Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd
[2023] VCC 1945
•27 October 2023
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-22-01842
| ASHTHORN CA PTY LTD (ACN 167 783 128) | Plaintiff |
| v | |
| YUME GROUP HOLDINGS PTY LTD (ACN 613 528 475) | Defendant |
---
JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 – 28 July 2023, written submissions dated 22 and 30 August 2023 and 5 September 2023 | |
DATE OF JUDGMENT: | 27 October 2023 | |
CASE MAY BE CITED AS: | Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1945 | |
REASONS FOR JUDGMENT
---
Subject:CONTRACTS – CONSULTING AGREEMENT
Catchwords: whether the plaintiff is entitled to fees under a consulting agreement, alternatively, damages – whether a relevant “transaction” occurred during the term of the engagement agreement (or within 12 months following) – whether the plaintiff is entitled to a claim for a “capital raising fee” or a “business sale fee” under the engagement agreement – whether the plaintiff waived advisory retainer fee
Legislation Cited: Insolvency Act 1986 (UK)
Cases Cited:Hellmann Insurance Brokers v Peterson [2003] NSWSC 242; Mirabela Nickel Ltd (in liq) (receivers and mangers appointed) v Mining Standards International Pty Ltd [No 5] [2023] WASC 62; Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64; Azevedo v Secretary, Department of Primary Industries and Energy (1992) 26 ALD 567; J&P Marlow (No 2) Pty Ltd v Five Islands Invest Pty Ltd (in liq) [2023] NSWCA 117; Commissioner of Taxation v Whitehouse (1961) 104 CLR 25; Fitzgerald v Masters [1956] HCA 53; Wimpey & Co Ltd v Inland Revenue Commissioners [1975] 2 All ER 45; Abbott v Philbin [1961] AC 352; Dear v Reeves [2001] EWCA Civ 227; Federal Commission of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; National Australia Bank Ltd v Clowes [2013] NSWCA 179; Coal & Allied Operations Pty Ltd v Crossley [2023] NSWCA 182; Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93; Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38; O'Connor v S P Bray Ltd (1936) 36 SR (NSW) 248; Commonwealth v Verwayen (1990) 170 CLR 394; Agriculture and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Musumeci and Another v Winadell Pty Ltd (1994) 34 NSWLR 723
Texts Cited:Farrands, The Law of Options and Other Pre-Emptive Rights (The Lawbook Co 2010)
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | F Bentley | Peak Legal |
| For the Defendant | B Petrie | K & L Gates |
HER HONOUR:
Introduction
1The plaintiff (“Ashthorn”) claims fees under an agreement with the defendant (“Yume”), or alternatively damages, together with interest (“Engagement Agreement”). Yume contends that no relevant “transaction” occurred during (or within 12 months following) the term of the agreement that entitled Ashthorn to claim a “capital raising fee” or a “business sale fee” under the Engagement Agreement.
2In my judgment, Ashthorn is entitled to a capital raising fee in relation to the SUEZ Recycling & Recovery Pty Ltd (“SUEZ”) transaction less the advisory retainer fees already paid. My reasons are set out below.
3Accordingly, there will be judgment for Ashthorn in the sum of $58,712.56, plus interest as claimed. I will order that Yume pay Ashthorn’s costs of and incidental to the proceeding on the standard basis, in default of agreement (unless either party has a basis for a different order as to costs). I invite the parties to prepare draft orders to give effect to these reasons. I will determine any issue concerning costs on the papers.
Issues
4The issues in dispute are as follows:
(a) Is Ashthorn entitled to a capital raising fee of $17,600.00 under clause 4.2 of the Engagement Agreement in relation to the share subscription agreement entered into between Yume and Salu Folk Pty Ltd (“Salu Folk”) on 27 June 2019?
(b) Is Ashthorn entitled to a capital raising fee of $231,000.00 under clause 4.2 of the Engagement Agreement in relation to the events that occurred between Cleanaway Operations Pty Ltd (“Cleanaway”) and Yume?
(c) Is Ashthorn entitled to a business sale fee of $165,000.00 under clauses 4.3 and 4.4, alternatively, a capital raising fee of $111,512.56 under clauses 4.2 and 4.4 of the Engagement Agreement in relation to the dealings and agreements entered into between SUEZ and Yume in the period 11 September 2019 to 5 July 2021?
(d) In relation to the advisory retainer fees, is Ashthorn entitled to additional advisory retainer fees for the period of July 2019 to September 2019 and, if so, in what sum?
(e) To the extent Ashthorn is entitled to any business sale fees or capital raising fees in relation to Salu Folk, Cleanaway or SUEZ, to what extent are the advisory fees already paid (or payable) by Yume to be rebated against that fee?
Facts
5Ashthorn is an independent corporate advisory firm that provides consulting and advisory service in respect of Mergers, Acquisitions, Business Sales, Capital Raising, Capital Structure and other strategic and/or financial matters.
6Yume owns and operates an online marketplace for quality surplus products that connects suppliers with buyers for a fee.
7Yume was introduced to Paul Beanland (“Paul”), the director of Ashthorn, in late 2018.
8Correspondence between Yume and Ashthorn prior to entering into the Engagement Agreement dated 16 January 2019 related to:
(a) Yume’s funding options;
(b) Ashthorn’s proposed fees;
(c) the timeline for a transaction;
(d) the exchange of drafts of the Advisory Agreement; and
(e) the proposed terms of the Advisory Agreement, including the exclusion of capital raised from existing shareholders from transactions.
The Engagement Agreement
9On 16 January 2019, Ashthorn and Yume signed the Engagement Agreement. Relevantly, the Engagement Agreement included the following terms:
(a) Term
(i)The contract commences on 16 January 2019 (defined as the “Commencement Date”), “and expires 6 weeks after the Commencement Date”, being 27 February 2019, defined as the “Expiry Date”. After the Commencement Date, the Engagement Agreement will be automatically renewed on the 27th of each month prior to termination. Notice for termination must be given with at least 7 day prior to the then current Expiry Date. (Clause 2)
(b) Services and capacity
(i)During the term of the agreement, Ashthorn was contracted to advise on and assist with and project manage any transaction considered by Yume, including arranging and obtaining commitments for Capital Raising in the amounts and on terms acceptable to Yume, and/or to solicit bids for the Sale of Business. Ashthorn would be Yume’s exclusive adviser and agent on these matters.
(ii)Ashthorn’s services will exclude the Scope Exclusions set out in Annexure 1 of the Engagement Agreement.
(iii)Subject to a “Potential Counterparty” signing a confidentiality agreement, Ashthorn was authorised to share any information relating to Yume in pursuit of a potential transaction with a Potential Counterparty.
(iv)Yume is responsible for evaluating any recommendations (or any other advice or materials provided by Ashthorn) and making its own decisions regarding any transaction. (Clause 3)
(c) Fees – advisory retainer fees
(i)Yume would pay Ashthorn a fee of $8,000.00 (excluding GST) per month in advance (“Advisory Retainer Fee”).
(ii)Ashthorn agreed to rebate Advisory Retainer Fees paid by Yume against any Capital Raising Fees payable under clause 4.2, or any “Business Sale Fee” payable under clause 4.3, which would never be less than zero. (Clause 4.1)
(d) Fees – Capital Raising Fees
(i)Yume agreed to pay Ashthorn a Capital Raising Fee of 7% (excluding GST) where part or all of any Capital Raising is obtained or committed (or is deemed to have been) from a Potential Counterparty in one or more transactions.
(ii)The Committed Amount would be the greater of either:
(a) The proceeds obtained from a Potential Counterparty before any set off or deduction of fees or other amounts payable to the Potential Counterparty or other parties; or
(b) The principal amount committed by the Potential Counterparty where Yume has elected to obtain an amount lower than the amount committed by the Potential Counterparty.
(iii)The Capital Raising Fee is due and payable on the date the Committed Amount (or relevant part thereof) is obtained or committed (or is deemed to have been). Any Capital Raising Fees due shall be made directly out of the proceeds of the first Capital Raising provided those funds are advanced within 30 days of the Capital Raising Fee becoming due. (Clause 4.2)
(e) Fees – Business Sale Fees
(i)Yume agrees to pay Ashthorn a fee for each of Yume’s assets or shares that are sold (or are deemed to have been) to a Potential Counterparty in one or more transactions.
(ii)The Business Sale Fee will be 2.25% of the “Gross Transaction Value” of each transaction, subject to a minimum aggregate Business Sale Fee of $150,000.00 payable on completion of the first transaction.
(iii)The Gross Transaction Value is the value of any consideration given to acquire all or part ownership or use of Yume’s assets or shares, including the granting of any equity or debt, or option to acquire equity or debt.
(iv)For the purposes of the above clause:
“completion will occur when ‘completion’, however defined in the contracts regarding to each transactions, occurs. In the absence of any definition of Completion, it will occur on in relation to each Transaction when Yume enters into binding contracts regarding the Transaction and on the earlier of: i) title to any asset of the parties to those documents is transferred, ii) Yume being provided or providing any part of the consideration under those agreements, or iii) the satisfaction or waiver of each condition precedent under those documents”. (Clause 4.3)
(f) Deemed Transactions
(i)A transaction shall be deemed to have been completed, obtained or committed under this agreement if that transaction is completed, obtained or committed within 12 months following the Expiry Date by a Potential Counterparty (excluding an existing investor as at the date of this agreement) that was identified or introduced to Yume or contacted on behalf of Yume by Ashthorn prior to the Expiry Date and negotiations leading to a transaction commenced (or recommenced) with the target at any time within 12 months following the expiry date. (Clause 4.4)
10Yume terminated the Engagement Agreement with “immediate effect” in an email from Katy Barfield (“Katy”), founder and CEO of Yume, to Paul on 13 September 2019.
Salu Folk Subscription Agreement
11On 27 June 2019, Yume and Salu Folk entered into a share subscription agreement (the “Salu Folk Subscription Agreement”).
12Prior to entering into the Salu Folk Subscription Agreement, Wolfgang “Pitzy” Folk (“Pitzy”), principal and director of Salu Folk, had indicated a willingness to provide funding for Yume. This was evidenced by Yume’s board meeting minutes dated 18 October 2018, where it was noted that “Mr Folk… remained supportive of Yume and would consider reinvestment when the runway required”. Again, it was noted in the board meeting minutes dated 18 December 2018 that “Mr Folk indicated he was prepared to put money in… [to Yume]”.
13Paul subsequently met with Pitzy and asked that he provide Yume with a letter of comfort in relation to any proposed investment in Yume. This is evidenced in Yume’s board meeting minutes dated 6 February 2019 where it is noted “action: Pitzy to prepare commitment letter to satisfy Paul’s requirements”.
14In a series of correspondence between Paul and Yume, Paul provided advice that any subscription agreement should be made using a convertible redeemable preference share (“CRPS”) structure. Paul also worked with Salu Folk’s solicitor and gave advice and worked with Roslyn Aikman (“Roslyn”), Yume’s CFO, and other member of Yume’s board on the transaction.
15Yume was ultimately provided capital of $200,000.00 under the Salu Folk Subscription Agreement in two tranches of $100,000.00 paid on 17 July 2019 and $100,000.00 paid on 17 September 2023.
Cleanaway
16In December 2018, Paul reached out to Cleanaway, speaking to Frank Lintvelt (“Frank”), Executive General Manager, Strategy, Mergers and Acquisitions. Paul and Frank had a “no names conversation about Yume and whether that was a position that they may be willing to invest in”.
17In early 2019, a number of meetings occurred between representatives of Yume and Cleanaway. Paul was present at these meeting.
18On 19 July 2019, Paul sent Katy an email outlining his “initial thoughts on a proposal for Cleanaway”, which was broadly “$3m for 50% phased over 3 years”. Katy sent an email to Paul later that day stating that she was happy with the proposal. In the evening, Paul sent an email to Frank which included a “proposal for Cleanaway to consider”. The email to Frank included a section titled “Indicative Yume Investment Terms”, which sets out the investment proposal available to Cleanaway.
19On 21 July 2019, Frank sent an email to Katy and Paul stating that Cleanaway was “good to proceed with the trans documents”.
20On 7 August 2019, Cleanaway and Yume signed a “Non-Binding Terms Sheet”, which outlined “the general terms and conditions of a proposed investment by “Cleanaway” in “Yume”, noting that this terms sheet “is subject to the negotiation and execution of a definitive subscription agreement and any other agreement that may be necessary to effect the Transaction”.
21On 10 September 2019, Yume’s lawyers sent Cleanaway a series of transaction documents.
22Later that same day, Yume held a board meeting where the minutes indicate that Katy was “unable to support the Cleanaway deal at this time”, and in substance, Yume had decided not to pursue the deal with Cleanaway.
23On 11 September 2019, not knowing that Yume was no longer interested in pursuing a transaction with Cleanaway, Cleanaway sent a marked-up version of the transaction documents to Yume’s lawyers and indicated in the covering email that they hoped “to confirm that the documents are in agreed form and proceed to signing ASAP”.
SUEZ
24On 21 July 2019, SUEZ provided Yume with a Best and Final Offer (“BAFO”) for a strategic investment by SUEZ in Yume. The deal was such that SUEZ would invest $2 million in exchange for 30% share in Yume.
25This transaction ultimately fell through due to SUEZ not being able to get approval from SUEZ France.
26On 11 September 2019, Yume entered into an agreement tiled “Strategic Partnership Agreement” (the “SUEZ Agreement”).
27The key terms of the SUEZ Agreement included the payment by SUEZ of a “strategic partnership fee” of $50,000.00 per month for the first 6 months and $30,000.00 per month thereafter.
28The funding was provided in exchange for a number of “partnership activities”, including joint media and communications partnerships, as well as a right of first refusal (“ROFR”). The ROFR granted SUEZ the right to purchase shares in Yume, with an agreed company valuation of $6,666,667.00 for 100% of the company. Any subsequent purchase of shares made pursuant to the ROFR would be discounted by the amount already paid under the “strategic partnership payments fees”.
29The SUEZ Agreement was extended and varied on 14 September 2020. The initial term of the agreement was extended for an additional 3-month period.
30On 24 December 2020, Suez made a BAFO to Yume to take a 20% shareholding in the company for a fee of $1,118,215.00, which reflected a discount on equity of $330,000.00.
31Yume did not accept the BAFO. Instead, on 31 March 2021, 3 months after the Strategic Partnership Agreement had already expired, the parties agreed to re-enliven that agreement for a further term of 9 months, such that it would expire on 11 September 2021.
32In addition to extending the SUEZ Agreement, the second extension and variation agreement established “a future offer for SUEZ to subscribe to a 20% shareholding in Yume”.
33Pursuant to the second extension and variation agreement, in exchange for the payment of $1,449,215.15, $669,108.00 of which had already been paid by way of “strategic partnership fees” under the SUEZ Agreement, SUEZ became the registered holder of 2,068,425 shares in Yume (being approximately a 20% share).
Is Ashthorn entitled to a Capital Raising Fee in relation to the share subscription agreement entered into between Yume and Salu Folk?
Ashthorn’s submissions
34Ashthorn submits that the share subscription agreement between Yume and Salu Folk entitles Ashthorn to a Capital Raising Fee pursuant to clause 4.2 of the Engagement Agreement.
35Ashthorn contends that there is no dispute that the Salu Folk Subscription Agreement raised additional capital for Yume and believes that a Potential Counterparty as defined under clause 3 of the Engagement Agreement is simply defined as a party which is potentially interested in pursuing a transaction.
36Ashthorn argues that the inclusion of the words “solicit commitments” at the beginning of clause 3 does not influence the definition of a Potential Counterparty, as advanced by Yume. Ashthorn says that because “Potential Counterparty” is a noun (being a person/party), it makes grammatical and logical sense to only include the words from “parties” onwards, because those are the adjectives which describe and therefore define the person/party in question. In Ashthorn’s view, the text preceding the word “parties” simply refers to the action which Yume authorises Ashthorn to take in relation to the potential parties and does not form part of the defined term.
37Ashthorn rejects Yume’s argument that it makes “no commercial sense” for Ashthorn to be rewarded for transactions that it did not solicit, stating that in other industries this is not unusual practice. Here, Ashthorn points out that it is a standard provision of the Exclusive Agency Authority produced by the REIV that a real estate agent obtains a commission in relation to any sales which occur during the exclusivity period, irrespective of who sells the property or who introduced the buyer.
38Ashthorn rejects Yume’s argument that Salu Folk is not a Potential Counterparty because Salu Folk was an existing investor, reiterating that the engagement only requires that a Potential Counterparty be an entity that is interested in pursuing a transaction (which is plainly evidenced by Salu Folk’s ultimate decision to do so).
39Ashthorn says that, even if Yume is correct, and the Engagement Agreement does require that Ashthorn solicit any Potential Counterparty, Ashthorn did in fact solicit the commitment of Salu Folk. Ashthorn draws upon the definition of “solicit” within the context of restraint provisions as outlined by Campbell J in Hellmann Insurance Brokers v Peterson.[1] In that case, it was found that solicitation did not depend on who contacts who first, but rather “depends upon the substance of what passes between them once they are in contact with each other”.
[1] [2003] NSWSC 242 at [12].
40Ashthorn says that the focus, therefore, should not be on the role of Ashthorn in soliciting general investment in the abstract, but rather the commitment to the specific transaction at hand.
41Ashthorn does not dispute that Pitzy had indicated a willingness to further invest financially in Yume but notes that these statements were too vague to amount to a specific commitment in relation to a specific transaction. Ashthorn points out that Katy acknowledges that no specific terms, quantum, or structure had been discussed and no agreement was in place prior to Paul’s involvement.
42Ashthorn says that it does not matter that it was not the first to “ask”, “petition” or “entreat” Salu Folk into providing funding. Given that Ashthorn was appointed “exclusive adviser and agent” to “assist with and project manage any Transaction considered or undertaken by Yume”, it is reasonable to assume that even where Ashthorn had not introduced an individual investor, Ashthorn was still operating in accordance with the agreement in undertaking significant work required to bring a transaction into fruition (despite not having introduced the party).
43In highlighting all the work undertaken by Ashthorn to “solicit” the Salu Folk Subscription Agreement, Ashthorn notes that it was Paul who: (i) suggested the idea of backstop funding which Yume said it would take (ii) met with Pitzy explaining to him the need for a letter of comfort (iii) reviewed the initial letter of comfort and gave advice on it at the request of Yume (iv) conceived of the idea of the CRPS, and (v) ultimately assisted in the renegotiation of the terms of the May CRPS (having regard to the value under the SUEZ BAFO).
44Through this work, Ashthorn contends that it brought about a more commercially advantageous deal in the form of the final Salu Folk Subscription Agreement, taking into account a range of perspectives, including solvency, strategy in dealing with investors and the protection of existing shareholders from a hefty and unreasonable dilution. Ashthorn submits that this process of intense negotiations should be contrasted with the general, nonspecific statements made by Pitzy earlier that he would be willing to invest if necessary and prove that it was Ashthorn that solicited the subscription agreement in its final form.
45Ashthorn rejects the suggestion made by Yume that Paul unreasonably “inserted himself” into the transaction and structured the transaction in a particular way to obtain a Capital Raising Fee. Ashthorn takes issue with the view that the letter of comfort, and later, the Salu Folk Subscription Agreement, was an instrument to assist Ashthorn in its capital raising endeavours and was only brought about to serve Ashthorn’s “own purposes”. Ashthorn contends that this interpretation ignores the substantial benefit which the Salu Folk Subscription Agreement conveyed on Yume, ensuring that Yume was not “gamed” in the capital raising process by new investors.
46Ashthorn submits that Paul did not deliberately structure the Salu Folk Subscription Agreement in such a way to enliven Capital Raising Fees, noting that Ashthorn would have been entitled to a fee irrespective of whether the capital raising was debt or equity or a combination thereof. Ashthorn contends that Paul was not acting out of his own interests but was providing his professional opinion to assist Yumeand facilitate a transaction that was in Yume’s best interest. An example of this, Ashthorn says, is apparent from the email from Paul to Roslyn on 28 February 2019, in which Paul explained that the initial letter of comfort significantly dilutes the existing shareholders.
47Ashthorn rejects the view that Yume did not necessarily want the transaction structured in the way that it was, noting that Yume, both at board level and through the CFO, as well as their lawyers, had regular input in the structure of the deal and the transaction. Ashthorn argues that Katy, in giving evidence, acknowledged that the ultimate terms in which the Salu Folk agreement were made was more commercially advantageous to Yume.
48Ashthorn submits that Yume incorrectly applies the wording from clause 4.4 of the Engagement Agreement to explain why Salu Folk is not a “Potential Counterparty”. In clause 4.4, a “Potential Counterparty” excludes “an existing investor as at the date of this agreement”. Ashthorn contends that clause 4.4 relates to “Deemed Transactions” only. The clause is only enlivened where an additional set of events or circumstances exist such that the transaction would not fall within the primary clause. Ashthorn says there is no need to rely on clause 4.4 of the Engagement Agreement because the circumstances of the Salu Folk Subscription Agreement were such that only the primary clause, clause 4.2, applied.
49Ashthorn argues that it does not matter that the second draw down of $100,000.00 under the Salu Folk Subscription Agreement occurs after Yume purported to terminate the Engagement Agreement. In Ashthorn’s view, the Capital Raising Fee arises at the time the capital is committed, not the time it was paid. Ashthorn contends that clause 4.2 of the Engagement Agreement also allows for the fee to be paid out of the first instance of capital raising, so long as that occurs within 30 days of the Capital Raising Fee becoming due.
50Ashthorn submits that clause 2 of the Engagement Agreement provides that the expiry date can be no later than 27 September 2019. Even though Yume sent an email to Ashthorn on 13 September 2019 purporting to terminate the arrangement “effective immediately”, this email did not negate the fact that, pursuant to the Engagement Agreement, the term would only cease on 27 September 2019, and therefore only operated to ensure that the term did not roll forward until 27 October 2019.
51Ashthorn says that it does not matter that Yume did not receive an invoice immediately after the transaction. Ashthorn submits that Paul did not send through an invoice because at that time there would be no point, given that it would be cancelled out by the Advisory Retainer Fees on adjustment. It would make more sense to request a fee once advisory fees could be rebated against subsequent fees claimed.
Yume’s submissions
52Like Ashthorn, Yume says that Ashthorn’s entitlement to a Capital Raising Fee under clause 4.2 of the Engagement Agreement or a Business Sale Fee under clause 4.3 is dependent on whether the transacting entity met the description of “Potential Counterparty”. On Yume’s reading of clause 3, a “Potential Counterparty” is any entity that Ashthorn “solicits”.
53Because the word “solicit” is not defined in the Engagement Agreement, Yume says that it should have its ordinary and natural meaning. Specifically, “solicit” means to “to entreat or petition (a person) for, or to do something; to urge, importune; to ask earnestly or persistently”, or to “seek for by entreaty, earnest or respectful request, formal application”, or “to endeavour to obtain”.[2]
[2] Mirabela Nickel Ltd (in liq) (receivers and mangers appointed) v Mining Standards International Pty Ltd [No 5] [2023] WASC 62 at [640].
54Yume says that it would make no commercial sense for Ashthorn to claim an entitlement to fees for a transaction that it had no role in soliciting or procuring.
55Yume also points out under the definition of a “deemed transaction” in clause 4.4 of the Engagement Agreement, the parties expressly carved out the concept of an “existing investor”. Yume says that this supports the premise that Ashthorn cannot claim fees for a transaction that it was not responsible for procuring.
56Yume argues that it was responsible for procuring the commitment of Salu Folk prior even to Ashthorn being engaged, and therefore Ashthorn did not itself solicit the commitment of Salu Folk.
57In support of the claim that Ashthorn played no role in soliciting investment from Salu Folk, Yume points out that Salu Folk was a founding shareholder when Yume was incorporated in 2015, Pitzy is one of only two people (the other being Katy) who have the status of “founder under Yume’s Shareholders’ Deed”, and that Katy described Pitzy as Yume’s “angel investor” for his support of the company since its inception, that he has “always been supporting right from the get-go”.
58Yume highlights that at the board meeting of the company on 18 October 2018, it was noted that the company only had enough cash to support a further 8 months of operations. At this meeting, Pitzy “reiterated” that he “remained supportive of Yume and would consider reinvestment when the runway required”. Pitzy made similar comments at a subsequent board meeting on 18 December 2018, where he declared that he “was prepared to put money in”.
59Yume contends that these two board meetings are significant in that they show that Pitzy demonstrated a willingness to provide funding prior to Ashthorn’s engagement.
60Yume submits that, prior to the Engagement Agreement being entered into, Paul was concerned as to whether Yume had “backstop financing” available. He explained in a letter sent on 9 January 2019 that without such funding, there might be issues with the completion of pricing of a transaction, as a potential investor may engage in “gaming”. Yume contends that Paul requested a letter of comfort from Salu Folk as this would assist in his attracting potential third party investors. It was also noted in the board meeting on 6 February 2018, the letter of comfort from Salu Folk would mitigate the risk of insolvency.
61On 13 February 2019, Pitzy’s solicitor prepared a draft letter of comfort providing Salu Folk an option to acquire equity in Yume. The draft letter of comfort was discussed at a board meeting on 28 February 2019, where the “directors were reminded the letter of comfort was intended to serve solvency and avoid new investor game-playing”.
62Yume submits that the signed letter of comfort provided by Salu Folk on 19 February 2019 was not to the liking of Paul, and in an email sent to Katy on 28 February 2019, Paul recommended that the shares be redeemable at the company’s election instead. Yume contends that Paul amended the letter of comfort in this way for the purposes of obtaining a Capital Raising Fee in the event that Yume did not elect to make an equity placement. Although at trial Paul said that his amendment was made to protect the solvency of the company, Yume rejects this explanation, arguing that Pitzy was the company’s “angel investor” and a significant shareholder who did not pose any serious threat.
63Yume also argues that there are no contemporaneous documents to support the assertion that they wanted the deal structured this way and note that Katy confirmed at trial that Yume did not care whether the options granted by Salu Folk were exercisable at the company’s election, or at Salu Folk’s election. Yume says that the amendments proposed by Paul and incorporated into the Salu Folk Share Subscription Agreement was done to assist Ashthorn in claiming a Capital Raising Fee, and therefore the court should not place emphasis on the transaction documents (because they were only generated for Paul’s own purposes).
64Despite these arguments, Yume concedes that there is no doubt that Paul played a substantial role in the structure of the Salu Folk Share Subscription Agreement. However, this in itself does not entitle him to a Capital Raising Fee, as he also needs to show that he solicited the investment. As already mentioned above, Yume believes that their angel investor and “Founder” of the company, Pitzy, had already indicated his preparedness to invest further in the company.
65Yume argues that, to the extent that Paul was involved in the structure of the transaction, this was precisely the reason he was being paid the Advisory Retainer Fees. Yume says there is no requirement in the Engagement Agreement that any “advice regarding the structure, terms and pricing of a proposed Capital Raising” need to be connected to an instance of “Capital Raising” to which Ashthorn would be entitled to a fee under clause 4.2.
66Yume also says that part of the funds (the second $100,000.00 tranche) was received on 17 September 2019, which is after notice of termination of the engagement had been given (for which clause 4.4 provided a specific carve out).
67Yume says that contrary to the terms of clause 4.2 of the Engagement Agreement, which provided that no capital raise shall proceed until a fee is properly placed on a settlement statement, Ashthorn did not insist that its fees be paid directly out of the payments made by Salu Folk. Yume notes that at no time during Yume’s engagement with Ashthorn did Paul allege an entitlement to the fee for this transaction, and it was only after the engagement had been terminated that he claimed an entitlement to the fee.
Analysis
68I do not accept Ashthorn’s argument that the clause 3 definition of “Potential Counterparty” in the Engagement Agreement should be read such that the word “solicit” does not form part of the definition. The purpose of the clause is to authorise the soliciting of potentially interested parties, and to define these potentially interested parties that have been solicited as “Potential Counterparties”. In my view, the term “Potential Counterparty” is introduced towards the end of the sentence, and is placed in brackets, in order to explain what the final designation of “Potential Counterparty” relates to an interested party that has been solicited.
69I further adopt Yume’s position that it makes little commercial sense for Ashthorn to receive fees for transactions that it did not solicit. I am not persuaded that this is standard industry practice, even in light of Ashthorn’s reference to the Exclusive Agency Authority produced by the REIV, where agents receive commission in relation to sales which occur during exclusivity period regardless as to who sells the property or introduced the buyer. In my view, the Capital Raising Fee provisions have been included as an incentive to go above and beyond the baseline duties of the Engagement Agreement and implies that something extra must be done to attract these fees. Plainly this “extra work” is the act of soliciting.
70The question as to whether the Salu Folk Subscription Agreement can be deemed a capital raise and be subject to a Capital Raising Fee, therefore, boils down to whether Salu Folk meets the above definition of a “Potential Counterparty”, of which “soliciting” forms a part.
71Both Yume and Ashthorn have submitted differing, but not competing, definitions of the term “solicit”. Yume argues that, because the term “solicit” is not defined in the Engagement Agreement, it should be taken to have its ordinary meaning. Here, Yume draws upon the case of Mirabela Nickel Ltd (in liq) (receivers and mangers appointed) v Mining Standards International Pty Ltd [No 5],[3] where the Western Australia Supreme Court, considered a similar situation where the term “solicit” had not been defined. The Court turned to the ordinary and natural meaning, which pursuant to the Oxford English Dictionary and the Macquarie Dictionary means “to entreat or petition (a person) for, or to do something; to urge, importune; to ask earnestly or persistently or ‘to seek for by entreaty, earnest or respectful request, formal application’ or ‘to endeavour to obtain”.
[3] [2023] WASC 62 at [640].
72Ashthorn argues for a different interpretation of the word “solicit”, drawing upon the case of Hellmann Insurance Brokers v Peterson[4] which related to alleged “soliciting” in relation to restraint of trade provisions. The definition which arises from that case is that solicitation does not depend upon who contacted who first, but rather “depends upon the substance of what passes between them once they are in contact with each other”. This definition is not necessarily in competition with Yume’s definition, as Yume’s definition does not mandate that soliciting involves the act of introducing, instead it seems to imply that there only needs to be some deliberate action to “entreat”. Both definitions therefore seem to envisage that there needs to be some level of ‘entreating’ or ‘convincing’ involved that ultimately determines whether ‘soliciting’ has occurred, and neither definition insist that soliciting needs to include an introduction.
[4] [2003] NSWSC 242 at [12].
73These definitions of the term “solicit” influence Yume and Ashthorn’s subsequent arguments. Yume does not believe that “soliciting” can occur when a party is an existing investor that has demonstrated a willingness to invest further, and no “soliciting” behaviour has been exhibited to guarantee that commitment. Ashthorn says that “soliciting” can occur for an existing investor in circumstances where their overall level of commitment is ambiguous, and it does not matter who approached who first.
74I do not accept Yume’s argument that the definition of a “Potential Counterparty” should exclude existing investors as referred to in clause 4.4 of the Engagement Agreement. Clause 4.4 relates specifically to deemed transactions and is thus limited to transactions which occur after expiration of the Engagement Agreement. Therefore, clause 4.4 of the Engagement Agreement has no relevance to the Salu Folk Subscription Agreement, which occurred while the Engagement Agreement was still on foot.
75However, although I do not accept Yume’s argument that existing investors should be excluded from the definition of “Potential Counterparty”, there is a relatively high bar that Ashthorn must overcome to prove that, as an existing investor, Salu Folk was effectively solicited, and is therefore a “Potential Counterparty”.
76The parties are not in dispute that, prior to the Engagement Agreement, Pitzy had indicated that he was willing to further invest in Yume. What the parties do disagree on is the extent to which Pitzy was committed, that is, whether his comments should be interpreted as vague reassurances or explicit promises. If Pitzy was not totally committed to investing, then there is room for Ashthorn to argue that he was solicited to do so.
77In my view, Pitzy’s comments made prior to the Engagement Agreement demonstrate that he was committed and willing to invest in Salu Folk and was always going to invest in Yume “in the future”. Therefore, Ashthorn should not be credited for soliciting Salu Folk’s ultimate contribution. Even operating on the assumption that it does not matter who contacts who first, the issue remains about the overall willingness to contribute, a willingness which I believe Pitzy had prior to the Engagement Agreement. The vagueness as to the specifics of that commitment does not necessarily matter. What matters is whether or not it can be considered genuine. Given that Pitzy was a founding shareholder when Yume was incorporated in 2015 (is one of only two people (the other being Katy) who have the status of “founder” under Yume’s Shareholders’ Deed), was described by Katy as being Yume’s “angel investor”,[5] and had a demonstrated history of investing in Yume, his commitments to reinvest made prior to the Engagement Agreement should be taken to be genuine.
[5] Transcript p282 lines 26–27.
78The parties are not in dispute that Ashthorn played a role in formulating the ultimate Salu Folk transaction. Yume does not dispute that Paul played an instrumental role in the structure and formulation of the final agreement, explaining and negotiating the letter of comfort, working with Yume’s lawyers and board members to consolidate the ultimate terms, and insisting on the ultimate form of the CRPS. However, I agree with Yume that this does not amount to conduct that can be considered to be “soliciting” and, in the words of the Engagement Agreement, is better characterised as Ashthorn’s commitment to “assist with and project manage any transaction considered or undertaken by Yume during the term of this agreement”. This advice and expertise are precisely why the Engagement Agreement was structured in such a way that it included an Advisory Retainer Fee, as this was deemed to be adequate to compensate Paul for his work in facilitating such a transaction that he did not solicit.
79In fulfilling his duties under the Engagement Agreement, Paul may have brought about an ultimately more commercially advantageous deal in the final Salu Folk Subscription Agreement. It might also be the case that in insisting on the letter of comfort, Paul prevented Yume from being subject to “gaming” from other potential investors. However, this is testament to his ability and diligence in “assisting” and “project managing” the transaction, rather than soliciting it.
80I am not convinced by Yume’s claim that Paul deliberately “inserted himself” and “meddled” in the Salu Folk transaction for the purposes of obtaining a Capital Raising Fee. Paul’s amendments to the original letter of comfort addressed legitimate commercial issues in that they: 1.) avoided dilution of existing shareholders entitlements, and 2.) ensured that the updated letter of comfort did not include a requirement to repay the debt, which, even despite Pitzy’s status as “angel investor”, potentially still has an impact on a solvency assessment. Further, in her evidence, Roslyn acknowledges that Paul’s influence in the transaction resulted in a more commercially desirable agreement for Yume.
81If Ashthorn had been able to prove that it successfully “solicited” the Salu Folk agreement, then it would not matter that the second $100,000.00 tranche was paid after the termination of the Engagement Agreement, as clause 4.2 of the Engagement Agreement states “the Capital Raising Fee is due and payable on the date the Committed Amount… is obtained or committed”. The signing of the Salu Folk Subscription Agreement occurred on 27 June 2019, and therefore this can be taken to be the date that the funds were committed.
82For the above reasons, I conclude that Ashthorn was not responsible for soliciting a commitment from Salu Folk as a “Potential Counterparty” in accordance with the Engagement Agreement. In the circumstances, Ashthorn is not entitled to a Capital Raising Fee under clause 4.2 of the Engagement Agreement in relation to the share subscription agreement entered into between Yume and Salu Folk on 27 June 2019.
Is Ashthorn entitled to a Capital Raising Fee of $231,000 under clause 4.2 of the Engagement Agreement in relation to the events which occurred between Cleanaway Operations Pty Ltd and Yume?
Ashthorn’s submissions
83Ashthorn claims a Capital Raising Fee in the amount of $231,000.00 in relation to what it says was a “commitment”, within the meaning of the Engagement Agreement, by Cleanaway to Yume for the sum of $3,000,000.00 in capital.
84Ashthorn says that it does not matter that Cleanaway and Yume did not execute the transaction documents so as to give rise to a legally binding agreement because a proper reading of the word “committed” within clause 4.2 of the Engagement Agreement did not require the parties to have reached a binding agreement to enliven the entitlement to fees.
85Ashthorn turns to the wording of clause 3 of the Engagement Agreement, arguing that to fulfill its obligations of a capital raise, it only needs to solicit from a “potentially interested” party, and thus argues that a commitment is akin to an offer or expression of interest.
86Ashthorn submits that the word “commitment” has been deliberately used here and is meant to represent a different arrangement to expressions such as “contract”, “binding contract” and “agreement”, which are used at different points throughout the Engagement Agreement. If the parties had intended that the Capital Raising Fee was only payable if and when Yume and the Potential Counterparty entered into such a binding agreement, the Engagement Agreement would have said so.
87Ashthorn contends that, in order to determine the proper meaning of the word “committed” within the Engagement Agreement, it cannot merely be given a “natural and ordinary meaning” in a vacuum but needs to be interpreted in light of the entire text and commercial purpose of the Engagement Agreement.
88Ashthorn then relies on the wording of “Committed Amount” in clause 4.2 of the Engagement Agreement, which includes “…the principal amount committed by a Potential Counterparty where Yume has elected to obtain an amount lower than the amount committed by the Potential Counterparty”. Ashthorn argues that this clause allows the payment of fees where Yume has elected to not take up part or all of a “commitment” by a Potential Counterparty, submitting that this contemplates a scenario where Yume is not legally bound and elects not to take funding which is offered.
89Ashthorn focuses on the use of the words “commitment for” and “bid(s) for” in clause 3 of the Engagement Agreement, noting that they are used as corresponding terms. Ashthorn says that both terms represent a willingness or intention on behalf of a Potential Counterparty to enter into the particular transaction, as a “bid” is simply an offer for an expression of interest on terms, not the sale itself.
90Ashthorn argues that, as it has no capacity to bind Yume to deals, it is only logical that any measure of Ashthorn’s “success” must stop at the point it becomes clear that the essential terms of the transaction are finalised. It is then up to Yume to accept the offer and complete the transaction if it chooses to do so. Because Ashthorn does not have authority to enter into transactions on behalf of Yume, this is the precise reason that a Capital Raising Fee becomes due and payable where Ashthorn presents Yume with a transaction that meets its requirements. Ashthorn is, therefore, entitled to be remunerated for the act of bringing about a commitment to Capital Raising, irrespective of whether Yume ultimately elects not to take up all the capital.
91Ashthorn submits that it brought about a “commitment” as defined under the Engagement Agreement in relation to Yume’s dealing with Cleanaway, as Cleanaway was committed to a Capital Raising transaction on terms acceptable to Yume.
92Ashthorn contends that the bundle of transaction documents sent to Cleanaway on 10 September 2019 demonstrate the deal as at 10 September 2019 was in a form that was “acceptable” to Yume. Further, Ashthorn argues that it is disingenuous for Yume to submit that the terms of the offer were unacceptable to Yume given that Yume had already agreed to the terms of the documents via a terms sheet, renegotiated some of the terms from the terms sheet and then finalised the transaction documents. Even though later that day Yume decided not to follow through with the deal, the documents still prove that up until the deal was abandoned it was on acceptable terms for Yume. Ashthorn says that Yume’s decision to abandon the deal was owing to a misalignment of values, and not that there was any deficiency in the documents, or terms being negotiated.
93Ashthorn submits that the minor amendments made by Cleanaway in a return of the drafts on 11 September 2019 in no way impacted the substance of the agreement, and, therefore, did not represent that Cleanaway was not willing to pursue the transaction. Ashthorn points out that, in the email from Cleanaway to Yume on 11 September 2019, Cleanaway stated that they were hoping to execute the transaction documents “ASAP (ideally on or before Friday)” and make the payment of the First Tranche by 18 September 2019. Ashthorn also relies on the oral evidence of Frank, who stated that, as of 11 September 2019 “our expectation was the documents would be signed within two or three days” and “there was nothing outstanding that would have let to us not signing the agreement”.
94Ashthorn argues that Frank was so committed to the transaction that he was already referring the post-transaction steps. All that was left for Cleanaway to do was sign an internal administrative form called a contract execution review form (“CERF”) and then executed the transaction documents. Ashthorn contends that the only reason why these documents were not signed was because Frank “received a call that following day that Yume had decided to go another way”. Ashthorn relies on Frank’s evidence that none of the people who were required to sign the form expressed reservation to sign it.
95Ashthorn rejects Yume’s argument that it makes no commercial sense for a Capital Raising Fee to be payable where Yume has not entered into a transaction or received any funds. For the reasons stated above, Ashthorn’s understanding of its role under the Engagement Agreement was to bring about a transaction on terms acceptable to Yume, which it believes it did.
96Ashthorn rejects Yume’s argument that, because a Capital Raising Fee can be paid “directly out of the proceeds”, this supports Yume’s contention that the proceeds must be obtained before a fee is paid. Ashthorn says that this ignores the latter part of the clause which states “…provided those funds are advanced within 30 days of the Capital Raising Fee becoming due”. Ashthorn contends that this indicates that fees are payable in any event if the funds are not advanced within 30 days.
97Ashthorn disputes Yume’s claim that Ashthorn’s definition of “commitment” is subjective and that a more “objective” view of the word “commitment” can be obtained either as a “legally binding agreement only”, or by applying a dictionary definition to seek to convey the word “committed” as being legally binding. Ashthorn submits that this is of no assistance to the court as the word “committed” has no strict or commonly accepted meaning and, accordingly, should be interpreted only in the context in which it appears. Ashthorn contends that applying a dictionary definition to such a word invokes the “directed exercise of seeking to construe a document simply by reference to supposed ‘natural and ordinary meaning’ of the word”.[6]
[6] Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [158].
98Ashthorn argues that Yume’s reliance on Azevedo v Secretary, Department of Primary Industries and Energy[7] is of no assistance to the court, as that case concerned interpreting the meaning of certain words (“significant financial commitment”) within a specific statutory context.
[7] (1992) 26 ALD 567.
99Ashthorn contends that, contrary to Yume’s submissions, the principle noscitur a sociis has no role to play in these proceeding. Ashthorn contends that Yume tried to rely on the doctrine of noscitur a sociis to conclude that the word “commitment” should be read down to be consistent with other words of the contract (in the present case “legal binding contract, “contract” and “agreement”). Ashthorn says that the rule of noscitur a sociis only applies when a general word follows specific words targeted at the same issue, and that this is not the present case.
100Ashthorn rejects Yume’s claim that they are “ignoring the commercial reality” of the fact that Ashthorn was obtaining Advisory Retainer Fees in exchange for the provision of services regardless. Ashthorn believes that Yume is implying that the bar for obtaining a Capital Raising Fee should be “higher” because Ashthorn was already receiving a retainer. Ashthorn asserts that the Advisory Retainer Fees were deliberately priced lower than usual to take into account Yume’s cash position.
101Ashthorn submits that, contrary to Yume’s assertions, the inclusion of the word “the” before “Potential Counterparty” in clause 4.2(b) of the Engagement Agreement is not designed to prevent Ashthorn from claiming fees in scenarios where Yume, presented with two conflicting options, chooses one over the other. Although Yume believes the word “the” has been included to ensure that Ashthorn can only claim fees in cases where Yume elects to receive say $50, rather than $100, from a particular counterparty, Ashthorn says this is not the point of the word “the”. Ashthorn says that the word “the” was included to communicate that, where Yume elects to obtain less than is considered by a particular “Potential Counterparty”, the fees are calculated on the higher commitment. Ashthorn says that this ensures that where Yume is presented with multiple, mutually exclusive deals to consider (as was the case with Cleanaway and SUEZ), Ashthorn is not entitled to fees on all of them. Ashthorn says that, here, Yume elected to obtain less, being the amount from SUEZ.
102Ashthorn rejects Yume’s argument that at all material times, Salu Folk had the right to veto the Cleanaway deal. Yume contends that pursuant to clause 4 of the Salu Folk Share Subscription Agreement, while there are fully paid subscriptions shares on issue that have not been converted or redeemed, the company “…must not, without the written approval of the subscriber… make any other distribution of profits or capital…”. According to Yume, their capital comprised of its share capital, and because Salu Folk’s final payment was only made on 19 September 2019 after the Cleanaway deal was terminated on 11 September 2019, at all times Yume required the consent of Salu Folk to make any distribution of its share capital. Ashthorn submits that Yume has misunderstood what a “distribution” is, arguing that it is the reduction of capital by payment out of funds or assets and not issuing of shares (this would be raising or increase of capital). Ashthorn contends that the purpose of this clause was to protect Salu Folk from having capital provided to Yume for the purpose of operating the business subsequently distributed without its consent to the shareholders. Therefore, in Ashthorn’s view, that clause did not in itself allow Salu Folk to veto the Cleanaway transaction.
103Ashthorn contends that its reliance on the terms sheet was not to imply that the term sheet was meant to be binding (as, it says, is argued by Yume). Instead, Ashthorn submits that it relied on the terms sheet drafted by Yume as evidence that Yume was working towards a final transaction with Cleanaway and that Paul was not acting independently, seeking to devise his own transaction with Cleanaway, dictate the terms of that which apparently were not satisfactory to Yume, keep Yume out of the communications with Frank and Cleanaway, rush through due diligence, and to then exert pressure on Yume to sign the deal with threat of insolvency.
104Ashthorn argues that Paul’s preference for Yume to pursue the deal with Cleanaway over SUEZ was his professional, considered opinion on which deal was better for Yume. This took into account the question of solvency, an issue which Yume argues was invented by Paul to bolster his personal view that Cleanaway was preferable. Ashthorn notes that the idea that Cleanaway was preferable to SUEZ for solvency reasons was also a view held by board member Daniel Fink, who resigned as a result of his concern that pursuing SUEZ would not address Yume’s solvency issues. Ashthorn also highlights that Katy also acknowledged in an email on 17 July 2019 that the funding from SUEZ still left a “gap” in Yume’s funding requirements.
Yume’s submissions
105Yume submits that a Capital Raising Fee would only be payable to Ashthorn where Yume has agreed to “obtain” an amount from a Potential Counterparty. Accordingly, a Capital Raising Fee would not be payable to Ashthorn where no amount is obtained or committed at all.
106Yume contends that this interpretation accords with business common sense and is also supported by the words that immediately follow in clause 4.2 of the Engagement Agreement, which anticipates the Capital Raising Fee being payable “directly out of the proceeds”, and the requirements that “Yume shall not proceed with closing any Capital Raising until the fee is properly placed on the settlement statement and approved in writing by Ashthorn”. Yume reiterates that it would make no commercial sense for a Capital Raising Fee to be payable where Yume has not entered into a transaction at all, or where it has not received any funds. Although Ashthorn says that there is nothing in the Engagement Agreement that suggests a “commitment” needs to go this far, or that it needs to be legally binding, Yume submits that in arguing this, Ashthorn has ignored clause 4.2 of the Engagement Agreement in its totality.
107Yume also draws upon the dictionary meaning of the word “commitment”, as an “engagement or (esp. financial) obligations” or a “dedication; committing oneself; pledge or undertaking”. In Yume’s view, the plain meaning of the word therefore closely accords with the concept of something that is binding.
108Yume relies on the decision of Azevedo v Secretary, Department of Primary Industries and Energy,[8] in which the Federal Court held, in a statutory interpretation context, that the words “substantial financial commitment” imported, “the requirement of an actual outlay or some obligation which was either legally binding or would have some significant commercial repercussions if dishonoured”.
[8] (1992) 26 ALD 567.
109Yume rejects Ashthorn’s claim that their interpretation of the word “commitment” “perfectly accords with [the] commercial purpose” of the Engagement Agreement. In assessing the “commercial purpose” of the agreement, Yume says that Ashthorn has incorrectly endorsed an entirely subjective, unreasonable and uncommercial position, drawing upon the following statement from Bell CJ in J&P Marlow (No 2) Pty Ltd v Five Islands Invest Pty Ltd (in liq).[9]In that case, it was held that one party’s view of the “commercial purpose” of an agreement should not be used to give contractual terms a meaning that they cannot reasonably bear.
[9] [2023] NSWCA 117 at [76]–[80].
110Yume points out that the terms sheet that they entered into with Cleanaway was non-binding, and clearly states that it “is indicative only and not legally binding on the parties”.
111Yume rejects Ashthorn’s argument that the word “commitment” was used in contradistinction in the Engagement Agreement to the other expressions such as “contract”, binding contract” and “agreement”. Yume submits that this is not done in an attempt to distinguish “commitment” from these terms, but rather the word should be construed noscitur a sociis such that the generality of the word should be read down to be consistent with these other words.[10]
[10] Commissioner of Taxation v Whitehouse (1961) 104 CLR 25.
112Yume submits that clause 3 of the Engagement Agreement states that Yume would be responsible for “evaluating any recommendations (or any other advice or material provided by Ashthorn) and making its own decision regarding any transaction”. Yume argues that it makes no commercial sense that it has retained the right to make its own decisions regarding transactions, yet it will be bound to pay a fee regardless of what it decides.
113Yume contends that its interpretation of clause 4.2 of the Engagement Agreement is consistent with the objective theory of the contract, and that the court should read the word “committed” as being a reference to a legally binding agreement only.
114Yume argues that Ashthorn’s definition of “commitment”, being “used in a way that is referable to the level of intention of the Potential Counterparty to provide the capital to Yume on terms acceptable to Yume”, is asking the court to decipher a number of uncertain subjective positions. Yume submits it is unclear how the court is supposed to interpret concepts such as “level of intention”, or “terms acceptable to Yume”, or to gauge precisely what the alleged “commitment” is. An analysis of any of these issues would require a determination of Yume’s subjective intention, and, therefore, cannot be undertaken objectively.
115Yume contends that compensation for the work conducted by Ashthorn in relation to the forfeited Cleanaway deal is captured by the Advisory Retainer Fee of $8,800.00 per month. Circumstances like the aborted Cleanaway deal are precisely why the retainer fee has been included in the Engagement Agreement, to ensure that Ashthorn is still compensated for its time and expertise.
272Further, I do not accept that Ashthorn effectively revoked this waiver when sending its invoice for those waived fees on 9 October 2019. Yume cited the case of Commonwealth v Verwayen[32] to explain why this retrospective revocation is ineffective, where Brennan J explained:
“…upon waiver, the party waiving the right ceases to be able thereafter to assert it effectively. When a right has been waived…it is unnecessary to consider whether any other party has acted in reliance on the release or abandonment: the right is abandoned once and for all.
…The sterilizing of a right might, in some circumstances, be attributable to either a waiver or an election, but the doctrines are distinct, for a right may be waived though there is no alternative right inconsistent with it”.
And went on to explain that:
“…a right is waived only when the time comes for its exercise and the party for whose sole benefit it has been introduced knowingly abstains from exercising it, a mere intention not to exercise a right is not immediately effective to divest or sterilize it”.
[32] (1990) 170 CLR 394.
273The principles that Ashthorn have attempted to rely upon from Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788[33] do not apply in this case, as I do not find that the waiver was “effectively retracted” at the time of the invoice. This is because this supposed revocation came after the point in time in when Ashthorn should have sent the invoice in late September, and, therefore, adopting the words of Brennan J, Ashthorn has “knowingly abstain(ed)” from exercising its rights.
[33] [2022] HCA 38.
274Finally, in respect of the arguments surrounding a potential contract variation, I agree with Ashthorn that no variation has taken place because no consideration was provided. Although, in certain circumstances, the completion of existing duties can amount to consideration, the facts of this case do not align with the requirements outlined by Santow J in Musumeci and Another v Winadell Pty Ltd.[34] However, as I have already determined that there was a waiver, this has no bearing on the ultimate outcome of the case.
[34] (1994) 34 NSWLR 723.
275For the reasons set out above, Ashthorn is not entitled to additional Advisory Retainer Fees for the period of July 2019 to September 2019.
Conclusion
276For the forgoing reasons, I find that there is judgment for Ashthorn against Yume in the sum $58,712.56, which comprises $111,512.56 in relation to the SUEZ Capital Raising Fee, less $52,800.00 for Advisory Retainer Fees, with costs.
- - -
Certificate
I certify that these 72 pages are a true copy of the judgment of her Honour Judge Burchell delivered on 27 October 2023.
Dated: 27 October 2023
Gideon Lipinski
Associate to Her Honour Judge Burchell
2
16
0