations to be accepted. Kanki’s accountants were to review the accounts of the Business and the figures that Neptune presented and would do so each month ‘for the purpose of taxation and to comply with any Australian Taxation Office obligations’. They could also review accounting materials on Seadeck after giving Neptune three business days’ notice of their intention to do so (cl 10(e)(i)).

17    Fortnightly payments as per these calculations were to be based on the management of the accounts of the Business and the review of the accounts by Kanki’s accountant (cl 10(i)).

18    Clause 10 also included a dispute resolution procedure should the parties disagree about the calculations of net profit. By cl 10(h) Neptune was required to pay to Kanki its 50% share of net profit for the relevant fortnight within one business day of either confirmation of Kanki’s acceptance of the calculations, or the decision of an independent accountant.

19    By cl (3)(j), Kanki could not unreasonably refuse to approve consent to any expenditure by Neptune for the operation of the Business.

20    Default arose under the JVA by cl 13(a) if a party

    failed first to make a payment owed to the other party under the JVA on the prescribed date; and secondly failed to remedy that failure within seven days of written notice by the other party (cl 13(a)(ii));

    continued to breach any obligation under the JVA for more than 14 days after receiving notice to remedy the breach (cl 13(a)(iii)); or

    breached any fiduciary duty it owed under the JVA to the other party (cl 13(a)(vi)).

21    Clause 13(b) provided that if default under cl 13(a) occurred, first the JVA was terminated and secondly the original fixtures on Seadeck could not be removed.

22    Clause 16 set out an entire agreement provision by which any former agreements between the parties were negatived.

23    By the CA, Seadeck was to be in full possession of Kanki and Neptune and under their complete control. They would at their cost and risk, crew, manage, navigate and operate Seadeck. Although Neptune was to carry out the day-to-day operation of Seadeck, this was to be done in consultation with Kanki on all matters related to bookings, general admission pricing and the quality of the vessel’s food and beverages such that all decisions were made jointly (cl 6(e)).

24    The charterers could not make any additions or alterations without Entertainment’s consent. Entertainment warranted in cl 7(a) of the CA that Seadeck would need to be fully classed and surveyed for a vessel of its type, allowing the Vessel to be used for the purpose of the Business and to carry up to 813 passengers. Entertainment agreed that any permits, licences etc would be taken out in Neptune’s name. Neptune had to do all things necessary throughout its term to ensure Seadeck was ‘in class’ and ‘in survey’ and to maintain any other relevant licences, certificates etc. Entertainment was and would remain under the terms Seadeck’s legal beneficial owner.

THE PRIMARY JUDGMENT

25    Following a trial occupying much of March 2019 the primary judge delivered detailed reasons early the following month in Ozmen Entertainment Pty Ltd v Neptune Hospitality Pty Ltd [2019] FCA 721.

26    Kanki claimed that the JVA automatically terminated or that Kanki itself terminated the JVA as at 25 July 2017 due to the failure by Neptune to remedy breaches specified in Kanki’s Breach Notice. Additionally, Entertainment claimed to have validly terminated the CA by notice on 4 August 2017 (the Entertainment Notice) because upon the termination of the JVA the purpose for which Entertainment demised the ship to Neptune and Kanki had failed.

27    Alternative claims were advanced by Kanki for the winding up of the joint venture on the basis that:

(a)    there had been a breach of fiduciary duty by Neptune under the JVA by its failing to advise Mr Ozmen that Neptune was in a conflict of interest and duty in early March 2016. After the survey certificate was issued for 450 instead of 800 passengers in circumstances where a survey for the lesser number of passengers would also restrict a liquor licence to that number, this purported to excuse Neptune under the terms of the JVA from having to meet its contractual guarantee to pay Kanki a minimum annual net profit of $5 million;

(b)    the substratum on which the parties had contracted failed (namely that Neptune would pay Kanki a minimum annual net profit of $5 million);

(c)    there had been a breakdown in trust and confidence particularly because of Neptune’s conduct of the financial affairs of the joint venture, its continuing failures to provide Kanki with financial information, including in respect of the catering arrangements for Seadeck, and its exclusion of Kanki from decision-making; and

(d)    Neptune made a unilateral decision over Kanki’s objection to take Seadeck to Brisbane in late June 2017.

28    Neptune however contended that none of the matters raised by Kanki and Entertainment had any substance or occasioned any relief because they both had unclean hands. The unclean hands assertion was that:

(a)    from November 2016 when the joint venture began trading, Mr Ozmen made frequent demands for money to which Kanki was not entitled, and that Neptune met those demands for a period until about 2 February 2017;

(b)    Mr Ozmen threatened to undermine the Business if he did not get his demands met;

(c)     from about late January 2017, Kanki contrived to raise unjustified disputes including in relation to the provision of accounting information and Seadeck’s relocation to Brisbane; and

(d)    from about May 2017, Kanki and Entertainment agreed with Culture Map Pty Limited that Culture Map would assist them to terminate the joint venture and that subsequently they would all enter into a new joint venture to conduct a business employing Seadeck.

29    Neptune also filed a cross-claim in which it sought declaratory relief to the effect that Seadeck was an asset of the joint venture and an account of profits.

30    There was substantial oral and written evidence about the relationship. Some of the documentary evidence was limited by the primary judge under s 136 of the Evidence Act 1995 (Cth). His Honour noted (at [12]) that while he may not have always stated explicitly that any particular document was admitted as, for example, an assertion by its author and was not evidence of the truth of the assertion, nonetheless he only relied on the documents to the extent of any limitation ordered as to its use.

31    Under the CA, Entertainment demise chartered Seadeck to Neptune and Kanki for three years with two options of three years each for a total hire of $1. The JVA was also for a three year term with two three year options but the CA and JVA each contemplated Neptune having responsibility to perform substantial tasks on behalf of the charterers and the joint venturers including the tasks of obtaining surveys for, and classification of, Seadeck to carry 800 passengers, managing the proposed luxury cruise business and preparing fortnightly and annual profit and loss statements and accounts for the trading of the Business.

32    Neptune appointed Mr Robertson as its manager to run the affairs of the joint venture on its behalf. Mr Robertson was on board Seadeck during the survey under which she was to be classified. At the time he was communicating with Mr Ozmen who was in Turkey via WhatsApp messages. During the sea trial of Seadeck the surveyor informed Mr Robertson that because of Australian fire regulations the surveyor was only prepared to issue a survey certificate for a maximum capacity of 450 passengers. Mr Robertson communicated this news first to Mr Douchkov and later that day exchanged messages with Mr Ozmen telling him that in order to get a greater passenger capacity approved Seadeck ‘needed work’ to ‘satisfy lots of fire requirements’ issued by the Australian Maritime Safety Authority (AMSA). This presented a conflict of interests according to the primary judge, a conflict, however, which was not appreciated by Mr Robertson. The conflict arose because while the survey allowing Seadeck to carry 800 passengers had financial benefits for both Neptune and Kanki, it also had a consequence that, come what may, if the joint venture made a net profit less than $10 million in a season, Neptune had to pay the difference between 50% of the profit and the $5 million guaranteed to Kanki. However, if it were only able to be surveyed to carry 450 passengers, cl 10(n)(i) of the JVA operated to relieve Neptune of the obligation of having to meet the $5 million guarantee and correspondingly Kanki would lose the benefit of receiving that guaranteed income. Mr Robertson did not appreciate this conflict and encouraged Mr Ozmen to accept a survey for 450 passengers.

33    These events were further complicated by communication difficulties. The primary judge found that Mr Ozmen’s messages were likely to have been ‘corrupted’ by either his imperfect English or more likely an auto-correct function for his more usual communications in Turkish rather than English on his mobile telephone.

34    Following the encouragement by Mr Robertson to accept a survey for 450 passengers Mr Ozmen wrote:

Mr Robertson: For class no problem with capacity but for Australian survey we only meet 450 capacity fire regulation. We can accept this now and then do the work required and increase capacity later. At 450 we can still take her out 2 and 3 times in the same day. And will be easier to get Liquor Licence approved initially.

Mr Ozmen: Ok Good Nexs years We make 850 capacity

Mr Robertson: Yea next year we can increase Focus on doing good job this year and keeping police on side So they see how we operate

Mr Ozmen: New fire plan

35    At this stage the ILGA still had to issue a liquor licence. It would only do so if Seadeck were in class and in survey. That licence was issued certifying a maximum of 450 passengers. The primary judge rejected an argument from Kanki that there was an implied term that any licence was to be for a legal capacity of Seadeck of 800 passengers. His Honour found it was unnecessary to imply such a term because cl 7(b) of the CA created an express obligation referrable to that topic on Neptune to do all things necessary through the term to ensure Seadeck was in class and in survey for her to carry 800 passengers.

Breach of fiduciary duty argument

36    In the primary judgment, his Honour held that Mr Robertson had acted honestly in his dealings and that the joint venturers were facing a common dilemma.

37    A prominent feature of the presentation of evidence was that Entertainment and Kanki relied on a documentary case. Mr Ozmen did not give evidence and there was no explanation for his absence. As a consequence it was common ground that it was open to the primary judge to infer that his evidence would not have assisted Entertainment and Kanki’s case in accordance with Jones v Dunkel (1959) 101 CLR 298, and secondly, that any inference favourable to Neptune (as the opposing party) for which there was ground in the evidence ‘might more confidently be drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by [Entertainment and Kanki] and the evidence provides no sufficient explanation of his absence’: Jones v Dunkel (at 308). Absent Mr Ozmen’s evidence, the primary judge was not prepared to infer that Mr Ozmen was not fully aware of all matters in the discussions with Mr Robertson including specifically, that proceeding with a survey of 450 passengers meant that Neptune would not be burdened by the $5 million guarantee. As a result, even if contrary to his Honour’s findings that Neptune had not acted in breach of its fiduciary duty or obligation, Kanki had still given fully informed consent to Neptune proceeding with a survey capacity of 450 passengers. Neptune was not required to act solely for and on behalf of Kanki or Entertainment to ensure that it obtained a survey for 800 passengers or for any other purpose. His Honour was satisfied there was no doubt that Neptune, through Mr Robertson, acted in good faith. Any breach of fiduciary duty was rejected. There was no cross-appeal against this finding.

The Breach Notice

38    The primary judge examined whether Kanki or Entertainment was entitled to issue the Breach Notice. His Honour said the determinative question was whether Neptune was in breach of the JVA on 11 July 2017. If it was in such breach, Kanki was entitled to issue the Breach Notice and if Neptune left the breaches there specified un-remedied, cl 13(b) of the JVA operated to terminate the JVA on 25 July 2017. Alternatively, Kanki claimed that it was entitled on 25 July 2017 to treat Neptune as having evinced an intention not to be bound by the JVA such that Kanki could accept a repudiation of the JVA. There was no dispute that if the JVA was terminated then Entertainment could rely on its termination of the CA by the Entertainment Notice in its solicitors letter of 4 August 2017.

39    As outlined above, there were three matters that Kanki alleged constituted breaches by Neptune:

(1)    Neptune failed to provide Kanki with financial information as to the operation of the joint venture Business, compliance with taxation obligations and the profitability of the Business (the financial information issue);

(2)    Neptune had failed to provide Kanki with information about the catering price and supply of food to Seadeck as part of the joint venture Business (the catering issue); and

(3)    between May and June 2017, Neptune had decided unilaterally to relocate and then move Seadeck and the joint venture Business to Brisbane knowing that Kanki and Entertainment did not agree to that move (the relocation issue).

40    Kanki asserted that each of those three matters was the subject of the Breach Notice. That assertion was in issue. The Breach Notice did complain that Neptune had taken sole conduct of the Business since the entry into the JVA including the day-to-day operations, financial management, relocation of Seadeck to Brisbane and making repairs, alterations and modifications to her and required Neptune to remedy these alleged breaches of the JVA by:

(1)    providing Kanki with copies of documents concerning the operation of the Business including:

(a)    financial information comprising calculations of net profit, all expenditure and outgoings (including the cost of the awning, RINA survey, generators, fit out and installation of all equipment), incurred losses, debts and liabilities;

(b)    ‘Business Activity Statements [BAS] submitted to the Australian Taxation Office’; and

(c)    the quality and pricing of food on Seadeck,

(2)    causing Seadeck to return from Brisbane to Sydney;

(3)    rectifying modifications which were unspecified to Seadeck at Neptune’s cost.

41    The Breach Notice was in these terms:

11 July 2017

…

We act for [Kanki] which entered into a written agreement with [Neptune] dated 6 January 2016 (“JVA”).

The purpose and object of the JVA was for the joint conduct of a hospitality, entertainment or other business (“Business”) on and from the Vessel known as the Seadeck IMO number 8672108 (“Vessel”), as is evident from the definitions in clause 1 of the JVA.

At the time of entry into the JVA, the Vessel was based in Sydney. The business of the JVA involved the provision of a unique world of luxe cruising on Sydney Harbour with the provision for payment of the Net Profits of the Business to Kanki and Neptune on a 50/50 basis.

We are instructed as follows:

1.    Neptune has taken sole conduct of the Business since the entry into the JVA and has excluded Kanki from any or any meaningful contribution in relation to the following aspects of the operation of the Business:

a.    The day-to-day operations of the Business;

b.    The financial management of the Business;

c.    The relocation of the Vessel to Brisbane;

d.    Repairs, alterations and modifications to the Vessel.

2.    The Business as conducted by Neptune, without any or any proper consultation with Kanki, has been conducted at a loss, with the consequence that only the amount of $23,000.00 of profits has been paid to Kanki.

3.    On about or around 21 June 2017 Neptune caused the Vessel to be sailed from Sydney to Brisbane for the purpose of conducting the Business on the Brisbane River and not on Sydney Harbour. This conduct on the part of Neptune:

   a.    Was not a decision made jointly by Kanki and Neptune;

b.    Was a unilateral decision taken by Neptune that was contrary to the basis upon which the JVA was established;

c.    Involved the incurring of expenditure which was not authorised by Kanki;

d.    Has deprived the Vessel of the opportunity to earn revenue and build its reputation as a vessel providing a unique world of luxe cruising on Sydney Harbour.

4.    Prior to and since its arrival in Brisbane the Business has been conducted by Neptune in a manner which is inconsistent with the reputation and marketing of the Vessel as a unique world of luxe cruising, including:

a.    Altercations initiated by customers and employees whilst in the course of their employment;

b.    Bar staff over serving alcoholic beverages to intoxicated customers;

c.    Inadequate and unprofessional services provided to customers by employees;

d.    Employees wearing unclean and inappropriate work attire;

e.    Inadequate and inexperienced security staff;

f.    Unauthorised use of a promoter, namely, “Roger”;

g.    Allowing drug affected, non-compliance with the Vessel’s dress codes/policies and otherwise undesirable customers on-board; ·

h.    The unsatisfactory quality of food and beverages provided to customers;

i.    Allowing more than the maximum capacity of customers on-board;

j.    Providing unauthorised and excessive discounts to customers;

k.    Advertising other venues and associating other businesses with the Vessel;

l.     Inappropriate and unsuitable music;

m.    Inability to ensure basic hygiene and cleanliness: eating utensils, floors, tables and bathrooms;

n.    Presenting a non-desirable aesthetic appearance of the Vessel: hull damage, internal water leaking, rust, holes drilled into the Green Room, middle bar and main deck.

5.    At a time unknown to Kanki, Neptune has caused modifications and alterations to be made to the Vessel without the consent of Kanki or [Entertainment], the owner of the Vessel, and thereby exposing Kanki to the risk of loss and damage.

Each of the above matters involves a serious breach of the provisions of the JVA and all related understandings between Kanki, Neptune and [Entertainment] in relation to the Vessel at the time of entry into the JVA.

On behalf of Kanki, we hereby give Neptune notice to rectify the following breaches in accordance with clause 13( a )(iii) of the JVA as. follows:

1.    Provide copies of the following documents to Kanki, by forwarding those copies to this firm, concerning the operation of the Business:

a.    Details of all decisions made jointly by the parties;

b.    The business plan concerning the relocation of the Vessel to Brisbane;

c.    All financial information including but not limited to:

i.    Calculations of the Net Profit of the Business including all cash income;

ii.    All expenditure and outgoings including the Awnings, RINA Survey Fee, the Generator Cost, fit outs and installation of all equipment;

iii.    Incurred losses, debts and liabilities;

iv.    Business Activity Statements submitted to the [Australian Taxation Office].

d.    Details of all prior and current employees including National Police Checks, relevant requisite licences and permits, payslips, nature of duties and period of employment;

e.    Chronology of all corporate and private bookings as well as pricing for the admissions upon entry;

f.    The quality and pricing of the beverages and food served on the Vessel;

g.    Repairs and maintenance to the Vessel.

2.    Provide access to Kyle Clarke and/or the writer, as an authorised representative of Kanki, to inspect all of the original books and records, whether ·held electronically or in hard copy, of the Business, and allow either Mr Clarke or the writer to take such copies of the documents as he may require at such inspection.

3.    Cause the Vessel to return to Sydney Harbour at Neptune’s expense for the continued operation of the Business on Sydney Harbour.

4.    Remove any reference on the Business website (www.seadeck.ccim .au) to any further operations of the Vessel in Brisbane, take no further bookings in Brisbane and cancel all bookings in Brisbane.

5.    Terminate the services of all employees who were directly or indirectly responsible for improper conduct in Brisbane and/or in the course of their employment.

6.    Rectify the modifications and alterations to the Vessel at Neptune’s cost.

Neptune is required to complete each and all of the above actions within 14 days of the provision of this letter, and if it fails to do so Neptune will be in default of the JVA and the JVA will thereby be terminated.

Please provide written confirmation of Neptune’s rectification of each of the above matters.

Further, we refer to clause 10(n) of the JVA. Please confirm that Neptune will be paying Kanki the sum of $5,000,000 on 30 September 2017, and the arrangements that Neptune has in place for the purpose of making that payment.

The notice under clause 13(a)(iii) contained in this letter is given without admissions and without prejudice to the rights of Kanki and/or [Entertainment] to contend that Neptune’s conduct in relation to the Business and the Vessel is a fundamental breach of the arrangements that exist between them, irrespective of the remedy by Neptune of any or all of the above breaches of the JVA.

…

The financial information issue at first instance

42    There appeared to be little doubt about Neptune’s non-compliance with its financial obligations in the first few months of the joint venture and that Kanki was pressing it for more information. Neptune asserts that compliance with the Breach Notice was substantially achieved within the timeframe. Kanki rejects this or alternatively argues that the later compliance does not assist Neptune. It is necessary to trace the evidence in a little detail in order to assess these competing claims, especially the latter proposition.

43    The primary judge noted that over the period until mid-February 2017, Neptune never calculated whether the joint venture had made a fortnightly net profit or loss and Kanki did not receive any payment of net profit as such. This was despite the fact that Seadeck was trading. Nonetheless, in response to requests from Mr Ozmen, Mr Douchkov did cause several payments to be made to Mr Ozmen and his associates from Neptune’s bank account of some $20,000 on each occasion up until late January 2017. His Honour said, ‘[o]bviously, such an ad hoc process of Neptune providing some financial return to Kanki without proper accounting information was bound to lead to trouble … and it did’ (at [100]).

44    Mr Douchkov on the other hand considered that Mr Ozmen was being unreasonable and was making his life impossible and stressful. Neptune strongly pressed this position at trial and on appeal.

45    As early as January 2017, Kanki and Entertainment were raising with Neptune numerous concerns about the operations of Seadeck in relation to cleanliness, customer service, security and marketing and the fact that it was working far less than anticipated (only about 10 hours per week). This was at odds with discussions about the possibility of working full time which had taken place before Seadeck left Turkey. By letter from Mr Como on 25 January 2017, Neptune responded to those concerns, citing climate issues and lack of weather protection on the ship and that it was investigating opportunities for the vessel in Brisbane. At the same time, Mr Ozmen was making a number of requests for payment from Neptune. From Mr Ozmen’s perspective Seadeck had not earned any money from 2014 to early 2016. He was contending that people in Turkey were dependent on him earning money from the ship. There was no real dispute that Neptune was in breach of its obligations at this time and continued to be for about three months.

46    The primary judge found Mr Douchkov to have given evasive answers in cross-examination on this topic. He held that by late January there was a significant, serious and ongoing breach by Neptune of its obligations under cl 10(c) of the JVA under which Neptune was to provide a fortnightly calculation of profit/loss and of sums due to Kanki and Neptune.

47    As against this, the primary judge said that Neptune’s arguments that Kanki contrived disputes about the joint venture’s accounting position were ‘specious’.

48    On 2 February 2017 Neptune paid $15,700 to Mr Ozmen. A meeting followed on 21 February 2017 the minutes of which recorded Mr Kyle Clarke for Kanki having made numerous requests and comments about Neptune’s presentation of accounting information. Mr Clarke reiterated that Neptune had an obligation to provide fortnightly profit and loss reports under the JVA and this would enable each of the parties to access its share of net profits. Mr Clarke said that he had applied for an ABN for Kanki and for it to be registered for GST. The primary judge inferred that this did occur and there was no evidence to the contrary. Mr Peter Konnaris, accountant for Neptune, at the 21 February 2017 meeting said that fortnightly and annual profit sharing would create many problems and disputes. Neptune also claimed interest on amounts spent. Mr Clarke pointed out that there was no entitlement for it to do so.

49    On 23 February 2017 Mr Clarke emailed Neptune’s directors reiterating the JVA required fortnightly accounts and that Kanki would be requesting its 50% of the net profits for each fortnight. He reiterated that Kanki did not accept the figures so far provided.

50    On 1 March 2017 Mr Clarke then raised the catering issue about which more will be discussed below.

51    Around the same time, Mr Terry Borella took over from Mr Konnaris as Neptune’s accountant. He said that he thought he was actually the joint venture accountant. Mr Borella then engaged Mr Dave Gorter to do the bookkeeping for Neptune. Mr Borella instructed Mr Gorter to create three separate ledgers: one for the joint venture itself and one each for Neptune and Kanki. He said the reason for this was that Neptune had incurred or funded a significant layer of costs in relation to the joint venture operation and that Kanki was liable to pay Neptune a half share with interest of those costs over 36 months. He said he had also spoken to Mr Douchkov about the need for the joint venture to provide in its books for depreciation and amortisation of these costs.

52    On 3 April 2017 Mr Clarke sent an email to Neptune’s directors and Mr Borella complaining of the lack of any payments to Kanki or information and inquiring whether there were monthly ‘BAS statements’ (or instalment activity statements) in respect of significant statutory liabilities namely, superannuation, PAYG and GST. He reiterated his grave concern the following day.

53    The primary judge also found Mr Borella to be loquacious and evasive in cross-examination as he was in his dealings with Kanki and Mr Clarke. Mr Borella explained that he did not provide the ‘BAS statements’ to Mr Clarke because he thought that the ‘BAS statements’ were confidential to Neptune and he did not think it was appropriate that he give details of a client’s integrated client account from the Australian Tax Office (ATO) to another party. However, the primary judge found that Mr Borella had no conception that, if as he incorrectly thought he was acting on behalf of the joint venture for both Neptune and Kanki he would have been in the position of having conflicting duties to each of them. Mr Borella submitted invoices to the receivers on their appointment in September 2018 and received payment for work which he said was done prior to the appointment of the receivers but did so without seeking Kanki’s authority to incur the liability involved in the invoices or to cause the joint venturers’ money to be used to pay his invoices.

54    On 8 April 2017 Mr Clarke sent an email to complain of Neptune’s failure to meet its obligation under cl 10(c) of the JVA and failure to provide net profit calculations for the previous fortnight saying that Kanki had no option but to engage lawyers and prepare a formal notice of breach. At that time, Neptune had never provided a fortnightly profit and loss statement under cl 10(c) and the last financial information as to the trading performance of the joint venture that it had provided to Kanki occurred on 16 February 2017 when Mr Douchkov provided Kanki with the Konnaris report, being a ‘report’ of Neptune’s affairs trading as Seadeck prepared by Mr Konnaris on 14 February 2017 and associated documents. Neptune had not and never subsequently provided any profit and loss statements to Kanki for any of the trading during February and before 15 March 2017.

55    On 11 April 2017 a profit and loss statement for the fortnight ending 28 March 2017 was made available to Kanki but this just caused further queries to be raised particularly in relation to catering which was running at a loss. Up until mid-June no ‘BAS statements’ had been given to Kanki however Mr Borella said that he had prepared 10 month financial statements to 30 April 2017 for Neptune as it was seeking some finance.

56    On 11 July 2017, the Breach Notice was served on Neptune by Kanki’s solicitors, Holman Webb. On the same day Mr Gregory Leather, then a partner of Omniwealth Legal, denied the breaches and replied saying it was completely false that the Business had been operating at a loss and that all pricing information had been available and Kanki had been kept reasonably informed.

57    The primary judge found that as at 14 July 2017 Neptune (not its solicitors) knew that the assertions in relation to the provision of all financial information such as ‘BAS statements’ lodged with the ATO and information regarding the quality and pricing of food served on Seadeck were false. His Honour based this conclusion on the fact that the fortnightly-based summary of profit and loss statements for the 100 week period from 1 March 2017 to 29 January 2019 in evidence showed that, other than a net profit of around $9,000 for the fortnight between 15 to 28 March 2017, the joint venture had recorded a net loss in every fortnight. Moreover, Neptune never produced separate accounts for February 2017.

58    The upshot was that although the Business was trading consistently at a loss since at least March 2017, it had been profitable for a period beforehand. His Honour also found that Neptune’s integrated client account with the ATO as at 14 September 2017 showed that on 16 December 2016, 31 January 2017 and 27 February 2017, Neptune had lodged self-assessments which, his Honour inferred, were monthly ‘BAS statements’ for November 2016, December 2016 and January 2017, that had generated debit entries in that account. A notice from the ATO on 17 August 2017 stated that Neptune’s ‘BAS statements’ remained overdue despite its attempts to assist Neptune to lodge them. It followed therefore that, as Mr Borella’s evidence also confirmed, Neptune had only lodged three ‘BAS statements’ relating to the affairs of the joint venture prior to the Breach Notice even though they also included other matters solely concerned with Neptune. Neptune had never provided or made available to Kanki any ‘BAS statements’ that it had lodged in respect of the joint venture and did not inform Kanki of its failure to lodge any ‘BAS statements’ for the three months after January 2017. The 17 August 2017 ATO notice to Neptune warning that it had to lodge the outstanding ‘BAS statements’ immediately to avoid penalties and audit was taken into account.

59    His Honour found that Mr Borella knew that Neptune had not lodged ‘BAS statements’ for some time. He also knew that it had access to the funds that ought to have been used to pay GST while it remained in default of lodging ‘BAS statements’ and paying the GST due whether directly to the ATO or to Kanki for it to pay any share of the GST that Neptune asserted it owed.

60    Importantly, Mr Borella gave none of this information to Kanki despite Kanki’s and Mr Clarke’s continuing requests. His Honour found that Neptune had an obligation to provide proper information about the GST position to Kanki timeously and at all events before the expiry of the Breach Notice on 25 July 2017 to enable Kanki to comply with whatever taxation obligations it had. Further, Neptune had not provided Kanki with a copy of the catering agreement and did not do so until after the proceeding commenced such that no pricing information had been given to Kanki.

The catering issue at first instance

61    In March 2016, Mr Douchkov caused Short St Kitchen Catering and Events Pty Ltd to be incorporated. Mr Douchkov and Mr Drew Bolton were equal shareholders of Short St and its directors until Mr Douchkov resigned in June 2017. Mr Bolton was an executive chef. Mr Douchkov informed Kanki that he was setting up a reliable and controllable caterer for the Business and sought Kanki’s approval for the appointment of Short St. Although Kanki did not respond to this request, Neptune in any event appointed Short St through a catering service agreement said to have commenced on 1 September 2016 and due to terminate three years subsequently with Short St having an option for a further three years. At no time had Kanki consented to Neptune entering into the catering agreement.

62    The catering agreement required Neptune to exclusively use Short St’s services at initial costs set out in a pricing schedule. However, it provided that Short St would have the right, as frequently as it so chose, to change any or all of its costs for the services by giving Neptune 30 days notice. The catering agreement was only terminable on insolvency or failure to remedy a breach following notice. His Honour found that, in effect, Neptune could not terminate the catering agreement and if the option was exercised it would be locked in even if Short St charged uncommercial or excessively high prices under its unconstrained power to do so. The cost of the food was about 28% of total revenue and net profit was about 8% based on 500 passengers. This fell a long way short of the projected profit and loss accounts annexed to the JVA based on 800 passengers. In those accounts the cost of goods sold as food was only 3.38% of total revenue and food sales of 5.64% which indicated a prima facie gross profit on food sales.

63    There was a joint venture meeting on 15 February 2017 but no apparent discussion took place about any profit that Short St had made from the catering agreement or if or how the joint venture would receive any part of it. His Honour found that what Neptune did with any such distribution of profits never appeared in any accounts in evidence or in any attempt by it to answer Kanki’s complaints that the catering should not run at a loss. The primary judge concluded that Neptune’s conduct in entering into and performing the catering agreement was a breach of first, its obligations to act in the best interests of the business of the joint venture and in good faith under cl 6(b)(iii) of the JVA, secondly, its duty of trust under cl 6(d), and, thirdly, its obligation not to unilaterally incur debts or commit Kanki to liabilities (as a party entitled to share in the net profits of the business and the joint venture) (cl 6(f)). This was because the catering agreement allowed Short St as the person with the exclusive rights to provide catering services to Seadeck, to charge any prices it liked over the three year term and the option term, and obliged Neptune, on behalf of the joint venture, to pay those prices without any reasonable ability to terminate the contract or dispute the prices.  Mr Douchkov explained that although Short St could control the price it was not ‘the arrangement we had’. The primary judge rejected this evidence. He found that Mr Douchkov was acutely aware, not only when giving evidence, but from when Neptune began operating under the catering agreement that it committed the joint venture to paying Short St for its catering at uncommercial prices, on a basis that Neptune was never prepared to or did explain to Kanki, as its joint venture partner or in evidence at trial.

Relocation to Brisbane issue at first instance

64    There had been discussions in late 2016 about the inclemency of the weather in Sydney for some of Seadeck’s trading period and the implications this could have for profitability. Other locations had been discussed at various times including Queensland. As already noted, on 25 January 2017 Neptune informed Kanki that it was investigating obtaining a Queensland licence for Seadeck and also a number of logistical issues to see if there were opportunities for the vessel there. It sought Kanki’s assistance in planning such use of Seadeck.

65    Mr Ozmen and Mr David Auld, on behalf of Neptune, agreed that Seadeck would trade in the Whitsunday Islands off the Queensland coast during the winter months. Mr Auld ascertained that AMSA and Maritime Safety Queensland (MSQ) considered that Seadeck’s survey permitted the ship to do this. However in March 2017 a cyclone caused extensive damage to the marina that Mr Auld had selected in the Whitsundays and he informed Mr Ozmen of this development. They then discussed the possibility of the Gold Coast but rejected this ‘due to the character of the prospective patronage’. Mr Ozmen did not have any new suggestions. Mr Auld himself made inquiries into Brisbane to which Mr Ozmen agreed (that is, agreed to inquiries being made). On 6 April 2017 Mr Douchkov on behalf of Neptune completed an application to AMSA for temporary operations in respect of Seadeck in which he indicated that she would be ‘transiting … from Sydney to the Brisbane River to trade in Qld til [sic] the first weeks of October 2018 [sic 2017]’.

66    The primary judge rejected Mr Douchkov’s assertion that Mr Ozmen had given ‘in principle’ agreement to the relocation to Brisbane. He explained that such an assertion was inconsistent with the correspondence and Mr Auld’s evidence (which his Honour generally accepted) that the discussion about Brisbane took place in about April 2017. Mr Auld sent the following email to Mr Ozmen on 15 May 2017:

Hi all

So I have been working over the past few months on locking us in a berth and a destination for us to trade during the off season.

First I had locked in the Whitsundays but after the cyclone wiped the area out this became impossible.

I then explored the idea of going to the Gold Coast but this quickly became not an option due to pick up points and the depth of majority of their water ways.

I then spoke to my friend Simon about Brisbane and he managed to connect with me with the boss of Rivergate Marina. I contacted them and they got back to me with a proposal for us to be berthed at their marina.

Once I locked in the marina we spoke to Scott’s [Mr Robertson] contacts in Brisbane, these contacts have both the promotion side and the corporate side of hospitality business in Brisbane covered. They will also allow us to utilise their licence whilst we are there, for this they have requested we allow them to have 3 events during the estimated 10 week period for which we will be trading.

We have a conference call with them this week to get the application lodged which is a 28 day process and to finalise the commercial agreement.

The goal is to trade the vessel Fri, Sat and Sun and hopefully some corporate events on the other days. This will allow us to cover the ongoing costs in Sydney and also cover the cost of trading and transporting to Brisbane and back.

Also the Marina is attached to a shipyard and the work is half the price of what it cost in Sydney so I will be able to get the boat looking absolutely beautiful for its return to Sydney ready for our next season.

At this moment I am taking 2 full time crew and 2 full time staff up to assist me in running the business. All other employees will be hired up there with the assistance of the company for which we are utilising their licence. The extra crew will also be hired up there.

I am personally re locating to Brisbane for 10 weeks to run the business and ensure we make as much money as possible and everything runs smooth.

All partners are more than welcome to come up whenever they are free to assist with everything.

If we were not to trade during this period we would go into next season another $650k behind, so this is the best option.

I will update everyone again later this week with dates and more details.

(Errors amended.)

67    The primary judge reasoned that, had Mr Ozmen already agreed to the proposal to move Seadeck to Brisbane, there would have been no need to explain that on Mr Auld’s view the joint venture would lose $650,000 if it were not to trade in the winter months. Critically, Mr Auld inserted the statement ‘so this is the best option’ in the email. His Honour inferred from this that Mr Auld already knew of Mr Ozmen’s objection or concern about relocating Seadeck to Brisbane. Mr Ozmen replied a little over an hour later to this email saying:

Your group can not make these decisions on your own. They must be joint decisions with us. Our accountant has been asking you to attend a meeting with Kanki group but your group has not answered. We now require a meeting with Neptune by the end of this week.

68    Mr Auld, however, promptly responded to say:

As previously discussed with you I only locked things in last week and I informed you that I would send an email today informing everyone of the plan as I did.

We have a Rina annual inspection in a couple of weeks and have a lot of work to do to ensure the vessel is compliant so we are busy but I do appreciate the fact that we are in a JV so let me know a time and day that suits you and your side and we will meet to discuss everything moving forward.

69    The primary judge reasoned that it was likely that Mr Ozmen and Mr Auld did have a discussion shortly prior to the long email of 15 May 2017 because in its opening lines he refers to having informed Mr Ozmen after locking in arrangements for Brisbane.

70    His Honour found that Neptune continued to proceed with implementing the relocation of Seadeck to Brisbane despite knowing that Mr Ozmen and Kanki disagreed with that course. Neptune later contended that the disagreement equated to Kanki intentionally imposing a barrier against a rational business decision. The primary judge rejected evidence to that effect from Mr Douchkov because Mr Douchkov and Neptune had already decided to go ahead with the relocation to Brisbane regardless of Kanki’s wishes.

71    Mr Douchkov said that around this time he and Neptune consulted a lawyer and accountant before making a decision saying that there was no option but to take up the move to Brisbane whether Kanki liked it or not. His Honour found that it was clear that Neptune was conscious of a serious contractual dispute at this time over this issue. His Honour found that there was no discussion by which Kanki approved the relocation but simply agreement by Mr Ozmen to Mr Auld exploring the possibility with a view to reporting back. His Honour was satisfied that the conduct was in breach of cl 6(b), (e) and (f) of the JVA because cl 6(e) required that both parties jointly operate and manage the Business and that all decisions are made jointly. Clause 6(f) prohibited either party from incurring debts unilaterally. By 15 June 2017 Neptune had placed advertisements for tickets to sail on Seadeck in Brisbane on the weekend of 1 and 2 July 2017 despite further protests and an email from Kanki on 15 June 2017 which read:

The partners and owner of the 50% Joint Venture have previously raised that we do not agree with SEADECK being taken up north or approve of any decisions until we have at least have had a chance to review the business proposal.

To date we have yet to receive confirmation of your proposal and the intention to conduct interstate business on the SEADECK in the offseason.

We are seriously concern that you have proceed to promote publicly that SEADECK will now be operating in Brisbane and notice only today, 15th June that you have proceeded to start selling ticket.

Kanki is formally extremely our disapproved [sic] on this decision and reiterate that at no time, an official proposal was present to our group for review, and we again take this opportunity to highlight your breach of our agreement should you proceed to relocate SEADECK without the Joint Venture’s approval.

As the SEADECK owner and 50% Joint Venture partner, we are advising you that we do not provide you with authorisation to relocate the vessel.

Please provide us with some availabilities as to when your group is all available to attend an emergency meeting to discuss this issue. We ask that you stop any sales of tickets or promotion that SEADECK is going to operate in Brisbane until we have all agreed on the business venture.

Any costs raised and is associated with your lone decision on this venture will not be accepted by Kanki. We will now proceed to engaging in our accountant and legal representatives to advise us of our position as a result of this action by Neptune Hospitality.

72    The only response from Neptune was a single line email from Mr Douchkov on the same day saying: ‘Email has been noted and referred to [Mr Borella]’. There was no further contribution on this topic from Mr Borella. Neptune did not provide Kanki with any information as to what, if anything, might occur. On 17 June 2017 Mr Ozmen again, on behalf of Entertainment, wrote to Mr Auld referring to his earlier email of 15 May 2017 insisting that any repairs to Seadeck be carried out only by experts of whom he approved and insisting that Seadeck could not be taken to Brisbane and repaired as foreshadowed by Mr Auld in his 15 May 2017 email without Mr Ozmen approving the shipyard that would carry out the repairs.

73    To this Mr Auld responded on 17 June 2017 to the effect that he had spoken with Mr Ozmen on numerous occasions about Seadeck going to Brisbane and Mr Ozmen had had no problem with this. After discussing the state of Seadeck and the cost incurred in bringing it to Australia Mr Auld said:

I don’t feel after everything we have done you have the right to stop us from making money which is in the best interest of all parties!

[If] you stop the business from making money please inform us on how you propose to cover the losses!

74    His Honour found that the statement that Mr Ozmen had no right to stop the joint venture from making money reflected the attitude of Neptune at this stage and as expressed by Mr Douchkov in evidence, namely, that regardless of Kanki’s views Neptune was acting on the basis that it could decide that there was no option other than to relocate Seadeck to Brisbane and apparently that there was no need to inform Mr Ozmen of the identity of the shipyard carrying out repairs.

75    His Honour also found that the opening statement about numerous discussions and no problems with Brisbane was incorrect. His Honour had found that first, there had only been the initial agreement that Mr Auld could investigate the possibility and secondly, that Mr Auld had informed Mr Ozmen of the decision shortly before he sent his long email, and in the conversation that followed, Mr Ozmen had certainly indicated his problems with the proposal.

76    The primary judge reasoned that given Kanki was not receiving any money or any fortnightly profit and loss statements that revealed the joint venture was making net profits, there was nothing unreasonable in Mr Ozmen insisting on Kanki being involved in making the important decisions about where and when Seadeck would trade and being able to see a business plan that made good Mr Auld’s assertions. The primary judge took into account that Mr Ozmen did not give evidence but said that because Neptune asserted that he and Kanki were being unreasonable Neptune had the onus of establishing that Mr Ozmen’s state of mind in relation to the consideration of relocating Seadeck to Brisbane was unreasonable. His Honour said (at [231]):

He does not appear to me to have been acting unreasonably in insisting that he and Kanki had a real say in a decision as to where and for how long and on the basis of what commercial or business plan the vessel should be deployed or repaired. On the evidence, Mr Ozmen and Kanki had a legitimate contractual right under both the JVA and [CA] to object to Neptune’s conduct in arranging the relocation to Brisbane and choosing a repairer regardless of Kanki’s wishes.

77    On arrival in Brisbane, the top 30 cm of Seadeck’s mast was removed so it could pass safely under a bridge on the Brisbane River. This was done without the knowledge or consent of Kanki and his Honour found it to be in breach of cl 1(d) of the CA. This was not referred to expressly in the Breach Notice, however at that stage there was no indication that the alteration to the mast was known to Kanki or Entertainment. The response by Omniwealth to the Breach Notice stated that there was no obligation set out in the JVA for decisions to be made jointly. Omniwealth also pointed out that a demand to rectify modifications and alterations to Seadeck in the Breach Notice had not specified any particular modification or alteration and his Honour found this to be a legitimate observation.

78    In the meantime, discussions had been held between Mr Ozmen and Mr John Le of Culture Map beginning on 2 May 2017, including a meeting at Mr Le’s home after dinner on 31 May 2017.

79    Of this development Mr Douchkov gave evidence that, in his view, the opposition to the relocation of Seadeck to Brisbane was effectively a fabrication designed to allow Mr Ozmen to shift the chartering of Seadeck to Culture map. He thought this because the failure to provide information about profit and finance was not ‘a big problem’. His Honour rejected this evidence. He found that Mr Douchkov knew that the catering agreement was a big problem and that Kanki was not being given information that was adequate, firstly, about why the joint venture was losing money or just breaking even on catering, and secondly, the financial performance of the joint venture including about the lack of any ‘BAS statements’ being provided to Kanki. He found that Mr Douchkov was likely to have known and that Mr Borella certainly did know that payment of GST was not occurring. On 17 August 2017, Entertainment and Kanki commenced these proceedings against Neptune.

80    The discussions with Culture Map did develop further during this time. On 7 September 2017 Entertainment entered into a management agreement with Mr Eric Woo and Culture Map. Mr Woo was to become a director of Entertainment with the right to give all necessary instructions to Holman Webb in relation to the litigation dispute now on foot against Neptune. Culture Map was to prosecute and defend the proceeding and pay operating expenses associated with the conduct of Seadeck’s Business. However, at a later time Mr Ozmen, Kanki and Entertainment fell out with Culture Map. In December 2018 a proceeding seeking relief against Culture Map and Messrs Woo and Le was commenced. As noted the primary judge rejected Mr Douchkov’s evidence about Culture Map and his Honour noted that the meeting at Mr Le’s house on 31 May 2017 was well after the disputes and default by Neptune in relation to accounting matters which arose from January 2017.

81    The primary judge considered but rejected Neptune’s arguments that Kanki was in breach of the JVA by failing to act in the best interests of the Business and in good faith so as to be precluded from issuing the Breach Notice. His Honour also rejected Neptune’s argument that Kanki had manufactured disputes and had engaged with Culture Map in breach of the JVA. His Honour held that Kanki had legitimate grounds of complaint about Neptune’s conduct from January 2017 onwards. The grounds were not manufactured. They arose because Neptune was in breach of its obligations in substantive respects and any discussion with Culture Map was well after Kanki had raised the disputes about the lack of financial information including as to the position in respect of BAS, GST, the catering issues and the relocation decision. Mr Douchkov’s evidence put beyond doubt that by 15 May 2017 the die had been cast in respect of Neptune’s unilateral decision to relocate Seadeck to Brisbane.

82    In any event, the primary judge held that Kanki had a right to issue the Breach Notice even if it (Kanki) was in breach of the JVA, as Neptune asserted. This was because the JVA did not preclude it from doing so. His Honour relied on Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57 per Perram J (at [55]-[57]), with whom Goldberg and Jacobson JJ relevantly agreed (at [1]). The primary judge did accept that not every breach of the JVA would have been capable of founding the right to give a notice to remedy a breach under cl 13(a)(iii). For example, if the parties disagreed on which of two brands of French champagne of similar price and quality should be offered to guests on board and that Neptune chose one rather than the other, that would not be sufficient to justify a notice. His Honour also rejected an argument from Neptune that the three breaches his Honour found to be the subject of the Breach Notice were not capable of remedy within 14 days as to all matters to be put right for the future. He noted that the Breach Notice relevantly required Neptune within 14 days to remedy its past conduct in breaching continuing positive obligations by putting things right for the future. It was possible for Neptune within 14 days first, to return Seadeck to Sydney, secondly, to provide Kanki with a copy of the catering agreement and explain if it could the pricing of the food served on Seadeck and why the cost of providing the food appeared to be greater than the revenue it earned, thirdly, to provide Kanki with ‘BAS statements’ submitted to the ATO and information about Neptune’s subsequent non-payment of GST from February 2017 onwards and, fourthly, to provide Kanki with the financial information it had requested and Neptune’s outstanding calculations of net profit over the life to date of the joint venture. Neptune could have also restored the mast, although its failure to do so is not a reason, by itself, that would have supported Kanki’s termination arguments.

83    His Honour found that all of Kanki’s complaints reflected genuine concerns as to matters fundamental to the running of the Business and a proper understanding of its financial position. It was no answer, as Neptune contended, that Mr Clarke, as a professional accountant, could look at entries in the Xero accounting system.  It took Mr Borella and Mr Gorter about four weeks and Kanki’s threat on 8 April 2017 to issue a notice of breach to produce the first fortnightly profit and loss statement and then it was only for the fortnight ended 28 March 2017.

84    His Honour noted that Neptune issued tax invoices for the sale of tickets and provided services including beverages and food in connection with the operation of Seadeck. It, and not Kanki, made taxable supplies of those services within the meaning of s 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) imposing an obligation on Neptune to pay GST. Separately, however, each of Neptune and Kanki as joint venturers in the Business had its own liabilities under taxation laws including the GST Act. Clause 10 required Neptune either to pay Kanki 50% of the revenue less expenses before taxation (being defined as ‘Net Profit’) plus any GST payable, or for Neptune to bear, itself, as between the parties, both any net loss and the amount of any GST payable. It was essential, therefore, for Neptune to create fortnightly profit and loss statements and to make all GST payments, including any for which Kanki were liable if there were to be a net loss in any fortnight or, if there were a net profit, to pay Kanki 50% of its share plus the amount of Kanki’s GST liability or account to Kanki in respect of GST.

85    His Honour also concluded that a reasonable person in Kanki’s and Entertainment’s position would have understood correctly that by the time of the issue of the Breach Notice on 11 July 2017 that Neptune did not intend to take the JVA seriously and was only prepared to carry out its part of the JVA if and when it suited Neptune. This conduct evinced an intention not to be bound by the JVA. The same position applies to the CA that demised Seadeck to Kanki and Neptune and placed her under their complete control.

86    In any event, his Honour held that even if there had not been compliance by Kanki with the requirements of cl 13(a)(iii) so as to bring about the automatic termination of the JVA pursuant to cl 13(b), Kanki validly terminated the JVA at common law. It followed that the express purpose of the CA, namely to operate Seadeck for the JVA ceased to exist and Entertainment was entitled to an order for possession and delivery up of Seadeck and a declaration that the CA was terminated. It was common ground however that the state of accounts between Kanki and Neptune required considerable investigation and the allocation of financial obligations to be determined as well as damages or an account.

87    There was also an alternative claim before the primary judge for the joint venture to be wound up. The primary judge was satisfied, as the parties are on appeal, that it was and remains plain beyond argument that the parties do not get on with each other and are unable to cooperate or jointly decide how their joint venture Business should be conducted. It is unnecessary to pursue this aspect further.

88    As the primary judge noted (at [296]), Neptune’s cross-claim fell with its defence.

89    His Honour concluded that Entertainment would have to give a ship’s mortgage over Seadeck or some other security to secure any obligation that it or Kanki may have to Neptune after the assessment of damages and the taking of accounts has occurred. The receivers would also need to be discharged. He stood the proceedings over to allow argument, if necessary (and it was), on appropriate orders to be made. This gave rise to orders made on 9 May 2019 supported by reasons declaring that the JVA was validly terminated as was the Business.

90    His Honour declared that the CA was validly terminated, that Kanki was not liable for any damages to Entertainment either in respect of the breach of the CA or in respect of the use of Seadeck on or after 4 August 2017 with any such damages to be payable solely by Neptune.

GROUNDS OF APPEAL AS AMENDED

91    Neptune sought leave to amend its grounds of appeal in a manner which did not unduly prejudice Entertainment. Leave was granted. Entertainment filed additional submissions going to the fresh point identified below.

92    There were 22 grounds of appeal (as amended) together with sub-grounds. As amended, they were as follows:

1.    That the primary judge erred in concluding that Neptune was in breach of clause 10(c) of the Joint Venture Agreement after 14 April 2017.

2.    That the primary judge erred in concluding that any breach of clause 10(c) of the Joint Venture Agreement prior to 14 April 2017 was a justifiable basis for termination of the Joint Venture Agreement.

3.    That the primary judge erred in concluding that clauses 10(b) and (c) the Joint Venture Agreement included an obligation to provide copies of Neptune’s BAS returns, or that breach of any such obligation was sufficiently serious to warrant termination of the Joint Venture Agreement.

4.    That the primary judge erred in concluding that Neptune engaged in “accounting manipulations” in the period following purported termination of the JVA that breached clauses 10(b) and (c) and that these breaches were relevant to the question of whether the JVA was terminated on and from 25 July 2017.

5.    That the primary judge erred in concluding that the [sic] Neptune was in breach of any obligation to provide Kanki with the catering agreement and details of pricing when such a breach was not pleaded by the respondents.

6.    That the primary judge erred in finding that Kanki never consented to entry into the catering agreement.

7.    That the primary judge erred in concluding in the absence of any evidence that the profit share with Short Street Catering under the catering agreement was with Neptune or Mr Douchkov.

8.    That the primary judge erred in concluding that the delay by Neptune in providing the catering agreement and details of pricing were such as to justify termination of the Joint Venture Agreement.

9.    That the primary judge erred in finding that the terms of the catering agreement were against the best interests of the joint venture in the absence of any evidence as to the prices charged pursuant to the catering agreement or that those prices were uncommercial.

10.    That the primary judge, having found that Mert Ozmen on behalf of Kanki and David Auld on behalf of Neptune agreed in April 2017 that investigations could be made regarding the vessel trading in Brisbane, erred in finding that a later joint decision was required before the Seadeck could relocate to Queensland.

11.    That the primary judge erred in finding that Neptune made a unilateral decision on 15 May 2017 to take the Seadeck to Brisbane.

12.    The primary judge erred in construing the Joint Venture Agreement and Charter Agreement as including contractual rights for the Respondents to refuse consent to the location of Seadeck’s charters and repairer.

13.    The primary judge ought to have found that from 15 May 2017 Kanki was in breach of clause 6 of the Joint Venture Agreement by refusing to participate further in the joint venture business and declining to consent to the Seadeck trading further over winter. In particular, Kanki’s refusal to the Sea Deck trading in the 2017 winter would have caused the joint venture to lose significant income.

14.    The primary judge was in error in inferring, absent evidence from Mert Ozmen, that the profits of the joint venture, the requirement for a business plan for Brisbane trading and details of the proposed vessel repairer reasonably justified Kanki refusing to permit the Seadeck to continue trading in the winter of 2017 in Brisbane.

15.    That the primary judge erred in finding that Neptune’s conduct and communications regarding the proposal to operate the Seadeck in Brisbane were an indication that Neptune did not take the Joint Venture Agreement seriously or did not intend to comply with its provisions.

16.    That the primary judge failed to infer that the evidence of Mert Ozmen, Gunay Koyunoglu, Kaan Ozer and Kyle Clark would not have assisted the Respondents, and was in error in finding, in the absence of evidence from any of those persons, in respect of matters which they might have been expected to have shed light on:

(a)    That the matters documented in the 2 February 2017 letter and the Konnaris Report as to affairs were not previously known to Kanki (at [J125]).

(b)    That Mr Clarke applied for Kanki to be registered for GST, in circumstances in which there is no evidence of such an application or of a Business Activity Statement ever having been lodged for Kanki (at J[134]).

(c)    That the email correspondence between Messrs Clarke and Borella established that Neptune had not provided access to supporting documentation to substantiate the profit and loss statements (at J[170]).

(d)    That Neptune had not provided Kanki with a copy of the catering agreement or pricing information in relation to catering services, and that Neptune instructed it [sic] solicitors to falsely contend to the contrary ( at J[173], [178], [196]).

(e)    That Kanki never saw the catering agreement before it was entered into and never consented to entry into the catering agreement (at J[184]).

(f)    That there was no discussion between Mr Ozmen and Mr Auld in which Mr Ozmen conveyed his approval or attitude to the relocation to Brisbane other than that in May 2017 in which Mr Ozmen conveyed his disapproval (at J[222]).

(g)    That in the conversation between Mr Ozmen and Mr Auld in April 2017 Mr Ozmen conveyed that he agreed to Neptune investigating the option of relocating to Brisbane and reporting back so that the decision could be made jointly (at J[222]) .

(h)    That Mr Ozmen did not consent to the relocation of the Vessel to Brisbane, in light of Mr Auld’s unchallenged evidence (at J[208], [213]).

(i)    That there was a proper basis for the assertions in the email communications of Mr Ozmen and Mr Koyonoglu dated 15 May 2017, 15 June 2017 and 17 June 2017 (at J[231]).

17.    That the primary judge erred in concluding that Kanki’s purported notice of termination of the Joint Venture Agreement complied with clause 13 of the JVA.

18.    In considering Kanki’s purported notice of termination dated 11 July 2017, the primary judge was in error in that:

(a)    The primary judge erred in finding that Kanki had reasonable grounds for serving the notice of termination; and further that the notice of termination was served contrary to Kanki’s obligation to act in good faith and in cooperation with Neptune.

(b)    The primary judge should have concluded that the breaches relied on in the notice of termination (whether relying on clause clause (sic) 13 of the JVA. termination at common law or repudiation) involved Kanki’s subjective and evaluative judgments as to the existence and nature of the alleged breaches and were not a valid exercise of the termination power in clause 13 of the JVA; or as a termination at common law.

(ba)    The primary judge erred in finding that the purported notice of termination was effective to serve as notice to remedy repudiatory breaches at common law. When:

(i)    Common law breach of the JVA was not pleaded or relied on by the Respondent at the trial;

(ii)    Properly characterised, the evidence does not support a finding that Neptune by its conduct evinced an intention that it was prepared to carry out the JVA only when it suited them (see appeal grounds 1-12 and 15 above); and

(iii)    The evidence did not support an acceptance by Kanki or Ozmen of any repudiatory breach by Neptune by giving the purported notice of termination.

(c)    The primary judge erred in failing to consider the inference that was available from:

(i)    the text messages between Mr Ozmen and Mr Le from 2 May 2017;

(ii)    the agreement between Mr Ozmen and Mr Le in May 2017 that Culture Map would assist in the dispute with Neptune in exchange for entry into a joint venture once the JVA with Neptune was terminated;

(iii)    the timing of those communications against the timing of the objections to the Vessel’s relocation to Brisbane and purported termination notice;

(iv)    the entry into the management agreement on 7 September 2017; and

(v)    the failure of Mr Ozmen, Mr Le or Mr Woo to give evidence;

in determining whether the purported termination notice was in breach of clause 6 of the JVA.

(ca)    The primary judge should have found that Kanki had been in persistent breach of clauses 6 and 7 of the JVA, from December 2016 to July 2017, by demanding revenue, making threats and failing to follow clause 10 of the JVA in relation to the profit share dispute.

(d)    The primary judge should have concluded that it was unreasonable and a breach of clause 6 of the Joint Venture Agreement for Kanki to assert minor breaches of the Joint Venture Agreement so as to permit Kanki to enter into a separate agreement with Culture Map contrary to the best interests of the joint venture.

(e)    The primary judge was in error in finding that the breaches identified in the notice of termination were capable of remedy.

19.    The primary judge failed to consider the evidence that Mert Ozmen, on behalf of the respondents, approved works and improvements on the Seadeck pursuant to clause 10(k) of the Joint Venture Agreement.

20.    The primary judge erred in construing clause 9 and Schedule 1 of the JVA as limiting the shared costs repayable to 22 October 2015 to the costs enumerated in Schedule 1.

21.    The primary judge erred in construing clause 9 and Schedule 1 of the JVA as excluding the costs of repairs and maintenance incurred by Neptune in Batam and in bringing the Vessel to Australia, in circumstances in which the primary judge found at J[132] that clause 10(k) and Schedule 1 contemplated an increase in the value of those costs.

22.    The primary judge erred in construing clause 9 and Schedule 1 of the JVA by reference to the email sent by Scott Robertson dated 27 October 2015 and the evidence of Mr Robertson in respect of it.

23.    In fixing the amount of security for the mortgage over the Seadeck, as provided for in order 21 made on May 2019, the primary judge erred in:

(a)    Reducing the appellant’s best arguable case by the costs of the receivership.

(b)    Excluding from the appellant’s best arguable case amounts in respect of the costs of capital improvements and vessel fit out, funded through loans by Douchkov and Como, (which were not expressly recorded in Schedule 1 of the JVA, but the respondent alleged were approved by Ozmen).

(c)    Excluding from the appellant’s best arguable case amounts in respect of the joint venture tax and superannuation liabilities, totalling $465,000.

ARGUMENTS ON THE APPEAL

Kanki’s alleged lack of cooperation and of good faith – grounds 13 and 18

93    Neptune argues that the disentitling conduct by Kanki arises from Kanki’s breach of cll 6(b)(i) and 6(b)(iii) of the JVA requiring the parties to fully cooperate and to ensure that they acted at all times in the best interests of the Business and in good faith.

94    Neptune contends that the judgment focused solely on the alleged breaches by Neptune to the exclusion of breaches by Kanki, such that Neptune’s argument based on Burger King Corp v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558 was not addressed. In Burger King, the Court of Appeal of the Supreme Court of New South Wales (Sheller, Beazley and Stein JJA) said (at [172]-[176]):

172    In Garry Rogers Motors (Aust), Finkelstein J considered (at 43,014) that such a term imposed an obligation on a party “not to act capriciously”. He pointed out, however, that such a term will not restrict a party acting so as to promote its own “legitimate interests”. As his Honour explained, “provided the party exercising the power acts reasonably in all the circumstances the duty to act fairly and in good faith will ordinarily be satisfied”.

173    The same point was made in Kham & Nate’s Shoes No 2 Inc v First Bank of Whiting 908 F 2d 1351 (1990) at 1357, that “[p]rinciples of good faith … do not block use of terms that actually appear in the contract”. There must be something more. This was explained in Metropolitan Life Insurance Co v RJR Nabisco Inc 716 F Supp 1504 (1989) at 1517:

“In other words, the implied covenant will only aid and further the explicit terms of the agreement and will never impose an obligation ‘which would be inconsistent with other terms of the contractual relationship’. … Viewed another way, the implied covenant of good faith is breached only when one party seeks to prevent the contract’s performance or to withhold its benefits. … As a result, it thus ensures that parties to a contract perform the substantive, bargained-for terms of their agreement.”

See also Rio Algom Corporation v Jimco Ltd 618 P 2 d 497 (1980) (Utah).

174    Burger King Corporation submitted that there should not be implied into the Development Agreement implied terms of reasonableness or good faith (or any hybrid of the two). It raised two general objections to the implication of such terms. First, it was said that caution should be exercised in implying any such terms, “as such terms are calculated to subvert and distort the carefully negotiated and articulated contractual balance which the parties have achieved”.

175    Secondly, it was submitted that such a term should not be implied where the application would occasion contradiction of, or friction with, express pro­ visions of the contract: see, for example, Metropolitan Life Insurance Co v RJR Nabisco Inc. It was submitted that His Honour erred in not asking whether there would be such contradiction or friction. It was then submitted that as the express provisions of the Development Agreement “comprehensively and exhaustively delineate the rights and obligations of the parties. [They] cover the field” and any implied term of reasonableness or good faith would “pro tanto” be inconsistent. The provisions of cl 4.1(a) and cl 4.2 were said to demonstrate this point.

176    Those clauses, it was submitted, established an “objective benchmark against which the grant or withholding of operational approval” was to be made. It was submitted that “[t]he introduction of a generalised qualification of reasonableness to that subject matter would alter the expressly formulated benchmark and to effect a substantive modification to the operation of the express term”. We understand this submission to mean that the objective benchmarks were the need to have operational, financial and legal approval as defined in cl 4.2. This submission is acceptable in so far as it goes. However, it does not grapple with two fundamental issues. First, the granting of operational, financial and legal approval is within “the sole discretion” of Burger King Corporation. If full force is given to that concept, it would allow Burger King Corporation to give or to withhold relevant approval “at its whim” including capriciously, or with the sole intent of engineering a default of the Development Agreement, giving rise to a right to terminate. That is hardly the language of objectivity. The point is well illustrated by the observations of Priestley JA in Renard Constructions (at 258):

“It seems clear that the words of the clause empower the principal to give a notice to show cause upon any default in carrying out any requirement in the contract. Thus for a completely trivial default the principal can give a notice to show cause. It is possible to imagine many situations in which, if a notice for some trivial breach were given the contractor might fail, as a matter of fact, to show cause within the specified period to the satisfaction of the principal why the powers should not be exercised against him. (One obvious example would be where, through some mistake, the contractor’s attempt to show cause was delivered late.)

For the principal, in such circumstances, to be able then to exclude the contractor from the site and/or cancel the contract would be, in my opinion, to make the contract as a matter of business quite unworkable. One way of explaining this view is to say that no contractor in his senses would enter into a contract under which such a thing could happen. The reasonable contractor, the reasonable principal and the reasonable looker-on would all assume that such a result could not come about except with good reason.

The over-riding purpose of the contract from both the contractor’s and the principal’s point of view is to have the contract work completed by the contractor in accordance with the contract, in return for payment by the principal in accordance with the contract. The insertion of a subclause such as subcl 44.1 not subject to the constraint of reasonable use by the principal is quite inconsistent with all the main contractual promises by each party to the contract to the other.”

(Citations omitted.)

95    Of course in the JVA there was no need to imply a duty of good faith as the duty was express as was the duty to co-operate. There can be little doubt as Neptune contends, that acting capriciously in serving the default notice or in refusing to approve the transfer of Seadeck to Brisbane would create problems for Kanki if indeed it had been acting capriciously. That was the first threshold question.

96    It cannot be accepted that the Burger King argument was not addressed as Neptune asserts. The primary judge referred to this argument (at [54] and to the issue by reference to Allphones at [255] and [260]-[261]), where his Honour said:

54    Neptune argued that the power of a party to give a notice of termination under cl 13(a)(iii) of the JVA had to be exercised reasonably and in good faith in respect of a substantive breach of an operational provision, and not capriciously for some extraneous purpose, relying on Burger King Corporation v Hungry Jack’s Pty Limited (2001) 69 NSWLR 558 at 571-572 [176]-[177], 573 [183]. It contended that Kanki had not alleged any breaches justifying termination. Rather, it submitted that Kanki had alleged breaches of the general obligations of the parties in cl 6 of the JVA and that the ascertainment of any breach of that character involved Kanki’s subjective evaluative judgments as to the existence and nature of any breach.

…

255    Mr Ozmen had told Mr Robertson and Mr Douchkov from the inception of their relationship in 2014 that he, Mr Ozmen, had no money, and the Australians would have to pay all expenses in getting Seadeck to Sydney and getting her ready for the joint venture business. In those circumstances, it is safe to infer that, when he engaged with Culture Map, Mr Ozmen needed financial resources in order to assert and protect Kanki’s and Entertainment’s rights under the JVA and the charterparty in circumstances where Kanki had not received any substantial funds from net profit or otherwise since late January 2017 or early February 2017.

…

260    The express duties of trust and to act in good faith operated to govern a decision of a party to invoke the provisions of cl 13(a)(iii) by giving a notice, such as the [Breach Notice]. Obviously, the parties contemplated, when they included cl 13(a)(iii), that there could come a point in their relationship when a breach was of such a character that one party, in good faith, could require the other party to remedy that breach within 14 days, failing which the JVA would terminate.

261    In other words, not every breach of the JVA would be capable of founding the right to give a notice to remedy under cl 13(a)(iii). For example, if the parties disagreed on which of two brands of French champagne of similar price or quality should be offered to guests on board Seadeck, the fact that Neptune chose one rather than that which Kanki preferred would not be sufficient to justify a notice under cl 13(a)(iii). As Mason ACJ, Wilson, Brennan and Dawson JJ said in Ankar Pty Limited v National Westminster Finance (Australia) Limited (1987) 162 CLR 549 at 561-562:

Since the judgment of Diplock LJ in Hongkong Fir [[1962] 2 QB 26] it has been recognized in England that a term in a contract may stand somewhere between a condition and a warranty. Such an intermediate or innominate term, it has been held, is capable of operating, according to the gravity of the breach, as either a condition or a warranty. In Hongkong Fir the obligation of seaworthiness was readily classified as innominate because a breach of the obligation might be trivial, making damages an adequate remedy, or grave, in which event it should have effect as a breach of condition. The innominate term brings a greater flexibility to the law of contract, as Lord Wilberforce has remarked on more than one occasion: Reardon Smith Line Ltd. v. Hansen-Tangen [[1976] 1 WLR, at 998; [1976] 3 All ER, at 576-577]; Bunge Corporation [[1981] 1 WLR, at 715-716; [1981] 2 All ER, at 541-542]. Although nothing less than a serious breach of an innominate term entitles the innocent party to treat the contract as at an end, the breaches of cll. 8 and 9 merit this description. (emphasis added [in the original])

97    The real difficulty with this argument on appeal and at first instance is that it first depends upon a finding that the party who seeks to terminate has breached a duty. Not only was no such finding made against Kanki, but such a finding was expressly and properly rejected.

98    Contrary to the suggestion that the primary judge did not consider Kanki’s alleged breaches, it is clear that he considered the arguments, but rejected them and in our view did so correctly.

99    The claim is that evidence of Kanki’s lack of cooperation and good faith was demonstrated by these actions:

(a)    in November or December 2016, Mr Ozmen began demanding payment of money from Neptune prior to any accounting records at a time when Mr Ozmen knew the Business was not yet profitable;

(b)    in late January or February 2017, Mr Ozmen demanded payment in circumstances where there was no money in the joint venture’s account;

(c)    at no stage did Mr Ozmen or his representatives comply or refer to the preconditions or mechanisms for payment set out at cl 10 of the JVA, for example, invoices were not issued; and

(d)    where Neptune declined to provide any further funds, Kanki persisted with demands.

100    As his Honour noted, Neptune could hardly complain that Kanki (or Mr Ozmen) was asking for money as profit distributions on the basis asserted by Neptune from 2 February 2017 (that this money was needed as working capital) without providing Kanki with a detailed set of management accounts showing (at least with management account levels of approximate accuracy) what the operations, cash flow and balance sheet of the joint venture were. Yet, as at July 2017, Neptune’s financial reporting to Kanki indicated that the business in the preceding four months had been consistently operating at a loss.

101    It follows that, insofar as the demands were concerned, no argument under Burger King arises. In any event, it is by no means clear that his Honour’s application of Allphones was incorrect. In Allphones, Perram J said (at [55]-[57]):

55    I do not think it is necessary to reach a view on whether a party who has repudiated an agreement may take advantage of a breach by the other party of an essential term and, thereupon, terminate the agreement. This is because the outcome of that question has no impact on the position of express powers of termination. It is, I think, plain that the parties could by their compact expressly provide that powers given to them under it could be exercised even where the party seeking to do so had repudiated the agreement. None of the familiar doctrines which can strike at the validity of contractual terms would invalidate such a provision. It does not, for example, find itself keeping company with the many bargains which the common law will not countenance such as those which operate in restraint of trade or those which have the effect of undermining the criminal law.

56    It follows that the suggested principle is one which, if it exists, conforms itself to the agreement at which the parties have arrived. This in turn means that it is either a presumption about how the parties' bargain is to be interpreted or it takes the form of an implied term. As to the former, it is difficult to ascertain why the parties should be presumed to have intended one answer to this question rather than another. The very many circumstances in which the issue may arise caution against a simplistic approach to the parties' intention. Should it be presumed, for example, that where both parties have repudiated the agreement neither should be able to escape it notwithstanding the express bargain between them that either could? Particularly where, as here, the right of termination is expressly conferred in the case of fraud, it is difficult to identify the redeeming features of an approach to interpretation that locks the victim of a fraud into an inescapable bargain with its perpetrator as a result of an act of repudiation which may be trivial by comparison.

57    For similar reasons I do not think that a term having a similar effect could be implied. No doubt there are implied terms which require the parties to a contract to do everything that is necessary on each of their parts to ensure the smooth operation of the contract. The decisions of Cockburn CJ in Stirling v Maitland (1864) 5 B & S 840 at 852; 122 ER 1043 at 1047 and Lord Blackburn in McKay v Dick (1881) 6 App Cas 257 at 263 show as much. But for reasons I have just given, I do not think that the implication of such a term is plausible. To the contrary, an implied term which perpetually confines the parties to a contract which neither wish for and both have repudiated seems to me to have little to commend it.

102    It is well-established that a party cannot take advantage of its own breach, but, in this instance there was no evidence that established that any alleged breach by Kanki (his Honour having found there were no breaches) was responsible for Neptune’s breaches. Indeed, Neptune does not appear to make such an argument. The only specific argument of such a breach on the part of Kanki pressed on appeal was the refusal to consent to Seadeck trading during winter in Brisbane. As will be seen, in our view, far from this being a breach on the part of Kanki, the breach in shifting the Seadeck and the operation of the Business to Brisbane without consulting Kanki prior to doing so, was a breach by Neptune.

103    Neptune also seeks to rely upon Kanki’s negotiations with Culture Map and, in particular, reliance is placed upon the lack of oral evidence from those who might be called for Kanki, most notably, Mr Ozmen. It was entirely open for his Honour to give little, if any, consideration to the somewhat peripheral evidence concerning Culture Map. Insofar as the pleaded issues of the litigation were concerned, it was the conduct of the parties to the JVA in relation to each other which was the key focus of attention. The determinations in relation to that topic were open to be made on the common ground as to the history of the commercial relationship, the documentary record and his Honour’s findings as to the adverse credit of some of Neptune’s witnesses. A critical finding in this regard (at [243]-[244]) was that the first communication of any substance between Mr Ozmen and Mr Le was at a meeting two weeks after Kanki was informed of Neptune’s decision to relocate Seadeck to Brisbane and months after the issues surrounding accounting information and payment of net profits first arose. In our view, the primary judge’s findings as to the absence of a breach by Kanki as asserted were open and correct. In those circumstances, it is unnecessary to consider further argument in relation to Burger King and Allphones.

104    As a postscript, Neptune raises some formal complaints about the content of the Breach Notice asserting that no specific JVA provisions or obligations were specified.  It is argued that the form of the Notice, in any event, did not allow for the alleged breaches to be remedied in the manner contemplated by cl 13(a)(iii) of the JVA.  This complaint should not be accepted.  It was quite clear from Neptune’s contemporaneous conduct that the terms of the Breach Notice were understood. In its letter in response to the Breach Notice, Neptune’s solicitors specifically addressed Neptune’s position as to its cl 10 obligations and the provision of financial information pertaining to the Business. It expressly denied that it was in breach of any obligation under the JVA. Importantly, the primary judge held that despite any complaint about the effectiveness of the notice of termination under cl 13(a)(iii), Neptune’s conduct was sufficiently repudiatory so as to constitute a basis upon which a reasonable person in the position of Kanki would have understood correctly that by the time of the Breach Notice on 11 July 2017, Neptune did not intend to take the JVA seriously and was only prepared to carry out the JVA when it suited it, such that it evinced an intention not to be bound by it. It was therefore, in any event, a proper basis for termination of the JVA at common law.

105    The question of whether there was a repudiation or not will be considered further below, but we would also accept Kanki’s submission (although it is not essential to our reasoning), that there is no basis to contend that the cl 13 default regime was in any way an exclusive code, governing termination for a breach, thereby depriving the parties of any concurrent right to terminate by law. There is no suggestion that clear words have been used to rebut the presumption that the contracting parties intended that remedies for breach of contract arising by operation of law should operate: Concut Pty Ltd v Worrell (2000) 75 ALJR 312 per Gleeson CJ, Gaudron and Gummow JJ (at [23]).

106    Finally as against this central appeal argument, the reasoning of the primary judge (at [258]-[272]) is compelling. From this passage the following points may be distilled:

    Kanki and Neptune agreed in cl 13(a)(iii) and cl 13(b) that if one of them continued to breach any obligation under the JVA after receiving 14 days’ notice to remedy the breach, then a default occurred under the JVA in consequence of which the JVA was terminated.

    The JVA also required both parties to do everything possible to give each other full cooperation (cl 6(b)(i)), and to act in the best interests of the joint venture’s business in good faith (cl 6(b)(iii)), to owe each other a duty of trust (cl 6(d)), jointly operate and manage the business (cl 6(e)), not unilaterally to incur debts or commit the other party to liabilities (cl 6(f)), and to ensure that the joint venture had sufficient working capital to conduct the business at all times (cl 7). These obligations could only be discharged if both parties worked cooperatively with each other.

    The express duties of trust and to act in good faith operated to govern a decision of a party to invoke the provisions of cl 13(a)(iii) by giving a notice, such as the Breach Notice. Obviously, the parties contemplated, when they included cl 13(a)(iii), that there could come a point in their relationship when a breach was of such a character that one party, in good faith, could require the other party to remedy that breach within 14 days, failing which the JVA would terminate.

    Not every breach of the JVA would be capable of founding the right to give a notice to remedy under cl 13(a)(iii).

    The three breaches, the subject of the Breach Notice, were capable of remedy within 14 days as to all matters to be put right for the future. The House of Lords in L Schuler AG v Wickman Machine Tool Sales Limited [1974] AC 235 explained the correct approach for determining when some past breaches were technically no longer able to be cured within the contractually stipulated timeframe.

    The Breach Notice, relevantly, required Neptune within 14 days to remedy its past conduct in breaching continuing positive obligations by putting things right for the future. It was possible for Neptune, within 14 days, first, to return Seadeck to Sydney, secondly, to provide Kanki with a copy of the catering agreement and explain, if it could, the pricing of the food served on the Vessel and why the cost of providing the food appeared to be greater than the revenue it earned, thirdly, to provide Kanki with ‘BAS statements’ submitted to the ATO and information about Neptune’s subsequent non-payment of GST from February 2017 onwards and, fourthly, to provide Kanki with the financial information it had requested and Neptune’s outstanding calculations of net profit over the life to date of the joint venture. Incidentally, Neptune could have also restored the mast, although its failure to do so is not a reason, by itself, that would have supported Kanki’s termination arguments. (emphasis added)

    Clause 6(e) was not limited to require joint management decision-making only with respect to the subject matters of corporate and private bookings, pricing for general admission, and the quality of beverages and food served on the Vessel.

    A reasonable person in the position of the parties would have understood that decisions about commercially significant matters (such as when, how often and where Seadeck would offer its services to the public, how it would be fitted out, when and what repairs or maintenance would be needed, and how much working capital was necessary) were matters for both parties.

    Kanki’s complaints were not contrived or captious. They reflected genuine concerns as to matters fundamental to the running of the business and a proper understanding of its financial position.

    It is no answer that (as Neptune contended) Mr Clarke, as a professional accountant, could look at entries in the Xero system. It took Mr Borella and Mr Gorter about four weeks and Kanki’s threat, on 8 April 2017, to issue a notice of breach, to produce the first fortnightly profit and loss statement, and then it was only for the fortnight ended 28 March 2017. Unlike Mr Clarke and Kanki, they had access to information that Neptune and Mr Borella were not prepared, ever, to provide to Kanki about the terms and operation of the catering agreement and the discharge of the joint venture business’ liabilities in respect of GST or, as it transpired, the failure of Neptune to lodge ‘BAS statements’ and so meet the joint venture’s GST obligations.

    Each of Neptune and Kanki, as joint venturers in the business, had its own liabilities under taxation laws, including the GST Act.

    The JVA provided for each party to have many joint responsibilities. Importantly, the structure of cl 10 and the first sentence of cl 6(e) allocated responsibility for collection of all revenue and the payment of day-to-day expenses to Neptune. That is why cl 10 required Neptune either to pay Kanki 50% of the revenue less expenses before taxation (being defined as ‘Net Profit’), plus any GST payable, or for Neptune to bear, itself, as between the parties, both any net loss and the amount of any GST payable.

107    Further, the following points (at [274]-[286]) were made:

    It was not necessary to determine the taxation issue as to the liabilities of each of Neptune and Kanki for GST under the GST Act. The JVA entitled Kanki to be given full information by Neptune about, among other financial information, GST and any ‘BAS statements’ that Neptune had lodged. Only on 13 October 2017 did Mr Borella provide, for the first time, his explanation as to why he reasoned that Kanki had to pay half of the GST on all of the taxable supplies that Neptune made in the course of running the day-to-day business on Seadeck. Neptune was in breach of its obligations at the time of the issue of the Breach Notice under cl 6(b)(i), (iii), (vi) and (e) and cl 10(a) and cl 10(b).

    Neptune was not entitled to constantly ignore its obligation under cl 6(e) to discuss and finalise arrangements for the operation and management of the joint venture Business. Nor was Neptune entitled to eschew its obligation to make decisions jointly when it contemplated relocating Seadeck to Brisbane. The relocation was a major decision that affected the overall operation of the Business. Neptune and Kanki jointly (as opposed to Neptune solely) had possession and control of Seadeck under the CA. Neptune decided on about 15 May 2017 to take Seadeck to Brisbane without, and regardless of whether it had, Kanki’s consent. As Mr Douchkov said, by then this was the only option, whether Kanki liked it or not, or as Mr Auld put it in his email of 17 June 2017, Kanki or Mr Ozmen did not ‘have the right to stop us from making money’.

    The Breach Notice was valid. No doubt, it could have been better expressed in parts, but it identified, and Neptune (or a reasonable person in its position would have) understood from it, the critical obligations on Neptune’s part that required remedy, namely, the return of Seadeck to Sydney, the provision to Kanki of the catering agreement and information as to the pricing of the food, financial information and the position with ‘BAS statements’ and GST.

    Lord Reid explained in Schuler (at 249H–250B) that what is sufficient to put things right for the future depends on the nature of the breach. His Lordship said:

It appears to me that clause 11(a)(i) is intended to apply to all material breaches of the agreement which are capable of being remedied. The question then is what is meant in this context by the word “remedy”. It could mean obviate or nullify the effect of a breach so that any damage already done is in some way made good. Or it could mean cure so that matters are put right for the future. I think that the latter is the more natural meaning. The word is commonly used in connection with diseases or ailments and they would normally be said to be remedied if they were cured although no cure can remove the past effect or result of the disease before the cure took place. And in general it can only be in a rare case that any remedy of something that has gone wrong in the performance of a continuing positive obligation will, in addition to putting it right for the future, remove or nullify damage already incurred before the remedy was applied. To restrict the meaning of remedy to cases where all damage past and future can be put right would leave hardly any scope at all for this clause. On the other hand, there are cases where it would seem a misuse of language to say that a breach can be remedied.

For example, a breach of clause 14 by disclosure of confidential information could not be said to be remedied by a promise not to do it again.

    Here, Neptune could have offered to meet or to provide Kanki with a clear, detailed and open financial justification for relocation of the ship that might have satisfied Kanki that she should stay in Brisbane.

    Instead, Omniwealth’s 14 July 2017 response affirmed Neptune’s breaches and evinced an intention that Neptune would not be bound by its obligations to make any relocation decision jointly and to provide Kanki with any further financial information including about GST or the catering issues. That letter, effectively, confined Kanki to the role of a passive investor with no say over a major decision, namely where Seadeck, of which it was supposedly in joint possession and control under the CA, would be or trade and no right to any more information about the joint venture or its business (including that GST was not being paid) than Neptune had chosen to give to it or might choose to give it in the future.

    Even if the Breach Notice was ineffective as a notice under cl 13(a)(iii) to bring about automatic termination of the JVA under cl 13(b), it was effective to enable Kanki to treat the JVA as at an end when, on 14 July 2017, Neptune refused to comply with any of its requirements.

    A reasonable person in Kanki’s and Entertainment’s positions would have understood, correctly, by the time of the issue of the Breach Notice, that Neptune did not, and did not intend to, take the JVA seriously, and was only prepared to carry out its part of the JVA if and when it suited Neptune: Carr v Berriman (1953) 89 CLR 327 (at 351-352) and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 (at 633, 644 and 658).

    The Breach Notice made plain that, if Neptune failed to remedy the breaches alleged, Kanki would treat the JVA as at an end. Even though the Breach Notice expressly relied on cl 13 of the JVA, it also sufficed as a notice to remedy one or more breaches at common law to entitle Kanki to treat the JVA as terminated once Neptune did nothing to remedy any of its breaches and persisted in its denial of Kanki’s right to make important decisions jointly.

108    For these reasons, grounds 13 and 18 cannot succeed.

The failure to draw inferences – ground 16

109    As noted, Kanki (and Entertainment) relied on a documentary case before the primary judge. His Honour did however make rulings limiting the use to be made of certain documents and classes of documents pursuant to s 136 of the Evidence Act. His Honour accepted that Neptune’s inability to test the documentary case by cross-examination of witnesses could be prejudicial and made clear in his reasons that where documents had been admitted on a limited basis, they would not be accepted as to the truth of their contents. Nonetheless, Neptune lists numerous examples where it contends that the primary judge should have drawn adverse inferences under Jones v Dunkel.

110    A number of Neptune’s arguments on the failure to draw inferences pertain to the question of the state of mind of key participants in Kanki’s activities, notably Mr Ozmen, but the state of mind of the parties bore little relevance to the topics for determination under the pleaded issues. What was essentially at issue were actions and inactions and their legal effect. But, in any event, a judge is not bound to draw inferences adverse to a party who does not call a witness. It is a discretion which may be exercised, obviously with the care that any judicial discretion should be exercised. Kanki is correct to describe these arguments as being high level generalisations, such as ‘the primary judge should have made inferences in Neptune’s favour …’. This simply raises further questions without offering answers as to what specific findings should have been made and what specific inferences should have been drawn. How would such findings and how would such inferences affect the ultimate findings or orders which were made?

111    It is true that on a number of occasions the primary judge did draw inferences in favour of Kanki, but there is no doubt that his Honour was entitled to do so, having regard to the findings properly open on the exchanged documents and more importantly, in relation to those witnesses who were called and cross examined.

112    Neptune also gives two illustrations of findings favourable to Kanki which it says should not have been made. The first example (given in a footnote to Neptune’s written submissions) is reliance upon a statutory declaration of Mr Douchkov, which had been admitted only for a limited purpose. That reliance is said to appear at [128] and [129] of the primary judge’s reasons as follows:

128    Mr Douchkov said in his statutory declaration of 28 September 2016 that, on a plain reading of the JVA, “it is clear that the promise to pay the owners a minimum $5 million profit does not now apply, because the underlying precondition (namely a legal capacity of 800) will not be met” (emphasis added) and that “Kanki’s entitlement will be to receive 50% of the profits of the enterprise (whatever they might be)”. He also said the vessel’s owners “took advantage” of their negotiating position in October 2015 “to bring about a situation where they would only be liable for half of the additional costs of bringing the Seadeck to Australia, rather than reimbursing us for all of those costs” (emphasis added).

129    Mr Douchkov said in cross-examination that about 10% of the $5 million (or about $500,000), for which Neptune, he and Mr Como claimed reimbursement from the joint venture’s revenues, had been incurred in the period after July 2015. However, under the JVA, Neptune was only entitled to reimbursement of half of the shared costs in schedule 1 being, as at 22 October 2015, about $470,000, together with expenses such as half of the subsequently incurred mooring fees. Yet the 2 February letter and the Konnaris report sought to inflate the shared costs to over $5 million and require that these much greater sums be reimbursed to Neptune (or Messrs Douchkov and Como) out of the joint venture’s revenue.

113    Mr Douchkov was actually called to give evidence such that his testimony could be tested, but in any event, it is quite unclear how it is said that this passage illustrated reliance on the statutory declaration to prove a Neptune breach.

114    The other complaint raised in a footnote goes to the primary judge’s assumptions about Mr Ozmen’s ‘substantial investment’ and discovery of some fact by Kanki’s representative, Mr Koyunoglu. The mere fleeting references to these illustrates how unhelpful this complaint is. Nowhere is it articulated with any precision what inference the primary judge should have drawn adverse to Kanki or favourable to Neptune or indeed not at all and how it would have affected the result. This is even assuming, which is by no means apparent, that his Honour went further in relation to uncalled witnesses and documents than his rulings foreshadowed.

115    Importantly on this issue, no ‘glaringly improbable’ findings of fact are identified. Ground 16 cannot succeed.

The Vessel’s relocation - grounds 10-12, 14-15

116    These grounds focus on the primary judge’s findings in relation to the Vessel’s relocation to Brisbane.

117    Neptune points out the primary judge characterised the location of the Vessel’s trading in the winter of 2017 as a unilateral decision made by Neptune knowing that the respondents did not agree to Brisbane. It is argued that in doing so the primary judge failed to consider that Kanki’s conduct in May and June 2017 was a refusal to cooperate on where the Vessel would trade.  That refusal by Kanki would necessarily have meant no income during the Sydney winter and a loss for the joint venture and in particular for Neptune. That is said to be a breach by Kanki as earlier discussed and, specifically, a breach of cl 6(b)(i) and cl 6(b)(iii) of the JVA. Neptune notes that there was no evidence from Kanki because neither Mr Ozmen nor Mr Koyunoglu were called to prove the communications that purported to raise genuine concerns or disputes.

118    It is said that two further errors arose. First, contrary to the conclusion made by the primary judge, Kanki having given in-principle consent to relocation to Brisbane, unreasonably changed its position and refused to consent to the relocation. Secondly, Neptune says it was not a breach of the JVA or CA to relocate the Vessel to Brisbane because neither of those agreements was geographically limited within Australia.

119    It was common ground, Neptune argues, that the parties discussed and reached some consensus that Seadeck would not remain in Sydney during the winter season for economic reasons. There was evidence that:

(a)    in mid-January 2017 Mr Ozmen and Mr Auld discussed taking Seadeck north, possibly to the Whitsunday Islands. Discussion about that possibility continued until March 2017 with about a dozen conversations concerning berthing and organisation until a cyclone made the berthing arrangements impossible;

(b)    Mr Robertson was informed that Brisbane was a viable idea and offered extensive contacts in Brisbane. Mr Douchkov was also of the view that Kanki had given consent to the relocation in early 2017 on the basis that the trading arrangements would be similar to those in Sydney;

(c)    in about April 2017, Mr Auld started to investigate taking Seadeck to Brisbane and advised Mr Ozmen of this, who said ‘quite OK’. Around that time, Mr Douchkov made a temporary operations application to AMSA;

(d)    on 15 May 2017, Mr Auld sent Mr Ozmen a detailed email explaining the Brisbane arrangements, estimating that not trading in winter could cost the Business $650,000. There was no cross-examination or contradictory evidence to suggest that figure was inaccurate. Approximately an hour later, Mr Ozmen responded stating ‘your group cannot make these decisions on your own’. Neptune says this is the first time Mr Auld had been told there had been any objections to the relocation to Brisbane. He replied to Mr Ozmen offering to meet to discuss the proposal; and

(e)    Mr Ozmen’s 15 May 2017 email was also the first objection Mr Douchkov saw to the Brisbane relocation and he considered it to be confusing for many logical reasons. Mr Douchkov disagreed that Neptune had decided to proceed with the relocation unilaterally. Relocation, he said, was based on a previous party agreement and planning that made economic sense and would avoid business disaster.

120    Neptune relies upon the content of the 15 May 2017 exchange of emails referring to ‘previous discussions’ between Mr Auld and Mr Ozmen. The primary judge considered Mr Auld’s evidence to be ‘generally accurate’. He gave evidence that he could not clearly recall those previous discussions with Mr Ozmen. Mr Ozmen did not give evidence, yet the primary judge used his doubt regarding Mr Douchkov’s evidence as a reason to draw an inference favourable to Mr Ozmen and Kanki.

121    In circumstances where the parties had been discussing the relocation between January and May 2017, Neptune says there was an in-principle agreement to go somewhere north and that the joint venture would be financially unviable in Sydney. It was unreasonable for Kanki to suddenly cease discussions and cooperation with Neptune and to decline any trading and not to propose any alternatives. The decision to oppose relocation was without any reasonable basis and without regard to the interests of the Business or as joint venture partner, including by reference to losses pursuant to cl 10(b) of the JVA. The unreasonableness of the position was manifest when compared with Kanki’s agreement to Brisbane trading in the 2018 winter. Neptune complains that the primary judge failed to consider whether this was a breach of the JVA and one motivated by Kanki and Entertainment’s new commercial arrangement with Culture Map. Having failed to consider Kanki’s breach, it is argued that the primary judge erroneously considered that Neptune’s relocation decision meant Neptune did not take the JVA seriously. Contrary to that conclusion, it is argued Neptune’s relocation to Brisbane was the only means for the joint venture to earn income in winter. It was Kanki’s refusal to trade which should have been an indication that it disregarded its JVA obligations. The requirement for contractual consent assumed by the primary judge was wrong, according to Neptune.

122    Neptune also argues that nothing in the JVA required Kanki’s consent to relocating Seadeck or, for that matter, required a joint decision on the subject. Neither the CA nor the JVA were geographically limited. Clause 5 of the CA permitted Seadeck to be operated worldwide. Clause 1(c) of the JVA defined the Business as one conducted in Australian waters. Clause 6(a), properly construed, required decisions to be made jointly in relation to bookings, pricing, food and beverages as that was the subject of the clause. Clause 6(g) and cl 9(d) provided for specific instances when Kanki’s consent was needed for decisions relating to maintenance, repair and installation of plant and equipment. Clause 10(n)(i)(6) referred to decisions made solely by Kanki that negatively impacted net profit, suggesting that the JVA did contemplate the parties making unilateral decisions in relation to conduct of the Business.

123    We do not consider that this ground of appeal is made out.

124    The move to Brisbane was squarely part of the Breach Notice. It cannot be asserted that the finding reached by the primary judge that Kanki did not consent to the Brisbane relocation was ‘glaringly improbable’. Clearly it was not. In a very dense factual case, with a substantial body of evidence, there would need to be good reason to interfere with the primary judge’s finding that no consent had been given. The documentary evidence and the inferences drawn from the documents by the primary judge to the extent such inferences were properly open, all pointed to a lack of consent.

125    What is even more important is that the moving of the Seadeck occurred before consent was even sought, let alone refused.

126    The relevant findings made by the primary judge, which properly support his conclusion that there was no consent, were that:

(a)    by letter of 25 January 2017, Mr Como, a director of Neptune, told Kanki that Neptune was investigating a Queensland license for Seadeck and logistics issues to see if there were opportunities for her there: (at [108]);

(b)    although Mr Douchkov, the other director of Neptune, asserted in evidence that Mr Ozmen had given an ‘in-principle’ agreement to Seadeck relocating to Brisbane before the above letter of 25 January 2017, the primary judge, unsurprisingly, rejected this evidence. His Honour had the benefit of hearing the witnesses, including their cross-examination.  Even if Mr Douchkov’s evidence had been accepted, there remained the real difficulty in knowing what an ‘in-principle’ agreement was, but it certainly appeared to be something less than an express consent to a specific act. Having regard to the correspondence, such form of consent seems highly improbable: (at [211]);

(c)    the email from Mr Auld to Mr Ozmen on 15 May 2017 would not have needed to explain all the justifications contained within it if Mr Ozmen had already agreed to the Vessel being relocated to Brisbane in the winter.  The primary judge was entitled to infer that it was a recitation of arguments to justify the action already taken prior to consent: (at [212]-[213]); and

(d)    based on Mr Douchkov’s testimony, Neptune had decided to relocate Seadeck as it had no other options and by 15 May 2017 was clearly handing Kanki nothing more than a fait accompli: (at [222]).

127    Not only were the primary judge’s findings open on the evidence, they were clearly the most probable findings. Neptune sought to persuade the primary judge that Kanki had consented to the relocation to Brisbane or, alternatively as it now argues, had initially consented, but then withdrew its consent. It is not surprising that the primary judge was not so satisfied.

128    The argument that there had been discussion about relocation between January and May and the ‘in-principle’ agreement about the Vessel going somewhere ‘north’ was:

(a)    not reflected by any documentary evidence;

(b)    not actually supported orally by any evidence from Neptune’s witnesses. Mr Auld could not clearly recall his previous discussions with Mr Ozmen; and

(c)    not consistent with the terms of Mr Auld’s 15 May 2017 email and its justificatory tone as fairly found by the primary judge.

129    It is important to stress that, contrary to Neptune’s argument, Kanki’s objection to the Brisbane move is nothing like a landlord unreasonably withholding consent from a tenant. In this instance no consent was ever sought prior to Seadeck being moved. Furthermore, this is a JVA under which, unlike most leases, there are express duties to consult on and agree to business decisions of substance before making them and an express duty of good faith. The suggestion that there is no duty to consult regarding a substantial move in the location of the Vessel is entirely untenable. On that argument the Vessel could be unilaterally moved to any location, even one where it could be irreparably damaged. Exercise of judgement as to where the Seadeck should operate was at the heart of the JVA requirements for collaboration.

130    The findings made by the primary judge were not glaringly improbable. To the contrary, they aligned entirely with the limited, and at times, unreliable evidence that Neptune called, including the testimony of Mr Douchkov, to prove any ‘in-principle’ agreement which was rejected and which established instead that Neptune was committed to a Brisbane relocation to generate profits in the face of its poor financial performance to that date.

131    As the primary judge observed, such a restrained construction of the JVA paid no regard to subsequent sentences of cl 6(e) which imposed general obligations consistent with those in cll 6(a), 6(b), 6(d), 6(f), 6(g) and 7. Clause 6(a) recorded the agreement of Neptune and Kanki that they were equally responsible for the day to day running of the Business.

132    A further difficulty with Neptune’s argument is that if Kanki’s consent was not needed, its failure to give consent would be immaterial, further undermining any suggestion that Kanki, rather than Neptune, was in breach for unreasonably withholding its consent.

133    As observed, the primary judge did consider the assertion that Kanki itself was in breach, noted the argument (at [251] and following) and explicitly rejected it for good reason (at [254] and [256]).

134    These grounds must be rejected.

The financial information – grounds 1 to 4

135    It is common ground that in the first several months of trading Neptune breached its obligations to provide fortnightly profit statements in accordance with cl 10(l)-(m) of the JVA. On 8 April, Mr Clarke sent an email to Messrs Douchkov, Como, Robertson and Borella about Neptune’s failure to provide a net profit calculation for the previous fortnight and threatened to issue a breach notice. In response, Mr Borella provided Kanki with the first fortnightly profit and loss statement for the fortnight ending 28 March 2017 and no breach notice was issued. As the primary judge noted however, (at [158]) aside from the Konnaris Report, Neptune had not, (and never subsequently) provided any profit and loss statements to Kanki for any trading during February and before 15 March 2017. Neptune says that generally neither party strictly complied with the mechanism envisaged in cl 10 of the JVA. Kanki’s remedy was to appoint an independent accountant to resolve disputes. Absent agreement or a determination by the independent accountant, Kanki and Mr Ozmen had no entitlement to be paid a profit share until an invoice was issued under cl 19(h). On this basis, Neptune argues that the primary judge’s further finding was in error. Neptune argues that the appropriate findings were and are that Neptune provided Kanki with profit and loss information from late January 2017 at the earliest. In early February 2017, the parties consulted about difficulties facing the Business, but Kanki made no complaints about the inadequacy of financial information. In early March 2017, Mr Clarke, for Kanki, was given access to Neptune’s accounting records through the Xero and Eventbrite platforms and in mid-March 2017, Neptune retained Mr Borella as an accountant to regularise its records.

136    There were no indications, Neptune says, that Mr Clarke prepared any accounts that substantiated his complaints about Neptune’s statements and calculation of profit share.

137    It is further claimed that the only independent accountant referral to have taken place determined that the accounting approach taken by Neptune was largely correct (Mr Christian Sprowles in January 2018).

138    Neptune says that in the period from February to June 2017, Mr Clarke conducted the bulk of Kanki’s communication with Neptune regarding financial information. His emails asserted problems with the accounting system, but Neptune says that Mr Clarke gave no reasons for his criticism and did not conduct his own analysis of the system. Despite being in the courtroom during the trial, Mr Clarke was not called and was not questioned about his emails. It followed that the emails were admitted only as evidence of the communications, but not as evidence of the truth of the facts asserted. There was no evidence, therefore, before the primary judge that Mr Clarke faced any impediments from the accounting information being provided to him in the format that it was. Neptune argues that the Court should have inferred that Mr Clarke’s evidence would not have assisted Kanki.

139    As to GST, referred to in appeal ground 3, Neptune argues that there was no obligation under cl 10(e) of the JVA for Neptune to provide its own ‘BAS statements’ to Kanki. The obligation extended only to giving Mr Clarke access to Neptune’s records to allow him to satisfy Kanki’s tax obligations. Neptune contends that Mr Clarke had that access via the electronic accounting system. It is argued that his Honour should have drawn an inference adverse to Kanki that those records would have allowed Mr Clarke to satisfy Kanki’s tax obligations and further that there was no contrary evidence to displace that inference.

140    His Honour’s finding that there were accounting manipulations referred to in ground 4 in the period after 25 July 2017 were based in part on a statutory declaration of Mr Douchkov dated 28 September 2016. Again, it is said that this document was admitted for a limited purpose and should not have been used as evidence of the truth of the facts asserted. A similar criticism is made by Neptune of the primary judge’s reliance on the statutory declaration of Mr Robertson dated 4 July 2016. Again, that document was admitted for a limited use and should not have been used as evidence of the truth of the facts asserted. In addition, Neptune complains that the manipulations were entirely irrelevant to the Breach Notice because the case pressed by Kanki was that the ‘clock stopped’ upon the issue of the Breach Notice in July 2017. As such, they were not able to rely on Neptune’s conduct after 11 July 2017 to establish breach. Contrary to the findings of the primary judge, Neptune’s accounting for the pre-JVA costs was therefore justified.

141    Neptune has understated its non-compliance in these arguments. For example, as noted above, by 8 April 2017, Neptune had still never provided a fortnightly profit and loss statement under cl 10(c). Moreover, contrary to Neptune’s claim that the independent assessment by Mr Sprowles showed its accounting approach to be ‘largely correct’, the primary judge found (at [170]) that Mr Sprowles’ report fortified the view that Neptune did not give Kanki adequate or full information about the financial performance of the Business.

142    There is a dispute between the parties as to whether the primary judge accepted that the default had been rectified by 14 April 2017. Even though the threatened breach notice was not issued at this time, Kanki argues that it was impossible to rectify the default because the issuance of a profit and loss statement at that point could not magically make the previous months of default disappear. It was for that reason that his Honour said (at [112]):

It is apparent from what I have set out that Neptune was in breach of its obligation to provide fortnightly profit and loss statements under cl 10(c) of the JVA. That breach (which by then had persisted for 3 months) caused disputes about what, if anything, Kanki was entitled to receive in light of the significant amounts in gross income that Neptune had earned through the trading under the liquor licence for Seadeck over the 13 weeks between 1 November 2016 and 31 January 2017. No doubt Mr Douchkov was reluctant to pay Mr Ozmen more and more on demand, as it were. But Kanki had a genuine reason to dispute what Neptune was doing, namely, obtaining, and controlling the disposition of, the income while breaching its obligation to provide basic financial information so that its joint venture partner could have any understanding of the operation and profitability of the business.

143    Kanki contends that these observations by the primary judge were correct and that Neptune had failed to explain why they were not correct.

144    There were breaches in the early months of the JVA, particularly relating to the provision of net profit calculations. There was no evidence that the breaches were incapable of remedy within the 14 day timeframe specified in the Breach Notice, albeit that it would no longer be possible to provide the financial information within each of the earlier 14 day periods. The primary judge (at [264]-[265]) correctly construed the Breach Notice as requiring Neptune within 14 days to remedy its past conduct in breaching continuing positive obligations by putting things right for the future. Even though it was no longer possible to provide the net profit calculations within each former fortnightly period, this impossibility did not preclude the breach being cured for the future upon the Breach Notice being issued.

145    The primary judge was correct in his view that Kanki had genuine reason to dispute Neptune’s failure to provide fortnightly profit and loss statements for three months and that this amounted to a serious breach of its obligations under cl 10(c). Once Neptune began providing fortnightly statements in April 2017, they revealed discrepancies in relation to catering costs which will be dealt with below. By the end of the 14 day period specified in the Breach Notice, Neptune had still not provided any fortnightly profit and loss statements or financial material for February or the first two weeks of March. This failure was of a serious nature and Neptune had given no indication of attempting to address it. On this basis, and after the 14 day period, Kanki was entitled to consider the JVA terminated: Ankar Pty Limited v National Westminster Finance (Australia) Limited (1987) 162 CLR 549 (at 561-562) and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 (at [51]-[56]). Neptune’s position was to simply deny any wrongdoing and, in our view, incorrectly contest the Breach Notice.

146    Appeal grounds 1 and 2 must be rejected.

147    However, we would allow ground 3. In our view, cl 10(b) and cl 10(c) of the JVA did not include an obligation to provide copies of Neptune’s ‘BAS statements’. Kanki knew it would have to lodge its own ‘BAS statements’ and had been given access to the accounting records to enable it to do so. Mr Clarke did not give evidence and there was no direct evidence before the primary judge that he could not ascertain whatever information was necessary for the lodging of ‘BAS statements’ from these records.

148    Ground 4 should also be allowed on the basis that, as Neptune argues, the alleged accounting manipulations that took place after the Breach Notice would be irrelevant because conduct of Neptune after 11 July 2017 could not be relied upon to establish previous breaches. The manipulations, if any, were after termination.

The catering issues – grounds 5 to 9

149    As will be recalled, this issue relates to Kanki’s allegation that Neptune failed to provide information about the catering, pricing and supply of food, which the primary judge considered by reference to the catering services agreement between Neptune and Short St. Neptune complains that Kanki’s pleaded case did not identify catering as a basis for termination and that the findings by the primary judge that Neptune breached the JVA by entering into and performing the catering services agreement were neither pleaded nor directly referable to the Breach Notice.  Neptune also complains that Kanki never particularised the nature of the deficiency in the agreement, nor was there any evidence of the loss suffered. There had been no secret about the fact that Mr Douchkov was the director of both Neptune and Short St and no challenge was made to his evidence that he had not personally profited from the arrangement. In any event, cl 6(d) of the JVA did not, in turn, prevent profits being made by associates of Neptune. No evidence was produced of any profits made by Short St from the arrangement. The issues arose in cross-examination and objection was taken to the costing information that was presented.

150    As to the pleading point, the position is this:

    The Breach Notice required Neptune to provide ‘[a]ll financial information including but not limited to … the quality and pricing of the beverages and food served on the Vessel’.

    In Kanki’s pleadings at first instance, it relied upon Neptune’s failure to provide ‘any of the information sought by Kanki in the Breach Notice’.

    There was no specific reference to the catering agreement, only to the pricing of food and beverage as part of the Business’ financial information.

    At [91], the primary judge correctly identified ‘the catering issue’ as referring only to the quality and pricing of food and beverage.

    The catering agreement first comes to light (at [163]) when the primary judge noted Mr Clarke’s enquiries about the agreement after realising that the provision of food and beverages on Seadeck was running at a loss.

    Kanki pleaded no claims based on the catering agreement itself, but the primary judge found (at [200]-[201]) that Neptune’s conduct in entering the agreement breached its JVA obligations of good faith (cl 6(b)(iii)), trust (cl 6(d)) and to not unilaterally incur any debts or liabilities on behalf of the joint venture (cl 6(f)).

    In most subsequent references to the catering agreement, the primary judge states that it should have been provided to Kanki so that Kanki could ascertain the pricing of food and beverages and why this part of the Business operated at a loss.

151    It is unclear whether it could have been possible for Neptune to give adequate information about food and beverage pricing without providing the catering agreement; but generally Neptune’s complaint about Kanki’s failure to plead entry into and performance of the catering agreement appears to be correct. To the extent that there was a failure to provide financial information about catering, this adds nothing to the established financial breach.

152    There is a difficulty then in the catering breach. First, it was not relied upon by Kanki in the pleadings as a breach and, secondly, while the agreement may have contained uncommercial terms (entitling Short St to increase prices without approval), there was no evidence that the prices actually charged were uncommercial or unreasonable. This may well be why the catering agreement ‘breach’ was not expressly relied upon in the pleadings. Further, there was no evidence that Kanki had not consented to entry into the catering services agreement. For these reasons, appeal grounds 5 and 6 should be allowed.

153    It is unnecessary to separately consider appeal grounds 7 to 9, which are effectively encompassed by the successful catering breach appeal grounds 5 and 6.

Clause 9 and Sch 1 of the JVA - grounds 19 to 22

154    These grounds complain that the primary judge failed to consider the evidence that Mr Ozmen had approved the works and improvements to Seadeck and wrongly construed the JVA as limiting the shared costs repayable and wrongly excluded the costs of repairs and maintenance incurred by Neptune in Indonesia and Egypt during the voyage to Australia. In doing so, Neptune argues that his Honour erred by construing the JVA by reference to the content of an email sent by Mr Robertson on 27 October 2015 and Mr Robertson’s evidence in respect of it.

155    In relation to these matters, Neptune argues that it funded the transport of Seadeck to Australia, including costs associated with facilitating Seadeck’s release from detention in Egypt, costs associated with the refurbishment of Seadeck in Indonesia and costs associated with having Seadeck brought in to class in survey in Sydney. Whilst the quantification of that was deferred, Neptune gave evidence of notice of these costs given to Mr Ozmen and of his consent. In relation to those matters, the primary judge said (at [132]):

There is no suggestion in the evidence about the pre-contractual context that the shared costs were agreed at about only 20% of the amount that Neptune was then asserting that it could claim. Instead, cl 16 of the JVA recorded that the JVA was the entire agreement and understanding of the parties and excluded any prior arrangement from having any force or effect. Of course, cl 10(k) and the express terms of schedule 1 to the JVA contemplated that the values (but not the subject matters) of the shared costs were capable of being increased, but only with Kanki’s approval under cl 10(k). Kanki did not give any such approval, and Neptune did not specify to Kanki what it claimed as further shared costs at any time prior to its solicitors’ letter, dated 22 November 2017.

156    Neptune says that not only was Kanki’s lack of approval not supported by the evidence, but that there was no cross-examination of the Neptune witnesses on this issue, nor contrary evidence from Kanki. Kanki’s obligations to Neptune in relation to Neptune’s expenditure on the Vessel stems from two sources, Neptune says:

(a)    Kanki’s contractual obligation pursuant to cl 9(c) and cl 9(d) of the JVA, as itemised in Sch 1. Kanki has not paid this sum despite receiving proof of payment and an itemised bill on 22 November 2017, as updated on 5 and 15 December 2017; and

(b)    an obligation arising from an initial joint venture between Entertainment, as owner of Seadeck, and Neptune before the joint venture was documented in the JVA. This obligation arose when the Court ordered that the joint venture had been terminated.

157    Neptune says that the Court’s orders terminating the joint venture significantly impact Neptune’s contractual rights such that:

(a)    Neptune’s investments in the joint venture and capital improvements in Seadeck are not fully covered by Sch 1 of the JVA, even when allowing for extended amounts to be recoverable under cl 9(d)(iv) where Entertainment has consented to the works;

(b)    the only way Neptune could have recovered its investment in the joint venture was through its contractual entitlement to joint venture profits. Termination of the JVA before the expiry of its terms (and noting the possibility of options being exercised), means Neptune has lost that entitlement; and

(c)    without remedial intervention, the Court’s termination of the JVA will unjustly benefit Entertainment and Kanki who will receive a vessel which can now be contributed to another profit joint venture and which has had substantial capital improvements, which they are not obliged to pay for.

158    It is argued that in the circumstances, ordinary principles of restitutio in integrum by analogy to rescinded or voided contracts apply.

159    Alternatively, Neptune argues, the work and improvements to Seadeck were undertaken by Neptune and accepted by Entertainment and in those circumstances a restitutionary remedy for fair remuneration is available.

160    Neptune says the evidence of Messrs Douchkov, Robertson and Auld demonstrates the effort and expense that they, on behalf of Neptune, dedicated to bringing Seadeck to Australia and to have it ready for sailing. It was the parties’ intention that Seadeck be used as property of the joint venture and that the profits from trading would be shared equally between the parties to the joint venture. The improvements to Seadeck at Neptune’s expense were an investment in the property of the joint venture for the purpose of the joint venture Business and increased its value. That engaged the principle that on conclusion of the joint endeavour, equity will not permit a party to retain the benefit of another party’s contribution to the endeavour where that was not contemplated by the parties. In these circumstances, Neptune says, relief is available: Muschinski v Dodds (1985) 160 CLR 583 per Deane J (at 620-621) and Baumgartner v Baumgartner (1984) 164 CLR 137 per Mason CJ, Wilson and Deane JJ (at 149).

161    Neptune further argues that the shared costs it can recover are not limited to those incurred as at 22 October 2015 or to the costs enumerated in Sch 1 in circumstances where:

(a)    the parties have negotiated and finalised the JVA in a context where it was contemplated that expenses that pre-dated it were brought into account. For example, the shared costs at Sch 1 of the JVA permit increases in ‘further costs’ subject to Kanki’s approval pursuant to cl 9(d)(iv);

(b)    that paragraph permits certain expenses to be brought into account ‘where there is notice and consent from [Kanki]’. Nothing in that provision, Neptune says, requires a temporal restriction providing the work was or is done with Mr Ozmen’s knowledge and consent before or after 22 October 2015. In those circumstances, the cost of the work should be brought to account.

162    There grounds were not addressed at any length orally. There are fundamental difficulties with them as once the conclusion is reached that the contract was validly terminated by Kanki, the issues cannot arise. Kanki also complains that no submission was made before the primary judge to the effect of the ground now run on the appeal. That contention can be put to one side for the more substantive reason that the notion of restitution is inapplicable in the case of a contract which has been validly terminated. The contract was certainly not inherently ineffective, nor was it rescinded such that the parties would be relieved of contractual obligations, in turn, setting up the equitable requirement for restitution. The JVA itself limited the costs that would be recoverable, no doubt in the expectation of much more profitable joint ventures occurring. As Deane J noted in Muschinski (at 622):

[I]t is the very absence of any provision for legal defeasance or other specific and effective legal device to meet the particular circumstances which give rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case.

There is no sound basis for equity to intervene here to effectively rewrite a contract which clearly set out a valid and pre-agreed method for either party to terminate the agreement in the event of a breach.

163    Nothing in grounds 19 to 22 of the amended grounds of appeal, nor the arguments in support justify setting aside the primary judge’s findings on this topic. Those grounds must be rejected.

The fixing of security – ground 23

164    This ground was abandoned in the amended notice of appeal.

Repudiation (new ground)

165    The initial ground 18(ca) to the effect that the primary judge should have found that Kanki had been in persistent breach by demanding revenue, making threats etc, obviously falls away in light of the conclusions reached above.

166    A further ground of appeal in 18(ba) asserts that the primary judge erred in finding that the notice of termination was effective to serve as notice to remedy repudiatory breaches at common law when:

(a)    a common law breach of the JVA had not been pleaded or relied upon at trial;

(b)    properly characterised, the evidence did not support a finding that Neptune by its conduct evinced an intention that it was prepared to carry out the JVA only when it suited it; and

(c)    the evidence did not support an acceptance by Kanki of any repudiatory breach by Neptune by giving the purported notice of termination.

167    The submissions for Neptune essentially embrace these points.

168    There is no substance in this amendment or the argument in support of it. Assuming repudiation was not expressly pleaded, nonetheless, the evidence was plainly advanced in support of pleaded contentions of serious breaches of the JVA. The case was bitterly fought with all manner of allegations of impropriety advanced by Kanki against Neptune and in response. It is clear that ever since the filing of the pleadings, the issues on which the parties have been joined was whether Neptune was in breach of the JVA, such that the JVA was terminated. The termination that was pleaded at [23] of the statement of claim was sufficient to include the notion of the common law right to end a contract for its breach. The facts pleaded in support were sufficient to capture:

(a)    conduct amounting to a breach which is taken as a repudiation or renunciation in that it evinces the intention of the offending party not to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the defaulting party’s contractual obligations; and/or

(b)    breach of innominate terms sufficiently serious in nature that they give rise to a right to terminate: see the discussion in Byrnes v Jokona Pty Ltd [2002] FCA 41 per Allsop J (as the Chief Justice then was) (at [70]-[80]) and Koompahtoo per Gleeson CJ, Gummow, Heydon and Crennan JJ (at [49]).

169    Neptune’s distinction between breach and repudiation does not matter in the circumstances of this case. There is no doubt that Kanki’s right to terminate the JVA either on the financial breach (without the GST complaint) or on the basis of Neptune moving Seadeck to Brisbane without consulting Kanki were made out. These breaches taken together evinced an intention on Neptune’s part to only fulfil the JVA in a manner substantially inconsistent with its obligations of consultation and good faith, or alternatively, constituted a sufficiently serious breach of a non-essential term to give rise to the same right.

170    There is no doubt that the parties were clear that this is the way the case was being run. Kanki also gave notice in its outline of submissions on 21 May 2018 that it was not confined in supporting the termination of the agreements by the notices of termination themselves, but were entitled to rely upon any ground then existing that would support the notices. In the list of issues agreed between the parties and filed on 20 February 2019, issue 2 was entitled ‘Breaches of Duty’. Of the five sub-issues, issue 2(e) ‘Whether the Respondents Otherwise conducted the Business in Contravention of the JVA’ was distinct from the previous sub-issues as it was concerned with the ground of termination which is broader than a breach or breaches of the specific provisions of the JVA.

171    Throughout the conduct of the case as reflected in submissions for Kanki, filed on 28 February 2019 (at [28]) its position was:

the evidence will disclose that Neptune’s conduct in relation to the Relocation decision was symptomatic of the extent to which Neptune carried on the Business generally as if it were the sole owner of the Business, without any regard to the rights or interest of Kanki or Neptune’s obligations under the JVA or [CA].

172    This contention was repeated on a number of occasions in the pre-trial outline of submissions. Reference was made additionally to Carr noting that the individual breaches may range from being more to less serious, but taken together, they indicated to a reasonable person that Neptune did not intend to take the JVA or the CA seriously.

173    Further, the primary judge’s finding that there was a valid termination at common law amounts to a finding of acceptance of the repudiation. Kanki offered 14 days within which to rectify the breaches at the expiration of which, if such breaches had not been rectified, there was an automatic contractual consequence. This equated to acceptance at common law. The occurrence of the termination on 25 July 2017 equated to an acceptance of repudiation, expressed or implied. Acceptance is not required to take any particular form. Acceptance may be inferred from intentional and unequivocal conduct: Sargent v ASL Developments Ltd (1974) 131 CLR 634 per Stephen J (at 648-649). The intentional and unequivocal conduct of Kanki following the notice of termination was:

(a)    on 24 July 2017, its solicitors reminded Neptune’s solicitors that the Breach Notice would expire the next day and if the alleged breaches were not remedied, the JVA would automatically terminate;

(b)    on 4 August 2017, Entertainment terminated the CA by notice based upon the termination of the JVA; and

(c)    on 17 August 2017, Kanki and Entertainment commenced proceedings based on the Breach Notice and the termination.

174    If there were no ‘acceptance’, one would look for affirmation of the contract. The circumstances of this case amount to anything but affirmation of a contract. Kanki could not have distanced itself from Neptune further than it did.

CONCLUSION

175    Despite Neptune having achieved some minor success, on the substantive issues the primary judge was correct and the orders at first instance should not be disturbed. The appeal should be dismissed. The parties should have the opportunity to make submissions on costs.

Associate:

Dated:    19 March 2020