Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd - [2008] NSWSC 144

No judgment structure available for this case.

CITATION: Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd & 2 ors [2008] NSWSC 144

HEARING DATE(S): 4, 5, 6, 7, 8, 11, 14 February 2008

JUDGMENT DATE :
28 February 2008

JURISDICTION: Equity Division
Expedition List

JUDGMENT OF: Brereton J

DECISION: The Plaintiff Lawfund did not repudiate or otherwise breach the joint venture agreement. Lawfund did not engage in misleading and deceptive conduct. After termination, Lawfund did not breach its fiduciary obligations by establishing its own business, Probitas Leasing. Lawfund is entitled to retain the name “Lawfund”, but both parties are entitled to use the database. The Second Defendant Ms Ward contravened her duties as a director of the joint venture vehicle, the First Defendant Lawfund Leasing, by terminating the joint venture business and transferring it to her own company the Third Defendant A-Ward, and is liable to pay compensation or account for profits. A-Ward was involved in her contravention. Lawfund is not precluded by unclean hands from claiming relief, nor required to bring to account the profits of its own business. Lawfund Leasing should be wound up on the just and equitable ground, and Ms Ward is not entitled to relief for oppression. Declarations of contravention of Corporations Act duties; inquiry as to compensation ordered; declaration of trust and order for transfer of trademark; cross-claim dismissed.

CATCHWORDS: CORPORATIONS – incorporated joint venture – whether fiduciary obligations superimposed on corporate relationship – whether obligation of good faith precludes termination of joint venture – whether joint venture terminable on notice – rights of parties on termination of joint venture – whether upon termination of joint venture parties entitled to carry on separate businesses in competition with joint venture vehicle – whether one or other party entitled to name of firm – entitlements to undivided assets. - CORPORATIONS – Internal management – Directors – duties – statutory duties – where following failure of joint venture director terminates business of joint venture vehicle and transfers it to her own corporation – whether breach of director’s duty – Oppression – where corporation under management of alleged victim – whether desire of other party to wind up corporation oppressive - CORPORATIONS - External management – winding up – just and equitable ground – where substratum of trust and confidence underlying incorporated joint venture fails – whether company should be wound up - CONTRACT – Termination – repudiation – where party proposes termination of joint venture upon terms – whether repudiatory – election – where other party evinces intention to continue to perform contract – whether election to affirm – abandonment – where both parties treat agreement as no longer on foot – whether agreement terminated by abandonment - CORPORATIONS – Remedies – derivative action - compensation – profits – where plaintiff sues on behalf of corporation – where claim is for statutory relief - whether plaintiff can be debarred from statutory relief in derivative action by “unclean hands” - TRADE PRACTICES – Misleading and deceptive conduct – pre-contractual negotiations – expressions of aspiration and intent – whether representations as to future matters

LEGISLATION CITED: (CTH) Corporations Act 2001
(CTH) Trade Practices Act 1974
(NSW) Partnership Act 1892

CATEGORY: Principal judgment

CASES CITED: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Alcock v Robb (1978) 2 BPR 9625
Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319
Banks v Gibson (1865) 34 Beav 566
Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384
Burchell v Wilde [1900] 1 Ch 551
Chan v Zacharia (1984) 154 CLR 178
Chappell v Griffith (1885) 53 LT 459
Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
Don King Productions Inc v Warren [2000] Ch 291
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Gibson v Tyree (1900) 20 NZLR 278
Glassington v Thwaites (1822) 1 Sim & St 124; 57 ER 50
In re David and Matthews [1899] 1 Ch 378
James Shaffer v Findlay Durham & Brodie [1953] 1 WLR 106
Johnson v Snaddon [2001] VSCA 91
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Liquor National Wholesale Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 392
Metlej v Kavanagh [1981] 2 NSWLR 339
MMAL Rentals Pty Ltd (ACN 008 293 490) v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167
Mopeke Pty Ltd v Airport Fine Foods Pty Ltd [2007] NSWSC 153; (2007) 61 ACSR 395; (2007) 25 ACLC 254
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455
Pathirana v Pathirana [1967] 1 AC 233
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Re a Company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961
Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126
Scott v Bail [1914] VLR 270
Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419
Shevill v Builders Licensing Board (1982) 149 CLR 620
Spettabile Consorzio Veneziano di Armamento e Navigazione v Northumberland Shipbuilding Co Ltd (1919) 121 LT 628
State of Western Australia v Bond Corporation Holdings Ltd (1991) 13 ATPR 41-081
Thomas v Mackay Investments Pty Ltd (1996) 22 ACSR 294
Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 WLR 605, 613; [1974] 1 All ER 1239
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; (1985) 60 ALR 741

TEXTS CITED: Lindley & Banks on Partnership, 18th Edition

PARTIES: Lawfund Australia Pty Ltd (plaintiff/cross defendant)
Lawfund Leasing Pty Ltd (first defendant)
Deborah Ward (second defendant/cross claimant)
A-Ward Finance Pty Ltd (third defendant)

FILE NUMBER(S): SC 6973/04

COUNSEL: Mr L S Einstein w Mr G W Pulsford (plaintiff/cross defendant)
Mr M B Evans (defendants/cross claimant)

SOLICITORS: TressCox Lawyers (plaintiff/cross defendant)
M J Woods & Co (defendants/cross claimant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Brereton J

Thursday, 28 February 2008

6973/04 Lawfund Australia Pty Limited v Lawfund Leasing Pty Limited & 2 Ors

JUDGMENT

1 HIS HONOUR: Since about 1995, the plaintiff Lawfund has carried on business as a mortgage aggregator, deriving its income primarily through commission earned from financial institutions upon the introduction to them of mortgage lending business from clients of the firms of solicitors and accountants that constitute its membership. In 2002, wishing to extend its business in the field of lease finance, it entered into a joint venture with the second defendant Ms Ward, who (through her company the third defendant A-Ward Finance) had extensive experience and expertise in that field. The first defendant Lawfund Leasing was the corporate joint venture vehicle. The relationship between Lawfund and Ms Ward broke down finally in October 2004, following which Ms Ward caused Lawfund Leasing to carry on business until August 2005, and then to cease trading, and its business to be transferred to her company A-Ward; meanwhile, Lawfund established its own lease finance division under the name of Probitas Leasing.

2 In these proceedings, Lawfund claims:

· By way of derivative action on behalf of Lawfund Leasing pursuant to (CTH) Corporations Act 2001, ss 236 and 237, compensation from Ms Ward and A-Ward for breaches by Ms Ward of her duties as a director of Lawfund Leasing, and her fiduciary obligations as a joint venture partner, in which A-Ward is said to be involved;

· Injunctive relief, restraining Ms Ward and A-Ward from continuing to use the name Lawfund (including cancellation of the registration of “Lawfund” by Lawfund Leasing as a trademark) and the database of the former joint venture which includes a list of Lawfund’s membership; and
· The winding up of Lawfund Leasing on the just and equitable ground.

3 Ms Ward and A-Ward do not oppose cancellation of the trademark, but cross-claim for:

· Damages for repudiation and other alleged breaches of the joint venture agreement;

· Damages for misleading and deceptive conduct said to have been engaged in by Lawfund in entering into the joint venture agreement; and
· Relief for oppression under Corporations Act , s 232, and in particular an order that Lawfund acquire Ms Ward’s shares in Lawfund Leasing.

4 This present hearing is concerned only with liability, the quantification of any damages, compensation or profits to abide a subsequent inquiry if required.

Background

5 Until 2002, Lawfund had operated primarily as a mortgage aggregator, although it brokered a small amount of lease finance business. From 1997, Ms Ward and A-Ward carried on business as lease finance brokers. In 2002, Lawfund wished to expand its lease finance business. It was introduced to Ms Ward.

6 Between May and September 2002, there were discussions and negotiations between Ms Ward and representatives of Lawfund concerning a potential joint venture in lease finance. On 27 August 2002, Lawfund’s Business Development Manager, Mr Carrero, wrote to Ms Ward, as follows:

Re: Agreement for the Leasing Division

It would seem from our recent discussions that both parties are enthusiastic about proceeding. Following is a summary of the proposed agreement.

1. That Deborah Ward (DW) and Lawfund Australia Pty Ltd (Lawfund) enter into an agreement for the provision of leasing services to the Lawfund members and others;

2. That Lawfund provide: the premises, reception services, phones, stationery etc;

3. That DW provide: any technology necessary, the leasing expertise, one sign up person on contract. It is agreed that DW will also use, where appropriate, Lawfund Lending Managers for sign ups and that they will be paid a fee.

4. That the expenses be paid by the moneys generated by the leasing services. Expenses would include: leasing costs of any technology as necessary, rent, stationery, etc. Rather than needing to account for every paperclip it is suggested that we deal with the larger and more easily quantified items such as the leasing of technology, rent and sign up contractor costs and then come to an agreement of a monthly flat fee to cover the administration costs such as reception, stationery etc.

5. Commissions for leasing from Lawfund members will be paid as follows: 40% to the Member, 40% to the Writer, 20% to the leasing Division.

6. Commissions for leasing from DW will be paid as follows: 50% to DW and 50% to the Leasing Division.

7. Commissions for any insurance will be split as follows: 50% to the Writer and 50% to the Leasing Division.

8. After the payment of the expenses in each quarter any profit will be split between DW and LF 50% each.

9. DW will also receive the benefits of Membership of Lawfund to refer mortgage finance to a Lawfund Lending Manager which will result in DW receiving 80% of the upfronts (less any Lending Manager’s fee) and 80% of the trailer.

10. In the event that the agreement is terminated by either party it is agreed that DW, like any other Lawfund member, would retain ownership and control of the client base which she brought to the Leasing Division.

As you know these arrangements are just for Sydney to start with but we are keen to grow the Leasing Division in Melbourne, Brisbane and Perth as soon as Sydney is well underway.

I believe we have a bright future together and I look forward to your comments.

7 Ms Ward responded by email on or about 28 August, as follows:

Thank you for the proposal.

In principal I agree with the “heads of agreement”, however I propose to address the following areas:

Firstly, given the long term view, direction and envisaged growth of the business; I would prefer to work within an incorporated entity structure from the outset. In this regard I would be prepared to cover the cost involved to establish the company;

Secondly, I would prefer to review the business trading on a monthly basis rather than quarterly. At this point I would envisage that profits from the venture be distributed;

Thirdly, I would need to be assured of the availability of necessary office space from which to effectively operate the leasing division from. I suggest a self contained office for my own use in this way addressing the confidentiality aspect (of the trading venture entity and administration) as distinct form the day-to-day processing area; and

Fourthly, given the nature of the business and level of processing involved I will require a full time assistant from the outset, the cost of which is would be bourne by the leasing division. This person is in addition to utilising Lawfund mortgage members for sign up as and when required.

I await your comments on the points raised.

8 None of the Lawfund witnesses gave evidence of further consideration of that email or the issues in it, but Ms Ward says (and in this respect her evidence was not the subject of challenge) that she had a meeting with Mr Carrero on 30 August, in which Mr Carrero agreed that the business should be conducted through a company structure, to be called Lawfund Leasing, with a 50/50 shareholding, and observed that there was not space to provide a self-contained office at present, “but we are expanding our premises here and we will be able to accommodate you in the near future”.

9 On 2 September 2002, Ms Ward sent Ms Fiander an email:

Please advise of the date you wish me to commence Lawfund Leasing from your premises, as I need to give notice to my landlord, and also advise my introducer & client base of the appropriate changes.

10 On 6 September, Ms Ward sent Ms Fiander another email:

The 30th of September for a start date would suit me fine. I would need to access the office ideally on the weekend prior to commencement. Please let me know if that is possible.

I will start the process of transferring accreditations with current lenders to the new entity so all commission & leasing transactions transfer to the new entity by 1st of October. We will require the incorporation of the new company to enable this process. I would be happy to arrange the incorporation through my accountant if you prefer. The cost would be approx $1,000.

11 Ms Fiander responded on 9 September:

30th September it is then. It is not clear whether we will have the new office space ready for you by then or not (the landlord has to build an intertenancy wall first) but we will have somewhere for you and your assistant to get started.

By all means proceed with the new shelf company. Lawfund would be happy to pay the cost of the company on behalf of the new entity and it can repay Lawfund later. I suggest yourself and Sal Carrero as the two Directors of the new company. …

I will have John Barlow contact you to discuss what furniture and technology you are bringing with you and what will fit where.

Looking forward to you starting.

12 On the same day, Ms Ward replied:

Thank you for your reply. I will instruct my accountant to proceed with incorporation of the new entity. I anticipate that the documents will be ready for execution by Thursday of this week. I will then commence the transfer of accreditations, we will also need to advise your current lease lenders of the change in structure. This might also be a good opportunity for me to introduce myself to the relationship manager from these banks.

If possible, I would like to briefly discuss the following while I am in your office tomorrow:

If I can arrange to have the above in place before commencement, I will then be in a position to start marketing to Lawfund members straight away.

13 Lawfund Leasing was incorporated as the joint venture vehicle on 12 September 2002, with Lawfund and Ms Ward each holding 50 shares, and Mr Carrero and Ms Ward as its directors. On 30 September 2002, Lawfund Leasing commenced trading, under the management of Ms Ward, from Lawfund’s premises at Level 1, 55 Norton St, Leichhardt.

14 Over the ensuing two years, each of Lawfund and Ms Ward perceived difficulties with and made complaints about the other. Ms Ward felt that Lawfund was not providing the support to which she was entitled, and Lawfund considered that she was a difficult person with whom to deal, and that her personality and style did not fit with “the Lawfund culture”. There were also disputes over Ms Ward’s claim to be entitled to a writer’s fee in respect of every lease written. By 2004, the relationship was strained.

15 On 28 September 2004, Lawfund wrote to Ms Ward, stating that it had concluded that it was highly desirable to terminate the relationship, and proposing terms on which that might be done – including the winding up of Lawfund Leasing, and her vacating the Lawfund premises by 31 October. Ms Ward alleges that this letter was a purported unilateral termination, and a repudiation, of the joint venture agreement. Its proper construction is controversial.

16 Over the weekend of 23 and 24 October 2004, Ms Ward – without informing Lawfund of her intentions – vacated Lawfund’s premises and moved (with all the hardware and software associated with Lawfund Leasing’s business, including filing cabinets, storage units, a facsimile machine, printer, photocopier, manuals, books, office trays, computer cabling, computers and a scanner) to premises at 270 Norton St, Leichhardt, which she caused Lawfund Leasing to occupy under a sublease from her company A-Ward. On Monday 25 October 2004, on arriving at work Lawfund directors found that Ms Ward had vacated the Lawfund premises. That day, Lawfund received a letter – dated 22 October, but deliberately not delivered until after Ms Ward had effected the removal over the preceding weekend – from Gilbert + Tobin, Ms Ward’s then solicitors, asserting that the 28 September 2004 letter inappropriately threatened unilaterally to wind up Lawfund Leasing for no compensation in breach of the joint venture agreement, that this was no way to address a business partner, and that their instructions were to enforce the joint venture agreement. Lawfund contends that, if its letter of 28 September 2004 were a repudiation (which it denies), then the Gilbert + Tobin letter of 22 October was an election to affirm.

17 Lawfund commenced these proceedings by Originating Process filed on 23 December 2004, claiming relief that included the winding up of Lawfund Leasing on the just and equitable ground. Until August 2005, under Ms Ward’s control, Lawfund Leasing continued to trade from 270 Norton Street; there was no Lawfund nominee on its board during this period. On 5 August 2005, Ms Ward filed her Cross-claim. On 16 August 2005, M J Woods & Co, who were by then acting for Ms Ward, wrote to Lawfund, as follows:

We are instructed, as will be clear from the Cross Claim, that the letter to our client under the signature of Mr Barlow dated 28 September 2004 constituted a repudiation of the joint-venture agreement entered into by Ms Ward and Lawfund Australia on 28 August 2002. Our client accepts that repudiation and has elected to treat the contract as terminated.

18 Having thus purported to accept Lawfund’s alleged repudiation, Ms Ward thereupon caused Lawfund Leasing to cease trading, and her own company A-Ward took over Lawfund Leasing’s business undertaking, continuing to operate from 270 Norton Street.

19 The major issues are:

· Is Lawfund liable to pay damages for repudiation, and/or other breaches, of the joint venture agreement? I conclude that Lawfund did not repudiate or otherwise breach the joint venture agreement.

· Is Lawfund liable to pay damages for misleading and deceptive conduct? I conclude that Lawfund did not engage in such conduct.

· What were the rights and obligations of the parties upon termination of the joint venture to the name, the database and the clientele? I conclude that Lawfund is entitled to the name “Lawfund”, that both parties are entitled to use the database, and that both parties were entitled to establish separate competing businesses to service not only new clients but also the referral base that that party introduced to the joint venture, and that Lawfund therefore did not breach its fiduciary obligations by establishing Probitas Leasing.

· Is Ms Ward liable to pay compensation or account for profits for breach of her duties as a director or joint venture partner? If so, is A-Ward implicated? Or is Lawfund debarred from relief by “unclean hands”? I conclude that Ms Ward did contravene her duties as a director and is liable to pay compensation or account for profits; that A-Ward was involved in her contravention; and that Lawfund is not precluded by unclean hands from claiming relief, nor required to bring to account the profits of Probitas Leasing.
· Should Lawfund Leasing be wound up on the just and equitable ground? Or has Lawfund engaged in oppressive conduct so as to be amenable to relief under Corporations Act , s 232, and to make a winding up inappropriate? I conclude that Lawfund Leasing should be wound up on the just and equitable ground, and that Ms Ward is not entitled to relief for oppression.

Is Lawfund liable to pay damages for repudiation, and/or other breaches, of the joint venture agreement?

20 The Cross-claim pleads that by its 28 September 2004 letter, Lawfund (1) purported to terminate the joint venture agreement other than by agreement between the parties or on proper grounds, (2) purported to set out terms on which the joint venture agreement would be terminated which had not been the subject of negotiations and which were severely disadvantageous to Ms Ward, (3) required Ms Ward to vacate Lawfund's offices by 31 October 2004 in breach of Lawfund's duty to act in good faith being a period of notice which in the circumstances was unreasonable and highly detrimental to Ward, and (4) by such conduct, repudiated the joint venture agreement. Mr M B Evans, for Ms Ward and A-Ward, contends that Lawfund’s 28 September 2004 letter was a repudiation of the joint venture agreement, which Ms Ward accepted by M J Woods’ letter of 16 August 2005. He submits that the 28 September 2004 letter was inconsistent with the obligation of good faith that Lawfund as her joint venture partner owed her, and that Lawfund thereby repudiated the joint venture agreement. Mr L S Einstein, for Lawfund, submits that the 28 September 2004 letter was not repudiatory, but that if it was, Ms Ward elected, by the 22 October 2004 letter, to affirm the contract.

21 It is not in dispute that although the parties were joint shareholders in Lawfund Leasing, it was an incorporated joint venture, attracting equitable obligations of the kind described by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (at 379):

The words ['just and equitable'] are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act 1948 and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The “just and equitable” provision does not, as the respondents [the company] suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.

22 His Lordship identified three circumstances that would commonly be associated with the superimposition of equitable obligations on the relationships between shareholders in a corporation, namely (1) an association formed or continued on the basis of a personal relationship involving mutual confidence, (2) an understanding that all or some of the shareholders would participate in the conduct of the business, and/or (3) restrictions on the transfer of shares, so that a member could not take out his or her stake and go elsewhere.

23 Young J, as his Honour the Chief Judge then was, while indicating that courts should be hesitant to conclude that equitable obligations are superimposed upon company law rights and obligations, explained the basis of the decisions that do so in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, (at 707):

Re Yenidje Tobacco Co Ltd

Ebrahimi v Westbourne Galleries Ltd

Westbourne Galleries

24 The same approach to the imposition of equitable obligations in the setting of a “corporate quasi-partnership” has been endorsed, in relatively recent times, in the context of the remedy for oppression, by the House of Lords in Re a Company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961, and by the Court of Appeal in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; see also Mopeke Pty Ltd v Airport Fine Foods Pty Ltd [2007] NSWSC 153, [41]-[55]; (2007) 61 ACSR 395; (2007) 25 ACLC 254.

25 The circumstances in which such obligations would be imposed in a commercial joint venture were explored by the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; (1985) 60 ALR 741, by Mason, Brennan and Deane JJ (at 10-11), with whom Gibbs CJ and Dawson J separately agreed:

The term ‘joint venture’ is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, ‘adventure’) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a ‘joint venture’ and what should more properly be seen as no more than a simple contractual relationship may, on occasion, be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a ‘joint venture’ than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: (but cf per Cardozo CJ, Meinhard v Salmon (1928) 164 NE 545 at 546). The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship (see, generally, Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 407-9).

In the present case, it is apparent that the relationship between the participants in the shopping centre venture was a fiduciary one, at least from the time when the formal agreement was executed. Under the agreement, the participants were joint venturers in a commercial enterprise with a view to profit. Profits were to be shared. The joint venture property was held upon trust. The participants indemnified the managing participant (SPL) against losses. The policy of the joint venture was ultimately a matter for joint decision. Apart from the absence of any reference in the agreement to “partnership” or “partners”, the relationship between the participants under the agreement exhibited all the indicia of, and plainly was, a partnership (cf Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 326-7). It is true that the UDC came to the joint venture in the role of prospective financier and, in so far as borrowings from it by the SPL group on behalf of the partnership were concerned, occupied the role of lender as well as that of partner. In so far as the property which was the subject of the joint venture was concerned however, the fact that UDC was a lender to SPL on behalf of the partnership did not absolve it from the ordinary fiduciary obligations of a partner.

26 Having regard to the indicia mentioned by their Honours in the passage just cited, and the three Ebrahimi factors, the joint venture between Lawfund and Ms Ward, though incorporated in form, was in substance a partnership. Their relationship was one ‘requiring mutual co-operation and a level of trust’ [cf MMAL Rentals Pty Ltd (ACN 008 293 490) v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167, [71] (Spigelman CJ)]. In those circumstances, the following obligations, described by Mason, Brennan and Deane JJ in United Dominion Corporation v Brian (at 13), are imposed:

Birtchnell

27 In Birtchnellv EquityTrustees Executors & Agency Co Ltd (1929) 42 CLR 384, Dixon J explained a partner’s fiduciary obligation in the following terms:

‘than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance: it is because they continue to trust one another that the business goes on’

— per Bacon, V-C., Helmore v Smith (No. 1), 35 Ch D 436 at p 444.

The relation is based, in some degree, upon a mutual confidence that the partners will engage in some particular kind of activity or transaction for the joint advantage only. In some degree it arises from the very fact that they are associated for such a common end, and are agents for one another in its accomplishment. Lord Blackburn found in this consideration alone sufficient reason for the fiduciary character of the partnership relation — Cassels v Stewart, 6 AC 64 at p 79.

28 Accordingly, Lawfund and Ms Ward owed each other, and Lawfund Leasing as the joint venture vehicle, fiduciary obligations to act with respect to the joint venture in good faith, and not to use their position or any information or entitlement acquired by them in the course of and for the purposes of the joint venture to their own separate advantage or in a manner inconsistent with the interests of Lawfund Leasing as the joint venture vehicle, without the fully informed consent of the other and of Lawfund Leasing.

29 But it does not follow that it was a breach of the duty of good faith for Lawfund to terminate, or attempt to terminate (let alone merely offer to terminate), the joint venture – if it no longer wished to be a co-venturer with Ms Ward for whatever reason – unless the agreement were one which Lawfund was not entitled to terminate, either upon reasonable notice or at will. Mr Evans submitted that (as was pleaded and admitted) the agreement could not be terminated except by agreement between the parties or otherwise “on proper grounds”, but this rather begs the question, what are proper grounds?

30 Mr Evans submitted that, as the purpose of the joint venture was the establishment of a business to provide lease finance broking services nationwide, it was implicit that the parties would carry on the venture until that goal was achieved, or at least until it had become clear that the goal could not be achieved. At least in some single undertaking joint ventures – for example, where the parties agree to develop and sell particular land – a term to that effect may be implicit: in such a venture, the relationship continues until the object of the venture is achieved, whereupon it comes to an end. But even then, the terms of the parties’ agreement will be decisive. In the setting of an on-going business that may expand or contract depending on conditions, it is far from self-evident that the parties would agree to such a term. There can be no sensible suggestion that the venture would come to an end automatically upon the business being rolled-out nationally. Moreover, the proposal to expand to other states was expressed in the 27 August 2002 letter as an aspiration, not as a contractual promise. There is no basis for implying a term that the joint venture would not be terminated until the business had been rolled-out nationally.

31 In a commercial arrangement of indefinite duration, the Court will readily imply a term that the arrangement was able to be terminated by either party on reasonable notice, if not at will [Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438, 443-4 (McHugh JA)]:

Although even in the second half of this century the law has been stated to be in accordance with the speech of Lord Selborne in Llanelly (see Halsbury , 3rd ed, Vol 8, par 267 at 156), the weight of twentieth century authority makes it difficult to hold that there is any presumption of perpetuity in the case of commercial agreements: Crediton Gas Co v Crediton Urban Council [1928] Ch 447; Winter Garden Theatre (London) Ltd v Millenium Productions Ltd ; Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd ; Re Spenborough Urban District Council's Agreement ; Australian Blue Metal Ltd v Hughes and Decro-Wall International SA v Practitioners in Marketing Ltd .

In Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd , McNair J said (at 577) that there is no presumption of permanency in the case of an indefinite commercial agreement but that if there is it is in favour of termination and not perpetuity. Buckley J has also expressed the view that there is no presumption either way: Re Spenborough Urban District Council's Agreement (at 150). To the same effect is the judgment of Lockhart J in State Bank of New South Wales v Commonwealth Savings Bank of Australia (1985) 6 FCR 524 at 554; 60 ALR 73 at 101. However, it is not easy to reconcile these statements with the principle that there is a general presumption against adding to a contract a term which the parties have not expressed: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 137 per Lord Wright. In principle, the better view would seem to be that, although there is a presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties must have intended it to be terminable on notice. This was the effect of the approach of the courts in Winter Garden ; Martin-Baker ; Spenborough and Decro-Wall .

Winter Garden Theatre (London) Ltd v Millenium Productions Ltd

Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd

Australian Blue Metal Ltd v Hughes

Winter Garden Theatre (London) Ltd v Millenium Productions Ltd

Australian Blue Metal Ltd v Hughes

W K Witt (WA) Pty Ltd v Metters Ltd and General Industries Ltd

Decro-Wall International SA v Practitioners in Marketing Ltd

32 Absent express provision, a partnership is ordinarily terminable at will. Here, there was no express term as to the duration or termination of the agreement. However, clause 10 of the 27 August letter contemplates the possibility of termination and makes provision, to some limited extent, as to its consequences; it denies that the parties envisaged that the agreement was one that could not be terminated. In my view, the joint venture was terminable, if not at will, then at least on reasonable notice.

33 The gravamen of Ms Ward’s complaint is that Lawfund decided it no longer wished to have a relationship with her, for no better reason than that she had not from Lawfund’s perspective proved a suitable fit with Lawfund’s culture. She contends that that was a breach of Lawfund’s obligation of good faith. However, absent special provision, a partner is not required by the obligation of good faith to remain in partnership with another, with whom it no longer wishes to be associated. The words of Buchanan JA in Johnson v Snaddon [2001] VSCA 91, [27]-[28], are apposite:

[27] I think that in large measure the difficulties encountered by the appellant in formulating breaches of duty were due to the facts that his real complaint was that the partners decided that they no longer wanted him to remain a partner and said so, and such conduct did not amount to a breach of any duty owed by the respondents to the appellant. Partners are required to be honest with each other and not to pursue their own interests to the detriment of the interests of the partnership. Partners must deal with each other in good faith. Judicial statements of partners' duties have been expressed in grand terms. In the first edition of his Treatise on the Law of Partnership , Lindley said that a partner's conduct was to be tried "by the highest standard of honour". Dixon J said that "a stronger case of fiduciary relationship cannot be conceived than that which exists between partners." Cardozo J referred to the duty owed by partners to each other as "the finest loyalty." It should not be supposed, however, that partners cannot fall out without breaking their duties to each other. While partners must be worthy of each other's trust and faith, they are not obliged to continue to trust and have faith in each other's abilities. Equally, they are not obliged to continue to respect each other and to wish to remain in partnership. Rectitude is demanded of a partner, but not good manners or sympathy. A partnership is a commercial undertaking, the principal object of which is to make profits, and the partners are entitled to pursue that objective robustly provided that they act honestly with each other and do not act in their own interests where to do so conflicts with the interests of the partnership.

[28]

34 Put in terms of Ebrahimi, the equitable obligations between the parties did not oblige either to maintain the relationship notwithstanding a loss of trust and confidence in the other. Either was entitled to terminate the joint venture on reasonable notice, if not at will, and it was not a breach of the obligation of good faith for Lawfund to do so.

35 Insofar as reasonable notice was required, I am satisfied that the time allowed – in excess of one month, to 31 October 2004 – was reasonable. There are two significant indicia. First, when Ms Ward joined Lawfund Leasing, she required less than a month – from 9 September to 30 September 2002 – to make the necessary arrangements to relocate, re-structure and re-badge her business. Secondly, she was in fact able to relocate and re-establish elsewhere a week before 31 October, by which date Lawfund had proposed she vacate.

36 So far I have proceeded on the footing that the 28 September 2004 letter was a termination, or at least an attempted termination, of the joint venture. However, that is far from clear. While Mr Evans submits that it was an outright (purported) notice of termination, Mr Einstein submits that it was an offer to agree to terminate upon the terms it contained. An alternative is that it was a notice of termination, which included a without prejudice offer as to the terms on which the termination might be implemented – with the consequence that if not accepted, there would still have been a termination, but the consequences would remain to be worked out according to law, rather than by agreement.

37 As Mr Einstein, for the plaintiff, submitted, repudiation of a contract is a serious matter, not lightly to be inferred [Progressive Mailing House Pty Ltdv TabaliPty Ltd (1985) 157 CLR 17, 32; and see Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319, [74] and the cases there cited]. It involves the manifestation, by words or conduct, of a party’s intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with his obligations [Shevill v Builders Licensing Board (1982) 149 CLR 620, 625-6]. As Atkin LJ said in Spettabile Consorzio Veneziano di Armamento e Navigazione v Northumberland Shipbuilding Co Ltd (1919) 121 LT 628 (at 634) (in a passage that was approved by Singleton LJ in James Shaffer v Findlay Durham & Brodie [1953] 1 WLR 106 (at 116-117), which was in turn referred to with approval by Walsh JA in Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126, (at 140)):

Johnstone v Milling

Bradley v H. Newsom, Sons, & Co. Limited

38 Mere uncommunicated intention to repudiate – however firm – is not repudiation; the conduct must be such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it [Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 658].

39 In the 28 September 2004 letter, after the opening remarks (which occupy the first page and a quarter), Lawfund wrote (emphasis added):

it is desirable -- we think from the point of view, probably, of both shareholders -- to end the relationship between the shareholders of Lawfund Leasing Pty Limited and wind up the company.

we offer the following. This proposal is made on a without prejudice basis, with the intent that we can manage everything that needs doing without acrimony.

40 The letter then sets out the proposal under a series of enumerated headings, including:

Winding up Lawfund Leasing Pty Ltd and Distributing Assets

5. We propose that Lawfund Leasing Pty Ltd cease trading on 31 October 2004 and its assets dealt with as follows:

…

5.7 We would ask that you vacate the office premises by 31 October 2004.

41 The letter concludes:

Whilst appreciating that I have taken a long time to come back to you … I would be grateful to hear from you as soon as possible. Again my intention is to minimise disruption, of whatever kind, to both businesses.

42 It is true that some aspects of the letter suggest that termination is a fait accompli: the statement “In order to make the transition as friendly as possible and to minimise interruption to revenue streams …” apparently assumes that there will be a termination, as does “and to help you see that this is not necessarily the end of the world”, and the concluding sentence “Again my intention is to minimise disruption, of whatever kind, to both businesses”. But there are other, contrary indications. Most importantly, the letter does not contain an express statement that the relationship is terminated. It is couched as an offer. Many – although not all – of its terms are expressed conditionally – “you would …”. And as it invited a response, it did not purport to be the last word on the topic. The proposal that Ms Ward vacate was one of the terms of the proposal contained in clause 5; it was expressed as a conditional request and was not, as Ms Ward asserted, an eviction notice.

43 In substance, the letter conveys a strong view that the joint venture agreement should be terminated, coupled with a ‘without prejudice’ proposal for achieving that end and a request that Ms Ward respond as soon as possible. But it was not an absolute or total refusal to perform the joint venture agreement, nor a declaration of an intention not to carry it out, or of an intention to treat Lawfund’s obligations as altogether at an end. It was not a termination, but an offer to negotiate an exit strategy. Accordingly, even if Lawfund were not entitled to terminate, the 28 September 2004 letter was not repudiatory.

44 Gilbert + Tobin replied, on behalf of Ms Ward, by letter dated 22 October 2004, which Ms Ward instructed not be delivered before 25 October – after she had removed the business from Lawfund’s premises to 270 Norton Street. The reply was relevantly as follows:

We have been provided with a letter from Lawfund Australia to our client dated 28 September 2004 which outlines some of Lawfund Australia's issues with our client. The letter inappropriately threatens, for no compensation and in breach of the agreement between the parties, to unilaterally wind up the Company on 31 October 2004. …

As you would appreciate, this correspondence is of significant concern to our client and is an entirely inappropriate way to address a business partner. …

Lawfund Australia has no entitlement to the relief sought in the letter and seeking to exclude our client on one month's notice from the business she has established is extraordinary.

45 This letter unequivocally evinced an intention to continue with performance of the agreement. By it, Ms Ward elected to affirm the joint venture agreement. Accordingly, in those circumstances, even if Lawfund’s 28 September 2004 letter had been repudiatory, any such repudiation was “writ in water”.

46 It follows that the repudiation case fails: primarily, because either joint venturer was entitled to decide at any stage, at least on reasonable notice, that it no longer wished to be associated with the other, and the time allowed was reasonable; secondly, because the letter did not convey a definite determination not to perform Lawfund’s obligations, but was an offer to negotiate the terms of an “exit strategy”; and thirdly, because even if it were repudiatory, Ms Ward elected to affirm.

47 In her cross-claim, Ms Ward alleged several other breaches of contract. These were not addressed in Mr Evans’ submissions, and may be disposed of shortly.

48 The first alleged breach was that Lawfund purported to give Ms Ward directions to participate in certain activities of Lawfund, even though she was not an employee. This allegation is misconceived in law and unfounded in fact. First and foremost, no contractual promise bound Lawfund to refrain from purporting to give directions, even though it had no authority to direct Ms Ward as if she were its employee. Had Lawfund purported to give directions as if it were Ms Ward’s employer, it would not thereby have broken any contractual promise; Ms Ward was simply not bound to obey them. Secondly, the evidence does not establish that Lawfund purported to give any such direction. The closest the evidence approaches it is the requests to Ms Ward that she attend the “Open Up” sessions – a staff development activity in which Lawfund staff were encouraged to speak openly about their feelings – and the expressions of disappointment by Mr Barlow, a Lawfund director, that she did not; but a strongly expressed wish expressed by one joint venture partner to another to participate in an activity is not a direction, let alone a breach of contract. Thirdly, it is impossible to see what damage resulted.

49 The second alleged breach was that Lawfund failed to provide adequate office space and support for Lawfund Leasing. Ms Ward’s email of 29 August 2002 raised the matter:

I would need to be assured of the availability of necessary office space from which to effectively operate the leasing division from. I suggest a self contained office for my own use in this way addressing the confidentiality aspect (of the trading venture entity and administration) as distinct form the day-to-day processing area.

50 So far as a self-contained office is concerned, that was a suggestion, not a stipulation. The only response – attributed by Ms Ward to Mr Carrero, was that there was not space to provide a self-contained office at present, “but we are expanding our premises here and we will be able to accommodate you in the near future”. Although, particularly in the second half of 2004, Ms Ward was raising with Lawfund the need for more room, the evidence does not establish that Lawfund Leasing was not provided the necessary space from which to operate. The portion of the allegation to the effect that Lawfund failed to provide ‘adequate support’ lacks particularity, does not obviously relate to any express term of the joint venture agreement, and is not sufficiently made good by any evidence.

51 The third breach alleged is that Lawfund conducted a leasing business in competition with Lawfund Leasing. It is no doubt a breach of a partner’s fiduciary obligation to carry on business during the joint venture in competition with it [(NSW) Partnership Act 1892, ss 29, 30; Glassington v Thwaites (1822) 1 Sim & St 124; 57 ER 50; Gibson v Tyree (1900) 20 NZLR 278; Birtchnell v Equity Trustees]; and it is implicit that a joint venture partner will not compete with the joint venture business during the subsistence of the joint venture [United Dominion Corporation v Brian, 11]. However, there is no suggestion that Lawfund operated a competing business prior to October 2004. Sometime after October 2004, it established a lease finance brokerage, under its Probitas brand name, which serviced clients of Lawfund members, in the same field as that in which Lawfund Leasing had operated. The question whether, after October 2004, Lawfund’s surviving fiduciary obligations as a former joint venture partner precluded it from doing so is more conveniently considered in connection with the respective rights and obligations of the parties after termination, below.

52 Accordingly, neither repudiation, nor any other breach before termination of the joint venture, has been established.

Is Lawfund liable to pay damages for misleading and deceptive conduct?

53 Ms Ward contends that in conversations prior to 27 August 2002, and in the letter of that date itself, Lawfund made representations that were misleading and deceptive, in contravention of (CTH) Trade Practices Act 1974, s 52. In the Cross-claim, three misrepresentations were alleged:

54 However, in closing submissions, the matter was put, somewhat more generally, as a representation that the lease finance business to be operated by Lawfund Leasing would commence in New South Wales but was to be developed into a nationwide business. The other representations alleged in the cross-claim were not addressed in submissions.

55 Lawfund denies having made the first alleged representation, which was particularised as a representation made by Mr Carrero on or about 13 May 2002. According to Ms Ward, there was a conversation between her and Mr Carrero to the following effect:

‘I am looking at sustainability. I want to expand my business interests. Aligning myself with one of the big mortgage aggregators would increase my income and the value of my interest in the business.’

‘Okay. Why don't you put together a model for Lawfund Leasing that you think would work? The issue is how the commission would be broken up. We can use the 50 – 50 model because ….’

56 Mr Carrero’s version is not materially different:

: ‘I am looking at sustainability. I don’t always want to be doing leasing by myself. Aligning myself with one of the big mortgage aggregators would give me sustainability. I also live at the Italian Forum which as you know is only about 100 meters from you. Perhaps we can take this further.’

: ‘Yes, sure. Why don't you put together a model for Lawfund leasing that you think would work? The issue is how the commission would be broken up. We can use the 50%/50% model as there are….’

57 No such representation as alleged is conveyed by that conversation. Mr Carrero’s acknowledgment of Ms Ward’s expressed desire for a long term and sustainable relationship is not a representation that there will be such a relationship.

58 Lawfund admits having made the second alleged representation – that it was looking for someone to build the leasing business nationally, starting in Sydney. But, as a representation as to Lawfund’s then state of mind, there is not the slightest reason to doubt that it was true: all the evidence points to that being exactly what Lawfund was looking for, and that it did not eventuate does not falsify the representation as one of Lawfund’s existing state of mind when it was made. (Neither in pleadings nor in submissions did Ms Ward invoke Trade Practices Act, s 51A).

59 Lawfund denies having made the third alleged representation – that Lawfund would enter into and comply with the terms and conditions of the joint venture agreement. If intended as an allegation that, at the time of entry into the joint venture agreement, Lawfund thereby represented that it then had the intention of performing its obligations under that agreement – a representation as to Lawfund’s then state of mind – there is nothing to suggest that Lawfund did not then entertain such an intention. If intended to convert each of the alleged contractual promises into a representation that Lawfund would comply with them in the future, so as to be a representation as to a future matter, then neither in pleadings nor in submissions was Trade Practices Act, s 51A, invoked. The better view is that if reliance is to be placed on s 51A, it must be pleaded, or at least the applicant must indicate an intention to rely on the section [State of Western Australia v Bond Corporation Holdings Ltd (1991) 13 ATPR ¶41-081, 52,279 (French J); O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455]. But assuming that it was intended to rely on s 51A, nonetheless it does not follow that every contractual promise can be treated as an implied representation of the kind referred to in s 51A, as has been explained by Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217, 238:

If a promissory statement is to be the subject of complaint, it is also necessary to ask how did it amount to misleading or deceptive conduct. It is wrong to view every contractual obligation as an unqualified promise to perform the stipulated act. Indeed it is rare that a contractual promise is not in some way qualified by some reciprocal obligation to be performed by the promisee or by some other circumstances. If the promise induced the other party to enter into an agreement, as one can readily accept it would, then it is that promise and the circumstances then surrounding it which must be examined. The promise can only be said to be misleading or deceptive if it was in some way inaccurate; otherwise every unfulfilled mutual contractual promise will constitute misleading or deceptive conduct, a consequence which I cannot believe those who drafted the Act intended. If intention be relevant, the promise may be misleading if the promisor had no intention to fulfil that at the time it was made and accepted. If intention be irrelevant, then the promise may be misleading if the promisor had no ability to perform it at the time. If one were to go to the breach to determine whether there has been misleading or deceptive conduct, the breach may, but only may, provide some evidence from which one could infer that the promisor never intended or never had the ability to fulfill the obligation. Otherwise, if one combines promise and breach, the question must arise: in what way has the plaintiff been deceived or led into error? If it is said that he was misled into entering into the contract, then the breach is irrelevant, for that breach could have played no part in misleading him.

60 As Mason P pointed out in Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290, [162ff], Futuretronics was referred to with approval by Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470, 506, and by Owen J in the Supreme Court of Western Australia in Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419, (at 434), who considered and adopted Ormiston J's reasoning to hold that a contractual promise does not, of itself, carry with it any representation as to the fact or conduct to which it relates, and that it is necessary to examine the contractual promise in the light of the circumstances surrounding the making of the offer and the circumstances as they have arisen, to see whether the conduct can be categorised as misleading or deceptive. Mason P continued:

[165] S51A provides a method for considering whether a representation with respect to any future matter shall be taken to be misleading. Absence of reasonable grounds for making the representation will deem the representation to be misleading (subs(1)); and for that purpose, a corporation shall be deemed not to have reasonable grounds for making a representation unless it adduces evidence to the contrary (subs(2)).

[166] But this provision does not say in what circumstances a representation as to a future matter shall be implied for a contractual promise ( Futuretronics at 239). A fortiori, it does not import into every contractual promise an implied representation as to intent and capacity to perform; nor does it prove that any such implied representation was relied upon by the other contracting party.

[167] I readily accept that it will be comparatively easy to establish that a contracting party is implicitly representing a present intention to perform it according to its tenor. If the other party can establish causation and loss then damages should ensue, although there is usually little point in addressing such a claim because the law of contract will compensate the innocent party for the consequences of non-performance without even having to prove misleading intent from the inception.

[168] But when one turns to an alleged implicit representation as to capacity to perform things are not so simple, nor should they be. There are policy reasons for restraint. The law arms the parties to a contract with rights to damages and other forms of relief if breach occurs or is threatened. A complex set of common law, equitable and statutory rights are superimposed on the terms of the bargain chosen by the parties. That bargain may have the simplicity as a contract to sell a loaf of bread or the complexity of a building agreement such as the one in question in this case.

[169] Why should the parties be found or presumed to have intended more by what they expressly represented and understood? Of course, s52 goes beyond intentionally misleading or deceptive conduct, but it does not follow that the innocent party understood or relied upon anything more than the express representations and the usually adequate consequences stemming from breach of them stemming from the law touching the mutually chosen regime, ie contract.

[170] As Ormiston J put it in Futuretronics (at 239):
... the mere acceptance of the promise by a promisee cannot ordinarily be characterised as being led into error. In the usual case the consequence would be that the promisee had enforceable rights. It is hard to believe that normally any promisee with ordinary contractual rights would then describe himself as having been deceived or misled.
His Honour added:
It is only when it became apparent that the promise cannot be enforced, because, for example, it is either unenforceable or the promisee's rights are valueless or diminished, that one may return to the original promise to inquire whether that promise was of so little substance that it can be concluded that the promisee was indeed misled or deceived in the first place, at the time of his acceptance of the promise. Thus it may then be seen that the promisor originally had no intention to perform his promise or that he originally had no capacity or ability to perform it.

[171]

ab initio

61 Even if there had been a non-fulfilment by Lawfund of its contractual promises contained in the joint venture agreement, there is no basis for concluding that Lawfund neither intended to perform them at the time they were made, nor that it made such promises knowing that it did not have the ability or capacity to perform them.

62 Finally, as to the alleged representation relied on in Ms Ward’s submissions – that the lease finance business to be operated by Lawfund Leasing would commence in New South Wales but was to be developed into a nationwide business – it is true that the 27 August 2002 letter contains the following:

As you know these arrangements are just for Sydney to start with but we are keen to grow the Leasing Division in Melbourne, Brisbane and Perth as soon as Sydney is well underway.

63 But not everything in the 27 August letter (or the subsequent communications) is a contractual term, and that paragraph – which expresses a desire to grow the business in other capitals once the business in Sydney is well underway – contains no contractual promise by either party to the other; it is an expression of Lawfund’s aspiration, not of a promise. There is no basis for concluding that Lawfund did not then have that aspiration.

64 Ms Ward’s misleading and deceptive conduct case is misconceived, fundamentally because it would treat expressions of aspiration and intent as promises.

What were the rights and obligations of the parties upon termination of the joint venture to the name, the database and the clientele?

65 In the derivative action brought by Lawfund on behalf of Lawfund Leasing against Ms Ward, pursuant to Corporations Act, ss 236 and 237, Lawfund claims compensation (pursuant to Corporations Act, s 1317H(1)) and/or an account of profits against Ms Ward and A-Ward, for alleged contraventions by Ms Ward of Corporations Act, ss 181, 182 and 183 – in which A-Ward is said to have been a person involved in those contravention – each of those sections being a civil penalty provision [Corporations Act, s 1317E(1)]; and for breaches of Ms Ward’s fiduciary duty as a director of Lawfund Leasing, in respect of which A-Ward is said to have been a knowing recipient, so as to attract accessorial liability. The contraventions alleged pertain to Ms Ward’s conduct of the business of Lawfund Leasing from October 2004, culminating in the effective transfer of the business to A-Ward in August 2005. Against that, Ms Ward contends that, by carrying on the business of Probitas Leasing in competition with Lawfund Leasing after the termination in late 2005 of the joint venture, Lawfund was in breach of its fiduciary duties in relation to the joint venture, is disentitled to any equitable relief by unclean hands, and/or in any taking of accounts must bring to account the amount that has been earned by Lawfund as a result of that leasing business. These competing contentions require consideration of the fiduciary obligations of the joint venture partners in the context of an incorporated joint venture following termination and before final settlement of accounts.

66 I have concluded, above, that the 28 September 2004 letter did not of itself operate to terminate the joint venture; nor was it terminated by acceptance by Ms Ward of any repudiation by Lawfund. But Ms Ward’s removal of the business from Lawfund’s premises, without Lawfund’s knowledge or consent (its proposal was that she vacate and that Lawfund Leasing be wound up, not that she take the joint venture business with her) was inconsistent with subsistence of the joint venture. Thereafter, she conducted herself in a manner manifestly inconsistent with the subsistence of any residual trust and confidence between her and Lawfund. In particular, Ms Ward:

· Procured Lawfund Leasing to enter into a sub-lease with A-Ward in respect of the premises at 270 Norton Street;

· Procured the registration as a trademark of the name “Lawfund” by Lawfund Leasing;

· Procured the appointment of an additional director, her associate Mr Coveny, without notice to Lawfund;

· Procured the issue to Mr Coveny of a 10% shareholding in Lawfund Leasing, thus diluting Lawfund’s shareholding, and made provision for payment to Mr Coveny of $75,000 director’s fees;

67 In my view, the parties had abandoned the joint venture agreement by October 2004. Both parties treated it as no longer on foot [cf DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 434]. At the very latest, Lawfund’s institution of proceedings for the winding up of Lawfund Leasing on the just and equitable ground, on 21 December 2004, terminated the relationship.

68 Reference has already been made to the fiduciary duties owed by each of Lawfund and Ms Ward to each other and to Lawfund Leasing as parties to a subsisting joint venture. Termination of a partnership alters the relationship and obligations of the partners, although it does not bring to an end all the fiduciary obligations which attend the relationship of partnership – and in particular those relating to partnership property, including commercial opportunities: as Deane J said in Chan v Zacharia (1984) 154 CLR 178 (at 197):

The relationship between the partners was curtailed and altered by the dissolution of the partnership. It did not however cease. In particular, and with the exception of the “goodwill” of the practice (as to which see cl.26(a), above), each doctor, by reason of his position as a former partner, remained under fiduciary obligations in respect of the partnership property which was to be realized and applied in paying or discharging partnership debts and liabilities and the expenses of and incidental to the winding up of the partnership affairs …

69 In Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 WLR 605, 613; [1974] 1 All ER 1239, 1249, Pennycuick V-C said:

What then is the position when a partnership is dissolved but there remains property of the former partnership which has not been realised? The general principle, I think, is correctly stated in Lindley [13th Edn (1971), pp 615, 616] in the following terms:

Upon the dissolution of a partnership, and in the absence of any agreement to the contrary, it has been seen … (4) That, for the purposes of winding up, the partnership is deemed to continue; the good faith and honourable conduct due from every partner to his co-partners during the continuance of the partnership being equally due so long as its affairs remain unsettled; and that which was partnership property before, continuing to be so for the purpose of dissolution, as the rights of the partners require.

It necessarily follows, I think, that where the property of a dissolved partnership includes a leasehold interest then, subject to any other arrangement which may be made between the partners concerning that interest, each of the former partners owes the same obligation to the other former partners in respect of that interest as he did while the leasehold interest remained the partnership property and, accordingly, he is under the same limitations with regard to the purchase of the reversion as he would have been had the partnership still been subsisting.

70 Thus if, after termination, one partner carries on the partnership business using the capital of the other, that partner is liable to account to the partnership [Pathirana v Pathirana [1967] 1 AC 233, 240; Lindley & Banks on Partnership, 18th Edition, [16-27]], and any opportunities such as renewals of leases or contracts which arise must be exploited, if at all, for the benefit of the partnership [Chan v Zacharia; Pathirana v Pathirana; Don King Productions Inc v Warren [2000] Ch 291], although a partner may after termination set up his or her own business and develop new business in competition with the former partnership, exploiting new clients and contracts, as opposed to renewing those of the former partnership [In re David and Matthews [1899] 1 Ch 378; Don King Productions, 339, [37]]). These cases illustrate the principle that, generally speaking, on the breakdown of a partnership — and, by analogy, on the breakdown of a joint venture short of partnership, but in which there are fiduciary obligations — one partner or joint venturer is not entitled to take for itself the assets of the joint venture, including the name, the business and the goodwill [Liquor National Wholesale Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 392, [41]].

71 In the absence of agreement, undivided assets of a partnership that are not sold after dissolution belong to the partners in common, and neither is entitled to prevent the other from using them; this includes the firm name, so long as its continued use is not misleading [Banks v Gibson (1865) 34 Beav 566; Chappell v Griffith (1885) 53 LT 459; Burchell v Wilde [1900] 1 Ch 551; Scott v Bail [1914] VLR 270]. Whether after termination a former partner can exploit existing clientele of the partnership for his or her own separate benefit depends on whether or not the goodwill is to be sold (to a third party or to one of the partners), as explained by Bowen CJ in Eq in Alcock v Robb (1978) 2 BPR 9625 (at 9627):

The right to use a partnership name is an element in goodwill. On dissolution, in the absence of express provision in the partnership agreement covering the matter, the prima facie right of the partners is to have the partnership assets, including goodwill, sold, and the proceeds applied first in discharging liabilities of the partnership and then by way of distribution to the partners. In the case where goodwill is sold following dissolution, the purchaser will be entitled not only to represent himself as the successor of those who formerly carried it on, but also to use the name, and to restrain others from using it.
...
If goodwill including the firm name is to be sold, no previous partner will be entitled thereafter to use the firm name. Such a right would be inconsistent with the right of the other partners to have the goodwill sold for the common benefit of all.
On the other hand, if the goodwill is not to be sold, either because the partnership agreement contains a contrary provision, or because the partners agree on terms of dissolution which preclude its sale, or because they act in such a way, as, for example, by dividing the clients between them, as to render the sale of goodwill impracticable, then each partner may continue in business in competition with his former partners; each may represent himself as ‘late of’ the old firm; and each may use the old firm name, provided he does not hold out that the other members of the old firm are still in partnership with him, and does not use the name in such a way as to expose his former partners to the risk of liability: Banks v Gibson (1865) 34 Beav 566; Burchell v Wilde [1900] 1 Ch 551; Chappell v Griffith (1885) 53 LT 459; and Scott v Bail [1914] VLR 270; cf Hill v Fearis [1905] 1 Ch 466 and In re David and Matthews [1899] 1 Ch 378; and see Lindley on Partnership , 13th Ed, pp 469-70; Halsbury’s Laws of England 3rd Ed vol 28 pp 560, 580, 582.

72 A case will be in the second category – that is, where the goodwill is not to be sold – if the partnership agreement provides for the goodwill to revert to the several partners on termination, as was the case in Chan v Zacharia (where cl 26 made just such provision), but not in Don King, in which Morritt LJ cited (at 333, [20]), with apparent approval, the following passage from the first instance judgment of Lightman J (emphasis added):

The obligation under clause 7.2 is that the [management and promotion] agreements shall be held to the benefit of the partnership ‘absolutely’. Under ordinary partnership principles, a partnership acquires an absolute interest in assets purchased or acquired or held by a partner or other fiduciary for its benefit. There is no hint, still less any clear manifestation of intention, in the second agreement that the interest of the partnership is determinable, or that there is any right of reverter in favour of Mr. Warren, on dissolution.

73 It will also be in the second category if the partners subsequently agree – upon termination – on a division of clientele between them, rather than sale [cf Metlej v Kavanagh [1981] 2 NSWLR 339, in which following the dissolution of their firm, the former partners agreed to divide the office space and carry on their separate legal practices in different parts of the premises].

74 In the present case, clause 10 of the 27 August 2002 letter contained an indication of the parties’ agreement as to what was to happen with clients upon termination – Ms Ward was to be entitled to retain the clients she brought to the joint venture, and Lawfund’s members were to retain the clients they brought. The parties intended that, in the event of termination, each party be at liberty to carry on business and service that party’s referral base; to establish its own business, not only to build up a new client base, but also to service existing clients. This was the type of “reverter” that was referred to but absent in the case of Don King. To that extent, the case was one of the second category referred to by Bowen CJ in Eq in Alcock v Robb. Accordingly, upon termination of the joint venture, Lawfund was entitled to establish a business under the name “Probitas”, and Ms Ward would have been entitled to establish a business under the name of A-Ward, operating in the field of lease finance broking, and to exploit in Ms Ward’s case the clients she had introduced, and in Lawfund’s case those referred by its members, to the joint venture. But neither was entitled to carry on a business using the name, logo, goodwill and capital of the joint venture, without accounting for it, nor to appropriate the business of the joint venture for its or her own benefit.

75 The “firm name” was Lawfund Leasing. Whatever might be said of that combination, the word “Lawfund” was, of course, the name of the plaintiff, which it had used for years in connection with its mortgage aggregation business, which it continued to use during the subsistence of the joint venture, and which no doubt had goodwill attached to it. The parties obviously did not intend that Lawfund be no longer entitled to use that name – it continued to use it without objection during the period of the joint venture to October 2004 and thereafter – and cannot have intended that upon termination of the joint venture Lawfund would no longer be entitled to use it. For Ms Ward to claim it exclusively for Lawfund Leasing was entirely unjustified. The parties have reached agreement that Ms Ward should assign the registered trademark “Lawfund” to Lawfund. Although the trademark is registered not in the name of Ms Ward, but in that of Lawfund Leasing, nonetheless, in circumstances where the persons beneficially interested in Lawfund Leasing are before the Court, as is the company itself, and I am satisfied that Lawfund Leasing was not entitled to appropriate to itself the name “Lawfund” as a registered trademark. I am prepared to declare that Lawfund Leasing holds the mark upon trust for Lawfund, and to order that Lawfund Leasing assign it to Lawfund, and that Ms Ward do all things necessary on her part to produce that result.

76 The database now in existence is a combination of Lawfund’s original list of members, clients introduced by Ms Ward, and clients acquired during the joint venture. Although it was originally pleaded that Lawfund provided the database to Ms Ward in circumstances that attracted obligations of confidence, that contention was not pressed at the hearing. In circumstances where the business is not to be sold, and the parties are entitled to set up in competing businesses, and in the absence of any obligation of confidentiality, it seems to me that the database of the former joint venture business is undivided property of the joint venture, and it is not apparent why both parties should not be entitled to use it.

77 Consistent with the principles to which I have referred, Lawfund was entitled to establish its own business to service the clientele that it was entitled to retain. It follows that I am not satisfied that, by establishing Probitas Leasing, Lawfund carried on business in competition with the joint venture at a time when its fiduciary obligations precluded it from doing so. Following termination, it was entitled to establish and carry on a competing business to service the clientele that the parties always envisaged it would retain in the event of termination.

Is Ms Ward liable to pay compensation or account for profits for breach of her duties as a director or joint venture partner? If so, is A-Ward implicated? Or is Lawfund debarred from relief by “unclean hands”?

78 In order to have an inquiry as to compensation or an account of profits, Lawfund must establish a breach or breaches in respect of which the compensation is to be awarded or the account taken. The breaches alleged against Ms Ward relate to two periods: first, October 2004 to August 2005, and secondly, August 2005 onwards.

79 In respect of the period 25 October 2004 until August 2005, Lawfund argued that, though an equal shareholder in Lawfund Leasing, it received no share of its profits, by way of the distribution of dividends or otherwise, notwithstanding that (according to the letter from her solicitors Gilbert + Tobin of 22 October 2004) Lawfund Leasing was operating profitably, and she had de facto management control of it. It is said that this amounted to Ms Ward operating the business of Lawfund to gain an advantage for herself.

80 However, I do not accept that a breach of duty is established by the non-declaration and non-payment of a dividend. If profits were available but not distributed by way of dividend, then they will remain in the company as accumulated profits, available for the shareholders upon liquidation. Moreover, the 2005 accounts do not establish that there were profits available for distribution. Although that was only after expenses that included $75,000 director’s fees for Mr Coveny, and $30,000 legal expenses apparently in respect of the defence of these proceedings, and while there is evidence of other potential breaches of duty during this period – including most strikingly the issue of additional shares – these matters were not pleaded as breaches of duty, and in those circumstances it would be unfair to rely on them for present purposes – and I hasten to add that counsel for Lawfund did not suggest otherwise.

81 Mr Einstein ultimately agreed that the derivative action depended on the second period of alleged contraventions, being those pertaining to the termination of the business of Lawfund Leasing and its transfer to A-Ward in and after August 2005. Ms Ward herself deposed:

Following Lawfund Leasing ceasing to operate from the premises of Lawfund Australia it continued to operate from 270 Norton St Leichhardt until August 2005 when it ceased operating. Since August 2005 the business formerly conducted by Lawfund Leasing has been conducted by A-Ward Finance Pty Limited trading as Multilease.

82 And, further:

However, since Lawfund Leasing stopped operating in August 2005, A-Ward Finance has not traded under the use of the name Lawfund, however the Lawfund Leasing website ( automatically directs people to the Multilease website … which since August 2005 has not had any reference to Lawfund Leasing.

83 Not only did Ms Ward use Lawfund Leasing’s website to redirect business to her own company, she also continued to use the Lawfund logo – there is evidence of its use on a newsletter as late as 17 April 2007. There is no suggestion that any consideration was paid to Lawfund Leasing for the transfer of its business.

84 While equitable obligations arise in an incorporated joint venture additional to the duties imposed in any event by company law, they do not supplant the statutory duties of a director, although they may to some extent inform the content of those duties. The circumstance that, upon termination of a partnership, the partners may at least in some circumstances be at liberty to set up in business and even exploit existing clients of the joint venture, does not relieve a partner/director from his or her obligation as a director to act honestly in the interests of the company as a whole. In the circumstances of this case, Ms Ward may well not have breached her duties as a director had she after termination simply set up, for her own benefit, a competing business, using her own capital and clientele. But it cannot have been bona fide in the interests of Lawfund Leasing as a whole for Ms Ward to cause it to cease trading, and its business to be taken over by A-Ward, for no consideration. Such a transfer was in Ms Ward’s interests, but contrary to those of the company as a whole. By causing Lawfund Leasing to cease operating and in effect to transfer its business undertaking to her own company A-Ward, Ms Ward made use of her position as an officer of Lawfund Leasing for an improper purpose and other than in good faith and in the best interests of Lawfund Leasing, in contravention of s 181(1), and made improper use of her position as a director of Lawfund Leasing to gain an advantage for herself and her company A-Ward and to cause detriment to Lawfund Leasing in contravention of s 182(1).

85 A-Ward was Ms Ward’s corporate alter ego; she was its officer and agent; her knowledge was its knowledge; and it was the beneficiary of her contraventions with that knowledge. A-Ward was, therefore, a “person involved” in her contraventions, being “knowingly concerned” in them.

86 Ms Ward’s breach of duty resulted in Lawfund Leasing being deprived, without compensation, of the value of its business as at August 2005. Alternatively, Ms Ward and/or A-Ward have received the profits of that business since that date. Lawfund Leasing is entitled to compensation for the loss or an account of the profits. However, Ms Ward was entitled to exploit for her own benefit the clients whom she had introduced to Lawfund Leasing, and the compensation she and A-Ward must pay, or profits for which they must account, to Lawfund Leasing, should exclude the value of those clients or the profits generated by them. Mr Einstein accepted that any liability of Ms Ward to account would be limited to profits generated by referrals other than those from her own client base.

87 I do not accept that Lawfund must do equity by offering to bring to account the profits it has derived from the Probitas leasing business since October 2004, nor that it is debarred from relief by lack of clean hands by reason of its having carried on that business. First, because in substance it is Lawfund Leasing, not Lawfund, that is claiming relief. The derivative action, though brought by Lawfund as plaintiff, is brought on behalf of Lawfund Leasing – not for Lawfund’s own benefit. Ultimately, Ms Ward will recover (as a 50% shareholder) one half of the compensation she must pay to the company. Secondly, because the relief is claimed under the Corporations Act, and the equitable maxims do not constrain the availability of statutory remedies. And thirdly, because – for reasons already explained – Lawfund was entitled, after termination of the joint venture, to establish its own business under its own name to provide a similar service. The difference between Lawfund’s position and that of Ms Ward is that upon termination, Lawfund used its own resources and its own capital to set up a business to service the clientele it retained, and others; whereas Ms Ward used the capital and resources of the joint venture to carry on business.

88 Having found liability on the basis of the Corporations Act, it is unnecessary to consider whether liability in respect of the same conduct might also be supported on the basis of breach of fiduciary duty.

Should Lawfund Leasing be wound up on the just and equitable ground? Or has Lawfund engaged in oppressive conduct so as to be amenable to relief under Corporations Act, s 232, and to make a winding up inappropriate?

89 Where, in a company which is in substance an incorporated partnership, in which mutual confidence has been the essence of the relationship, that confidence fails so that the “partners” can no longer work together in the way originally contemplated, then it is appropriate – and just and equitable – that the relationship be ended and the company wound up [Ebrahimi v Westbourne Galleries Ltd]. In Thomas v Mackay Investments Pty Ltd (1996) 22 ACSR 294, Owen J observed (at 300–301):

Where there is a breakdown in a relationship of mutual trust and confidence which was the foundation of an understanding by which the operations of the company were to be governed the court can order that the company be wound up. These have become known as the quasi-partnership cases. The reference to partnership can be misleading. The company is just that, a corporate structure. It is not necessary to show that any partnership agreement or deed was entered into before the principle can be invoked. However there are circumstances in which the relationships between the company members cannot be accurately resolved by the application of strict principles of company law. In those cases it may be appropriate to superimpose equitable considerations on legal principles to give effect to the agreement or understanding which exists between the parties.

90 I have already concluded that Lawfund Leasing is a “quasi-partnership” corporation to which the principles in Ebrahimi apply. It is manifest that the relationship of trust and confidence between Lawfund and Ms Ward, on which Lawfund Leasing was based, has broken down. Ordinarily it would follow that it would be just and equitable that the company be wound up. However, Ms Ward submitted that it would be unfair to her to make such an order, and that instead Lawfund should be required to purchase her shares at valuation.

91 Ms Ward contends that by terminating the joint venture in the manner and circumstances in which it did, and bringing winding up proceedings, Lawfund has acted in a manner prejudicial and discriminatory, and commercially unfairly, to Ms Ward. In particular, it is said that the joint venture was profitable; that Ms Ward had effectively abandoned her previous business structure and concentrated on building up Lawfund Leasing; that Lawfund had not acted fairly in presenting its genuine concerns – if it really had any – to her; that the directors of Lawfund had not acted “properly” with respect to the joint venture vehicle and Ms Ward; and that Lawfund’s actions were intended to destroy the business of Lawfund Leasing and deprive Ms Ward without commercial justification, and to poison her relationship with Lawfund members. On that basis she claims, pursuant to Corporations Act, s 232, an order that Lawfund purchase her shares.

92 Insofar as Ms Ward alleges that Lawfund has acted in the affairs of Lawfund Leasing in a manner oppressive or unfairly prejudicial to her, it is to be observed that, during the period until September 2004 while Lawfund Leasing traded from Lawfund’s premises, Ms Ward was the managing director of Lawfund Leasing; and between October 2004 and August 2005, when she caused Lawfund Leasing to cease trading, the company was under her practical control, to the exclusion of Lawfund, who had no representative on the board after September 2004. In those circumstances it is difficult to comprehend the basis of the oppression allegation, which must be founded upon Lawfund’s conduct of Lawfund Leasing’s affairs.

93 I can see nothing oppressive, or unfairly prejudicial, or commercially unfair, in Lawfund’s conduct of the affairs of Lawfund Leasing, so far as it did conduct those affairs. If there was any conduct that would attract that description, it would be Ms Ward’s conduct of Lawfund Leasing’s affairs after September 2004, and in particular the appointment of an additional director without notice to Lawfund, the issue of additional shares contrary to the corporate Constitution diluting Lawfund’s shareholding, and the cessation and effective transfer of its business to A-Ward.

94 Once again, Ms Ward’s real complaint is that Lawfund no longer wished to be associated with her in a joint venture, and terminated the joint venture; but once again, the observations of Buchanan JA in the passage already cited from Johnson v Snaddon are pertinent. It is not oppressive for one partner to decide that he or she no longer wishes to be associated with the other, and to take the requisite steps to bring about that result.

95 I am, therefore, quite unpersuaded that Ms Ward is the victim of oppression such as would justify declining to make a winding up order.

Conclusion

96 My conclusions may be summarised as follows.

97 Lawfund did not repudiate or otherwise breach the joint venture agreement while it subsisted. The joint venture between Lawfund and Ms Ward, though incorporated in form, was in substance a partnership, such that fiduciary obligations were superimposed on the corporate relationship. However, those equitable obligations were not such as to oblige either party to maintain their relationship notwithstanding a loss of trust and confidence in the other. Either was entitled to terminate the joint venture on reasonable notice, if not at will, if it no longer wished to be associated with the other, and it was not a breach of the obligation of good faith for Lawfund to do so. Moreover, Lawfund’s letter of 28 September 2004 did not convey a definite determination not to perform Lawfund’s obligations, but was an offer to negotiate the terms of an “exit strategy”. Further, even if it were repudiatory, Ms Ward, by her solicitors’ response of 22 October 2004, elected to affirm. None of the other breaches of contract alleged by Ms Ward against Lawfund is established.

98 Lawfund did not engage in misleading and deceptive conduct. Ms Ward’s case in this respect is misconceived, fundamentally because it would treat expressions of aspiration and intent as promises.

99 The joint venture agreement was terminated by abandonment in or about October 2004. Upon termination of the joint venture, each partner was entitled to establish its own business, not only to build up a new client base, but also to service existing clients. But neither was entitled to carry on a business using the name, logo, goodwill and capital of the joint venture, without accounting for it, nor to appropriate the business of the joint venture for its or her own benefit.

100 Lawfund did not breach its fiduciary obligations as a joint venture partner after termination. Lawfund was entitled to establish a business under the name Probitas, in the field of lease finance broking, and to exploit the clientele referred by its members to the joint venture. Lawfund Leasing holds the trademark “Lawfund” upon trust for Lawfund. However, in circumstances where the business is not to be sold, and the parties are entitled to set up in competing businesses, and in the absence of any obligation of confidentiality, both parties remain entitled to use the database of the former joint venture business.

101 Ms Ward contravened her duties as a director and is liable to pay compensation or account for profits. Although Ms Ward would have been entitled to establish a business under the name of A-Ward, in the field of lease finance broking, and to exploit the clients she had introduced to the joint venture, Ms Ward remained bound by her duties as a director of Lawfund Leasing. While the non-declaration and non-payment of a dividend was not a breach of those duties, it was not bona fide in the interests of Lawfund Leasing as a whole for Ms Ward to cause it to cease trading, and its business to be taken over by A-Ward, for no consideration. By doing so, Ms Ward made use of her position as an officer of Lawfund Leasing for an improper purpose and other than in good faith and in the best interests of Lawfund Leasing, in contravention of s 181(1), and made improper use of her position as a director of Lawfund Leasing to gain an advantage for herself and her company A-Ward and to cause detriment to Lawfund Leasing, in contravention of s 182(1). A-Ward was a “person involved” in her contraventions, being “knowingly concerned” in them. Because Ms Ward was and is entitled to exploit for her own benefit the clients who she had introduced to Lawfund Leasing, the compensation she and A-Ward must pay or the profits for which they must account to Lawfund Leasing should exclude the value of, or profits generated from, those clients. Lawfund is not obliged to bring to account the profits it has derived from the Probitas business, nor do “unclean hands” deny it relief: first, because in substance it is Lawfund Leasing, not Lawfund, that is claiming relief; secondly, because it is claiming relief under the Corporations Act, which is not subject to the equitable maxims; and thirdly, because Lawfund was not precluded, after termination of the joint venture, from establishing its own business under its own name to provide a similar service.

102 Lawfund Leasing should be wound up on the just and equitable ground. Although on behalf of Ms Ward it was submitted that it would be unfair to her to make such an order, and instead that Lawfund should be required to purchase her shares at valuation, there is no basis for concluding that she is the victim of oppression such as to justify declining to make a winding up order.

Orders

103 There should be orders to the following effect, but I shall afford the parties an opportunity to speak to their form; it may (unless advertising is dispensed with) be necessary to defer making formal orders until after advertisement.

1. ORDER that the Cross-claim be dismissed.

2. DECLARE, pursuant to Corporations Act , section 1317E(1), that the Second Defendant Deborah Ward, in contravention of Corporations Act , sections 181(1) and 182(1), as a director of the First Defendant Lawfund Leasing Pty Ltd, in and about August 2004, failed to exercise her powers and discharge her duties in good faith in the best interests of that corporation and for a proper purpose, and made improper use of her position to gain an advantage for herself and the third defendant A-Ward Finance Pty Limited and to cause detriment to Lawfund Leasing Pty Limited, by causing it to cease trading, and its business to be taken over by A-Ward, for no consideration.

3. DECLARE, pursuant to Corporations Act , section 1317E(1), that the Third Defendant A-Ward Finance Pty Limited, in contravention of Corporations Act , sections 181(2) and 182(2), was a person involved in the contravention referred to in paragraph 2.

4. ORDER that there be an inquiry as to the compensation which the second and third defendants should pay to the plaintiff pursuant to Corporations Act, s 1317H, and that until further order the inquiry proceed before me.

5. BY CONSENT DECLARE that the First Defendant holds the registered trademark “Lawfund” upon trust for the Plaintiff.

6. BY CONSENT ORDER that the First Defendant assign the said trademark to the Plaintiff, and that the Second Defendant do all things and execute all documents and pay all moneys necessary on her part to produce that result.

7. ORDER that the First Defendant be wound up and that Bruce Gleeson be appointed liquidator.

8. ORDER that the Second and Third defendants pay the Plaintiff’s costs.

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Citations

Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd [2008] NSWSC 144

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CITATION:	Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd & 2 ors [2008] NSWSC 144
HEARING DATE(S):	4, 5, 6, 7, 8, 11, 14 February 2008
JUDGMENT DATE :	28 February 2008
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
DECISION:	The Plaintiff Lawfund did not repudiate or otherwise breach the joint venture agreement. Lawfund did not engage in misleading and deceptive conduct. After termination, Lawfund did not breach its fiduciary obligations by establishing its own business, Probitas Leasing. Lawfund is entitled to retain the name “Lawfund”, but both parties are entitled to use the database. The Second Defendant Ms Ward contravened her duties as a director of the joint venture vehicle, the First Defendant Lawfund Leasing, by terminating the joint venture business and transferring it to her own company the Third Defendant A-Ward, and is liable to pay compensation or account for profits. A-Ward was involved in her contravention. Lawfund is not precluded by unclean hands from claiming relief, nor required to bring to account the profits of its own business. Lawfund Leasing should be wound up on the just and equitable ground, and Ms Ward is not entitled to relief for oppression. Declarations of contravention of Corporations Act duties; inquiry as to compensation ordered; declaration of trust and order for transfer of trademark; cross-claim dismissed.
CATCHWORDS:	CORPORATIONS – incorporated joint venture – whether fiduciary obligations superimposed on corporate relationship – whether obligation of good faith precludes termination of joint venture – whether joint venture terminable on notice – rights of parties on termination of joint venture – whether upon termination of joint venture parties entitled to carry on separate businesses in competition with joint venture vehicle – whether one or other party entitled to name of firm – entitlements to undivided assets. - CORPORATIONS – Internal management – Directors – duties – statutory duties – where following failure of joint venture director terminates business of joint venture vehicle and transfers it to her own corporation – whether breach of director’s duty – Oppression – where corporation under management of alleged victim – whether desire of other party to wind up corporation oppressive - CORPORATIONS - External management – winding up – just and equitable ground – where substratum of trust and confidence underlying incorporated joint venture fails – whether company should be wound up - CONTRACT – Termination – repudiation – where party proposes termination of joint venture upon terms – whether repudiatory – election – where other party evinces intention to continue to perform contract – whether election to affirm – abandonment – where both parties treat agreement as no longer on foot – whether agreement terminated by abandonment - CORPORATIONS – Remedies – derivative action - compensation – profits – where plaintiff sues on behalf of corporation – where claim is for statutory relief - whether plaintiff can be debarred from statutory relief in derivative action by “unclean hands” - TRADE PRACTICES – Misleading and deceptive conduct – pre-contractual negotiations – expressions of aspiration and intent – whether representations as to future matters
LEGISLATION CITED:	(CTH) Corporations Act 2001 (CTH) Trade Practices Act 1974 (NSW) Partnership Act 1892
CATEGORY:	Principal judgment
CASES CITED:	Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 Alcock v Robb (1978) 2 BPR 9625 Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319 Banks v Gibson (1865) 34 Beav 566 Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384 Burchell v Wilde [1900] 1 Ch 551 Chan v Zacharia (1984) 154 CLR 178 Chappell v Griffith (1885) 53 LT 459 Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290 Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 Don King Productions Inc v Warren [2000] Ch 291 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Gibson v Tyree (1900) 20 NZLR 278 Glassington v Thwaites (1822) 1 Sim & St 124; 57 ER 50 In re David and Matthews [1899] 1 Ch 378 James Shaffer v Findlay Durham & Brodie [1953] 1 WLR 106 Johnson v Snaddon [2001] VSCA 91 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Liquor National Wholesale Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 392 Metlej v Kavanagh [1981] 2 NSWLR 339 MMAL Rentals Pty Ltd (ACN 008 293 490) v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 Mopeke Pty Ltd v Airport Fine Foods Pty Ltd [2007] NSWSC 153; (2007) 61 ACSR 395; (2007) 25 ACLC 254 Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455 Pathirana v Pathirana [1967] 1 AC 233 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Re a Company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961 Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126 Scott v Bail [1914] VLR 270 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419 Shevill v Builders Licensing Board (1982) 149 CLR 620 Spettabile Consorzio Veneziano di Armamento e Navigazione v Northumberland Shipbuilding Co Ltd (1919) 121 LT 628 State of Western Australia v Bond Corporation Holdings Ltd (1991) 13 ATPR 41-081 Thomas v Mackay Investments Pty Ltd (1996) 22 ACSR 294 Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 WLR 605, 613; [1974] 1 All ER 1239 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; (1985) 60 ALR 741
TEXTS CITED:	Lindley & Banks on Partnership, 18th Edition
PARTIES:	Lawfund Australia Pty Ltd (plaintiff/cross defendant) Lawfund Leasing Pty Ltd (first defendant) Deborah Ward (second defendant/cross claimant) A-Ward Finance Pty Ltd (third defendant)
FILE NUMBER(S):	SC 6973/04
COUNSEL:	Mr L S Einstein w Mr G W Pulsford (plaintiff/cross defendant) Mr M B Evans (defendants/cross claimant)
SOLICITORS:	TressCox Lawyers (plaintiff/cross defendant) M J Woods & Co (defendants/cross claimant)