KRM (Vic) Pty Ltd v Classicbet Pty Ltd

The case of KRM (Vic) Pty Ltd v Classicbet Pty Ltd involved a dispute over the payment of a lump sum under an affiliate contract (the APA) between KRM and two online betting companies, Classicbet and Bestbet. The third defendant, who was initially the owner of the companies, sold his shares to Playup, which now controls Classicbet and Bestbet. The dispute centred on the timing of the obligation to pay the lump sum to KRM, with Classicbet and Bestbet contending that they were only required to give notice of an actual change of control, not a proposed one. The Kays, the former owners of the companies, argued that they breached their duties as directors by not issuing a notice of a proposed change of control before the completion of the share sale agreements.

The court had to decide several legal issues, including whether Classicbet and Bestbet were contractually required to give notice of a proposed change of control, whether the Kays breached their duties as directors, and whether KRM had waived its right to continue receiving commissions after it had elected to take the lump sum. The court also needed to interpret the terms of the APA, including the calculation of the lump sum and the meaning of certain terms such as "the 12 months immediately preceding the date that the option is exercised by KRM" and "average monthly commission".

The court found that Classicbet and Bestbet were not contractually required to give notice of a proposed change of control, and that the obligation to pay the lump sum was incurred after completion of the share sale agreements. The Kays were not in breach of their duties as directors, as the APA did not require Classicbet and Bestbet to give notice of a proposed change of control. KRM, having opted for the lump sum, was not entitled to commissions after that date, but commissions so received should be offset against the amount of the lump sum owed to it. The court also found that the reference to "the 12 months immediately preceding the date that the option is exercised by KRM" refers to calendar months, not 365 days pro rata, and "paid" should be understood as "payable". The promise in cl 6.1 of the share sale agreements was made by the Kays to Playup, not to Classicbet/Bestbet. Finally, the court held that the Kays could not rely on evidence of pre-contractual negotiations in support of their contention that it was not the parties’ intention to make the third defendant liable under the APA to pay his share of the lump sum to KRM.

The court ordered that KRM was to receive a lump sum payment, with certain offsets and deductions applied, and that Classicbet and Bestbet were not required to pay any further commissions to KRM.