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A summary of cases by our Corporate Advisory team for the month of May.
This case provides some useful analysis of when a fiduciary relationship between a company and its directors who also have interests in competing businesses might be qualified so that the duty to avoid conflicts of interest won’t apply. Where the directors in this case diverted business opportunities to their competing businesses without declaring those interests (and actively concealed them), the fiduciary relationship was found not to be qualified in this way.
DTM Constructions Pty Ltd (trading as QA Developments) (QA) used a company owned by Mr Poole and Mr Hopkins to market and sell its home packages. Mr Poole and Mr Hopkins later became shareholders of QA and then a director (in the case of Mr Poole) and an officer (in the case of Mr Hopkins who became so involved in the operations of QA that he became an officer) . Mr Poole and Mr Hopkins subsequently established a number of other businesses which QA alleged entered into direct competition with QA (Competing Businesses).
QA argued that, by diverting business opportunities to the Competing Businesses, Mr Poole and Mr Hopkins breached their statutory duties under the Corporations Act 2001 (Cth) and their general law fiduciary duties owed to QA. In defending these claims, Mr Poole and Mr Hopkins argued that:
In finding that the relationship between QA and Mr Poole and Mr Hopkins was not a qualified fiduciary relationship, Justice Lyons in the Supreme Court of Queensland found that:
On the evidence, Justice Lyons found that Mr Poole and Mr Hopkins had, in certain circumstances, breached:
This case illustrates that courts will not necessarily void a contract for statutory illegality merely because it is ‘associated with or in the furtherance of illegal purposes’ but is not otherwise expressly or impliedly prohibited by the relevant statute. Rather, the Court will look at a range of other factors including how essential the illegality is to the agreement, whether the parties were aware of the illegality, whether the illegality is in fact carried into effect and also how the interests of the parties may be affected if the contract is unenforceable.
A contract dated 13 December 2013 for the sale of land from REW08 Projects Pty Ltd (REW08) to PNC Lifestyle Investments Pty Ltd (PNC) contained a provision which allowed PNC to rescind the contract and re-enter into a new contract every 3 months until the plan of subdivision was finalised. The contract also provided for the price to be reduced by $235,000 if REW08 performed all of its obligations under the contract.
After disagreement between the parties, PNC sought specific performance of a contract dated 13 June 2014 (following 2 purported rescissions since the date of the original contract). After REW08 filed a defence, PNC paid the full amount of stamp duty payable on the transactions the subject of the contract (together with interest calculated from 13 December 2013).
REW08 submitted that the trial judge erred in not finding that the relevant contracts for sale and deeds of rescission were not ‘unenforceable for illegality’. REW08 argued that the purpose of entry into the contract was to commit an unlawful act (delaying stamp duty) and the contract dated 13 June 2014 (and those dated 13 December 2013 and 13 March 2014) were therefore unenforceable under the general law for public policy reasons.
Macfarlan JA (with Beazley P and Gleeson JA agreeing) in the New South Wales Court of Appeal started with the general rule that a contract may be unenforceable for statutory illegality even where not expressly or impliedly prohibited by the relevant statute if it is a ‘contract associated with or in the furtherance of illegal purposes’. However, a Court should not refuse to enforce contractual rights merely because this is the case.
In dismissing the appeal by REW08 (and therefore enforcing the contractual rights of PNC), the Court pointed to the following factors:
On the issue of PNC’s alleged lack of ‘clean hands’ (which would mean it was not entitled to equitable relief), the Court held that PNC’s alleged impropriety did not have ‘an immediate and necessary relation to the equity sued for’ because it:
This case emphasises the importance of ensuring firstly, that standard terms and conditions in an online contract are clearly brought to the attention of the counterparty (ideally by requiring that the party click through to the terms in order to proceed) and secondly, that the counterparty briefly read those terms (rather than blindly clicking on to proceed) so that they are aware of at least the key practical terms of their agreement (relevantly in this case, the law and jurisdiction that will apply to any claim under the contract). This case also provides some useful analysis of when a Court might find that a party has shown cause that they should not be held to an exclusive jurisdiction clause.
Agoda Pte Ltd (Agoda) is a Singaporean company which provides an online booking portal for booking accommodation at hotels around the world. Ms Gonzalez used her home computer in Sydney to book accommodation in Paris through the Agoda portal. The “Payment details page” included a link to Agoda’s standard terms of booking (Terms) and the words “I agree with the booking conditions and general terms by booking this room…” appeared above the “Book Now” button that Mrs Gonzalez needed to click in order to proceed. The Agoda booking portal did not require Mrs Gonzalez to check a box or click on a link to explicitly accept the Terms.
The Terms included an exclusive jurisdiction clause that designated the law of Singapore as the governing law and provided for any dispute to be submitted to the courts of Singapore.
During her trip, Ms Gonzales suffered injury which she claimed occurred because the shower screen in the bathroom of her hotel room was not correctly fitted. Ms Gonzalez brought proceedings claiming damages against Agoda in the New South Wales Supreme Court.
The relevant question for the Court was whether it should decline to exercise jurisdiction, and Button J held that:
In finding that Mrs Gonzalez had not shown cause as to why she shouldn’t be held to the exclusive jurisdiction clause, Button J pointed to the following factors: