By Jeremy Johnson and Callum Hackston
In White Pointer Investments Pty Ltd v Creative Academy Group Pty Ltd [2023] NSWSC 817 the Court was asked to consider whether the impact of a ‘boozy lunch’ would void the contractual arrangement that had been made.
The agreement under scrutiny was to ‘source’ eight childcare centres for a set fee of $2,000 (AUS) per approved child place. After White Pointer claimed a contract was agreed all eight childcare centres were sourced which fulfilled their contractual obligations. However, a significant portion of the fees were not paid. Creative Academy argues that the contract White Pointer was fulfilling does not exist, in part because it was agreed to whilst one of their directors was alcohol influenced and not in a fit state of mind.
Rather disappointingly, the lunch in question played only a minor role in the overall judgement.
The Court began by noting at [204], that whilst oral contracts are enforceable like any other, it is likely that the plaintiff may have serious difficulties in establishing proof without records or corroboration from other parties of the existence of the contract. To simply claim that an agreement exists is not sufficient.
As for the lunch itself, the court accepted evidence that the lunch between the director of White Pointer Mr Hedley, and a representative of Creative Academy Mr Larcombe was ‘lengthy and boozy’. However, there was no evidence provided to the Court detailing what was drunk, by whom and how affected the parties may have been. Naturally, the Court was reluctant to draw a conclusion as to how alcohol impacted either party during the lunch.
This contrasts with another Australian case, ACCC v Bluescope Steel Ltd (No 5) [2022] FCA 1475, where the Court did assess the impairment of the parties. The restaurant receipt was produced which corroborated witness accounts that the parties had two mixed drinks before eating, shared a bottle of wine over dinner and finished with a glass of scotch whiskey. This ‘boozy dinner’ was not of a significant enough magnitude to convince O’Bryan J that either party was mentally impaired such that their arrangement was not enforceable.
The judgement in White Pointer did acknowledge that the time proximity between the lunch and when affidavits were made, some four and a half years, may have contributed to the party's recollection ability or lack thereof.
The Courts relied on several actions of ‘post-contractual conduct’ to infer that the contract was in effect and therefore enforceable after the lunch in question. This included correspondence between the parties after the lunch with emails referring to Creative Academy as ‘my client’. One site was treated specifically in reference to the oral arrangement, including a ‘sourcing fee’ which was invoiced and paid. Additional fees were also billed and acknowledged on other sites via email in 2019. The nature of these interactions was such that the Court was satisfied both parties understood there to be and intended a contractual relationship.
It would not be unreasonable to conclude that the actions taken by both parties signalled that a contract existed clearly enough that it was of lesser importance to the Court to investigate the ‘boozy lunch’ itself.
Rees J concluded that an oral contract did exist and awarded damages to the plaintiff for breaching that contract amounting to $747,650.
Ultimately the most important points established in the case for note are:
- It is vital to have a written record of contractual arrangements between parties. Most particularly when such agreements have been made in a relaxed and casual social setting.
- It is possible for a Court to void a contract if one or both parties are under the influence of alcohol at the time of making the agreement should the impairment be such that it mentally impairs the party. For a Court to make this ruling there must be sufficient evidence of the amount of alcohol consumed and that it mentally impaired them significantly enough that it cannot be certain that the contract was their true intention.
- Actions taken subsequent to the supposed contractual formation are a vital tool for Courts to rely on in interpreting commercial relationships. Parties would be well advised to act with care when corresponding in contractually ambiguous situations and seek clarity as quickly as possible.
Comment