LEADENHALL (AUSTRALIA) PTY LTD v LEWBELL NOMINEES PTY LTD AS TRUSTEE OF B D LEWIS FAMILY TRUST [2025] SADC 17

Applicant: LEADENHALL (AUSTRALIA) PTY LTD Counsel: MR G FINLAYSON - Solicitor: DIASPORA LEGAL First Respondent: LEWBELL NOMINEES PTY LTD AS TRUSTEE OF B D LEWIS FAMILY TRUST Counsel: MR E BELPERIO - Solicitor: CCK LAWYERS Second Respondent: BERNIE LEWIS HOME LOANS PTY LTD Counsel: MR E BELPERIO - Solicitor: CCK LAWYERS Third Respondent: BERNIE LEWIS FINANCIAL SOLUTIONS PTY LTD Counsel: MR E BELPERIO - Solicitor: CCK LAWYERS Hearing Date/s: 04/09/2023, 05/09/2023, 27/10/2023 File No/s: CIV-21-012467 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. LEADENHALL (AUSTRALIA) PTY LTD v LEWBELL NOMINEES PTY LTD & ORS [2025] SADC 17 Judgment of her Honour Judge Thomas 26 February 2025 CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS This proceeding concerns the proper construction of the terms of a written contract for the provision of advisory services and, if the contract does not operate as the Respondents contend, whether it should be rectified to so operate. The Applicant advisor claims to be entitled to payment of two success fees as part of its remuneration in facilitating the sale of a group of companies that shared common services but independently conducted separate financial services businesses. The crux of the dispute is what, on the proper construction of the contract, 'success' means and whether 'success' was achieved in circumstances where only two lesser value parts of the group were sold, and whether the second sale transaction was governed by the contract. There are ancillary claims in contract for interest and recovery costs and, for the second sale transaction, an alternative claim for damages for breach of contract. Held: (i) The proceeding is dismissed with costs to follow the event on the standard costs basis, subject to any relevant matter informing the Court’s discretion on costs otherwise. (ii) The Respondents’ construction is to be preferred. The contract only entitled the Applicant advisor to a payment of a success fee if all of the group were sold, whether by a sale of business or assets or the issue of securities, under one or more “Contracts” or to one or more “Acquirers” (all as defined in the contract). The contract, properly construed, did not provide -- 1 of 41 -- for multiple success fees to be payable and did not contemplate any remuneration additional to the agreed monthly retainer fee if only part of the group was sold. (iii) 'Success' within the meaning of the contract was not achieved in circumstances where only one business was sold during the term of the contract. (iv) The second sale transaction occurred after the termination of the contract. Its “Acquirer” was not a related party to its prospective Australian Financial Services licensee within the meaning of the contract. Accordingly, the contract did not apply to this sale transaction. (v) Since the Respondents’ construction is to be preferred, no question of rectification arises to be determined and the Applicant’s claim for interest and recovery costs as a contract debt fails. Corporations Act 2001 (Cth), referred to. AIB Group (UK) Ltd v Martin [2002] 1 WLR 94; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Ecosse Property Holding Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 644.; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Halford v Price (1960) 105 CLR 23; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; H Lundbeck A/S v Sandoz Pty Ltd; CNS Pharma Pty Ltd v Sandoz Pty Ltd (2022) 276 CLR 170; International Petroleum Investment Company v Independent Public Business Corporation of Papua New Guinea [2015] NSWCA 363; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Miwa Pty Ltd v Siantan Properties Pty Ltd [2011] NSWCA 297; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Nova Property (Aust) Pty Ltd v Bria Constructions Pty Ltd [2024] SASC 10; P J Nash Pty Ltd v Food and Beverage Australia Ltd [2021] SASCA 86; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co (The Diana Prosperity) [1976] 1 WLR 989; Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; Unsworth v Debsan Pty Ltd [2014] WASC 46; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Williams James Watson & May Marlene Watson as Trustee for the WJ & MM Watson Superannuation Fund v Christopher Alexander Scott [2015] QCA 267; Willis Australia Ltd v AMP Capital Investors Ltd [2023] NSWCA 158; Zhu v Treasurer of NSW (2004) 218 CLR 530, applied. -- 2 of 41 -- LEADENHALL (AUSTRALIA) PTY LTD v LEWBELL NOMINEES PTY LTD & ORS [2025] SADC 17 Overview 1 The Applicant corporate advisor (Leadenhall) sues its former clients, the Respondents, for the unpaid balance of consultancy fees totalling $200,000 plus GST, interest and recovery costs as contract debts under a written contract made between the parties on 17 December 2017.1 In the alternative, Leadenhall sues for damages for breach of contract for failure to refer a prospective counterparty for inclusion in a “Prospects List” as defined in the contract. 2 Leadenhall’s assignment was to assist the Respondents sell the Bernie Lewis group then comprising three companies: • the Second Respondent, Bernie Lewis Home Loans Pty Ltd (BL Home Loans) • the Third Respondent, Bernie Lewis Financial Solutions Pty Ltd (BL Financial Solutions) • the former Fourth Respondent, Bernie Lewis Insurance Services Pty Ltd (BL Insurance Services).2 3 These companies shared common services and had some common clients but conducted separate businesses in their individual areas of operation: homes loans; financial services and planning; and general insurance. 4 The First Respondent, Lewbell Nominees Pty Ltd as trustee for the B D Lewis Family Trust (Lewbell) was the ultimate holding company of the Bernie Lewis group of companies. 5 Mr Mark Lewis and Ms Vanessa Willans are the children of Mr Bernie Lewis (deceased). They are the beneficiaries of the B D Lewis Family Trust and the directors of Lewbell. They were the directors of BL Home Loans at all relevant times. Mr Lewis was the sole director of BL Insurance Services and BL Financial Solutions. 3 As it was put in the engagement letter forming a key part of the contract, Mr Lewis and Ms Willans were “the beneficiaries of the value of the Bernie Lewis Group”.4 1 Claim Revision 2 (FDN 47) and Reply Revision 2 (FDN 61). The Respondents’ pleaded case is set out in their Defence Revision 2 (FDN 57). Leadenhall’s claim for an extension fee of $55,000 was not pressed at trial. 2 BL Insurance Services was deregistered on 21 November 2021. 3 Exhibit R6 [15]. 4 Exhibit A3.59.341. That is, page 341 of document 59 in the common tender book. -- 3 of 41 -- [2025] SADC 17 2 6 Leadenhall’s engagement was terminated with effect from 26 September 2019 in circumstances where the outcome of the sale process better equated with failure than success having regard to the purpose of Leadenhall’s assignment. 7 In short, not all of the Bernie Lewis group was sold. Negotiations with a prospective purchaser for the most valuable member of the group, BL Home Loans, fell through during Leadenhall’s engagement. The business/assets of the two lesser value companies were sold in the following circumstances. 8 First, on 14 May 2019 during Leadenhall’s engagement, the business of BL Financial Solutions was sold to Poynter Hargraves Financial Consultants Pty Ltd (Poynter Hargraves) for a purchase price of approximately $1.1 million. 9 Secondly, on 11 October 2019,5 a contract was made for the sale of the client book6 of BL Insurance Services to TCB Fire and General Insurance Agencies Pty Ltd (TCB) for a purchase price of $500,000. The contract with TCB settled on 1 November 2019, after the effective termination of the contract on 26 September 2019. 10 TCB was owned and controlled by Mr Ross Debrowski. They were both Australian financial services (AFS) authorised representatives of BL Insurance Services from February 2017 until these contracts were terminated with effect from 18 October 2019. Mr Debrowski and TCB became AFS authorised representatives of Thomas Insurance Brokers Pty Ltd (Thomas) from 1 November 2019. 11 Thomas was a potential counterparty on the “Prospects List” as defined in the contract7 with whom Leadenhall had discussions on behalf of the Respondents during Leadenhall’s engagement. Negotiations with Thomas were ultimately unsuccessful. 12 Mr Debrowksi and TCB were not identified as potential counterparties nor were they parties with whom Leadenhall had discussions during Leadenhall’s engagement. Yet both Mr Lebbon and Mr Lewis knew that Mr Debrowksi and TCB were in negotiations with Thomas to become authorised representatives of Thomas from about March 2019. 13 In these circumstances, the parties are divided as to what constitutes ‘success’ under the contract and whether ‘success’ was achieved. Leadenhall claims ‘success’ was achieved twice in circumstances that entitle it to be paid two minimum success fees of $150,000 each (excluding GST). The Respondents 5 Although the sale contract (Exhibit A3.180) is dated 11 October 2019, it was an agreed fact that the contract was executed on 14 October 2019 (Statement of Agreed Facts (FDN 73) [18].) This discrepancy is not relevant. 6 It was an agreed fact that the business of BL Insurance Services was sold to TCB. That is strictly not correct. The sale contract provided for the sale of TCB’s “Client Book” being its register of clients and their policy details, not TCB’s business. Whilst the legal distinction is important, it is not relevant to the issues to be determined, save that the parties referred to both interchangeably at trial. 7 Schedule B, clause 1: Exhibit A3.59.354. -- 4 of 41 -- [2025] SADC 17 3 contend otherwise and that the contract does not provide for a success fee to be paid at all because, properly construed, ‘success’ under the contract means the sale of all of the Bernie Lewis group and only part of it was sold. Nor does the contract provide for multiple minimum success fees as claimed by Leadenhall. 14 Further, on the Respondent’s case, the contract does not apply to the sale of BL Insurance Services’ client book because it was sold after the contract was terminated to a party that was not on the “Prospects List” and with whom Leadenhall had no dealings. The purchaser was also not a “related party” to Thomas who was on the “Prospects List” and with whom Leadenhall had unsuccessful discussions. Nor did the Respondents breach any obligation under the contract with regard to the nomination of Mr Debrowski and TCB as prospective counterparties for the “Prospects List”. 15 The parties are also divided as to whether, if the contract does not operate as the Respondents contend, it should be rectified to so operate. 16 There is no dispute about the retainer fees paid or termination of the contract. The Trial 17 The trial was conducted on the basis of an Agreed Statement of Issues to be Determined8 and a Statement of Agreed Facts. 9 The parties rely on written closing and oral submissions.10 The Evidence The Documentary Evidence 18 The parties prepared a four volume common tender book that was received without objection.11 It contains the documents comprising the written contract and emails exchanged during pre-contractual negotiations and subsequently as the dispute unfolded, both during the period of Leadenhall’s engagement and after the date of effective termination of the contract. 19 The contract was negotiated by Leadenhall’s managing director, Mr Timothy Lebbon and Mr Mark Lewis, then a director and authorised agent of the Respondent companies.12 The contemporaneous email correspondence between them records much of the substance of their negotiations and its primary relevance is to the Respondents’ rectification case. 8 FDN 75. 9 FDN 73. 10 The Applicant’s Closing Submissions (FDN 81) (Leadenhall’s Closing) and Closing Submissions in Reply (Leadenhall’s Reply Closing) (FDN 84); the Respondent’s Written Closing Address (FDN 82). 11 Exhibit A3. 12 Statement of Agreed Facts [3]. -- 5 of 41 -- [2025] SADC 17 4 20 Leadenhall included in the tender book 20 contracts it had entered into with other clients for unrelated assignments in largely unknown circumstances. Leadenhall submitted the Court can properly have regard to them for a number of purposes.13 21 Leadenhall’s submissions in this regard should be rejected. 22 Although these contract documents included an adaptation of Leadenhall’s standard terms, the contract made by the parties in this case was, in Mr Lebbon’s words, “unique” and came about through his interactions with Mr Lewis.14 On the evidence, it is clear that Leadenhall was flexible in agreeing alternative fee arrangements with its clients that met their specific requirements and were tailored to their needs. The contract said so (in the engagement letter). 23 No admissible evidence was led as to how Leadenhall’s contracts with other clients informed the parties’ contractual intentions as expressed in the words of the contract or their intentions as relevant to the rectification issue. Mr Lebbon’s subjective intentions about Leadenhall’s standard terms were largely uncommunicated and no evidence was led to prove what Mr Lewis knew about them. 24 In any event, it is obvious and uncontentious that Leadenhall’s standard terms were tailored to the Respondents’ specific requirements and the contentious parts of the contract have to be read in context of the whole of the contract and the parties’ contractual purpose. 25 Accordingly, these contracts are of little assistance in resolving the issues in dispute. The same must be said of Mr Lebbon’s evidence about Leadenhall previous engagements.15 The Witnesses Generally 26 The credibility and reliability of the witnesses is not critical in this case. Generally, resolution of the issues turns on the inferences to be properly drawn from the written contract and the largely uncontentious primary facts established by the documentary evidence where relevant. 27 Leadenhall called two witnesses: Mr Lebbon and Mr Anderson. The Respondents called Mr Lewis only. All three were cross-examined at some length. 28 Affidavits made by Messrs Lebbon16 and Lewis17 were read in lieu of oral examination in chief, with some limited supplementary questions being asked. Save for one exception, the parties agreed that despite the filed formal objections 13 Leadenhall’s Reply Closing [10]. 14 T13.21-.26. 15 Exhibit A1 at [10]-[20]. 16 Mr Lebbon’s trial affidavit and his reply affidavit comprising Exhibit A2. 17 Exhibits R5 and R6. -- 6 of 41 -- [2025] SADC 17 5 to written evidence18 all of the trial affidavits would be received de bene esse with the reservation that any substantive matter would be addressed in final submissions.19 29 The exception was the objection pressed by Leadenhall to the form of Mr Lewis’ written evidence about his conversations with Mr Lebbon where Mr Lewis quoted in direct speech the effect of the words used. The objection was resolved by granting the Respondents leave to clarify what Mr Lewis meant when he gave this evidence. He confirmed in oral examination in chief that he could not remember verbatim the words actually spoken since the relevant conversations occurred some six years ago, and he was referring to the gist or general thrust of the conversation.20 His written evidence is to be understood on this basis. Mr Lebbon 30 The founding and managing director of Leadenhall, Mr Timothy Lebbon is an astute, highly qualified and experienced businessperson.21 Whilst he and his two sons constitute the board of directors of Leadenhall, Mr Lebbon was Leadenhall’s decision maker for this engagement. 31 Mr Lebbon qualified in England in 1971 as a chartered accountant and moved to Adelaide in 1978. He started Leadenhall in 1982. By 2017, in addition to his extensive qualifications in accounting, finance and valuations, Mr Lebbon had some 40 years’ experience as a consultant and corporate advisor, specialising in mergers and acquisitions in mid-market transactions. Mr Lebbon is also an experienced company director. He has spoken at many congresses and professional development seminars over his long career as well as being a contributor to a major valuation reference used in Australia. 32 Mr Lebbon’s trial affidavit was prepared with assistance from Leadenhall’s solicitors and largely read as a reconstruction of the documentary evidence. It unhelpfully addressed a number of irrelevant issues including Mr Lebbon’s commercial opinions and understanding of the legal effect of Leadenhall’s standard terms and the contract. 33 In cross-examination, Mr Lebbon was candid about the limitations of his memory of events that occurred six years ago. Unsurprisingly, he could not recall what was said, whether the precise words or their effect. When pressed, he said he had no independent recollection of his pre-contractual meetings with Mr Lewis and had prepared his trial affidavit from his timesheets, contemporaneous emails and his usual way of conducting business.22 He later conceded that his reconstruction by reference to what he usually did when he negotiated Leadenhall’s retainer with 18 FDN 48, FDN 68 and FDN 69. 19 T4.37-38.4;11.10-.15. 20 T129.4-.13. 21 Mr Lebbon’s curriculum vitae comprise Exhibits A3.98 and A3.99. 22 T27.22-28.13;29.25-.29. -- 7 of 41 -- [2025] SADC 17 6 clients was not accurate because his discussions with Mr Lewis were unique to this engagement.23 34 For this reason, overall, Mr Lebbon’s oral evidence adds little to his written evidence (where relevant) and should be given lesser weight than the documentary evidence and Mr Lewis’ generally better recollection of what was discussed where it differs. 35 Mr Lebbon’s evidence on certain topics was self-serving. 36 One topic was Mr Lebbon’s insistence that Leadenhall did not value the Bernie Lewis group and was not engaged to do so. He described in evidence in chief that pre-contract he did some calculations to prepare a model from the group financial statements. He distinguished his model from undertaking a proper valuation prepared in accordance with the accounting standards that he said would have involved a lot of work. He told Mr Lewis as much by email when he sent him the model.24 In cross-examination, Mr Lebbon repeatedly emphasised this distinction. 37 The Respondents criticised Mr Lebbon’s evidence in this regard as designed to disconnect the agreed formula for the success fee from the indicative value of the group. This criticism is valid. 38 It is not relevant whether Leadenhall was engaged to formally value the Bernie Lewis group, nor was this alleged. What matters is what Mr Lebbon said and did in his dealings with Mr Lewis that informed their mutual assumption about the minimum enterprise value of the group and the genesis of the agreed formula for success expressed in the contract. 39 Ultimately, in answer to questions from the bench in cross-examination, Mr Lebbon accepted the financial model he set up reflected the parties’ expectations as to the price at which the group of businesses might be sold, although it was not a valuation.25 He had said as much in his first email to Mr Lewis about structuring a success fee as a component of Leadenhall’s remuneration. Mr Lebbon told Mr Lewis they needed to look at the last three years financials to judge where the base or minimum “enterprise value” of the group should be set so as to be an incentive for Leadenhall.26 40 A second example was Mr Lebbon’s evidence that the success fee was to be set at an agreed but not a fair level. His evidence to this effect should be disregarded in light of his first email to Mr Lewis about structuring the success fee to incentivise Leadenhall to achieve more than the base level of enterprise value27 and his later 23 T28.21-.27. 24 Exhibit A3.35. 25 T71.23-74.29. 26 Exhibit A3.23. 27 Ibid. -- 8 of 41 -- [2025] SADC 17 7 concession in evidence that the interests of both the advisor and client needed to be balanced.28 This is commercial commonsense. 41 Another example was Mr Lebbon’s evidence that the client always had the “whip hand” in deciding whether to sell or not29 and in this case the sale of BL Home Loans was ‘off the table’ because he understood Mr Lewis had decided to keep it.30 On the evidence, there is no substance to the suggestion Mr Lewis always had a “plan B” for BL Home Loans at the time of contracting.31 Mr Lewis’ contemporaneous email of 29 May 201932 and oral evidence make it plain he was only keeping it because an acceptable offer had not been received after a longer than anticipated sale process and poor outcome. Accordingly, Mr Lebbon’s evidence on this topic should be disregarded. Mr Anderson 42 In 2019, Mr Paul Anderson worked as a business development consultant and part- time practice manager for Thomas (and another unrelated business). He also provided compliance services to BL Insurance Services through a national insurance group. 43 Mr Anderson should be accepted as an honest and reliable witness, despite not being able to precisely date events that occurred many years ago. 44 Mr Anderson was subpoenaed to give evidence by Leadenhall. In opening, Leadenhall’s counsel said Mr Anderson would give evidence about the chain of events that led to the sale of BL Insurance Services to Mr Debrowski and TCB. He would also give evidence about how his involvement began with him arranging a meeting between Mr Lewis and Mr Crowther of BL Insurance Services, Mr Gary Thomas and himself to discuss whether there was any interest in selling, and that he was involved in September 2019 in moving the business of BL Insurance Services to Thomas Insurance Brokers.33 45 Ultimately, much of Mr Anderson’s evidence is of peripheral relevance and where relevant, does not support Leadenhall’s case. 46 Mr Anderson gave evidence that he was not involved in negotiations with Thomas after the initial coffee meeting, he did not then know who Mr Ross Debrowski was then or have any role in the transfer of TCB’s client database to Thomas. It was only later he met Mr Debrowski and he had no role in brokering any relationship between Mr Debrowski and Thomas. 28 T23.1-.25. 29 T66.1-.12. 30 T70.4-71.20. 31 Leadenhall’s Closing [15], [215] to [220]. 32 Exhibit A3.162. 33 Leadenhall’s Opening (FDN 76) [73]. -- 9 of 41 -- [2025] SADC 17 8 47 Mr Anderson gave evidence about the fundamental difference between the appointment of a corporate authorised representative and ownership of a client book in an insurance business. 34 His evidence demonstrates the untenability of Leadenhall’s contentions that TCB and Mr Debrowski were related parties of Thomas or that TCB was a potential counterparty that ought to have been nominated for the “Prospects List” by the Respondents. Mr Lewis 48 At all relevant times, Mr Lewis was an executive director of BL Homes Loans, BL Financial Solutions and BL Insurance Services as well as Lewbell. 49 He joined his father’s business, BL Home Loans in 1997 and was appointed managing director in 2003. In February 2005, he and his sister, Ms Willans became the owners of BL Home Loans. Mr Lewis established a wealth management business in 2007 after acquiring a financial planning business. That part of the business was divested in about August 2014. 50 In 2012, Mr Lewis established BL Insurance Services. In 2014, Mr Lewis established BL Financial Solutions. Ms Willans was a director of Lewbell and a non-executive director of BL Home Loans. Mr Lewis was the sole director of and BL Financial Solutions and BL Insurance Services. 51 Mr Lewis is also an experienced businessperson. He has held and holds a number of senior and leadership positions in organisations in and outside the financial services industry, as well as being a professional speaker. Mr Lewis has a diploma in Finance and Mortgage Brokering Management, an Advanced Diploma in Aviation and an Associate Diploma of Administration. 52 In early 2017, for personal reasons, Mr Lewis thought it was the right time to sell and exit the Bernie Lewis group. Ms Willans agreed for him to take steps to facilitate the sale. 53 In oral evidence, it was apparent Mr Lewis had a better recollection of relevant events than Mr Lebbon. He generally recalled the substance of their pre- contractual discussions and made appropriate concessions where he did not. 54 In closing submissions, Leadenhall criticised Mr Lewis’ evidence in cross- examination variously as self-serving, uncommercial, less than genuine or that he was tailoring his evidence. These criticisms are largely unfounded. Mr Lewis was not seriously challenged in cross-examination on any topics critical to Leadenhall’s case. Otherwise much of his cross-examination was on irrelevant topics including for example his opinions about what was commercially reasonable, questions about the role transaction structuring played in the sales 34 T103.28-104.18. -- 10 of 41 -- [2025] SADC 17 9 process post-contract and discovery of board reports during Leadenhall’s engagement. 55 Overall, Mr Lewis should be accepted as an honest witness doing his best to recall somewhat dated events. Like Mr Lebbon, where his evidence is contentious, the contemporaneous email correspondence where relevant should be preferred as the more reliable account of what was discussed in contractual negotiations. Facts Pre-contractual Negotiations 56 In about August 2017, Mr Lewis contacted Mr Lebbon by telephone and told him he was looking to exit the Bernie Lewis group and was interested in his assistance in selling it. They arranged to meet. 57 A friend in the industry had recommended Mr Lebbon and Mr Lewis knew of Mr Lebbon’s reputation and experience in business divestments and the value he would bring in facilitating the sale of the Bernie Lewis group. 58 On 24 August 2017, a meeting took place between them for about two hours. They discussed the proposed assignment and how Leadenhall might assist in the sale process and Leadenhall’s flexibility in agreeing fee arrangements to meet its clients’ requirements. 59 It is uncontroversial that Mr Lewis told Mr Lebbon he wished to move on and sell the Bernie Lewis group, that it comprised three companies that ran independent businesses that shared services and had integrated client bases. He therefore preferred to sell the group as a ‘job lot’ because he thought the group might be worth more if sold as a whole to one purchaser. Mr Lebbon told Mr Lewis that the best outcome might involve more than one sale and purchaser of the companies or their businesses and the structure of the necessary transactions would be driven by taxation considerations. Since Leadenhall were not tax advisors, the Respondents would need to seek their own tax advice. Both understood that the market would determine the outcome. 60 This was commercial commonsense and basic for two experienced businesspersons. 61 They discussed the nature of the services to be provided by Leadenhall by reference to a ‘sales process schematic’35 tabled by Mr Lebbon. It was generic and set out the basic phases of any corporate sales process. 62 As to Leadenhall’s professional fees, Mr Lebbon told Mr Lewis that Leadenhall was flexible in its arrangements with clients and outlined options including charging hourly rates for time spent or a retainer with a success fee component or a mix of both. Mr Lewis told Mr Lebbon he operated in an industry “where you 35 Exhibit A3.58. -- 11 of 41 -- [2025] SADC 17 10 only eat what you kill” and liked the idea of a success fee to incentivise Mr Lebbon to get a higher price. 36 He told Mr Lebbon he preferred to share the risk of a bad outcome and the benefit of a good outcome and a good outcome was selling the group for a good price. 63 Mr Lewis also told Mr Lebbon he wanted the value of one asset owned by BL Home Loans, the Mile End property, excluded from any success fee. There is no dispute about this aspect of the success fee arrangements ultimately agreed. 64 The following day, Mr Lebbon sent Mr Lewis two emails about the proposed sale process (attaching, the sales process schematic, a generic information memorandum outline and a due diligence checklist) and said he would write separately about a draft engagement letter. 65 On 28 August 2017, Mr Lebbon sent Mr Lewis by email a draft engagement letter providing for alternative fee bases.37 It records the substance of their discussion at their exploratory first meeting. 66 The letter is the first draft of the engagement letter that ultimately comprises part of the final contract. As does its final form, the draft expressly identifies that Leadenhall’s proposed assignment is to assist sell the Bernie Lewis group comprising the three identified companies that share common services but conduct independent businesses. It confirms that Mr Lewis has been considering the sale of the Bernie Lewis group “preferably in total to a single purchaser but would entertain alternative transactions”38 and specifies the client for the assignment as each company in the group and Lewbell, on a joint and several basis. 67 In the third section, professional fees are addressed and three options are offered: time and responsibility; retainer and success fee; and a mix. For the second option, a monthly retainer of $5,000 plus GST is specified that would be deducted from any success fee payable. 68 The success fee is not specified in the draft engagement letter. It is to be charged as per attached “Terms and Conditions of business”39 that had not yet been provided to Mr Lewis. 69 Mr Lebbon’s covering email states that if Mr Lewis wants a success component to be incorporated into the fee base, they would need to agree and define what that is and how realistic the assumptions behind it are. Further: 40 Typically we structure these as 2 to 3% of a base number and 5 to 6% on amounts in excess of the base – that needs to be discussed with you and the base is at the minimum level of 36 Exhibit R5[41]; T173.16-174.1. 37 Exhibit A3.23. 38 Exhibit A3.23.175. 39 Since Schedules A and B are collectively referred to in the contract as the “Terms”, that expression is adopted in these reasons: Exhibit A3.59.347 . 40 Exhibit A3.23. -- 12 of 41 -- [2025] SADC 17 11 enterprise value and it should be set so as to be an incentive for us to achieve more than that. It goes without saying that clients are generally not interested in setting the base at an extremely low number because that means we would be well remunerated largely irrespective of the size of outcome however similarly we are not interested in entering into a success arrangement where the base is set so high that the fee incentive becomes mute. 70 To make some judgment on where the base number should be set in agreeing a success fee, Mr Lebbon said in his email that they needed to look at the last three years financials for the group. 71 This email is the genesis of the formula for calculating the success component of Leadenhall’s remuneration that was ultimately agreed. 72 There was no mention in the draft engagement letter or the covering email of the possibility of a success fee per sale of each entity or asset in the group or that the partial sale of the group (whether its assets or securities) would constitute success under the contract. In cross-examination Mr Lebbon conceded this possibility was not discussed during negotiations and was first raised in December 2018.41 73 It took some time for the financials to be prepared and sent to Mr Lebbon. He was sent both the normalised and full financials for the Bernie Lewis group for the last three years in late September 2017. 74 In his written evidence, 42 Mr Lewis referred to a meeting with Mr Lebbon in October 2017, the precise date of which he could not remember, at which Mr Lebbon proposed the structure for the success fee. Mr Lewis recalled Mr Lebbon in effect proposing that Leadenhall charge a success percentage of 2.5 % of the purchase price for the whole of the Bernie Lewis group up to $8 million and 5% thereafter, net of paid retainer fees. He said Mr Lebbon told him that he would like to insert a minimum payment of $150,000 so that Leadenhall was compensated for their work in selling the group in case the purchase price was much lower than expected for the sale of the group. Mr Lewis told Mr Lebbon he was happy to agree these figures and he wanted them both to share the gains if he could sell the group for a good price. 75 According to Mr Lebbon’s timesheets, he met with Mr Lewis on 9 October 2017. Mr Lebbon had no independent recollection of this meeting or what was said at it. When cross-examined about what he told Mr Lewis at this meeting, he could not recall what Mr Lewis said. He specifically could not recall saying he would like to include a minimum payment in case the total purchase price for the group is lower than expected then volunteered “but all our terms have a minimum of 41 T63.20-.35 42 Exhibit R5 [49]-[50]. -- 13 of 41 -- [2025] SADC 17 12 $150,000 transaction fee”.43 However, Mr Lebbon did not say this to Mr Lewis at this meeting or in any of their pre-contractual communications. 76 Whilst Mr Lewis was not seriously challenged in cross-examination about what was said in the October meeting, the subject of their discussions does not fit with it being so early in their discussions. It was not until 23 October 2017 that Mr Lebbon proposed a success formula with a minimum success fee. 77 The next communication was an email sent on 10 October 2017. It concerned the financial model Mr Lebbon had prepared from the group financial statements, a workbook he described not as “a set of formal valuations but a pro forma set of calculations based on various assumptions”.44 This is the model Mr Lebbon told Mr Lewis he would prepare to inform the parties’ assumptions as to the likely range of outcomes from selling the Bernie Lewis group for the purposes of negotiating a success fee as a component of Leadenhall’s remuneration. This email concludes by Mr Lebbon asking Mr Lewis to answer his queries in the draft engagement letter so he can respond with a fee proposal. 78 On 16 October 2017, by email Mr Lewis responded to Mr Lebbon’s 28 August email and answered Mr Lebbon’s queries. He was “[n]ot sure about entertaining alternative transactions. Strong preference to sell as a ‘job lot’. They are all very intertwined.”45 As to the success fee component, Mr Lewis said:46 As discussed our preference will be a percentage success fee up to a ‘base’ amount and a higher percentage for any amount in excess of the base amount. 79 It is uncontroversial that notwithstanding the strong preference expressed by Mr Lewis, from the outset it was understood by the parties that the companies and their businesses comprising the group might be sold together or separately to one or more purchasers, depending on the offers received. 80 On 20 October 2017, after meeting with the Respondents’ tax adviser Mr Grant Miles, Mr Lebbon sent Mr Lewis and Mr Miles three workbooks by email. The workbooks were all very similar but with notable differences from varying assumptions about the effect of different tax issues. Relevantly, each showed the same assumed enterprise values for the group entities:47 Enterprise Values assumed for BLHL 8,400,000 BLFS 1,551,000 BLIS 725,000 subtotal 10,676,000 43 T24.19-.24. 44 Exhibit A3.37. 45 Exhibit A3.38.211. 46 Ibid. 47 Exhibits A3.41; A3.42 and A3.43. -- 14 of 41 -- [2025] SADC 17 13 81 Mr Lebbon’s email concluded with him saying he would work on the engagement letter and have it to Mr Lewis early the next week for discussion. 82 On 23 October 2017, Mr Lebbon sent Mr Lewis by email an updated draft of the engagement letter and included a first draft of the Terms. In the engagement letter, Mr Lebbon had deleted the reference to Mr Lewis “entertaining alternative transactions”48 no doubt as a result of Mr Lewis’ 16 October email expressing uncertainty about that. In the definition of “Success Fee(s)” in Schedule B of the draft Terms, Mr Lebbon had inserted suggested success percentages and thresholds for discussion with Mr Lewis. The proposed definition is the same one as in the executed contract and reads as follows:49 “Success Fee(s)” The fee(s) which become due to [Leadenhall] by the Client in the event of Success and payable upon Completion which, unless otherwise agreed in the Engagement letter, will be 2.5% of Gross Transaction Consideration (excluding GST) on the first $8 million and 5% thereafter with a minimum fee of $150,000 (excluding GST). 83 A reasonable person in the position of the parties would have known from the financial workbooks prepared by Mr Lebbon that the proposed $8 million figure represented the assumed minimum enterprise value of the Bernie Lewis group and not that of any individual entity in the group. 84 Mr Lewis eventually responded by email on 11 November 2017 having read through the Terms, saying “I have to say they are very one sided. I think we need to discuss these as they are not palatable to us in their present form.”50 85 Mr Lebbon and Mr Lewis met again on 14 November 2017 for the purpose of discussing Leadenhall’s proposed terms of engagement and the terms Mr Lewis found unpalatable. 86 Mr Lebbon identified some of the topics discussed at his meeting in his written evidence but had no independent recollection of the meeting in oral evidence. 87 Mr Lewis only referred to one uncontentious topic in his written evidence concerning clause 9 of Schedule A of the draft Terms. This clause provided Leadenhall would be paid a “Success fee” where “Success” was achieved within two years after effective termination of Leadenhall’s engagement regardless of any connection between Leadenhall’s service and “Success”. Mr Lewis told Mr Lebbon he did not want to pay Leadenhall for a sale after their arrangement had ended if Leadenhall had not done any work for that sale. This led to a discussion about introducing the concept of a prospects list for the purposes of a two-year period after termination of Leadenhall’s engagement. 88 The following day, 15 November 2017, Mr Lebbon sent Mr Lewis by email an amended version of the Terms, marked up to show the changes he had made and 48 And in error, the word “purchaser”. 49 Exhibit A3.45.248 50 Exhibit A3.49. -- 15 of 41 -- [2025] SADC 17 14 asked Mr Lewis to advise if he had not captured all that was discussed. Mr Lebbon included a spreadsheet51 showing three fee alternatives as examples and invited Mr Lewis to suggest which he preferred, saying that may not be any of them. 89 The marked up changes to Schedule A are not relevant to the issues in dispute. As regards Schedule B, the relevant changes to clauses 1 and 9 in effect confine Leadenhall’s entitlement to a success fee after effective termination of its engagement to purchasers on a “Prospects List” with whom Leadenhall has had discussions. These changes only concern the sale of BL Insurance Services and the dispute as to whether the contract applies to it, depending on the meaning of ‘success’. 90 The attached fee alternatives spreadsheet charts three fee options in increasing $1 million increments of “GTC” between $6 and $15 million. The first option is the success fee Mr Lebbon proposed in Schedule B of the draft Terms sent on 23 October 2017, described as follows: Per proposal: 2.5% on the first $8m and 5% thereafter with min of $150k 91 In the spreadsheet, the proposed success fee increases from $150,000 for “GTC” of $6 million to $550,000 for “GTC” of $15 million. Self-evidently, the minimum of $150,000 is 2.5% of $6 million, 2.5% being the base success percentage. 92 Alternative B, by way of a second example, was a flat 3.5% fee of “GTC”. The third, Alternative C, was “$150k plus 6% excess over $10m”. 93 “GTC” is “Gross Transaction Consideration – GTC - as defined in the Terms”. The first line of the spreadsheet says so. This is uncontentious. 94 In clause 5 of Schedule B of the draft Terms, “Gross Transaction Consideration” is calculated on 100% of “Enterprise Value”52 (which is defined in turn as the sum of the market value of the equity of the business plus debt net of surplus cash).53 95 Mr Lebbon accepted in cross-examination that the range of “GTC” in this spreadsheet is for the whole Bernie Lewis group.54 This was obvious anyway because the parties knew the $8 million base represented the assumed “Enterprise Value” for the whole of the Bernie Lewis group and not for the individual entities as shown in the financial workbooks. The workbooks were to be used to judge where to set the base and minimum level of enterprise value in structuring a success fee as a component of Leadenhall’s remuneration. 51 Exhibit A3.51.273. 52 Exhibit A3.51.281, clause 1. 53 Exhibit A3.51.282. The full definition (specifying different increments of “Gross Transaction Consideration” before certain deductions) is of no further relevance. 54 T33.2-.11. -- 16 of 41 -- [2025] SADC 17 15 96 It was Mr Lebbon’s evidence55 that the fee alternatives spreadsheet charted one likely permutation of the proposed success fee, applicable to each sale transaction involving any part of the Bernie Lewis group entities or businesses. However, he did not tell Mr Lewis that. 97 After considering the changes proposed by Mr Lebbon, by email dated 4 December 2017, Mr Lewis told Mr Lebbon by email that they “look ok”56 and asked him to prepare a package for signing. He also said: After consideration I am happy to stick with the original success fee, bearing in mind I’m going to be reticent to let it go for less than $8m not including the Mile End Property. And confirming the value of the property if included in the sale in not subject to the fee. 98 By “it,” Mr Lewis was referring to all of the Bernie Lewis group entities and businesses and his minimum expectations as to its sale price. 99 On 5 December 2017, Mr Lebbon emailed Mr Lewis the final version of the engagement letter and the Terms. He said:57 I understand your concern regarding sale price and whether you sell or not will be entirely at your discretion, taking into account all the terms and conditions which might apply to the offers received. The success percentage does not apply to the arm’s length value of the property (net of any tax effect thereon). 100 He asked Mr Lewis to sign and ask his sister to sign if the engagement letter met with his approval, noting that he had given him Option B with the retainer fee taking effect from 1 February 2018. 101 In their pre-contractual communications, Mr Lebbon never said anything to Mr Lewis about the possibility of there being multiple minimum success fees if the group was sold piecemeal. Indeed, Mr Lebbon accepted in cross-examination that the first mention of this possibility was in his 4 December 2018 email.58 That there might be three minimum success fees “wasn’t discussed at the time”.59 Execution of the Contract 102 The engagement letter is structured as an offer from Leadenhall to provide services. The Respondents accepted that offer by their directors Mr Lewis and Ms Willans signing two copies of the letter and returning one to Leadenhall and retaining the other. It includes an acknowledgement by the Respondent clients (after Mr Lebbon’s signature and before the signature blocks for the Respondents) as follows: I have read and understood the above and attached Terms and Conditions and select fee basis 55 T33.12-34.11. 56 Exhibit A3.52.285. 57 Ibid. 58 T63.26-.35. 59 T35.4-.9. -- 17 of 41 -- [2025] SADC 17 16 A - delete if not applicable B - delete if not applicable C - delete if not applicable and agree to the Terms and Conditions for the engagement of Leadenhall Australia Pty Ltd. 103 In signing the letter of engagement for the Respondents, neither Mr Lewis nor Ms Willans deleted the inapplicable fee basis in the acknowledgement. Mr Lebbon noticed this and on 19 December 2017 told Mr Lewis by email that he took it he had elected for “Option B - Retainer and Success Fee” based on Mr Lewis’ previous email that stated the terms were based on the success fee previously discussed. 104 It is therefore strictly not correct that the contract constitutes the letter of engagement and the Terms and Conditions as Leadenhall submits.60 105 In any event, it is an agreed fact that ‘Option B’ was the agreed fee basis. 106 It is also an agreed fact that the contract was executed by the parties in accordance with the requirements of s 127 the Corporations Act 2001 (Cth) and commenced on 18 December 2017 when Mr Lewis emailed Mr Lebbon the copy duly executed for and on behalf of the Respondents. BL Home Loans Negotiations 107 Of the Bernie Lewis group, BL Home Loans was the most valuable business and commanded the most attention in the sale process. 108 The prime potential counterparty was MoneyQuest. Negotiations proceeded to the point of written offers and draft contracts. The initial price offered in August 2018 of $4.4 million was disappointing and more so when a reduced offer of $4 million was made in late 2018. Mr Lewis was not prepared to agree to the directors giving personal guarantees. The negotiations eventually failed. 109 Contrary to Leadenhall’s contentions, Mr Lewis did not withdraw BL Home Loans from sale as part of his ‘plan B’ of keeping it. The evidence shows that BL Home Loans and its business were genuinely on the market from the start of Leadenhall’s engagement. However, as Mr Lebbon acknowledged in his evidence, it was up to Mr Lewis whether to sell or not. The terms of the offers received were not acceptable to Mr Lewis. Bearing in mind the parties’ assumption as to the enterprise value of BL Home Loans at the time of contracting was almost double despite not having a formal valuation (that is, $8.4 million),61 it was not surprising Mr Lewis was unhappy with the price offered. 60 Leadenhall’s Closing [9]. 61 See [80] above. -- 18 of 41 -- [2025] SADC 17 17 The Sale of BL Financial Solutions 110 The best offer for the business of BL Financial Solutions was received from Poynter Hargraves. Following a meeting between its principal and Mr Lebbon on 6 November 2018, a term sheet was signed on 19 December 2018 and contract entered into on 14 May 2019 providing for a settlement on 27 May 2019. 111 The parties agreed as a fact that the purchase price was $1.1 million. Negotiations to Sell BL Insurance Services’ Client Book 112 BL Insurance Services was the least valuable member of the Bernie Lewis group. Whilst it traded at a loss, its client book was a saleable asset. Its book was in commercial terms its register of clients and the details of the policies written by it. 113 Interest in its business was expressed by the McLardy McShane group. Their interest waxed and waned and after being sent a draft contract, despite resuming their interest, by May 2019 they were not willing to increase their offer. Negotiations stalled. 114 Meanwhile, Thomas expressed interest in buying BL Insurance Services’ client book. Dealings with Thomas began after an initial coffee meeting between Mr Lewis and Mr Thomas, (among others) was arranged by Mr Anderson, a part- time business development consultant to Thomas. Mr Anderson learned of the potential sale while working at BL Insurance Services on a compliance audit in a separate capacity to his role at Thomas. 115 After this initial meeting, Mr Anderson did not participate in the negotiations that followed. From about March 2019, the negotiations on Thomas’ behalf were taken over and conducted by Mr Tony Goldsmith, the chief executive officer of Coverforce Partners, who owned 50% of Thomas according to Mr Anderson. Mr Lewis understood Coverforce was a joint venture partner of Thomas. 116 Thomas made an offer subject to the completion of due diligence. Due diligence was conducted and then a draft asset sale deed prepared by Arnold Bloch Liebler was provided by Mr Goldsmith to Mr Lewis on 4 June 2019. Mr Lewis engaged solicitors CCK Lawyers to review the deed. 117 When an impasse over Thomas’ requirements was reached, negotiations stalled. Thomas required BL Insurance Services put in place run-off professional indemnity cover at a cost of approximately $120,000 and for BL Home Loans to act as guarantor. These terms were not acceptable to Mr Lewis for a proposed sale price of approximately $569,000. Mr Debrowski and TCB as Authorised Representatives 118 BL Insurance Services was an AFS licensee. From 22 February 2017 until 18 October 2019, Mr Debrowski was its authorised representative and TCB its corporate authorised representative. As their licensee, BL Insurance Services -- 19 of 41 -- [2025] SADC 17 18 retained a percentage of the commission earned by Mr Debrowski and TCB in writing new insurance policies for TCB’s clients. Their contractual arrangement was terminable on three months’ written notice. BL Insurance Services did not have any proprietary interest in TCB’s business. 119 Mr Lebbon (in negotiations with Thomas in March 2019 to sell BL Insurance Services’ client book) described BL Insurance Services’ relationship with TCB as a 35% economic interest in the business written by TCB.62 120 Plainly, TCB’s client book was its own and separate from the book owned by BL Insurance Services. The latter’s economic interest in business written by TCB only subsisted so long as TCB was its authorised representative. 121 Mr Debrowski worked in the offices of BL Insurance Services. Since he joined the Bernie Lewis group in early 2017, he and Mr Lewis had become friends and often talked about business and their personal interests. 122 When Mr Debrowski found out that Mr Lewis wanted to sell BL Insurance Services, he began considering his future and own best interests. He told Mr Lewis that he did not like the McLardy McShane group and would not go with them. In an email sent on 25 March 2019, Mr Lewis told Mr Lebbon this and that Mr Debrowski was having separate discussions with Thomas and “making noises about going with them”.63 123 Mr Debrowski and TCB were free to deal with whichever AFS licensee they chose and this would have been known to both Mr Lebbon and Mr Lewis as experienced businesspersons operating in the financial services industry. 124 Consequently, there was nothing remarkable about the draft sale deed prepared by Coverforce’s solicitors, Arnold Bloch Liebler, including as a condition precedent the exchange at completion of authorised representative agreements between Mr Debrowski and TCB on one hand and Thomas on the other. Fees Dispute 125 The dispute about Leadenhall’s fees arose when on 4 December 2018, Mr Lebbon sent Mr Lewis an email raising for discussion the issue of there being most likely three completions and three minimum success fees and the unfairness of three or only one minimum. He followed it up with a further email on 15 December 2018, to which Mr Lewis responded on 18 December 2018, expressing his surprise and concerns about varying their fee arrangements at that stage. They met before Christmas. Neither gave evidence of what was discussed. 126 On 22 May 2019, Leadenhall issued an invoice to the Respondents for $77,000 (including GST) on this basis that under the contract it was entitled to be paid at imminent completion of the BL Financial Solutions transaction a minimum 62 Exhibit A3.134. 63 Exhibit A3.148. -- 20 of 41 -- [2025] SADC 17 19 success fee of $150,000 less paid retainer fees of $80,000, being $70,000 plus GST. Mr Lebbon explained this in his covering email to Mr Lewis and Ms Willans. 127 Mr Lewis responded by email dated 29 May 2019, expressing confusion as to why this completion constituted success under the contract and that the invoice was a “little premature”.64 They exchanged further emails about their differences. 128 The Respondents did not pay Leadenhall’s invoice. 129 On 7 June 2019, when CCK Lawyers asked Mr Lebbon for some correspondence about negotiations concerning BL Insurance Services, he advised that Leadenhall would not do any further work until its invoice was paid. 130 On 24 June 2019, Mr Lebbon sent Mr Lewis and Ms Willans an email (copied to CCK Lawyers) about the fees it claimed were due to Leadenhall. After setting out clause 2 of Schedule B, Mr Lebbon demanded they ensure that the contract for the sale of BL Insurance Services include a term that Leadenhall’s fees would be paid from the proceeds at completion. 131 On 28 June 2019, CCK Lawyers wrote to Leadenhall on behalf of the Respondents. The letter set out why the Respondents did not consider Leadenhall was entitled to payment of a success fee under the contract. It also included a notice of termination of the contract, advising that all retainer fees to 16 September 2019 would be paid. When did the Sale of BL Insurance Services’ Client Book to TCB occur? 132 The sale of BL Insurance Services’ client book to TCB took place after the date of “Effective Termination” of the contract under a written contract dated 11 October 2019.65 There is no cogent evidence that agreement was reached prior to 3 October 2019 (Leadenhall’s pleaded case)66 or, more relevantly, before the date of “Effective Termination” of the contract, being 26 September 2019. 133 On the evidence it is apparent that by early July 2019, CCK Lawyers were still in negotiations with Mr Goldsmith of Coverforce for Thomas to buy BL Insurance Services’ assets. On 8 July 2019, CCK Lawyers proposed amendments to the draft sale deed that Mr Goldsmith rejected. By email dated 18 July 2019, he formally withdrew Thomas’ offer, referring to discussions the previous week. 134 Meanwhile, on 16 July 2019 Mr Debrowski told Mr Lewis he was leaving the Bernie Lewis group. 135 The next day, 17 July 2019, by email Mr Debrowski gave written notice of termination of his and TCB’s AFS authorised representative agreements, effective on 18 October 2019. His email to Mr Lewis refers to the practical arrangements 64 Exhibit A3.162. 65 Exhibit A3.180. 66 Leadenhall’s Reply [8.5]. -- 21 of 41 -- [2025] SADC 17 20 necessary to transfer his client data base (through a third party, EBIX) and that he may be able to finish up sooner if Mr Lewis is able to reach a good outcome selling BL Insurances Services so they could book the data transfer for their respective clients on the same day.67 136 Mr Debrowski then set about making arrangements to transfer TCB’s client book to Thomas, independently of any continuing efforts to sell BL Insurance Services’ business. 137 These arrangements included the electronic transfer of TCB’s client database held by EBIX with its then still current AFS licensee, BL Financial Solutions, to its prospective licensee, Thomas. When Thomas’ operations manager received the EBIX release form from Mr Thomas on 30 September 2019, she asked Mr Thomas whether it was just part of the Bernie Lewis ledger coming into Thomas or was it a whole ledger. Mr Thomas replied:68 Sorry in my haste I have not explained properly. We have new AR – Ross Debrowski. He is currently an AR of Bernie Lewis Insurance Services and he is buying the whole Bernie Lewis Book then coming over to us as an AR. The whole scenario is set out to be effective 01.11.19 138 This email coincides with the approximate date on which Mr Debrowski came into Mr Lewis’ office and proposed he buy BL Insurance Services’ client book for $500,000, on terms he pays half now, half in 12 months, no rise and fall and that he would take the staff but not the manager. Lewis said he told him he liked the idea and would think about it. The next day, he told Mr Debrowski he accepted his offer and instructed CCK Lawyers to draw up a simple contract. 139 On 4 October 2019, Mr Lewis sent Mr Debrowski an agreement for sale of the client book of BL Insurance Services for $500,000, half of which was due at completion, half 12 months later. The contract was duly executed and dated 11 October 2019. 140 The sale to TCB completed on 1 November 2019. On the same day, Mr Debrowski and TCB became authorised representatives of Thomas. Litigation 141 In November 2021, Leadenhall instituted proceedings in the Magistrates Court claiming $50,000 (excluding GST) for the unpaid balance of its May 2019 invoice less subsequently paid retainer fees of $20,000 (excluding GST), plus contract interest and recovery costs plus GST. 67 Exhibit A3.69. 68 Exhibit A3.176.924. -- 22 of 41 -- [2025] SADC 17 21 142 Despite the demand made in Mr Lebbon’s email of 24 June 2019, Leadenhall never issued an invoice for the second success fee it claimed for the sale of the BL Insurance Services’ client book to TCB. 143 In its trial pleading,69 Leadenhall changed position. Its amended claim includes a new claim for $130,000 (excluding GST) on account of a second minimum success fee of $150,000 (excluding GST) for the sale of the business of BL Insurance Services less retainer fees paid between May and September 2019 of $20,000 (excluding GST). 144 Despite this, the pleaded contract interest claim is calculated by deducting all paid retainer fees against the first invoiced minimum success fee.70 145 At trial, Leadenhall quantified its claim for unpaid success fees as comprising the total of its unpaid May 2019 invoice of $77,000 and its second success fee of $143,000 (both including GST). 146 As Leadenhall’s case evolved, it changed its treatment of the deduction of retainer fees from the success fees claimed as expressly provided for in the engagement letter. It did so in circumstances where the contract does not provide an express mechanism as to when and how retainer fees are to be deducted from any success fee payable under the contract. Construction Relevant Principles 147 The meaning of the terms used in a commercial contract are to be construed objectively by reference to what a reasonable person in the position of the contracting parties would have understood them to mean. This requires attention to the language used by the parties, the commercial circumstances it addresses and the purpose of the transaction and objects the contract was intended to secure.71 148 The principles applicable to the construction of commercial contracts are well established. They are authoritatively identified in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd72 and have been cited with approval in subsequent High Court decisions such as Simic v NSW Land and Housing Corporation73 and Ecosse Property Holding Pty Ltd v Gee Dee Nominees Pty Ltd.74 More recently, these principles were applied in South Australia by the Court of Appeal in P J Nash Pty 69 Claim Revision 2 filed on 28 July 2023 (FDN 47). 70 Ibid interest table [7]. 71 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22] per Gaudron J. 72 (2015) 256 CLR 104 at [46]-[52] per French CJ, Nettle and Gordon JJ (Mount Bruce Mining) and stated as reflecting the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 and Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 (Electricity Generation Corporation). 73 (2016) 260 CLR 85 (Simic) at [18] per French CJ and [78] per Gageler, Nettle and Gordon JJ. 74 (2017) 261 CLR 544 (Ecosse v Gee Dee) at [16] per Kiefel, Bell and Gordon JJ. -- 23 of 41 -- [2025] SADC 17 22 Ltd v Food and Beverage Australia Ltd75 and the Supreme Court in Nova Property (Aust) Pty Ltd v Bria Constructions Pty Ltd.76 149 For present purposes, these principles are summarised as follows. (1) The rights and liabilities of the parties under a contract are determined objectively by reference to its text, context (as a whole) and purpose. (2) Context is the entirety of the text of the contract as well as any contract, document or statutory provision referred to in the text. The whole of the document has to be considered. Preference is given to a construction supplying a congruent operation to the various components of the contract. (3) In asking what a reasonable person would have understood the terms of a contract to mean requires consideration of the language used by the parties, the circumstances addressed by the contract and the commercial purpose of the transaction or the objects intended to be secured by the contract. (4) Ordinarily, it is possible to construe the terms of a contract by reference to the contract alone. If the words in the contract are unambiguous or susceptible of only one meaning, the Court must give effect to them. Evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. (5) Recourse to the surrounding circumstances may be necessary to identify the commercial purpose or objects of the contract or where there is a constructional choice. (6) Any such recourse is objective and is limited to those events, circumstances and external things known to the parties or those that assist in establishing the purpose or object of the transaction, including its history, background and context and the market in which the parties were operating. (7) The parties’ subjective intentions and expectations are not relevant. Evidence of the parties’ statements and actions reflecting their actual intentions and expectations are therefore inadmissible. It does not matter what the parties think the words of the contract mean. (8) Unless a contrary intention is indicated in the contract, a Court is entitled to approach the task of construction on the assumption that the parties intended to produce a commercial result, in the sense that a commercial 75 [2021] SASCA 86 at [41] per Lovell, Livesey and Bleby JJA). 76 [2024] SASC 10 at [85]-[88]. -- 24 of 41 -- [2025] SADC 17 23 contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.77 150 More should be said about two matters. 151 First, both parties emphasised the issue of commercial absurdity as important and favouring the construction they preferred. Accordingly, there was much controversy over whether the meaning they preferred made a commercial nonsense or worked a commercial inconvenience. 152 The authorities make clear that it is important to bear in mind the distinction between an absurd as opposed to an uncommercial outcome arising from a particular construction.78 It has been said many times that courts have no mandate to rewrite agreements merely to give them a more commercial operation and depart from the language used by the parties.79 The concept of absurdity in this context has a more limited meaning than in common parlance and is:80 ...something opposed to reason, or irrational. It can form a basis for resolving internal inconsistencies in a contract or giving commercial sense to language which is otherwise in a practical sense meaningless. 153 Whilst the test of absurdity may not be easily satisfied, it should not be forgotten that in giving meaning to the words of an agreement it is still an important contextual matter to be considered because courts will infer that commercial parties would not usually agree to something commercially absurd.81 154 The second matter concerns the evidence of Mr Lebbon and Mr Lewis as to their actual intentions and their subjective views about the commercial reasonableness of their opposing positions on what constitutes success under the contract and whether it was achieved within the meaning of the contract. A striking feature of the evidence at trial was the degree of attention given to their subjective understandings and views. Much of their evidence on these topics was not relevant to the construction issues and therefore inadmissible:82 77 Electricity Generation Corporation op cit at [35] per French CJ, Hayne, Crennan and Kiefel JJ. 78 As canvassed in Willis Australia Ltd v AMP Capital Investors Ltd [2023] NSWCA 158 at [51]-[60] per Ward P, Beech-Jones JA and Griffiths AJA. 79 International Petroleum Investment Company v Independent Public Business Corporation of Papua New Guinea [2015] NSWCA 363 at [147] and [148] per Ward JA (Bathurst CJ and Macfarlan JA agreeing); H Lundbeck A/S & Anor v Sandoz Pty Ltd; CNS Pharma Pty Ltd v Sandoz Pty Ltd (2022) 276 CLR 170 at [104] per Edelman J. 80 Miwa Pty Ltd v Siantan Properties Pty Ltd [2011] NSWCA 297 at [13] per Basten JA (McColl and Campbell JJA agreeing). 81 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314 per Kirby P as approved in Zhu v Treasurer of NSW (2004) 218 CLR 530 and in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603. 82 Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co (The Diana Prosperity) [1976] 1 WLR 989 at 996 per Lord Wilberforce cited with approval in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 351 per Mason J. Emphasis supplied. -- 25 of 41 -- [2025] SADC 17 24 …When one speaks of the intention of the parties to the contract, one is speaking objectively – the parties cannot themselves give direct evidence of what their intention was – and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. Similarly when one is speaking of aim or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties. 155 More fundamentally, it is for the Court to determine what the parties intended ‘success’ to mean objectively and not for the witnesses to say what they intended, or from their perspective what should be concluded to be commercially absurd or inconvenient. What constitutes ‘success’ under the contract? The Parties’ Contentions 156 Leadenhall’s put its case simply. The contract provided for it to be paid a monthly retainer fee and a further fee for defined events of ‘success’. During its engagement, two contracts were entered into that constitute ‘success’ as expressly defined by the contract. 157 Leadenhall contends that ‘success’ as such is not defined in the engagement letter83 and its meaning is expressly provided for in the “broad, but nevertheless particular and technical”84 definition found in clause 1 of Schedule B of the contract. Further, the construction favoured by the Respondents is commercial nonsense when regard is had to the clauses in Schedule B addressing the timing and security for payment of success fees. 158 For ‘success’ to be achieved, Leadenhall submits it is sufficient for any of the Respondents (including BL Insurance Services) to have entered into a contract providing for a change in beneficial ownership or control of any of their businesses or assets or the securities of any of the companies in the Bernie Lewis group. In support of its preferred construction, Leadenhall relies on the definitions of “Contract(s)”, “Client”, “Vendor” and “Assets” and the following interpretation clause found in Schedule A:85 Interpretation Word importing the singular shall embrace the plural and words importing one gender shall embrace the other gender and vice versa respectively. 159 The Respondents contend that ‘success’, when read in context of the entire contract and surrounding circumstances known to the parties at the time of contracting, must mean the sale of all the Bernie Lewis group, whether in one sale or separate sales of all the companies or their businesses. They submit that construing the contract otherwise would lead to uncertainty and wholly uncommercial outcomes. 83 Leadenhall’s Closing [10]. 84 Ibid [19]. 85 Clause 2. -- 26 of 41 -- [2025] SADC 17 25 What comprises the contract? 160 The contract comprises a number of documents including, most relevantly, the engagement letter86 and Schedules A and B of the Terms. 161 These are not the only contract documents, contrary to Leadenhall’s contention that they are. The sales process schematic is incorporated into the contract by reference in the engagement letter and was provided to Mr Lewis again with the final version of the other contract documents.87 However, all that turns on this is what would have been obvious to both parties. That is, at the time of contracting there was a process to be undertaken and until it was, how the sale transaction would be structured was unknown. 162 The engagement letter begins with a reference to “our recent discussions in respect of the Bernie Lewis Group…”. The trial proceeded on the basis that these recent discussions were not part of the contract and instead surrounding circumstances that may illuminate the purpose or objects of the contract. Does ‘success’ mean sale of the group or entry into any sale contract? The proper approach 163 The meaning of ‘success’ under the contract does not simply turn on its definition in Schedule B of the Terms as Leadenhall contends for the reasons that follow. 164 It would be unprincipled to construe the meaning of ‘success’ under the contract by reference to the definition of “Success” in Schedule B in isolation. A defined term does not have operative effect and functions as an aid to construction.88 It must be read into the operative words of a contract and construed in context of the entire contract and in light of the contractual purpose. Accordingly, the question of what constitutes ‘success’ under the contract is not logically anterior to the question of whether, when and how success fees are payable and if so, what is their quantum as Leadenhall contends. 89 165 The proper starting point in determining the meaning of ‘success’ under the contract is the text of the terms of the contract that provide for payment of a success fee as a component of Leadenhall’s remuneration. Text: The Engagement Letter 166 The concept of ‘success’ first appears in the context of a fee for ‘success’ in the section of the engagement letter offering alternative fee bases for Leadenhall carrying out its assignment. This has some significance because, uncontroversially, of the contract documents, the engagement letter has primacy over the Terms 86 Exhibit A3.59.341-.346. Exhibit A3.63.370-.375 is a duplicate. 87 Exhibit A3.52. 88 Williams James Watson & May Marlene Watson as Trustee for the WJ & MM Watson Superannuation Fund v Christopher Alexander Scott [2015] QCA 267 at [50]-[51] per Morrison and Phillippides JJA; Halford v Price (1960) 105 CLR 23 at 25 per Dixon CJ. 89 Leadenhall’s Closing [43]. -- 27 of 41 -- [2025] SADC 17 26 where there is conflict.90 As discussed below, there is conflict between the engagement letter and Schedule B of the Terms when both are read literally. 167 ‘Option B’ of the fee alternatives is expressed in the following terms:91 B – Retainer and Success Fee – we will charge you a retainer fee of $5,000 (plus GST) per calendar month with effect from 1 February 2018 and a success fee as per the attached Terms and Conditions of business. However, the retainer fees paid would be deducted from the success fee. The success percentage would not apply to surplus cash (less external financial debt) and not to the arm’s length value of the property (net of any tax effect thereon). 168 The language used in ‘Option B’ contemplates ‘success’ as a singular event giving rise to the payment of one success fee for the assignment of selling the Bernie Lewis group of companies or their businesses.92 It does so by twice using a singular noun and definitive article (“a success fee” and “the success fee”) against which monthly retainer fees would be deducted. The deduction of retainer fees against the success fee reinforces the notion of one success fee by suggesting one accounting although the mechanics of that are not further addressed in the contract. 169 In oral closing submissions, counsel for Leadenhall argued against this reading, submitting the interpretation clause should be applied to the engagement letter so that wherever it refers to “Success Fee” it should be read as the plural “Success Fees”.93 It was suggested this would resolve any conflict between the engagement letter and Schedule B when read as Leadenhall contends it should be. 170 This submission should be rejected for several reasons. First, the interpretation clause should be applied selectively and not to language that was deliberately chosen in the engagement letter for this contract, unlike most of the language in the Terms that was intended to have a more general application. Secondly, the interpretation clause cannot cure any conflict in favour of Schedule B when Schedule A expressly provides that where there is conflict, the engagement letter prevails. The final and most compelling reason is that reading “Success Fee” in the engagement letter as embracing the plural does nothing to address the ambiguity arising as to the meaning of ‘success’ under the contract. 171 The last reference in the text of the engagement letter is that the success fee to be charged is as “per the attached Terms and Conditions of business”. Text: the Terms 172 The relevant terms are found in Schedule B of the Terms. Schedule B is headed “ADDENDUM FOR SUCCESS FEE ARRANGEMENTS” and begins with the 90 It is expressly provided in clause 4 of Schedule A that the incorporated “Terms” are subject to the “Engagement Letter” and the latter prevails if there is conflict between it and the “Terms”. 91 Ibid. 92 Whilst the word “purchaser” does not appear in the text, it should be read as if it were there to give it a sensible meaning. 93 T204.1.-.26. -- 28 of 41 -- [2025] SADC 17 27 statement that it “applies where any component of Leadenhall’s remuneration incorporates a Success Fee”.94 In this case, it applies because ‘Option B’ is the agreed fee base. 173 The obligation to pay “Success Fees” is found in clause 2 of Schedule B. It relevantly provides: Payment of Success Fees If Success is achieved the Client shall pay [Leadenhall] the Success Fees in accordance with Schedule B. 174 In this way, the meaning of the defined terms “Success” and “Success Fees” are inextricably linked to the obligation of the “Client” to pay the success component of Leadenhall’s remuneration. These terms are also connected by the way they are defined, the latter definition of “Success Fees” expressly providing for the definition of the former term “Success” to be read into it. 175 The definitions of “Success” and “Success Fee(s)” are found in clause 1 of Schedule B and provide as follows: “Success” Unless otherwise defined in the Engagement Letter, “Success” means the Client entering into a Contract with a party or counter-party during the period of the Agreement or within two years from the date of the Effective Termination of this Agreement whereby one or more of the following occur: • A change in the beneficial ownership or control of the Securities, or of the business or of the Assets of any party connected with the Vendor or • New Securities are issued by any party connected to the Vendor. “Success Fee(s)” The fee(s) which become due to [Leadenhall] by the Client in the event of Success and payable upon Completion which, unless otherwise agreed in the Engagement Letter, will be 2.5% of the Gross Transaction Consideration (excluding GST) on the first $8 million and 5% thereafter with a minimum fee of $150,000 (excluding GST). 176 Turning first to the definition of “Success”, it should be accepted that it defines ‘success’ in the context of a sale transaction in a broad and technical manner. The Terms are drafted in this way because as standard terms they are intended to apply generally to all manner of divestment transactions, whether structured as a share or assets sale or a mix. Hence, the use of the generic definitions of “Transaction”, “Assets”, “Securities”, “Acquirer”, “Vendor” and “Contract(s)”, since a relevant transaction may involve an acquisition or a divestment depending on the circumstances of the specific assignment, contemplating that Leadenhall’s “Client” may be on either the sell or buy side of a divestment transaction. 94 First line of Schedule B. -- 29 of 41 -- [2025] SADC 17 28 177 Since a corporate business sale may be structured as an asset or share sale, the definition of “Success” unsurprisingly addresses a change in equitable ownership of “the Securities”, “the business”95 or “the Assets” of “any party connected with the Vendor”. 178 The specified event of “Success” is the “Client entering into a Contract…” etc. The use of the singular is not illuminating, bearing in mind “Contract(s)” is defined as: The documents evidencing the Transaction. 179 ‘Success’ is connected to the entry into a contract by the “Client” and, plainly, there may be one or more contracts and one of more changes in beneficial ownership of assets or securities involved in any “Transaction”. The words “whereby one or more of the following” make this clear. 180 However, an appreciation of the technicality of the definition of “Success” and the definitions of “Assets”,96 “Securities”97 and “Vendor” used in it does not shed any light on the proper meaning of ‘success’ under the contract in the circumstances of this case. Nor does the meaning of “Client”. The meaning of “Client” 181 In presenting their opposing cases, both parties focussed their attention on the meaning of “Client” as used in the definition of “Success” in Schedule B. Leadenhall contends it should be read as referring to any of the entities in the Bernie Lewis group of companies and Lewbell as expressly defined in the engagement letter. The Respondents contend it should be read as each and all of the Bernie Lewis group of companies (but not Lewbell). 182 “Client” is not defined in Schedule B. It is defined (differently although not inconsistently) in both the engagement letter and Schedule A of the Terms. In the engagement letter, the “Client” for the assignment is expressly provided to be:98 …the Bernie Lewis Group which is understood to be each of the companies comprising that group and Lewbell Nominees Pty Ltd acting as trustee of the BD Lewis Family Trust (on a joint and several basis). 183 In Schedule A, “Client” is defined as:99 Where the Client is: 95 Why the undefined term “business” is used, when a “business” is an “Asset” is unclear. It can be ignored for present purposes as an irrelevant drafting infelicity. 96 “The items including but not limited to Securities, assets, rights or other property transferred from the Vendor to the Acquirer, including liabilities of the Vendor assumed by the Acquirer as part of the Transaction. ” 97 “Any shares, units, convertible notes in, or debentures of, or options to acquire any shares units convertible notes in or debentures of a corporation and any prescribed interest of a corporation.” 98 Exhibit A3.59.342. 99 Exhibit A3.59.347. -- 30 of 41 -- [2025] SADC 17 29 • an individual, that individual; • a business, that business and its owners jointly and severally; • corporation (either public or private) the corporation and its members jointly and severally. 184 The more specific definition in the engagement letter should prevail. Leadenhall agrees. This was the definition it relied on in closing submissions in support of its preferred construction.100 Importing this definition creates some incongruity, however. 185 For the purposes of clause 2 and the obligation to pay the “Success Fees”, the meaning of the expanded definition of “Client” (in the engagement letter) is plain and congruent in its operation. The nature of the client entities’ liability is also expressly restated. Its evident purpose is to bind each and all of the parties comprising the “Client” to the terms of the contract and specifically to payment of Leadenhall’s fees. By providing that it means them on a joint and several basis, it provides that the client entities undertake their obligations under the contract jointly as well as individually giving separate undertakings to perform their payment obligations. 186 However, if, as Leadenhall contends, in the definition of “Success” in Schedule B, “Client” means ‘any’ of the group companies or Lewbell entering into a sale contract, then it contemplates multiple success fees contrary to the language of the engagement letter and (as discussed below) the formula for success in the definition of “Success Fee(s)” in Schedule B. For any conflict between the engagement letter and Schedule B, the engagement letter has primacy. 187 Despite this conflict, Leadenhall advanced two arguments as to why the meaning of ‘any’ of the “Client” entities identified in the engagement letter should be preferred to ‘all’ of the group entities as advanced by the Respondents. The first was that the definition of the “Client” in the engagement letter identifies each of the group entities (and their ultimate shareholders) “on a joint and several basis”. The second was because the interpretation clause should be applied. 188 As to the first argument, any ambiguity arising from the expression “Client,” cannot be simply resolved by reference to the several liability of the group entities as expressed in the engagement letter. Their joint and several basis of liability does not simply convey a meaning of ‘all’ or ‘any’ of them. The basis of the group entities’ obligations under the contract makes no linguistic or conceptual sense in identifying whether ‘success’ under the contract was intended to be achieved on sale of all of the group entities or businesses or each time there was a sale transaction for any part of the Bernie Lewis group. In any event, as far as each entity is jointly liable as well as severally, the contrary argument can equally be made. 100 Leadenhall’s Closing [22]. -- 31 of 41 -- [2025] SADC 17 30 189 Leadenhall’s second argument relying on the interpretation clause in Schedule A does not assist. 190 An interpretation clause shortens drafting and avoids unnecessary repetition. Its purpose is not to the enlarge the parties’ rights and obligations beyond those provided in the operative provisions of a contract. If it is to have such effect, it should do so plainly and unambiguously,101 which it does not do here, bearing in mind the language of the engagement letter. 191 The application of the interpretation clause to Schedule B is also not straightforward. Schedule A is not expressed to apply to Schedule B. Is it intended to apply? One might think not when the definitions of “Contract(s)” and “Success Fee(s)” in Schedule B are considered. This deliberate use of “(s)” in standard terms contemplates that there may be one or more “Contracts” or “Success Fees” depending on the circumstances of the actual engagement. However, “Success” is not defined in the same way. There are also definitions used in Schedule B that expressly include the singular and the plural.102 These deliberate drafting choices suggest that the interpretation clause does not apply to Schedule B. 192 If it were concluded otherwise, the proper application of the interpretation clause would necessarily be selective and would not require every word to be read as embracing the singular and the plural. Here, it again makes no linguistic or conceptual sense to apply the interpretation clause to the collective expression “Client” as defined in the engagement letter or otherwise. In this case, the application of the interpretation clause does not “bring linguistic and grammatical precision to the construction” of Schedule B and “burdens” the clause “with more weight than it can bear”.103 It certainly does not resolve the question as to whether the use of the expression “Client” in the definition of “Success” is intended to describe the group entities collectively or each of them separately in context of an engagement to assist sell the businesses or entities in a corporate group. Context 193 The meaning of ‘success’ under the contract is resolved when the definition of “Success” is read in the immediate context of the definition of “Success Fee(s)” and the broader context of the engagement letter. Then it is evident that ‘success’ under the contract means the sale of all of the Bernie Lewis group entities or businesses and ‘success’ is not simply achieved each time a sale contract is entered into by any group entity. 194 There a number of contextual indications favouring this construction. 195 The words “in the event of Success and payable upon Completion” in the definition of “Success Fee(s)” contemplate a singular collective event of success, 101 Unsworth v Debsan Pty Ltd [2014] WASC 46 at [19] per Le Miere J citing AIB Group (UK) Ltd v Martin [2002] 1 WLR 94 at [8] per Lord Millett. 102 I.e. the definitions of “Vendor” and “Acquirer” refer to the party or parties. 103 Ecosse v Gee Dee op cit at [51] per Gageler J. -- 32 of 41 -- [2025] SADC 17 31 consistent with the words used in the engagement letter. “Completion” is defined to similar effect as: “The settlement of the Transaction as per the Contract(s).” The latter expression is defined as: “The documents evidencing the Transaction.” 196 In context of the engagement letter, the “Transaction” is the sale of the Bernie Lewis group of companies, whether by an asset or share sale or sales. 197 In clause 7 of Schedule B, it is provided that there will be a property rental adjustment for the purposes of calculating “the Success Fee”. This clause was a bespoke term introduced into Leadenhall’s standard Terms for this assignment. The use of the article “the” is a deliberate choice and focuses attention on ‘success’ as a singular event giving rise to the payment of only one “Success Fee”. 198 However, the most compelling indication of the parties’ intention as concerns ‘success’ under the contract is found in the following formula for “Success Fees(s)”: …2.5% of the Gross Transaction Consideration (excluding GST) on the first $8 million and 5% thereafter with a minimum fee of $150,000 (excluding GST). 199 “Gross Transaction Consideration” is as defined in clause 5 of Schedule B of the Terms and calculated as 100% of “Enterprise Value” being in essence:104 The sum of the market value of the equity of the business plus debt net of surplus cash being cash that is surplus to that required to operate the business on a sustainable basis, without any other set off of any other kind whatsoever. 200 The obvious question arising is the enterprise value for which business? Any business? Or all the businesses of the Bernie Lewis group entities collectively? 201 The answer is found by giving attention to the $8 million point at which the success percentage escalates. This figure is significant not because it is the point of escalation, but because it represents the parties’ assumption at the time of contracting about the minimum enterprise value for the Bernie Lewis group collectively. It was also the minimum price Mr Lewis told Mr Lebbon he would let all of the group go for. When what the parties knew about the $8 million is appreciated, it is evident that the parties intended that ‘success’ under the contract meant the sale of all the Bernie Lewis group entities or businesses collectively and that ‘success’ would not occur simply on entry by any client entity into a sale contract for any group entity or business or asset. 202 This conclusion follows from two considerations. 203 First, because the parties expressly linked the concept of ‘success’ to group enterprise value by the contractual formula they chose for ‘success’. 104 The specified additions and deductions are omitted for convenience. -- 33 of 41 -- [2025] SADC 17 32 204 Secondly, in the circumstances known to the parties at the time contracting, it would be anomalous to apply this formula to the enterprise value of a single entity, a contention advanced by Leadenhall at trial. 205 The Respondents prepared a document105 showing the percentage of fees to “Gross Transaction Consideration” for different scenarios to illustrate the commercial absurdity of Leadenhall’s preferred construction. The more relevant scenario is the one outcome the parties contemplated as referred to in the engagement letter. That is, the sale of each of the Bernie Lewis group companies to different purchasers. Assume that the formula for ‘success’ was to apply to each contract for the sale of any group entity or business in the scenario where “Gross Transaction Consideration” in each case was less than $6 million, being the point at which the minimum of $150,000 equates to 2.5% of $6 million “Gross Transaction Consideration” (as was the outcome in this case). Then, on Leadenhall’s preferred construction, multiple minimum fees would be payable. If there were two such contracts, the minimum success fees would equate to a success percentage of 5% for an aggregate “Gross Transaction Consideration” of $6 million (or a higher percentage if less). 206 This outcome is contrary to the parties’ express agreement that a base success percentage of 2.5% would only escalate to 5% only after the first $8 million of “Gross Transaction Consideration”. If there were three such contracts, three minimum fees would equate to a success percentage of 7.5% , a result that is even more anomalous when regard is had to the parties’ agreed success percentages of 2.5% and 5%. 207 The result of Leadenhall’s preferred construction is clearly incongruous. It should also be accepted that it would be commercially absurd for there to be multiple minimum success fees. However, it does not follow that there should not be one minimum success fee if ‘success’ under the contract had been achieved. The parties expressly agreed a minimum “Success Fee” of $150,000 (excluding GST), irrespective of whether the “Gross Transaction Consideration” exceeded $6 million or not. 208 Finally, it is no answer to say, as Leadenhall contends, that whether any sale proceeded was at the discretion of the Respondents. This was a risk assumed by Leadenhall regardless of the meaning of ‘success’ under the contract and there were provisions in the contract that directly addressed this risk and protected Leadenhall’s interests.106 Contractual Purpose 209 Consideration of the parties’ contractual purpose is of assistance in determining the meaning of ‘success’ under the contract. 105 Exhibit MFI R4. 106 Schedule B, clause 8 [Alternative Business Arrangements Achieving Client Objectives]. -- 34 of 41 -- [2025] SADC 17 33 210 Leadenhall submitted that the purpose of the success fee was to share the risk of a good outcome and the benefit of a bad outcome and it is not appropriate in a professional services contract to construe ‘success’ through the lens of incentive.107 211 Whilst it should be accepted that one purpose of including a ‘success’ component in Leadenhall’s remuneration was to share the risk and benefit of the outcome, it does not follow that its purpose was also not to incentivise Leadenhall to do better in carrying out its assignment. A reasonable businessperson in the position of the parties at the time of contracting would have understood one important purpose was to incentivise Leadenhall to achieve a better outcome by maximising “Gross Transaction Consideration” in selling the Bernie Lewis group for the parties’ mutual benefit. Further, it was not all about there being an incentive once Mr Lewis’ minimum of $8 million had been achieved. 212 This follows from two considerations. First, because a success component is self- evidently outcome dependent (unlike ‘Option A’ that was expressed as being charge on a time spent basis “irrespective of outcome”). Secondly, the success formula shows the “Success Fee” necessarily operated as an incentive. The higher the “Gross Transaction Consideration” achieved on sale, the greater the ‘success’ and the higher the “Success Fee” payable. And after the first $8 million, a higher success percentage applied, thereby providing a further obvious incentive to achieve more than the minimum enterprise value for the group assumed at the time of contracting. 213 Appreciation of the commercial purpose or objects of the contract is facilitated by an understanding of the genesis of the transaction, its history, background and context and the market in which the parties operated. In their negotiations the parties gave attention to the definition of the success component for the express purpose of ensuring that the assumptions behind it were realistic and to balance the parties’ competing interests in formulating it. They were astute to the need for the success percentages not to operate to remunerate Leadenhall irrespective of outcome or be set so high that any incentive was mute. This is commercial commonsense. 214 The parties’ intentions in this regard should not be considered as confined to the success percentages and the point at which the base success percentage escalates. Reasonable businesspersons in the position of the parties would have intended the specified minimum of $150,000 (excluding GST) to still operate as an incentive by not rewarding Leadenhall irrespective of outcome, especially if they intended to share the risk of a bad outcome. 107 Leadenhall Reply Closing [11]. -- 35 of 41 -- [2025] SADC 17 34 Congruent Operation 215 Undisputedly, preference is to be given to a construction supplying a congruent operation to the various components of the contract.108 216 In this regard, counsel for Leadenhall emphasised the importance of the payment clauses in Schedule B that address when payment is due and secure payment from the proceeds of sale on completion of any “Contract(s)” as favouring Leadenhall’s construction. 217 Clause 2 of Schedule B provides: Payment of Success Fees If Success is achieved the Client shall pay [Leadenhall] the Success Fees in accordance with Schedule B. Where the Client is the Vendor, any Success Fee payable will be paid from the proceeds received at Completion. The Client authorises [Leadenhall] to ensure that this provision is included in the Contract(s). All the parties comprising the Clients will be jointly and severally liable for payment of [Leadenhall’s] fees. In the event the Client is the Vendor and an Acquirer pays a deposit and does not complete a Transaction and all or part of that deposit is retained by the Client, one third of the Success Fee will be payable within seven days of the date of notification by the Acquirer of their intention not to proceed with a Transaction and if the Client does not take action to enforce completion then [Leadenhall] may take action on the Client’s behalf to do so. [Leadenhall] shall recover all its unpaid Success Fee and all its recovery costs from the amounts subsequently paid as a result of the enforcement actions. 218 Leadenhall contends these clauses addressing the timing and security for payment of any “Success Fee(s)” mean the Respondents’ construction is a commercial nonsense.109 For example, it submits that in a piecemeal sale of all of the entities in the group, Leadenhall could not secure payment of success fees until the ultimate transaction, leaving the success fees as a whole unsecured against earlier transactions. Leadenhall contends clause 2 only has work to do if ‘success’ means any disposition of all the group to one purchaser or any entity in the Bernie Lewis group. 219 Leadenhall’s contentions in this regard are not compelling. 220 If ‘success’ is achieved according to the construction preferred by the Respondents, clause 2 of Schedule B should be read as providing that the success fees payable are to be paid from the sale proceeds at the final completion in a piecemeal sale. It does not follow that there is a risk that the proceeds at the final 108 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 529 per Gleeson CJ, McHugh, Gummow and Kirby JJ, citing Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381- 382 [69]-[71]. 109 Leadenhall’s Closing [18] and [55]-[60]. -- 36 of 41 -- [2025] SADC 17 35 completion might be insufficient to secure all of the success fee then payable such that the assumption by Leadenhall of such risk would be commercial nonsense. 221 To start, there is no good reason why any such risk should not be assumed by Leadenhall in circumstances where ‘success’ was achieved by the piecemeal sale of part of the group to more than one purchaser. And any such a risk is largely theoretical for two reasons. First, the quantum of the likely success fees (including the minimum of $150,000 (excluding GST)) in issue would be significantly less than the net sale proceeds due on completion. Secondly, it is expressly provided in the engagement letter that retainer fees paid would be deducted from the success fee, leaving only a residual balance to be paid at the final completion. Thirdly, any risk is mitigated by each company in the Bernie Lewis group and Lewbell, being jointly and severally liable for the payment of Leadenhall’s fees. 222 A second matter concerns the incongruence between clause 2 of Schedule B and the engagement letter that would result if Leadenhall’s construction was to be favoured. 223 It is uncontentious that paid retainer fees are to be deducted from any success fee payable (because the engagement letter expressly provides so). There is ambiguity about when and how paid retainer fees should be deducted from successive success fees payable at successive completions upon entry into successive sale contracts. The change in Leadenhall’s case between the institution of the proceeding and its trial pleadings (as discussed above)110 exposes this difficulty and undermines its contentions about the intended operation and importance of clause 2. Commercial Reasonableness 224 For completeness, it is necessary to address Leadenhall’s submission that to construe the meaning of ‘success’ by reference to the existence of a retainer is tantamount to an invitation to the Court to form a view about the commercial reasonableness of the retainer fee which it should not do.111 It submits the Court should not “overconfidently arrogat[e] itself to the role of arbiter of commercial reasonableness or likelihood”.112 225 What is next put is contradictory: that the Respondents’ construction would clearly not be reasonable compensation. 226 These submissions should be rejected. That the agreed fee arrangements included a monthly retainer as a component is an important contextual matter that bears directly on the parties’ common intentions as to the success fee component. The two components are linked by set off in the event of ‘success’ and were together expressed in the engagement letter to be an option that balanced the client’s interests in controlling fees with the advisor’s interest in being paid properly for 110 See [141]-[146] above. 111 Leadenhall’s Rely Closing [24]. 112 Leadenhall’s Closing [7]. -- 37 of 41 -- [2025] SADC 17 36 its services whilst incentivising the advisor to achieve more for the parties’ mutual benefit. Is there a middle ground? 227 In their dispute over the proper meaning of ‘success’ under the contract, neither party contended for the middle ground discussed with counsel during trial. That is, properly read, does the contract provide for a success fee to be paid at completion of any contract for the sale of any entity or asset in the Bernie Lewis group at the base success percentage, but ultimately only one minimum fee of $150,000 (excluding GST) where the aggregate “Gross Transaction Fee” for all completed sale contracts is less than $6 million? 228 Both parties rejected such a construction. Leadenhall engaged with the issue by resting on its contention that ‘success’ means each sale transaction.113 229 The Respondents rejected such a construction as unavailable on the express terms of the contract when considered in context of its commercial purpose but also as unworkable or commercially absurd.114 230 For the reasons discussed above, the Respondents’ preferred construction of ‘success’ under the contract should be accepted as its proper meaning. However, having regard to the scenarios considered in submissions, it does not follow that, had the parties’ contractual intentions been otherwise such that ‘success’ meant each and every sale transaction, a single minimum fee success fee of $150,000 (excluding GST) would not have been commercially unreasonable (as Leadenhall put it) or absurd (as the Respondents contended). A minimum success fee in those circumstances would have shared the downside of a disappointing level of ‘success’ and not been commercially absurd. 231 The same conclusion does not follow for multiple minimum success fees for the reasons discussed above.115 The Sale of BL Insurance Services’ Client Book 232 Having determined that, properly construed, ‘success’ under the contract means the entry into a contract or contracts for the sale of all of the Bernie Lewis group, it is not strictly necessary to consider the further issues arising as to the sale of the BL Insurance Services’ client book to TCB. However it is appropriate to do so for completeness. 233 For the following reasons, this part of Leadenhall’s case was untenable even on its preferred construction of ‘success’ under the contract. 113 Ibid [115]. 114 Respondents’ Closing [67]-[69]. 115 See [205] to [208] above. -- 38 of 41 -- [2025] SADC 17 37 234 The first difficulty with this part of Leadenhall’s case is that the evidence does not support its contention that the BL Insurance Services’ book was sold to TCB before the date of “Effective Termination” of the contract. As discussed above, the genesis of this transaction was a conversation between Mr Debrowski and Mr Lewis on about 30 September 2019. Mr Debrowski initiated the proposal after the date of “Effective Termination” and more than two months after he had given formal notice of termination of his and TCB’s appointment as authorised representatives of BL Insurance Services. 235 The second difficulty concerns Leadenhall’s first construction proposition. That is, the proposition that properly construed, clauses 4 and 9 of Schedule B of the Terms should be read as providing that it is not necessary for discussions to be held with a prospective counterparty prior to the date of “Effective Termination” if that counterparty should have been referred to Leadenhall by the Respondents and was not.116 236 Clause 9 provides:117 Client’s Continuing Obligation If during the period of this Agreement an Effective Termination occurs and then Success is achieved with an Acquirer with whom discussions have been held and who was nominated on the Prospects List, or a related party thereto, within two years of the date of Effective Termination the Client shall pay [Leadenhall] the Success Fee(s) within 30 days of the date on which Success is achieved, notwithstanding that other fees may have been paid or payable to [Leadenhall] during the period of this Agreement. 237 Clause 4 provides: Referral of Prospects In order to co-ordinate the efforts to complete transactions satisfactory to the Client, the Client agrees to refer all prospective counter-parties to [Leadenhall] and to grant the right to conduct the negotiations with prospective counter-parties as [Leadenhall] determines. 238 The expression “Prospects List” is defined as:118 A list of potential counter parties agreed with the Client who shall be approached as part of this assignment. 239 Leadenhall’s first construction proposition should be rejected. It would be wrong to read the contract this way given the express words of clause 9 manifest an intention to require a nexus between Leadenhall’s work and a sale completed after the date of “Effective Termination”. 240 Leadenhall’s third difficulty concerns Leadenhall’s second construction proposition that the Respondents were obliged to pay Leadenhall a success fee for 116 Leadenhall’s Closing [62]-[65]. 117 Emphasis supplied. 118 Schedule B, clause 1. -- 39 of 41 -- [2025] SADC 17 38 the sale of BL Insurance Services to TCB under clause 9 of Schedule B because TCB was a “related party” to Thomas within the meaning of the contract. 241 The expression “related party” is not defined in Schedule B or any other part of the contract, although it is used in other parts of it. 242 In the immediate context of clause 9, these words should be given their natural and ordinary meaning as referring to a party who is a nominee or vehicle by which a prospective counterparty enters into a contract to acquire a group entity or asset. This is what a reasonable person in the position of the parties would have understood this language to mean in the context of a sale and purchase transaction. Having regard to the express words of clause 9 requiring a nexus between Leadenhall’s work and “Success” after the date of “Effective Termination”, there is no basis for inferring that any “discernible or rational link” between a prospect and an “Acquirer” within the meaning of the contract would suffice for it to be a “related party”.119 243 Accordingly, Leadenhall’s submissions that Mr Debrowski and TCB were related parties to Thomas should be rejected. They are not “related parties” within the proper meaning of clause 9 for the following reasons. 244 Leadenhall’s primary contention as to their ‘relatedness’ is that, as early as July 2019, Thomas was buying BL Insurance Services’ 35% economic interest in TCB’s book.120 Secondly, TCB and Mr Debrowski were counterparties to an agreement to ‘accrete’ a significant part of the business of BL Insurance Services to Thomas.121 245 Leadenhall’s primary contention is unprincipled. It is wrong to conceive of TCB’s client book as part of BL Insurance Services’ business in the context of a business sale. TCB owned its client book, not BL Insurance Services. As Mr Debrowski’s and TCB’s AFS licensee, BL Insurance Services’ economic interest in TCB’s client book only subsisted so long as they were its authorised representatives. Under their contractual arrangements with BL Insurance Services, Mr Debrowski and TCB were free to change AFS licensee as they wished upon giving written notice. This is why Thomas required authorised representative agreements with Mr Debrowski and TCB be in place as a condition precedent in the draft asset sale deed for BL Insurance Services’ business. 246 Contrary to Leadenhall’s second contention, the evidence does not establish that Mr Debrowski and TCB entered into any agreement with Thomas prior to termination of the contract. It may be inferred there were negotiations a foot, but how those negotiations were consummated is not known, save that on 1 November 2019, Mr Debrowski and TCB became authorised representatives of Thomas. This 119 Leadenhall’s Closing [68]. 120 Ibid [99]-[107]. 121 Ibid [102]. -- 40 of 41 -- [2025] SADC 17 39 fact was agreed and otherwise proved by searches of ASIC’s professional registers for AFS authorised representatives.122 247 The final difficulty concerns Leadenhall’s contentions that the Respondents were required to refer Mr Debrowski and TCB to Leadenhall to be included on the “Prospects List” and by failing to do so, breached clause 4 of Schedule B of the Terms. 248 On the evidence, there is no good reason why the Respondents should have referred Mr Debrowski or TCB as prospective counterparties to Leadenhall. 249 First, contrary to the opening of Leadenhall’s case, Mr Anderson’s evidence was clear as to his lack of involvement in any alleged business development between Mr Debrowski, TCB and Thomas. There was none. 250 Secondly, Mr Lewis’ unchallenged evidence was that he did not consider Mr Debrowski would be interested in being a prospective purchaser or have the financial means to purchase BL Insurance Services’ client book. The sale to TCB came about as a genuine surprise to Mr Lewis after the date of “Effective Termination” and in the absence of any discussions between Leadenhall and Thomas or Mr Debrowski. Mr Lebbon knew at least as much as Mr Lewis did about Mr Debrowski’s negotiations to become an authorised representative of Thomas and did not at the time consider him or TCB to be a prospective counterparty. 251 Ultimately, there is no proven breach of the Respondents’ obligation to refer prospective counterparties to Leadenhall under clause 4 of the contract. Interest and Recovery Costs 252 Since Leadenhall’s claims for payment of success fees under the contract fails, its claims for contract interest and recovery costs also fail. Rectification 253 The Respondents claimed rectification of the contract if their construction was not accepted. Having concluded that the contract operates as the Respondents contend it is not necessary to consider their rectification claim. Conclusion 254 The result is that all of Leadenhall’s claims fail. The proceeding should be dismissed with costs to follow the event on the standard costs basis, subject to there being any relevant matter informing the Court’s discretion on costs otherwise. 122 Exhibit A3.171 and 172. -- 41 of 41 --