King Network Group Pty Ltd v Club of the Clubs Pty Ltd

The case of *King Network Group Pty Ltd v Club of the Clubs Pty Ltd* concerned a dispute arising from a joint venture agreement for the purchase and development of land. The appellants, King Network Group Pty Ltd (KNG) and related parties, had entered into a joint venture with the respondents. A key element of the dispute involved an "Overriding Supplementary Joint Venture Agreement" (OSJVA) procured by the appellants, which, upon failure to provide certain bank guarantees by a specified time, had the effect of expropriating the respondents' shares. The trial judge had found the OSJVA to be invalid.

The primary legal issues before the Court of Appeal were whether the trial judge erred in finding that the OSJVA was not within the amending power of the original joint venture agreement, and whether the OSJVA was invalidated under the doctrine of "fraud on the power." The appellants argued that the OSJVA was a valid amendment, while the respondents contended it constituted a fraud on the power, akin to the principles discussed in *Gambotto v WCP Limited*.

The Court of Appeal, comprising Hodgson JA, Campbell JA, and Young CJ in Eq, considered the construction of the joint venture agreement's clauses concerning amendments. The majority held that clauses 13.2 and 13.3, which stipulated that certain matters were to be determined by the joint venturers personally, ought to be construed widely and commercially to encompass alterations to the joint venture agreement. Regarding the "fraud on the power" argument, the court found that the traditional elements were not made out, particularly as the first appellant was the only party able to provide the necessary guarantees and the project's feasibility was in question. Consequently, the OSJVA was not set aside on this ground.

The appeal was allowed in part, with orders being varied to substitute "KNG" for the joint and several liability of KNG and the Stamoulis individuals. Certain orders of the trial court were set aside, and an adjustment was made to ensure that payment by KNG to KCOTC would be pro tanto satisfaction of KNG's liability. The cross-appeal was dismissed. The court indicated a tentative view that the respondents should bear the costs of the appeal and cross-appeal, with KNG to pay half of the plaintiffs' costs at trial, subject to further submissions on costs and restitutionary orders.