Revisiting the fourth category of contract from Masters v Cameron and contracts as a single transaction - Rose v Manno Kingsway Pty Ltd
- kemartin18
- 53 minutes ago
- 7 min read
Heath Burton, Associate
Introduction
The NSW Court of Appeal recently decided Rose -v- Manno Kingsway atf the Manno Kingsway Unit Trust [2025] NSWCA 23, a case which examined the ‘fourth category’ of contract arising out of the landmark decision of Masters -v- Cameron. While delivering further commentary on this principle, the decision may have muddied the waters in other areas of law which have determined when a contract comes into existence.
Background
The initial Supreme Court proceedings concerned a debt claim. The Appellant (Rose, debtor) was a property developer, and the Respondent (Manassen, creditor – Manno Kingsway was a related entity) was one of Rose’s financiers.
A loan agreement was allegedly entered into against the backdrop of a property development Rose and Manassen undertook together. The undisputed facts were:
In early December 2021, Rose proposed that Manassen provide him with a $1 million loan, to be repaid over 24 months at 5% interest.
In late December 2024, Manassen sent an email to Rose, stating that ‘as discussed’ “we will lend $1m to [Rose] by 24th Dec for 1 year at 5%”, among other conditions. Rose sent an email reply 2 minutes later stating, “confirmed [R]oy”.
The sum of $1.3 million was paid to Rose by Manassen in early January.
On 2 February 2022, entities related to Rose and Manassen executed a written loan agreement. The relevant terms of the agreement were that Manassen would loan $1.3mil to Rose, to be repaid in 12 payments, at 3.85% interest.
Rose made payment of the interest but failed to repay the principal sum.
Manassen sought repayment of the remaining amount under the written loan agreement.
Summary of Arguments
Rose raised several defences, the most significant of which was that the $1.3 million was prior consideration. That sum had been paid before the written loan agreement was executed and Rose argued that as the written loan agreement was unsupported by consideration, it was not a valid contract.
To address that argument, Manassen filed an amended pleading on the first day of the Supreme Court hearing , alleging an agreement had been reached in December 2021 under the first or fourth category of contract in Masters v Cameron, with the result that the $1.3 million had been paid pursuant to that agreement.
In short, argument advanced by Manassen was that an agreement had been reached in December 2021, and that the sum of $1.3 million had been paid under that agreement, but Manassen and Rose then substituted that agreement for the written loan agreement. If that was accepted, Manassen argued, then the $1.3 million was paid under the written loan agreement, notwithstanding payment occurred prior to its execution.
The Fourth Category in Masters v Cameron
Before addressing the decisions of the Supreme Court and Court of Appeal, it is crucial to address the grounds on which Manassen said a binding loan agreement arose.
Masters v Cameron stands as authority that parties can agree to a contract to be formalised at a later date, or in other words, ‘agree to agree’ to a contract.
The joint judgement of Dixon CJ, McTiernan and Kitto JJ identified three such 'categories' of agreement:
“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.”
(emphasis added)
Of these, the third category does not give rise to a binding contract.
The ‘fourth category’ is not found in Masters v Cameron, instead being articulated in the High Court decision of Sinclair, Scott & Co v Naughton as a category:
“…in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”
Supreme Court Decision
In finding for Manassen, His Honour Justice Campbell made the following determinations:
Firstly, that the emails in late December 2021 had created an agreement under the fourth category in Masters v Cameron, as:
the objective wording of the email exchange in December 2021 indicated the parties were content to be bound immediately (to pay certain amounts);
although the Loan Agreement had different terms to what had been discussed in December, his Honour inferred there had been “consensual variations at some stage which increased the loan amount by $300,000 and reduced the interest rate from 5% to 3.85%”; and
Rose’s conduct, including engaging in those negotiations and making interest payments, indicated it accepted it was bound.
Secondly, his Honour did not address whether an agreement had been reached under the first category in Masters v Cameron. However, he considered that the Loan Agreement was also binding because, with reference to the decision of Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136, citing Pao On v Lau You Long [1979] UKPC 17, the payment of $1.3 million and the entry into the Loan Agreement formed “part of one single transaction”.
Court of Appeal
Eight grounds of appeal were raised, but his Honour Bell CJ (Mitchelmore JA and Adamson JA agreeing) considered that the case that the Appellant had to prove was that:
Firstly, there had been no agreement reached in December 2021; and
Secondly, the $1.3mil had not been consideration for the Loan Agreement, if that Loan Agreement was not a mere formalisation of the December 2021 agreement.
The Court of Appeal rejected the reasoning of the NSW Supreme Court, finding no contract arose under the fourth category in Masters v Cameron on the following grounds.
The terms of the agreement of December 2021 were not sufficiently clear. Bell CJ observed that the emails discussed commercial considerations that were not finalised, making it unclear what was being agreed.
The language asking Rose to ‘confirm’ the email could be viewed as asking for confirmation of the matters discussed, not necessarily agreement to the terms in the email.
$1 million was not advanced by 24 December 2021, as the email from Manassen set out. Further, interest was not paid at 5% at any time. Bell CJ considered that if the parties had expected to be immediately bound to the terms in the December emails, then there would have been correspondence asking why the $1 million had not been paid, and interest would have been made at 5%, not 3.85%. The absence of such correspondence suggested there was no agreement to be immediately bound.
However, the Court of Appeal did not overturn the judgement, instead finding that the written loan agreement was validly entered into and steps had been taken during the period of December 2021 to January 2022, which Bell CJ considered was enough to constitute a single transaction, observing (at [45] and [58]) that:
[45] By reference to the above, it is plain that Manno Kingsway’s transfer of the funds on 24 January 2022 at Mr Rose’s request of 9 December 2021 (see [11] above) amounted to the “act” described in Pao On. In the absence of any submission by Mr Rose that the advance was a gift, there is no available inference other than that Manno Kingsway’s act of advancing the funds was effected in consideration of Mr Rose’s promise to repay the principal in accordance with the terms of the loan agreement and pay interest in the meantime. In this regard, I am satisfied – having regard to the genesis, background, negotiation and terms of the Loan Agreement – that Manno Kingsway’s advance of the loan and Mr Rose’s promise of repayment are substantially one transaction.
…
[58] This was not a case, moreover, where there was some other earlier transaction or obligation on the part of the Respondent which was arguably discharged by the advance of the $1.3 million on 24 January 2022: cf SAS Realty. In this context, it is to be noted that the premise of this aspect of the Appellant’s argument was that no agreement was formed by the exchange of emails of 13 December 2021. That raised the question of what the advance of $1.3 million was referable to if not the Loan Agreement that was executed shortly thereafter and by reference to which the Respondent calculated interest payable and the Appellant paid such interest.”
This could be viewed as something of a circular argument.
The Court determined no agreement was reached in December 2021 (because the ‘agreement’ was too uncertain), then found payment after that date could not have been advanced for any other purpose than consideration for the yet-unexecuted written loan agreement.
It could equally be argued an agreement was negotiated up to the date of the payment of the $1.3 million. However, that would not change the ultimate outcome, being that uncertainty in the terms of the December 2021 negotiations prevented a contract arising on that date.
Principles and Outcomes
There are two important takeaways from this decision.
Firstly, if there is a deviation from an ‘agreed’ position in terms of consideration provided, that may be grounds to say that there was no agreement under the fourth category of Masters v Cameron. Both the Supreme Court and Court of Appeal stressed that contemporaneous conduct is more persuasive than representations of what the parties actually agreed.
Secondly, it is tempting to approach cases chronologically. However, both the Supreme Court and the Court of Appeal acknowledged that there is a substantial body of caselaw that a chronological sequence of events is not always decisive. As evidenced by the ‘single transaction’ argument being accepted by the Court, early consideration may still be valid, even if a category under Masters v Cameron cannot be made out.
Alex Tuhtan, Director
(07) 3307 4544
Heath Burton, Associate
(07) 3307 4529
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