Hungry Jack's v Burger King - Addendum

[1999] NSWSC 1130

CITATION:	Hungry Jack's v Burger King - Addendum [1999] NSWSC 1130
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	50258/96
HEARING DATE(S):	12/11/99
JUDGMENT DATE:	18 November 1999
PARTIES :	Hungry Jack's Pty Limited - Plaintiff Burger King Corporation - First Defendant The Shell Company of Australia Limited - Second Defendant Burger King Australia Limited - Third Defendant
JUDGMENT OF:	Rolfe J

COUNSEL :	Mr N.C. Hutley SC/Mr T.D. Castle - Plaintiff Mr B.C. Oslington QC - First and Third Defendants Mr A.J. Sullivan QC - Second Defendant
SOLICITORS:	Mallesons Stephen Jaques - Plaintiff Corrs Chambers Westgarth - First and Third Defendants Blake Dawson Waldron - Second Defendant
CATCHWORDS:	Amendment to Judgment of 5 November 1999 to delete certain references to Shell's having had or breached fiduciary duties, on the basis that these matters were agreed not to be argued and were not argued.
DECISION:

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

ROLFE J

THURSDAY, 18 NOVEMBER 1999

50258/1996 - HUNGRY JACK’S PTY LIMITED v BURGER KING CORPORATION & ORS

ADDENDUM TO JUDGMENT OF 5 NOVEMBER 1999

HIS HONOUR:

Introduction

1    On 5 November 1999 I published my reasons for judgment and stood the proceedings over to 12 November 1999 for the parties to bring in Short Minutes of Order to give effect to my findings. I shall assume that the reader of this addendum has access to that judgment, and I shall use the references in it in these reasons.

2    When the matter was called on 12 November 1999 the parties stated that they had not finished preparing draft orders. Mr Sullivan of Queen’s Counsel, who appeared for Shell, requested me to recall my judgment to delete certain portions thereof, which related to and caused concern to his client. It will be remembered that on the first day of the hearing HJPL and Shell settled the proceedings between them and, thereafter, Shell took no further part in this litigation.

3    Mr Sullivan had proposed to furnish to my Associate on 11 November 1999 a letter setting out those portions of the judgment on which he wished to comment, but did not do so as the solicitors for HJPL took the view that the matter should be “dealt with in a formal manner”. It was, accordingly, mentioned in open Court on 12 November 1999.

4    The settlement between HJPL and Shell left in issue whether BKC’s dealings with Shell had caused BKC to breach its fiduciary duties to HJPL, which I found they had. However, conformably with its settlement with Shell, HJPL was not to advance a case that Shell had breached any fiduciary duties it owed to HJPL by reason of any dealings it, Shell, had with BKC.

5    In his letter, which was handed up, without objection, on 12 November 1999 and which will remain with the papers, Mr Sullivan stated:-

“Shell has received and considered a copy of your Honour’s Reasons for Judgment delivered on 5 November 1999. It has observed in paragraph 369 of your Honour’s Reasons, your Honour expresses the view or ‘finding’ that:-
‘.. The arrangements into which they entered created, in the view to which I have come, fiduciary obligations between them, which were breached by BKC and Shell prior to the entry into the Tripartite Test Agreement’ (emphasis added).
Shell has also noted that in your Reasons for Judgment, your Honour sets out that submissions were made (presumably by the Plaintiff) that Shell owed and/or breached fiduciary duties (see paragraphs 14, 300, 302 and 345 of the Reasons).”

6    The letter referred to the fact that Shell had not been heard on any such matters; that the Deed of Settlement between HJPL and Shell precluded HJPL from advancing any such submissions against Shell; and that HJPL’s solicitors had advised Shell’s solicitors that no submissions were made to the Court “that Shell breached any fiduciary duty it may have owed to the Plaintiff. Moreover, it appears that, given the way the case was run and the orders sought (see, e.g. paragraph 29 of the Reasons), it was unnecessary for the Court to make any finding that Shell owed a fiduciary duty to the Plaintiff, let alone breached any such duty”.

7    In addition to the matters to which I have referred in relation to Shell, I should state that Mr Sullivan’s letter pointed out that Shell, in its defence, denied that it owed or breached any fiduciary duty to HJPL; stated that it had no notice of the possibility of any adverse findings or view being made or expressed about its conduct; and stated that it did not have the opportunity to call or challenge evidence or to make submissions as to whether it owed or breached a fiduciary duty to HJPL.

8    It must, of course, be steadfastly borne in mind that the case before me was conducted on the basis that BKC, by its dealings with Shell, breached its fiduciary duty to HJPL.

Jurisdiction

9    The parties did not suggest that I did not have jurisdiction to amend my reasons at this stage, if I thought it appropriate, nor did any party raise any objection to my doing so. Mr Hutley stated that he did not wish to be heard on the matter. Mr Oslington took the same approach, although he added, lest his silence should be misinterpreted, that if by amending any part of my original reasons that provided BKC and/or BKAL with another ground or grounds of appeal, his clients would be relying upon it or them.

Shell’s Application

10    The first two amendments I have been asked to make relate to paragraph 14, which reads:-

“A particular area of dispute concerns the relationship developed between HJPL, BKC and Shell. This involved several elements after initial discussions between HJPL and Shell, and BKC and Shell. One was the negotiation for and subsequent entry into a tripartite test development agreement, pursuant to which several restaurants would be opened at Shell controlled service station sites to see whether the co-branding of petroleum products and a fast food restaurant would be successful, and also the extent to which the three companies could work together in that venture. Although the agreement was signed in February 1995 and exchanged in March 1995, the parties had been pursuing the arrangements since late 1993 or early 1994. The parties proceeded with the test on the basis that if it was successful they would enter into a long-term relationship for the development of a number of restaurants at Shell sites. Shell suggested there may be as many as 70. HJPL’s case was that prior to the entry into that agreement, the parties were working towards the formation of a long-term relationship for the mutual financial benefit of each. It is alleged by HJPL that BKC and Shell, contrary to the spirit and intent of that agreement and the arrangement for the long-term relationship, and thus in breach of a fiduciary duty allegedly owed to HJPL, sought to deal with each other to achieve the same end but to the exclusion of HJPL. The submission was that the evidence established that prior to 1994 Shell had been dealing separately with each of BKC and HJPL because it was interested in introducing fast food restaurants at its service station sites. By March 1994 the parties came together to seek to develop the test agreement and long-term arrangement to which I have referred. Subsequently, and it will be necessary to consider the evidence in detail, Shell advised BKC that it was not prepared to go ahead if HJPL was involved. BKC did not seek to change Shell’s attitude on this and, on one view, encouraged it not to proceed with HJPL, whilst pursuing arrangements for Shell to enter into an arrangement with it. BKC did not advise HJPL of its attitude, nor of Shell’s, until Mr Fitzjohn wrote to Mr Cowin on 15 May 1995. Although BKC had been aware of Shell’s attitude to HJPL for some months prior to May 1995, it not only did not advise HJPL of it, but it allowed HJPL to continue with the test arrangements, with the expense and time that involved, in the knowledge that Shell was stating that it would not participate in a long term dealing with HJPL. When BKC told HJPL of the position in May 1995, the tension between the two was heightened. Thereafter BKC sought to improve its own position in Australia through Shell to the disadvantage of HJPL. On the basis of these submissions HJPL has put that BKC and Shell breached fiduciary duties to it as a consequence of which it is entitled to equitable compensation from BKC.”


The amendments sought are within the category where I have set forth the submissions made.

11    The first amendment is to delete the words “and Shell” in line 13. I do not see those words in that line. I have also been asked to delete the words “each other” in line 15 and insert in lieu thereof “Shell”. I do not see those words in that line. It seems to me that the sentence to which reference is being made is:-

“It is alleged by HJPL that BKC and Shell , contrary to the spirit and intent of that agreement and the arrangement for the long-term relationship, and thus in breach of a fiduciary duty allegedly owed to HJPL, sought to deal with each other to achieve the same end but to the exclusion of HJPL.”

That is a recitation of the submissions made. I have not been referred to any submission in those precise terms, and I have not, in those circumstances, gone back through the voluminous oral and written submissions. In my opinion, the sense of what I was seeking to convey, without referring to any “fault” on the part of Shell, is conveyed adequately if the sentence is amended to read:-
“It is alleged by HJPL that BKC, contrary to the spirit and intent of that agreement and the arrangement for the long-term relationship, and thus in breach of a fiduciary duty allegedly owed to HJPL, sought to deal with Shell to achieve the same end but to the exclusion of HJPL.”

12    I have also been asked to delete the words “and Shell” in the final sentence of paragraph 14. In my opinion that amendment should be made for the same reason. I propose to amend the sentence to read:-

“On the basis of these submissions HJPL has put that BKC breached fiduciary duties to it as a consequence of which it is entitled to equitable compensation from BKC.”

It is quite clear from the balance of the paragraph that reference is being made to BKC’s dealings with Shell.

13    Paragraph 300 is the next to which exception is taken. I have been asked to delete the words “and Shell” in line 4; and to delete the words “either” and “or Shell” in line 5. Once again I was referring to the submissions made. I think the words about which complaint is made are:-

“…gave rise to a series of fiduciary duties owed by BKC and Shell , relevantly for present purposes, to HJPL, such that if either BKC or Shell sought to subvert the arrangements …”.

14    In the passage I have just quoted I consider, essentially for the reasons I have thus far given, that the words “and Shell”; and “either” and “or Shell” should be deleted, so that the passage to which I have just referred will read:-

“…gave rise to a series of fiduciary duties owed by BKC, relevantly for present purposes, to HJPL, such that if BKC sought to subvert the arrangements …”.

15    The next amendment I am asked to make is by deleting the words “the two parties, namely” and “and Shell” in line 5 of paragraph 302. That paragraph refers expressly to paragraph 30.3 of HJPL’s written submissions, which reads:-

“By reason of that joint venture or proposed joint venture, BKC owed fiduciary duties and obligations to HJPL, which required that it not take steps, either itself or in conjunction with Shell, to exclude HJPL from the development, operation and/or servicing of Burger King Restaurants at Shell service stations in Australia (Summons para 29). At the least, those duties required that that (sic) two parties must not secretly negotiate to exclude the third from the proposed venture. Alternatively, the dealings between HJPL and BKC, so far as they concerned negotiations with Shell, were directed to the formation of a joint venture between HJPL and BKC to establish and operate Burger King Restaurants at Shell service stations in Australia, and BKC owed HJPL fiduciary duties and contractual duties of good faith in relation to that matter.”

16    Paragraph 302 reads:-

“In paragraph 30.3 it was submitted that by reason of either the joint venture or proposed joint venture, BKC owed fiduciary duties and obligations to HJPL, which required that it not take steps, either itself or in conjunction with Shell, to exclude HJPL from the development, operation and/or servicing of Burger King restaurants at Shell service stations in Australia, and that those duties required that the two parties, namely BKC and Shell, must not secretly negotiate to exclude HJPL from the proposed joint venture. Alternatively, it was submitted, the dealings between HJPL and BKC, so far as they concerned negotiations with Shell, were directed to the formation of a joint venture between HJPL and BKC to establish and operate Burger King restaurants at Shell service stations in Australia, and BKC owed HJPL fiduciary and contractual duties of good faith in relation to that.”

What I have set out in paragraph 302 faithfully records the written submissions of Mr Bathurst at paragraph 30.3 of his written submissions, the reference to the “two parties” clearly being a reference to BKC and Shell. The solicitors for HJPL have stated, apparently, that this was not a submission that Shell owed or breached a fiduciary duty. I consider that the opening words make clear that the allegation is one being made against BKC only, and the reference to “secretly negotiating” is, in the circumstances, only relevant to BKC’s conduct. Accordingly, I do not propose to amend this paragraph.

17    The next amendment I was asked to make was by deleting the words “and Shell” in line 8 of paragraph 345. I assume this is a reference to the submission that “BKC and Shell must not negotiate secretly ..”. In the context of the whole submission I do not consider that this could be read other than as a reference to BKC’s duties, and I do not propose to amend it.

18    The next amendment I was asked to make was by deleting the word “them” in the fourth last line of paragraph 369 and inserting in lieu thereof “HJPL and BKC”. The passage reads:-

“No party had any intention to enter into a long-term relationship at that time, but the arrangements into which they entered created, in the view to which I have come, fiduciary obligations between them, which were breached by BKC and Shell prior to the entry into the Tripartite Test Agreement.”

This was clearly a finding involving Shell and in lieu of the words “between them”, I consider that the words “between HJPL and BKC” should be inserted, and that the words “and Shell” should be deleted, so that the sentence reads:-

“No party had any intention to enter into a long-term relationship at that time, but the arrangements into which they entered created, in the view to which I have come, fiduciary obligations between HJPL and BKC, which were breached by BKC prior to the entry into the Tripartite Test Agreement.”

Proposed Amendments

19    I propose that the sentences in paragraph 14, to which I have referred, be amended to read:-

“It is alleged by HJPL that BKC, contrary to the spirit and intent of that agreement and the arrangement for the long-term relationship, and thus in breach of a fiduciary duty allegedly owed to HJPL, sought to deal with Shell to achieve the same end but to the exclusion of HJPL.”
“On the basis of these submissions HJPL has put that BKC breached fiduciary duties to it as a consequence of which it is entitled to equitable compensation from BKC.”

20    I propose that the passage in paragraph 300, to which I have referred in paragraph 13, be amended to read:-

“…gave rise to a series of fiduciary duties owed by BKC, relevantly for present purposes, to HJPL, such that if BKC sought to subvert the arrangements …”.

21    I propose that the sentence in paragraph 369 to which I have referred in paragraph 18, be amended to read:-

“No party had any intention to enter into a long-term relationship at that time, but the arrangements into which they entered created, in the view to which I have come, fiduciary obligations between HJPL and BKC, which were breached by BKC prior to the entry into the Tripartite Test Agreement.”

22    I shall give the parties the opportunity to consider these reasons before making final orders.

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On 19 November 1999 Shell advised that it did not require any further amendments to the above judgment.

Last Modified: 11/24/1999