Federal Court of Australia
TWW Yachts Sarl v The Yacht “Loretta” (No 1)  FCA 240
DATE OF ORDER:
11 FEBRUARY 2021
THE COURT ORDERS THAT:
1. The matter be adjourned to 26 February 2021.
2. On or before 25 February 2021, the parties provide to the Associate to Rares J draft orders providing for specific performance of the contract between the parties entered into on 17 September 2020, as varied on 13 November 2020, together with any consequential orders, including as to costs and, if not agreed, a version in mark-up identifying any differences.
(REVISED FROM THE TRANSCRIPT)
1 Samuel Goldwyn, the Hollywood movie mogul, reputedly once said “A verbal contract isn’t worth the paper it’s written on”. The question for decision is whether that observation is borne out in this proceeding.
2 On 17 September 2020, the parties entered into a contract for the sale and purchase of Loretta, a pleasure yacht of the type known as a gulet, registered Cayman Islands, with a length overall of 40.35 metres. There were three addenda that the parties executed at the same time that formed part of the contract. The contract is expressed in a memorandum of agreement on a standard form approved by MYBA, the Worldwide Yachting Association, which I infer is used for international yacht broking agreements.
3 At all relevant times in 2020, Loretta was moored at Southport in Queensland, near Brisbane.
4 The plaintiff, TWW Yachts Sarl, is a company incorporated in Monaco (TWW Monaco), and the buyer under the contract. Sea Shine (Isle of Man) Limited, is, as its name suggests, a company incorporated in the Isle of Man, and is the owner and seller of the yacht. A related company of the buyer, TWW Yachts Limited (TWW London), is incorporated in the United Kingdom, and is the broker named in the contract.
5 Prior to their entry into the contract, the parties were aware that the intended ultimate beneficial purchaser of Loretta was Khalid Affara, probably through his company, Saba Shipping Limited, and that the beneficial owner of the yacht was Tony Fung, who appears to have been based in Hong Kong.
6 One of the principals of both the buyer and the broker is David Westwood. He is an experienced ship broker, and has had prior dealings in which Mr Fung was involved through his also experienced broker, Daniel Bender, who resides in Brisbane. Mr Bender was also a director of the seller. In his usual parlance, Mr Bender referred to Mr Fung as “the boss”.
7 The original draft of the contract was prepared by Dr Nicholas Valenzia, an attorney in Malta engaged by Mr Affara, Saba Shipping and Mr Westwood. That draft named Mr Affara as the buyer. But, he did not wish to be named in the contract as the buyer and, subsequently, chose to have TWW Monaco named instead.
8 A standard clause in the MYBA contract was cl 41. That provided that the buyer would have the right, by written notice to the seller prior to delivery of the vessel, to transfer its right, title and interest in the contract to its nominee, subject to the original buyer remaining responsible, on a joint and several basis, for the performance of all obligations of the nominee as buyer. It is fair to say that, at all relevant times, all parties were aware that Mr Affara, or Saba Shipping, would ultimately be the beneficial owner of the vessel and that the use of TWW Monaco as named buyer was a means of providing for his anonymity for the time being.
9 The parties agreed that the ultimate issue in the proceeding was whether, in consequence of a meeting held electronically between Mr Bender, Dr Valenzia and Mr Westwood on 13 November 2020, the parties made an agreement to vary the terms of the contract as a result of matters that arose during the course of the sea trial and condition survey of Loretta in and after late September 2020. There is also a dispute about whether the buyer performed its obligations under the contract if it was varied. The buyer seeks specific performance of what it says were the terms of the contract, as varied on 13 November 2020, or, alternatively, damages, including for the alleged misleading or deceptive conduct of the seller. The parties raised a number of other issues, but, essentially, as emerged at the end of the evidence and in final address, the issue turns upon the proper characterisation of what occurred in the meeting of 13 November 2020 and its immediate aftermath.
10 The buyer claims damages based on the facts that, on 13 November 2020, Saba Shipping, on its behalf, entered into a cargo contract with Sevenstar Yacht Transport BV, trading as DYT Super Yacht Transport, a subsidiary of the Spliethoff group, for the carriage of Loretta from off Brisbane, Australia to Palma de Mallorca, Spain in mid-January 2021, and paid DYT a deposit of USD135,000, being a deposit on the total agreed freight of USD540,000. The buyer seeks to recover the deposit, and a further USD300,000 it paid to DYT on 9 February 2021 to settle its claim for the freight in consequence of Loretta not being loaded, in circumstances that I will explain below.
11 Relevantly, the contract made on 17 September 2020 provided that:
the sale price for Loretta would be USD3,000,000 and the deposit USD300,000 (cll 6–7),
a sea trial and condition survey would be concluded by no later than 25 September 2020 (cl 9),
the place of delivery of Loretta would be in international waters off Brisbane, and completion would occur, with time being of the essence, not later than 20 days from the date of the contract (cll 11–12),
the vessel had to be delivered safely afloat or as otherwise agreed at the place of delivery, at the seller’s expense in the same condition, fair wear and tear excepted, and outfitted, as at the time of the sea trial, if any, and the condition survey, and, effectively, carrying all relevant gear, stores, fuel and relevant supplies and outfitting, including furniture, linen, crockery and cutlery that belonged to her, as set out in an inventory that was provided (cl 21),
the seller undertook not to use the vessel after the sea trial and condition survey, and that the risk of loss, damage or destruction of her would be borne by the seller until completion of the sale (cl 22),
the sea trial would occur prior to the vessel being placed ashore for a condition survey. The buyer, for any reason whatsoever at its discretion, could determine that the vessel had not performed in the sea trial to its satisfaction and did not wish to proceed with the purchase. The buyer had to do so by giving written notice of rejection to the seller or broker within 24 hours of completion of the sea trial, and if no notice of rejection was given, the sea trial would be deemed to have been to the buyer’s satisfaction (cl 26),
the buyer, within seven days of completion of the condition survey, had the right to require the seller, by notice given to it or the broker, to make good any of the defects or, alternatively, make a reasonable and sufficient reduction in the sale price to enable the buyer, after completion of the sale, to make good the items that were defective. The seller would have to complete all of the remedying work, without undue delay, prior to completion to satisfy the buyer’s surveyor. Alternatively, the buyer could give a notice of rejection, which operated to deem the termination of the contract and invoke the provisions of cl 29 (cl 27(a)),
if the buyer served a notice under cl 27(a) and if, after seven days, the seller did not agree in writing to make good without delay any defects, did not agree in writing about the amount of reduction of the sale price or did not agree to the period within which the needed works were to be completed, once again, the contract would be deemed to have been terminated and cl 29 would apply (cl 27(b),
“defect” meant a defect that an officially appointed marine surveyor had certified, in writing, affected the operational integrity of the vessel, her machinery or systems or rendered her unseaworthy, and that for the purpose of any time limit, the survey would be deemed to be completed immediately following the completion of the physical inspection by the surveyor. Also, for the avoidance of doubt, “the period of the Condition Survey” (sic) and the completion of it would not depend on the production or provision of any written report by the surveyor to the buyer (cl 27),
in the event of the contract being terminated under either of cll 26 or 27, the buyer would make good any damage to the vessel caused by the sea trial or condition survey so far as that damage related to action taken by it or on its behalf, and the stakeholder would without delay return the deposit to the buyer with interest (cl 29),
if the buyer failed to pay the balance of the price on or before completion, the seller would have the right to cancel the contract forthwith and forfeit the deposit but any interest on the deposit would be shared equally between the seller and the broker after deduction of any outstanding expenses incurred by the seller for the sea trial and condition survey. The seller would not be entitled to any further compensation from the buyer (cl 31),
the seller and buyer agreed that the time periods in the contract reasonably could be extended due to delay arising out of force majeure (cl 35),
the broker was a party to the agreement for limited purposes, including to be able to enforce its commission in respect of the transaction (cl 37(d)),
there be a stakeholder (cl 38),
the law of England was the governing law, the law of England and Wales the law of the arbitration, and the parties agreed to submit to any award being entered as a judgment of the High Court of England and Wales (cl 40).
12 Addendum 1 dealt with the documents that were required to be tendered on delivery. Addendum 2 dealt with special conditions that included that the inventory of the vessel included all gear, machinery, spares, equipment, documentation, plant, manuals, furnishings and other appurtenances belonging to the vessel, whether on board or ashore, and gave the seller the opportunity to provide a list of items that were excluded, including what, substantively, would have been Mr Fung’s personal effects. Addendum 2 also amended the force majeure clause (cl 35) so that it read:
(35) FORCE MAJEURE
In this Agreement "Force Majeure" means any cause arising from or attributable to acts, events, non-happenings, omissions, accidents or Act(s) of God beyond the reasonable control of the SELLER or the BUYER (including, but not limited to, strikes, invasion, war, fire, explosion, sabotage, storm, extremes of weather, collision, grounding, fog, government act or regulation) or surveyors falling ill or being delayed or otherwise unable to attend the Sea Trial and/or Condition Survey or to produce their report for reasons beyond the BUYER'S control including but not limited to any delay caused in view of travel restrictions due to the Covid 19 outbreak). Both SELLER and BUYER agree that the time scales mentioned in this Agreement may be reasonably extended due to any delay arising from "Force Majeure" circumstances provided that each party uses his/its reasonable endeavours to minimise such delay. "In the event that a Force Majeure delay continues uninterrupted for a period of sixty (60) days or more the BUYER may terminate this Agreement on written notice to the other parties hereto and the terms of Clause (29) shall apply.
(bold emphasis added; italic wording inserted by addendum 2 cl 3)
13 Addendum 3 contained other special conditions, including that there was a 20 foot container offsite with some of the vessel’s inventory, which the buyer’s surveyor would have to inspect and, if the buyer wished to keep part or all of the contents of the container, it would need to obtain those after completion. Clause 2.1 of addendum 3 provided that both parties agreed that the sale of the vessel was subject to the buyer, in the exercise of its absolute discretion, being satisfied, at its own cost, with all matters concerning the vessel by no later than five days after the conclusion of the sea trial and condition survey.
14 The context in which the parties entered into the contract included that, from about mid-March 2020, many aspects of ordinary life in Australia, like the rest of the world, were affected by the consequences of the COVID-19 pandemic. These effects included Governmental public health restrictions on travel and personal movement. National governments imposed various restrictions on ordinary freedoms, including, here, the ability to travel throughout Australia. Various State and Territory Governments enforced lockdowns and other restrictions on ordinary day-to-day activity, with a view to reducing or mitigating the effect of the disease and its potential to spread. The Australian Government generally banned international travel to and from Australia. It was common ground that the latter ban prohibited foreign crew, who would be capable of making up the crew of nine to man Loretta and sail her to Europe or to Turkey (where Mr Affara wished her ultimately to go) from coming to or departing from Australia, and also prohibited the return to Australian of Australians located here if they wished to crew her.
15 It was also common ground that, due to these constraints, in September and October 2020 the parties already contemplated that Loretta might not sail under her own power from her dock in Southport, but would be carried as cargo on a vessel capable of conveying her to a destination in the Mediterranean. In the event, the parties contemplated that she would sail to international waters off Brisbane and then load on a sail-on, sail-off vessel.
16 After Loretta was arrested, the parties waived any right to arbitration and allowed the proceeding to go to trial.
17 The COVID-19 restrictions prevented either Mr Westwood or Mr Affara, or their representatives, other than persons present already in Australia who were professionals paid to inspect Loretta, from inspecting her prior to the sale going through.
18 On 14 September 2020, Sterling Yacht Management, a company controlled by Mr Affara, deposited EUR255,000, being the then equivalent of the deposit of USD300,000 under the contract, into the trust account of TWW London.
19 On 18 September 2020, Mr Bender sent a WhatsApp message to Michael King, one of Mr Fung’s employees or associates, in which he said:
…good news…have been told by the surveyor the seatrial is engines only…not putting up the sails…should be a formality
20 That relief in Mr Bender’s message was a reference to the seller’s prior knowledge of the poor condition of the sailing gear.
21 The sea trial could not take place until 30 September 2020, as Mr Bender confirmed in his email to Mr Westwood of 22 September 2020. The sea trial revealed to the buyer that there were serious problems with the yacht’s sailing rig and that it was not serviceable. The sea trial did not suggest that she was not able to sail under motor power. But, obviously, those defects in the sailing rig entitled the buyer to seek a reduction in the purchase price for their remedy.
22 The condition survey went ahead following the sea trial. Mr Westwood arranged for AUD20,000 to be sent to Mr Bender’s personal account so that he could pay the experts engaged on behalf of the buyer.
23 The buyer did not make any express claim for a reduction in price or draw attention to defects within any of the time limits set out in cll 26 and 27. But, both parties engaged in discussions on the basis that the buyer, apparently, would still be able to make such a claim outside those time limits. For instance, on 13 October 2020, Mr Bender and Mr Westwood exchanged WhatsApp messages in which Mr Westwood said that he was still going through the surveyor’s report and would talk with Mr Bender the next morning. Mr Bender asked for another AUD20,000 if the matter were to progress, adding:
…[A]s I understand… [people] will be showing up on the boat to do further work/evaluations.
I Look forward to hearing from you.
24 On 15 October 2020, Mr Westwood engaged in a WhatsApp exchange with Mr Bender, saying that he had been through all the reports and had highlighted several areas that concerned him from a point of view of a safe passage back to Turkey. Mr Westwood said that he would need some clarification from Mr Bender’s team and from the engaged surveyor. Mr Bender responded, suggesting that they should talk first, and then Mr Westwood could talk to the surveyor.
25 On 16 October 2020, Mr Westwood told Mr Bender that Mr Affara had asked him to get the best final shipping rate to take Loretta as cargo to the Mediterranean. The next day, Mr Bender asked if Mr Westwood could give him a timeframe to pass on to Mr Fung.
26 On 21 October 2020, Mr Bender sent Mr Westwood an email in which he referred to their earlier discussion, and confirmed his understanding that the buyer would allow the contract to become unconditionally binding on the following basis:
the price was reduced to USD2,750,000,
the broker’s commission was similarly reduced,
the vessel was to be delivered to the cargo ship in mid-January 2021,
the buyer remained responsible for all of the trans-shipment costs,
completion would occur when Loretta was in international waters,
the parties would share equally all of the costs incurred in relation to Loretta from 1 November 2020, and
the seller would be noted on the buyer’s insurance policy for the duration of the voyage.
27 Mr Bender asked that they agree about a sunset period for completion, and proposed 31 January 2021. He identified what the crew wages, berthing, electricity and provisioning costs were, and said that there would be no further works undertaken on Loretta, subject to the flag State (the Cayman Islands) agreeing to any work being postponed on a list of outstanding items that he attached.
28 The parties negotiated further about a reduction in price and other arrangements needed for a renegotiated contract.
29 By 1 November 2020, Mr Bender had told Mr Westwood that the seller had agreed to the reduction in price on the basis that, among other matters, USD70,000 be advanced to him for holding costs, and the commission of USD250,000 be deducted from any final payment.
The proposed variation of the contract
30 Further exchanges occurred until 6 November 2020, when Dr Valenzia prepared and circulated a first version of addendum 4. There were four versions of addendum 4 that passed between the parties, to which I will refer, for clarity, as versions 1, 2, 3, and 4, respectively. Mr Westwood forwarded version 1 to Mr Bender later on 6 November 2020. Mr Bender responded that he wanted to have the deposit moved to an escrow agent in Hong Kong on the signing of “unconditional contracts. This is a key point for the Boss”. That was a reference to the signing of a final version of addendum 4, agreed between the parties, that committed the buyer to the purchase.
31 More negotiations followed. Later on 6 November 2020, at about 8:30pm Central European Time (CET), Mr Westwood emailed Mr Bender, copying in Dr Valenzia, and referred to an earlier telephone conversation that day. Mr Westwood summarised the position as that the parties were in agreement to proceed with the purchase of the yacht, the USD300,000 would be held by an independent escrow agent in Hong Kong, and the buyer would deposit 50 per cent of the holding costs with Mr Bender. He asked Dr Valenzia to amend addendum 4 to deal with the changes that the parties had discussed, and noted that they were looking towards shipping Loretta to the Mediterranean between 10 and 25 January 2021.
32 On 9 November 2020, Mr Bender forwarded documents for completion by the buyer to satisfy the ‘Know Your Client’ and any anti-money laundering requirements about the identity of the buyer.
33 On 10 November 2020, Dr Valenzia sent to Mr Westwood and Mr Bender version 2 of addendum 4, which provided for the Hong Kong escrow agent.
34 On 10 November 2020, Mr Westwood emailed Mr Bender and Dr Valenzia, saying that he had spoken to Mr Affara the previous night, who was not happy with the suggestion of a Hong Kong escrow agent and wanted the funds held by either of the parties’ lawyers, if not by the broker, TWW London. Mr Westwood emphasised that the buyer intended to enter into a binding contract, would send the money for the holding costs and a confirmation of the shipping deposit payment, and ensure that the broker would not be paid until completion. He emphasised the urgency of obtaining agreement, saying that at the close of business on 10 November 2020, the buyer would have to pass on the purchase or miss a shipping deadline. But, ultimately, that did not happen.
35 On 11 November 2020, Dr Valenzia, Mr Bender, and Mr Westwood had a telephone conversation, and Dr Valenzia subsequently produced version 3 of addendum 4 to reflect what they had agreed in that meeting. During the conversation, the parties agreed that the buyer would pay Mr Bender, in advance, AUD50,000, as its half share of the anticipated holding costs to be incurred from 1 November 2020 until completion. Version 3 removed any reference to there being an escrow agent in Hong Kong and elsewhere.
36 Version 3 provided that the parties had agreed, following the sea trial and condition survey, that (among other matters):
the buyer accepted the vessel and, as a result, the deposit would not be refundable if the contract subsequently were terminated under cll 26, 27, and 29 (cl 1.1),
the price would be USD2,750,000 (cl 1.2),
the completion date would be extended to 31 January 2021, but, if completion did not occur due to a force majeure event, including the impossibility of loading Loretta onto the transport vessel due to COVID-19 restrictions, the contract would be extended for a further 28 days to 28 February 2021, and failing agreement by that time, it would be considered terminated and the deposit (less any expenses due under the contract) would be refunded by the stakeholder to the buyer (cl 1.3),
from 1 November 2020 up to completion, the parties would bear the expenses for the ongoing day–to–day expenses of the vessel on a 50/50 basis, and that the buyer would pay the AUD50,000 to cover its proportion of the anticipated expenses (cl 2),
the buyer had to indicate the date on which the vessel would begin to be transported to Palma de Mallorca, Spain, or another port nominated by it, five days prior to the day of the transport and that completion would occur on that nominated date or when the transport began, upon the transport vessel entering international waters (cl 3.1),
the balance of the sales price would be payable prior to completion (cl 3.2),
TWW London, as stakeholder, would hold the adjusted balance of the deposit in lieu of the buyer doing so under cl 30 of the contract (cl 3.3),
all the costs relating to transport of the vessel to Mallorca, or elsewhere, were to be at the buyer’s expense (cl 4.1),
the seller would provide any relevant export documentation prior to delivery (cl 4.2),
in the event of any conflict between the terms of addendum 4 and the contract, addendum 4 would prevail (cl 4.4).
37 On 11 November 2020, after he received version 3, Mr Bender emailed Mr Westwood and Dr Valenzia, saying: “All good by me”.
The meeting of 13 November 2020
38 In this context, the critical telephone conversation occurred on 13 November 2020, between Dr Valenzia, Mr Westwood and Mr Bender. Dr Valenzia and Mr Westwood gave evidence before me. Mr Bender, while available, was not called by the seller. Both Dr Valenzia and Mr Westwood gave evidence by audio visual link from Valletta and London, respectively. There was no suggestion that either of them gave evidence other than honestly and to the best of their recollection, although some cross-examination dealt with clarifications or perceived inconsistencies. I accept the oral evidence of Dr Valenzia and Mr Westwood generally.
39 Crucially, during the telephone meeting of 13 November 2020, Dr Valenzia said that Mr Westwood ran through the two elements that needed to be clarified then, namely that, first, the buyer would pay AUD50,000 (and the parties discussed the methodology of how it would do so), and, secondly, Mr Westwood would proceed to book a ship to carry Loretta as cargo to Palma de Mallorca.
40 Dr Valenzia did not recall any discussion, specifically, about addendum 4 because he had understood Mr Bender’s statement in his email of 11 November 2020, “[a]ll good by me”, as conveying that the terms of version 3 were agreed and did not need to be further discussed. He said that Mr Bender insisted that he wanted proof to show “the boss” that there was commitment and, therefore, proof of payment to Mr Bender of both the AUD50,000 and entry into the cargo contract.
41 They discussed how and to where the money would be transferred. Dr Valenzia said that he did not recall any discussion of the execution of version 3 because: “It was a given, you know. It was just a question of going for signature”. He said that Mr Bender stated :
It was when they [scil: Mr Bender] said, “You guys show me the evidence that you’ve booked, and then we will get a signature”, that was said. “You guys show me the evidence that you booked the freight contract and 50,000 are paid, and we will get the signatures.”
42 Dr Valenzia said that Mr Westwood responded that he would action everything.
43 Mr Westwood gave similar evidence about the 13 November 2020 telephone meeting, saying that its purpose was to confirm that the buyer wanted to proceed with version 3, and that it and the cargo contract would be signed in parallel. He said that he told Mr Bender the two contracts had to be signed in parallel because the buyer did not wish to have a vessel in Australia with no ship or to have a ship (Loretta) with no vessel to carry her. Mr Bender said that he wanted to see a signed copy of the shipping contract and of version 3, along with proof of payment of the deposit for the shipping contract and proof of payment of the buyer’s 50 per cent share of the holding costs, in line with version 3. Mr Westwood responded that he was happy with that and: “We had a deal. Addendum 4 was agreed”. Mr Westwood said that, on 11 November 2020, all the points recorded in version 3 had been agreed to and accepted and that: “As far as we were concerned, the vessel was unconditional”, meaning that the contract, as amended by version 3, would proceed.
The events after the 13 November 2020 meeting
44 Subsequently, things did not go quite according to that script, on 13 November 2020 or later.
45 Later on 13 November 2020, the buyer arranged for Saba Shipping, as ‘yacht owner’, to enter into the cargo contract, under which:
the “yacht owner” was named as Saba Shipping,
“yacht owner” was defined as including the shipper, receiver, consignee and/or any person or party owning or entitled to the possession of the yacht and any party or person acting on behalf of such a party or person, all of whom are jointly and severally liable to the carriage (cl 1),
the time for shipment was between 10 and 25 January 2021,
the total freight of USD540,000 was payable in two instalments; the first instalment of USD135,000 was due on 13 November 2020 (the day on which the cargo contract was made) and the second of USD405,000 was due by 27 December 2020 (as provided in DYT’s invoice issued on 13 November 2020),
the freight, whether paid or payable, was fully earned on entry into the cargo contract (cl 10.1),
the yacht owner had the right to terminate the contract before DYT’s ship arrived at the port of loading but would not be entitled to any refund. If notice of cancellation were given more than two months before loading was due and the freight fully paid, DYT would make reasonable efforts to resell the cancelled slot, but 25 per cent of the freight was non-refundable in all circumstances, and if the slot were resold, then DYT would give the yacht owner credit in a future voyage for the remaining amount it had paid valid one year from the date of cancellation (cl 10.4).
46 On 13 November 2020, TWW London paid DYT USD135,000 as the deposit under the cargo contract and Mr Westwood arranged a transfer of AUD50,000 to be made to Mr Bender’s account, as the parties had agreed. As Dr Valenzia explained, Mr Westwood managed the yachting and shipping affairs of Saba Shipping.
47 However, on 13 November 2020, after the telephone meeting, Mr Affara met with Dr Valenzia to discuss the terms of version 3. At this point, things began to go wrong. As a result of that discussion, Dr Valenzia prepared version 4, that included a new cl 3.2, namely:
3.2 The Seller shall prior to Completion inspect the Vessel solely for the purposes of:
3.2.1 Determining that it is in the same condition and state as determined in the condition report prepared by Marine Industry Services PTY Ltd and dated 11/10/2020;
3.2.2 Determining that all items specified in the Inventory are on board the Vessel in the same condition they were in, when the Inventory was drawn up.
Should the Vessel, any part thereof, any equipment or any inventory item not be in the above specified condition save for fair wear and tear, then the Parties shall mutually determine how any such deficiency shall be remedied, failing which this Agreement shall be deemed to be terminated and the Deposit shall be refunded to the Buyer accordingly.
48 At about 7:00pm Australian Eastern Standard Time (AEST) on Saturday 14 November 2020, Mr Westwood sent Mr Bender and Dr Valenzia an email to which he attached a copy of version 4 signed by the buyer, a copy of the cargo contract and a SWIFT confirmation of the payment of the USD135,000 deposit. He said that he would settle payment of the AUD50,000 on Monday (16 November 2020). He asked that the seller countersign and return version 4. The email repeated the terms of cl 3.2 verbatim and stated:
Please Note: after our call with the client he has requested Nicholas to add article 3.2 which I did not see a problem with as it is referenced to Geoff’s survey findings and we will have Geoff come to the vessel one day before loading to check the vessel and run through the inventory as we would have done prior to signing the protocol of delivery and acceptance
49 Mr Bender responded about half an hour later saying:
It appears we are wasting each other's time.
50 Mr Westwood replied shortly afterwards asserting that they were not wasting each other's time. He said that:
[T]he buyer is committed now and the funds are non-refundable along with the shipping payment. If you have a problem with the new article Nicholas & yourself need to agree on the language and understand the context of the Buyers request.
51 He promised to call Mr Bender. About 20 minutes later, at 8:18pm AEST on 14 November 2020, Mr Bender responded:
Not interested… intent is clear to remain conditional… not the spirit of the deal
52 Mr Westwood, seeking to retrieve matters, emailed Mr Bender saying that he had asked Dr Valenzia to call him (Mr Bender) directly so the two of them could discuss things. Mr Bender replied:
It is not unconditional… it is bullshit… no point
53 Dr Valenzia joined in this exchange, saying that he was unable to reach Mr Bender but that the buyer was not seeking to have a new survey, and only wanted the comfort that all the equipment would be available and in the same condition as when it had been inspected. Dr Valenzia said that the buyer simply had been concerned that two months would go by before completion but that “the vessel is and remains accepted”. Mr Bender responded at 8:22pm, saying that he was not interested in the new wording.
54 At about 9:56pm on 14 November 2020, Mr Bender sent a WhatsApp message to Mr King saying:
Fyi… they are f[…]ing around unless I am missing something.
55 Mr Bender also exchanged WhatsApp messages with Mr Westwood that night. Mr Westwood told Mr Bender that he had stressed to Dr Valenzia that the original version 3 was fine and that the buyer would be sending it signed, as he did. Mr Bender responded:
He is using the wrong language... we… have an obligation to maintain the boat... his wording introduces a condition I will not discuss or accept... in short we have shown good faith... I have cleaned up nicks wording so no interest in further discussion
56 Mr Westwood responded that Dr Valenzia was not mandated by him and that he would have “the original addendum 4 executed”, asking Mr Bender to confirm that that (ie. version 3) was the final version. Mr Bender said that he had not opened the attachment and would not, adding:
If the buyer is firm or that this his final agreement in principle… as opposed to the prior version… then please get it signed and I will present it to the boss for his review.
57 Shortly afterwards, at about 10.30pm AEST, Mr Westwood emailed Mr Bender with a copy of version 3 signed by the buyer, and asking for it to be signed and returned. He asked Mr Bender to arrange for the seller to countersign and return it accordingly. Mr Westwood assured him that the AUD50,000 would be transferred on Monday in accordance with version 3. Mr Bender responded that he would read the document overnight.
58 Shortly afterwards, at 10:34pm AEST, Mr Westwood sent Mr Bender a WhatsApp message, “Just mailed over,” referring to his earlier email (see  above).
59 On Monday, 16 November 2020, Mr Bender emailed Mr Westwood and Dr Valenzia in reply to the email of 10:30pm AEST on 14 November 2020, saying:
Does this still remain the final addendum?
If so I will take it to the Boss.
There is no objection to you having the boat inspected on an ongoing basis and doing a final inventory if that is what the buyer wants.
60 Mr Westwood responded shortly afterwards, agreeing that version 3 was the one that Mr Bender had confirmed he was happy with. He thanked Mr Bender for the assurance that inspection would be allowed, which he said would be greatly appreciated by the buyer. Mr Bender responded later on 16 November 2020 as follows:
Just so we are clear before I got to the Boss, the agreement is based on the following
1. Addendum 4 is as presented by David on the understanding that
2. The boat will be presented in the same condition as inspected and reported on as at the date of last inspection, fair wear and tear excepted;
3. Inspection by the buyer’s nominated representative to ensure that the inventory is in order and as represented…if not then there will be monetary compensation… not the right to terminate..ie we are not losing the sale over, for instance, an allegedly missing fuel filter/pump/ whatever.
4. If there is a major failure of any P & E ( which is not anticipated) then that is to the purchasers account as they are tasking in “as is [where] is” as at to today.
5. The Seller remains responsible for 50% of the normal running costs as previously sent until settlement.
If I am misunderstanding anything then please let me know.
I will not go to the Boss until we all understand the above.
61 Mr Westwood responded shortly afterwards, saying:
This is agreed, please proceed and submit the addendum 4 [scil: version 3] and please return the counter signed copy.
Please note the vessel is to remain under your current insurance policy until loaded, when the shipping insurance will take over.
62 Soon after these exchanges, Mr Bender began the following WhatsApp exchange with Mr King (described as ‘Mck’):
[6:08 AM, 11/17/2020] Mck: Is that to say they have sent another 50k for commission?
[6:08 AM, 11/17/2020] Mck: Do we need TF [scil: Tony Fung] signature on some documents; will electronic suffice?
[6:47 AM, 11/17/2020] Daniel Bender: No signature needed from TF...I will get signed by IOM [scil: the seller]
director,.the 50k is their advance to me on account as part payment of their 50 percent of running costs
[6:50 AM, 11/17/2020] Mck: Ok will confirm with TF
All he needs to know is
Share costs to end of January
they sent 50k last night as an advance on costs
Deal unconditional.once we sign
[6:53 AM, 11/17/2020] Daniel Bender: No...that's it
[6:54 AM, 11/17/2020] Mck: Is there an official close date or is it some date b4 last day of Jan
[6:55 AM, 11/17/2020] Daniel Bender: Some date b4 last day of Jan in international waters
[6:55 AM, 11/17/2020] Mck: Choice
Will confirm.later this morning
[12:23 PM, 11/17/2020] Daniel Bender: I got the 50kclear in my account
[1:16 PM, 11/17/2020] Daniel Bender: If the boss is happy to proceed then I propose to get contract signed in IOM [Isle of Mann] and transfer to 50 k to 4Js
[1:33 PM, 11/17/2020] Mck: Just hold for a bit please
[1:33 PM, 11/17/2020] Mck: He wants to know
Cost per month sitting as it is
Cost to move to HK in Covid times
Cost to move to HK in non Covid “normal” times
Good estimates are fine
63 As promised, and acknowledged in the exchanges above by Mr Bender to Mr King, by 17 November 2020 Mr Westwood had transferred the AUD50,000 to Mr Bender’s account.
64 During 17, 18 and 19 November 2020, Mr Westwood tried to communicate with Mr Bender about when the signed counterpart of version 3 would be returned. On 19 November 2020, Mr Bender sent him a WhatsApp message saying: “Still waiting to hear from the boss on a number of matters... this is one of them” but confirmed to Mr Westwood that he had received the AUD50,000.
65 On 20 November 2020, Mr Westwood emailed Mr Bender, attaching a message from DYT that the ship was anticipated to be loading between 20 and 27 January 2021. Mr Westwood said that he would set up a conference call on the following Monday to agree on the closing process and paperwork.
66 Later on 20 November 2020, Mr Westwood emailed Mr Bender saying that he had received a call from shipping contacts who had advised him that there had been a request to quote a shipment of Loretta to Hong Kong. He reminded Mr Bender that the buyer had already booked and paid for the vessel to be shipped to Europe in accordance with the agreed sale terms. He said the shipping agent was confused by the conflicting request “...and when he asked further was advised that the owner might renege on the agreed sale and move it to Hong Kong instead.” He asked Mr Bender for clarification, but did not receive any.
67 Subsequently, lawyers that the buyer instructed in London wrote to seek clarification from lawyers who appear to have been instructed by the seller, copying in Mr Bender. Mr Bender and the seller gave no response to any of these communications.
The proceeding begins
68 On 17 December 2020, the buyer commenced this proceeding by filing a writ in rem seeking specific performance of the contract or alternatively damages and a warrant for the arrest of Loretta, pursuant to which she was arrested.
69 On 24 December 2020, at a case management hearing, I set the matter down for what I, mistakenly, thought would be a one day trial on 15 January 2020, having regard to the urgency created by the imminent possible need to perform the cargo contract to which the buyer or Saba Shipping was bound.
70 On 30 December 2020, the parties agreed that Loretta would be released from arrest, on the seller paying into Court AUD1,529,425, as the agreed amount to secure the buyer’s claim for damages, together with the understanding that the parties had reached, without prejudice to their positions, an agreement that the deposit for the purchase of USD290,000 or EUR255,000, held in trust by the stakeholder, be returned to the buyer.
The parties’ submissions
71 During the course of argument, the parties refined their positions to, in effect, a dispute about, first, the characterisation of the state of their negotiations from the point of the 13 November 2020 meeting until receipt of the funds of AUD50,000 on 16 November 2020 and, secondly, whether the buyer could recover any of the money paid to DYT and if the buyer was entitled to an order for specific performance.
72 The buyer argued that, in the telephone discussion on 13 November 2020, the parties had reached a binding agreement that fell within the first or, as a fallback, second, class of contracts discussed in Masters v Cameron (1954) 91 CLR 353 at 360. The buyer contended that it had tendered performance in accordance with the contract as varied and was ready, willing and able, in accordance with the first class of contracts. It submitted that this situation allowed it to seek to refine the wording of the existing documents because that wording had not been completely settled, and to suggest the addition of cl 3.2, as the buyer had put forward in version 4. Alternatively, the buyer argued that the characterisation of the agreement reached on 13 November 2020 was of a complete agreement in the second class, and that its tender of version 4 was merely a defective performance that it remedied immediately once Mr Bender rejected version 4. The buyer contended that, even before it tendered the signed copy of version 3 on 14 November 2020, the seller was bound to execute its counterpart of version 3 because the buyer, by then, had provided all the consideration required pursuant to the agreement reached on 13 November 2020.
73 For its part, the seller argued that the buyer’s tender of version 4 was a counter-offer and that Mr Bender had rejected that counter-offer in no uncertain terms. The seller contended that the buyer’s subsequent conduct should be seen as an attempt to resuscitate the informal, non-binding arrangement reached on 13 November 2020, which in any event, on the seller’s argument, was conditional at all times on Mr Fung, or “the boss”, agreeing, in his own unfettered discretion, to the seller executing version 3. The seller submitted that it was always contemplated, even during the 13 November 2020 meeting, that it would be up to Mr Fung to agree, or not, as he chose, to signing any variation of the contract. The seller argued that Mr Fung retained this discretion, despite having asked the buyer to enter into what both parties knew to be a very expensive cargo contract to carry Loretta as freight to Europe, so that there was no obligation binding the seller to agree to any amendment of the contract as expressed in version 3 or at all, including any reduction of the purchase price.
74 On the seller’s version of events, it wanted the buyer, first, to enter into the cargo contract (or one like it), secondly, to make the AUD50,000 payment and, thirdly, to tender a copy of version 3 executed by it, in effect, as an earnest of good faith on the part of the buyer, which the seller then could assess with a view to determining whether or not it would agree to enter into version 3. The seller submitted that it was not obliged to enter into version 3 even if the buyer had acted as it had stipulated, because it wanted to see if the buyer was willing, and had the resources, to complete, having regard to its corporate identity as a Monegasque company with a small paid-up capital.
75 The seller argued that this was a position open to it in the circumstances where neither Mr Affara nor any of his companies was personally prepared to enter into a binding agreement under which he or it, as opposed to the nominee, TWW Monaco, could be sued. The seller contended that its execution of version 3 was not a mere formality in the circumstances. Indeed, it submitted, the fact the buyer felt free to proffer version 4, after making all the arrangements, including committing itself by paying the deposit on and entering into the cargo contract, showed that, from its point of view, it was still manifesting a right to propose new terms, unless and until there was an agreement in place which both parties had signed.
76 The seller argued that Mr Bender’s email of 16 November 2020 was a clarification, following discussions, of a still proposed variation to the contract as at that date and that he was seeking to ascertain the parties’ positions in light of the seller’s emphatic rejection of version 4.
77 Alternatively, in answer to the buyer’s argument that there was a binding agreement made during the telephone meeting on 13 November 2020, the seller argued that the buyer’s defective performance by the tender of the signed version 4 was a breach of a condition that entitled the seller to terminate that agreement. The seller contended that Mr Bender’s reaction in rejecting version 4 amounted to the seller’s acceptance of that conduct as repudiating the 13 November 2020 agreement.
78 The seller submitted that it was essential that the actual wording of version 3 be signed by the buyer for the 13 November 2020 agreement to be performed. It argued that the way in which the buyer now put its case did not appear on the pleadings. The seller also argued that, at all times, it was apparent to Mr Westwood that Mr Bender was not an agent free to make agreements without passing through Mr Fung, or “the boss”, whatever it was that was proposed in the negotiations, and getting Mr Fung’s approval before any binding contract could come into existence.
Consideration – specific performance
79 Parties to an existing agreement can enter into a further agreement that varies the existing one in at least two ways, as discussed by Gleeson CJ, Gaudron, McHugh and Hayne JJ in Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Limited (2000) 201 CLR 520. They said (at 533 ):
When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring to an end the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration.
80 In Masters 91 CLR at 360, Dixon CJ, McTiernan and Kittto JJ said:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common….
81 In Toll (FCGT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179 , Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction [Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 ].
82 Their Honours also said (at 180 ) that consistent with the objective approach to the determination of rights and liabilities of contracting parties “is the significance which the law attaches to the signature (or execution) of a contractual document.”
83 In Niesmann v Collingridge (1921) 29 CLR 177, the owner of a parcel of land, in consideration of receiving sixpence, which the offeree, in fact, paid, signed a document in which he made a firm offer to sell it to the named offeree, at a stated price, on terms that provided for the payment of a deposit of £1,000 on the signing of a contract and the balance of the purchase price by two instalments on fixed dates. Subsequently, the offeree telephoned the agent and said that he wished to purchase the property on the terms of the option, at which point, the offeror asserted that he was not bound. The offeror asserted that it would be necessary for the parties to sign a contract for the purchase and that, without it, there was no agreement to seek. Knox CJ held (at 181) that:
the question of construction to be solved is whether upon the true construction of that document the execution of a further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will go through.
(citation omitted, emphasis added)
84 Knox CJ cited (at 181–182), with approval, from speeches in the House of Lords in Rossiter v Miller (1878) 3 App Cas 1124, including what Lord Blackburn said at 1151 (being a passage also cited by the Court in Masters 91 CLR at 360–361), namely:
The mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. It is a matter to be taken into account in construing the evidence and determining whether the parties have really come to a final agreement or not. But as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed.
(citation omitted, emphasis added)
85 As Knox CJ pointed out, if the offer were accepted, the manner in which the bargain would then be implemented did not affect its already binding nature as a contract. The Court held there that part of the agreement made by the acceptance of the offer was that the offeror–vendor would ultimately sign a contract or a transfer of the land in accordance with the offer. And, Rich and Starke JJ, in agreeing, said (29 CLR at 185):
when the parties had concluded such an agreement, the necessary implication is that each of them will sign a contract in accordance with the terms of the agreement. If the parties had concluded an agreement for the grant of a lease, it is clear that the agreement would not then be conditional upon the grant of the lease and that the lease would not be the mere expression of the desire of the parties as to the form of their agreement. It is a term of the bargain which can be specifically enforced. So here, where the parties made the signing of a contract a term of their bargain, there is no difficulty, in our opinion, in decreeing specific performance of the agreement, and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion.
86 In Masters 91 CLR at 361, Dixon CJ, McTiernan and Kitto JJ held that Niesmann 29 CLR 177 was a case in the second class. And, in Godecke v Kirwan (1973) 129 CLR 629 at 639, Walsh J, with whom Mason J agreed, said:
But there are cases in which a provision as to the execution of a further contract is not to be construed as a mere expression of desire or as a “condition” of the bargain, if by that is meant a condition upon which is dependent the coming into existence of a binding agreement. It may be a term of a concluded agreement and may place upon the parties an obligation, capable of being specifically enforced by the court, to sign a further contract in accordance with the agreement which they have already made. The decision of this Court in Niesmann v Collingridge [(1921) 29 CLR 177] is a direct authority for those propositions, which I have stated in a form based upon the language used in their judgment in that case by Rich and Starke JJ [29 CLR at 184-185].
87 In my opinion, the exchange that occurred during the meeting of 13 November 2020 should be characterised as resulting in an agreement in the second class of Masters 91 CLR at 360. The parties agreed the essential terms of the new bargain, namely that, first, version 3 accurately recorded their agreement to make variations to the contract and, secondly, the buyer had to provide consideration for those variations by satisfying two conditions, being that it had to arrange and pay, or enter into a binding contract, for the shipment of Loretta from Brisbane to Europe, and pay AUD50,000 for its share of the holding costs. The parties contemplated that, subsequently to the performance of those conditions, version 3 would be signed by both sides. But the agreement recorded at that meeting was that the terms already contained in version 3 would become binding upon the performance by the buyer of the additional substantial consideration of entering into a contract to ensure that there would be a ship to carry Loretta from Brisbane, which involved the buyer committing itself to a significant commercial liability and paying its share of the holding costs. The nature of what was agreed emerged clearly from Dr Valenzia’s evidence of Mr Bender’s statement during the meeting, namely: “You guys show me the evidence that you’ve booked, and then we will get a signature”.
88 An objective person in the position of the parties on 13 November 2020 would have understood, from what the parties said and did, that, if the buyer arranged for a shipping contract (which both parties knew involved a very substantial outlay of money, in the hundreds of thousands of dollars), and paid the AUD50,000, the contract would be varied as provided in the terms of version 3: Niesmann 29 CLR at 181–182, 184–185; Masters 92 CLR at 360; Toll 219 CLR at 179 .
89 Once the buyer had satisfied those conditions, Mr Fung would not subsequently be free to say he would not sign or authorise, the signing of, version 3 by the seller. Such an outcome would make no commercial sense, having regard to the fact that, at that point, the buyer, at the seller’s insistence, would have contracted, at considerable expense, for a ship to carry the yacht but not have any right to compel the seller to provide the cargo to put on that ship. Mr Bender never said, including after he received it, that the payment of AUD50,000 to him was no longer appropriate, and it is common ground he has not refunded that money.
90 Nor, in my opinion, is Mr Bender’s conduct, in the period immediately following receipt of version 4 on 14 November 2020, able to be characterised as an acceptance of a repudiatory act by the buyer. Rather, objectively, his conduct emphasised that the buyer was not performing the agreement the parties had made on 13 November 2020. That, undoubtedly, was so. But, shortly after Mr Bender’s rejection of the tender of performance in version 4, the buyer performed its obligation on 14 November 2020 by proffering a signed version 3. At no point on or after 14 November 2020 did Mr Bender say or indicate that “the deal is off”. Rather, he protested on receiving version 4 that the buyer was not honouring the deal that had already been made, as I have found.
91 In those circumstances, I reject the seller’s argument that, by refusing the proffer of version 4, the seller brought the agreement made on 13 November 2020 to an end.
92 Mr Bender was correct in identifying that version 4 did not record the agreed terms. The terms of version 3 had already been agreed in the meeting of 13 November 2020 in the same way as in Niesmann 29 CLR 177 and the second class in Masters 91 CLR at 360. Signatures on version 3 were not essential to the making of the enforceable agreement: Rossiter 3 App Cas at 1151. The parties had agreed that they would enter into a binding variation of the 17 September 2020 contract if the buyer performed the two conditions, representing what the seller wanted as an earnest of good faith, and that ultimately both parties would sign version 3.
93 I do not accept the seller’s argument that Mr Bender’s email of 16 November 2020 constituted a clarification of an offer for a new agreement. In my opinion, in that email he was affirming that the agreement made on 13 November 2020 was reflected in the terms of version 3. The second and third paragraphs reflected the seller’s obligation under cl 21 of the contract, which provided for what would happen if the seller failed to deliver the yacht with the relevant inventory and items promised under cll 16 and 21 as amended in addendum 2. The fourth paragraph merely reflected the fact that cl 22 left Loretta at the seller’s risk until completion and that, because the seller was promising not to use her, if there was any major failure of plant and equipment, which Mr Bender said was not anticipated, that was the risk the buyer took in acquiring her in the condition she was in when surveyed. The fifth paragraph reflected the fact that the seller also would be responsible for 50 per cent, or AUD50,000, in anticipation of the holding costs.
94 Moreover, Mr Bender understood what he had set out in that email reflected the previous agreement, as did Mr King, in their exchange of WhatsApp messages on 17 November 2020.
95 For the reasons above, I am of opinion that there was a binding contract entered into on the terms of version 3 that varied the contract, upon the buyer providing (as it did) the further consideration of entering into the cargo contract and making the payment of AUD50,000. In those circumstances, the buyer is entitled to an order for specific performance of the contract as varied.