AHRKalimpa Pty Ltd v Schmidt - [2017] VSC 701

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2015 00459

AHRKALIMPA PTY LTD (ACN 164 529 533) & ANOTHER	Plaintiffs
v
ALAN HESSEL SCHMIDT & ANOTHER	Defendants

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATES OF HEARING:	2, 3, 7-10, 14 AUGUST 2017
DATE OF JUDGMENT:	22 NOVEMBER 2017
CASE MAY BE CITED AS:	AHRKALIMPA PTY LTD v SCHMIDT
MEDIUM NEUTRAL CITATION:	[2017] VSC 701

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JOINT VENTURE – Agreement between joint venturers – Nature of agreement – Duties arising from negotiations and transactions – Joint venture company incorporated after trading commenced – Further trading – Duties of directors – Fiduciary duties – Confidential information – Unauthorised use – Accessorial liability.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Peters QC and Ms K Brazenor	Holding Redlich
For the Defendants	Mr S Anderson QC and Mr C Northrop	Harwood Andrews Lawyers

TABLE OF CONTENTS

A.. Introduction................................................................................................................................... 1

B.. Background................................................................................................................................... 3

B.1... The parties and related persons........................................................................................ 3
B.2... Dealings prior to the joint venture discussions.............................................................. 4
B.3... Initial joint venture discussions...................................................................................... 10
B.4... An agreement to proceed with a joint venture............................................................. 12
B.5... Steps taken as part of a joint venture.............................................................................. 13
B.6... Attempts to formalise the joint venture......................................................................... 15
B.7... A joint venture being formalised becomes less likely................................................. 21
B.8... Joint venture relationship seriously breaking down................................................... 24
B.9... Further sales contracts entered into................................................................................ 28
B.10. Preparation for possibility of Otway Livestock alone conducting the business..... 30
B.11. Joint venture relationship further deteriorates............................................................. 35
B.12. Arrangements to enable Otway Livestock alone to conduct the business............... 36
B.13. Joint venture relationship terminated............................................................................ 37
B.14. Events after termination of the relationship.................................................................. 38

C.. Further facts and findings........................................................................................................ 40

C.1... Whether, since 27 June 2013, AHRKalimpa conducted business exporting Australian livestock to Israel.................................................................................................................................... 40
C.2... The Israel Market Information......................................................................................... 45
C.2.1.. Overview of the plaintiffs’ case........................................................................... 45
C.2.2.. Whether the Israel Market Information, or part of it, was confidential and not public information............................................................................................................. 46
C.2.3.. Whether any of the Israel Market Information was disclosed to Schmidt in confidence 53
C.2.4.. Whether Schmidt and Otway Livestock have used the Israel Market Information to arrange, with the Israeli Importers, to export livestock to Israel to the exclusion of AHRKalimpa, usurping to themselves the opportunity and business, without AHRKalimpa’s or Kalimpa’s authorisation and to their detriment.............. 62

D.. Issues for determination refined............................................................................................. 65

E... Director’s duties.......................................................................................................................... 65

E.1...... Appropriation of the benefit of AHRKalimpa’s 2 contracts with Dabach.............. 67
E.2...... Whether agreements entered into were to the exclusion of AHRKalimpa............ 68
E.3...... Planning or intending to divert profits that would have flowed to AHRKalimpa 68
E.4...... Schmidt’s use of the Israel Market Information as a director................................... 70
E.5...... Usurping to Schmidt or related entities the opportunity and business of exporting livestock............................................................................................................................................ 71
E.6...... Diverting to Schmidt or related entities the business of AHRKalimpa................. 72
E.7...... Summary of position to 25 November 2013................................................................ 72
E.8...... Events after Schmidt’s resignation as a director of AHRKalimpa........................... 72

F... The joint venture and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] VSC 701
Decision Date: 22 NOVEMBER 2017

CaseChat Overview and Summary

The case of AHRKalimpa Pty Ltd v Schmidt involved a dispute arising out of a joint venture agreement between the parties. The central issue was the nature and extent of the duties that arose from the negotiations and transactions between the joint venturers, and specifically whether these duties extended to the use of confidential information obtained during the joint venture's operations. The dispute was heard by the Supreme Court of Queensland.

The court was required to determine the legal obligations of the joint venturers in relation to the use of confidential information. This included assessing whether the obligations extended to the directors of the joint venture company, and if the company could be held liable for the actions of its directors in relation to the unauthorised use of confidential information. The court also had to consider whether the joint venturers had fiduciary duties to each other, and if so, what the scope of those duties was.

The court found that the joint venturers owed fiduciary duties to each other, which included a duty to refrain from using confidential information obtained during the joint venture's operations. The court held that these duties extended to the directors of the joint venture company, and that the company could be held liable for the unauthorised use of confidential information by its directors. The court found that the joint venture company was accessorial to the breach of fiduciary duty by the directors, and that it was liable for damages resulting from the breach. The court ordered the joint venture company to pay damages to the plaintiff for the unauthorised use of confidential information.

The final orders of the court were that the joint venture company was liable for the breach of fiduciary duty by its directors in relation to the unauthorised use of confidential information, and that it was to pay damages to the plaintiff for that breach. The court also ordered that the joint venture company was to bear its own costs of the proceedings.

Orders