McCabes acted for the defendants in Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd & 3 Others, an interesting matter which was recently heard before his Honour Justice Kunc in the Supreme Court of New South Wales (Commercial List). The parties are presently awaiting judgment.
The focus of this article will be one particular aspect of the case, namely, an alleged agreement to exercise good faith and use best endeavours (to enable a lease or licence between the plaintiff and the first defendant to be finalised).
The first defendant, Boydah Pty Ltd (Boydah), decided to develop a large parcel of land which it owned at Caves Beach, which is around 30 minutes’ drive south of Newcastle (the Property), and turn it into a hotel, housing and tourist estate.
In 2005, Greg Hopper and William (Bill) Saddington, a director of Boydah, were introduced. Bill asked Mr Hopper, who had been involved in restaurants and the food service industry for many years, whether he would be interested in running the food and catering operations at the proposed new hotel. Mr Hopper said he was interested.
Mr Hopper gave evidence that shortly thereafter he said to Bill words to the effect: “I will definitely need a 15 year lease minimum and obviously we can work out rents and things separately.”
Thereafter Mr Hopper consulted on the design and fit out of the kitchens at the hotel and attended numerous meetings for that purpose. He also allegedly disposed of other catering businesses in which had an interest.
In 2008, Bill and Mr Hopper agreed on a figure for rent. This was understood to be an “interim arrangement” only, until the parties could see how the business was going.
In March 2009, the new Caves Beachside Hotel opened and the plaintiff, Caves Beachside Cuisine (Cuisine), commenced operating from the kitchens on the premises. The directors and shareholders of the company are Mr Hopper and his wife.
In or about October 2009, Boydah provided a draft license agreement to Cuisine. The terms of the agreement included a 5-year term with two 5-year options to renew, a clause which entitled Boydah to buy the licence back from Cuisine at any time for a price of 200% of the net profit after tax, and terms on outgoings.
Thereafter the parties through their solicitors exchanged multiple drafts of the licence agreement but were unable to agree on terms. Amongst the aspects which could not be resolved was the buy-out price. Cuisine proposed 250% of the net profit after tax. However, Boydah was set upon a 200% multiple.
In December 2010, Mr Hopper sent Bill an email requesting that the parties sign-off on the licence agreement. He proposed deleting the clause which gave Boydah the ability to approve the party to whom Cuisine proposed to assign or sell the licence (which Bill regarded as critical), amending the buy-out price multiple to 225%, and deleting a number of the outgoings for which Cuisine was to be liable.
Bill did not respond to that email. He gave evidence that by this time he had become frustrated with the negotiations and decided to put the issue to one side for a while.
In February 2011, Bill’s brother and co-director of Boydah, David Saddington, emailed Mr Hopper and advised him that Boydah would agree to a set sum for the buy-out clause but not an undetermined times earnings factor. David suggested “that $100,000 would be an amount that gives you security”. He stated: “So that you can get back to dealing with just Bill, I suggest you and he come up with a fixed amount.”
Mr Hopper expressed his disappointment and frustration in a lengthy response which included accusing David of “coming in at the eleventh hour once all the hands are played and making new rules.” Mr Hopper gave the defendants two options:
The Saddingtons did not respond to the above proposal and in August 2011, Boydah declined an offer of mediation to attempt to finalise the licence agreement.
In the middle of 2013, Boydah gave written notice to Cuisine that it was terminating the catering arrangement effective March 2014.
In November 2013, Cuisine commenced the present proceedings in the Supreme Court.
Cuisine’s primary claim was for breach of contract. Alternative claims for misleading or deceptive conduct and for unconscionable conduct within the meaning of the Australian Consumer Law were also pleaded. As mentioned at the outset, the focus of this article is on Cuisine’s claim in contract. Cuisine claimed that:
As to allegation 2 above, Cuisine contended that by late 2010 “the negotiations had reached a point where there was very little left in issue between the parties and nothing which would have been expected to be a “deal breaker”. It argued that despite the advanced stage which the negotiations had reached, David Saddington in February 2011 proposed a completely different and far less favourable arrangement from Cuisine’s perspective; and thereafter Boydah simply refused to engage in any meaningful attempt to finalise the negotiations.
Each of the above allegations was denied by the defendants.
The leading authority in New South Wales is United Group Rail Services Ltd v Rail Corp (NSW) 2009 74 NSWLR 618. That case concerned a clause dealing with dispute resolution in a contract between Rail Corporation New South Wales (“Railcorp“) and United Rail Group Services Limited (“United“). The clause said that a senior representative of each of the parties “must meet and undertake genuine and good faith negotiations with a view to resolving the dispute or difference”.
United claimed that this clause was uncertain and therefore void and unenforceable.
It is a fundamental principle of contract law that a contract or a particular term must be certain, that is, clear and capable of precise or definite meaning. If a term is not certain it may be severed from the contract, provided that severance is possible without undermining the agreement as a whole. If a contract is not certain it is said to be void, that is, treated as a nullity as from the beginning.
In United Group Rail Services, the Court of Appeal rejected the previous generally expressed view to the effect that a promise to negotiate in good faith is uncertain and ‘binding only in honour’. It held that in some circumstances, depending on its specific terms and context, an agreement to negotiate in good faith will be enforceable. The Court of Appeal’s reasons included:
“With respect to those who assert to the contrary, a promise to negotiate (that is to treat and discuss) genuinely and in good faith with a view to resolving claims to entitlement by reference to a known body of rights and obligations, in a manner that respects the respective contractual rights of the parties, giving due allowance for honest and genuinely held views about those pre-existing rights is not vague, illusory or uncertain.” (Allsop P, at 639)
It is clear from the above extract that the particular context of an agreement to negotiate in good faith found in an dispute resolution clause in an existing contract was crucial to the Court of Appeal finding that the agreement in that case was certain and enforceable.
The Court of Appeal also drew a distinction between an agreement to undertake good faith negotiations to resolve disputes arising from an existing contract, on the one hand, and an agreement to negotiate in bringing about a commercial agreement in the first instance, on the other. It observed that the difference “is of great importance”.
Baldwin & Anor v Icon Energy Ltd & Anor  QSC 12 (3 February 2015) is an example of a recent decision where an alleged agreement to negotiate to bring about a contract was held to lack sufficient certainty to be enforceable. That case concerned a term in a Memorandum of Understanding which had been executed as a deed. The term stated in effect that the parties agree to use reasonable endeavours to negotiate a Gas Supply Agreement. The Queensland Supreme Court (Philip McMurdo J) said :
“[I]n an agreement of the present kind (as distinct from that in United Group Rail Services), how can a standard of reasonableness or good faith be measured and applied so as to give the promise a sufficiently certain content? … there is no existing contractual relationship to which that standard of reasonableness could be anchored. A duty to carry on negotiations in good faith or reasonably in a context such as the present is, as Lord Ackner said, “repugnant to the adverserial position of the parties when involved in negotiations”.”( At )
It will be interesting to see how the Supreme Court rules on the alleged agreement to negotiate in good faith in the Caves Beach case (to bring about a lease or licence granting Cuisine security of tenure for up to 15 years). And, if the Court finds that such an agreement is sufficiently certain to be enforceable, how the Court determines the allegation that Boydah breached the agreement. For example, it has been observed that: “An appropriate (and indeed often effective) negotiating strategy may be a refusal to negotiate.” ( NSWSC 723, Hammerschlag J at ) However, a refusal to negotiate is one of the main actions of the defendants which Cuisine attacked at the hearing.
An additional hurdle which Cuisine faces is that the agreement to negotiate which it has asked the Court to find is one implied from the conduct of the parties. In United Group Rail Services the Court of Appeal said at : “Many issues arise in respect of any implication (whether as a matter of fact or by law) of any term requiring performance of a contract, or the exercise of contractual rights, in good faith. Those issues need not be explored here in a case dealing with an express clause as part of a dispute resolution clause.” However, counsel for Cuisine submitted that the fact that the alleged agreement to negotiate is implied should not make any difference.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.