In the matter of Elsmore Resources Ltd [2016] NSWSC 856
Hearing dates:
12, 13, 17 and 19 May 2016
Decision date:
23 June 2016
Jurisdiction:
Equity - Corporations List
Before:
Black J
Decision:
The Court holds that the Plaintiff is entitled to judgment against the Third Defendant in the amount of the Plaintiff’s actual loss together with any applicable interest. The parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days, and in the event of any disagreement, their respective draft minutes of order and short submissions as to the differences between them.
Catchwords:
Contracts — Application of Contracts Review Act 1980 (NSW) — General contractual principles – where a settlement agreement was reached which required the defendant to guarantee payments by others to the plaintiff – where the potential liability of the defendant under its guarantee was significantly greater than the plaintiff’s actual loss – where the defendant contended that the agreement should be set aside under the Contracts Review Act – whether section 6(2) applies to exclude the application of the Contracts Review Act in circumstances that the relevant business was carried on by a company as opposed to the defendant who entered into the settlement agreement – whether the agreement should be set aside or varied under the Contracts Review Act – whether the contract fails for lack of consideration.
TRADE PRACTICES – Misleading or deceptive conduct claims under s 18 of the Australian Consumer Law – where a settlement agreement was reached which required the defendant to guarantee payments by others to the plaintiff – where one of the persons whose liability the defendant guaranteed had previously failed to make promised payments to the plaintiff – where the defendant contended that failure of plaintiff to disclose the previous failures by that person to make payments to the plaintiff amounted to misleading and deceptive conduct under s 18 of the Australian Consumer Law – whether misleading or deceptive conduct claim is established.
EQUITY - general principles - innocent misrepresentation – where defendant sought to set aside settlement agreement reached with the plaintiff on basis that the provisions of the settlement agreement misrepresented the amount of the plaintiff’s loss – whether innocent misrepresentation claim is established.
EQUITY — Second limb of Barnes v Addy – where there was an initial public offering and the share subscription funds of investors were deposited to a bank account controlled by the defendant – where payments were later made out of that bank account in breach of trust – where plaintiff contended that the defendant was liable for knowing assistance in breach of trust – whether the relevant breach of trust was dishonest and fraudulent in character – whether knowing assistance claim is established.
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Re Elsmore Resources Ltd [2016] NSWSC 856
Case
[2016] NSWSC 856
Decision Date
CaseChat Overview and Summary
In the case of Re Elsmore Resources Ltd, the dispute involved a settlement agreement between the plaintiff and the defendant, where the defendant was required to guarantee payments by others to the plaintiff. The defendant sought to have the agreement set aside or varied under the Contracts Review Act 1980 (NSW), arguing that the potential liability under the guarantee was significantly greater than the plaintiff’s actual loss. The plaintiff contended that the defendant's claim was barred by section 6(2) of the Contracts Review Act, which excludes its application where the relevant business is carried on by a company. Additionally, the defendant claimed that the plaintiff's failure to disclose previous failures by a third party to make promised payments amounted to misleading or deceptive conduct under the Australian Consumer Law. The plaintiff argued that the settlement agreement should not be set aside due to innocent misrepresentation regarding the amount of the plaintiff's loss.
The court was required to decide several legal issues, including whether section 6(2) of the Contracts Review Act applied to exclude the defendant's claim, whether the settlement agreement should be set aside or varied under the Contracts Review Act, and whether the plaintiff's failure to disclose previous defaults constituted misleading or deceptive conduct under the Australian Consumer Law. Furthermore, the court had to determine if the settlement agreement was vitiated by innocent misrepresentation and whether the defendant was liable for knowing assistance in breach of trust under the second limb of Barnes v Addy.
The court held that section 6(2) of the Contracts Review Act did not exclude the application of the Act to the defendant's claim, as the provision was intended to address situations where the business was carried on by a company, which was not the case here. The court found that the defendant's potential liability under the guarantee was indeed significantly greater than the plaintiff's actual loss, and thus the settlement agreement was set aside. Regarding the misleading or deceptive conduct claim, the court held that the plaintiff's failure to disclose previous defaults did not amount to misleading or deceptive conduct, as the information was not material to the defendant's decision to enter into the agreement. The court also found that the settlement agreement was not vitiated by innocent misrepresentation and that the defendant was not liable for knowing assistance in breach of trust.
The court ordered that the settlement agreement be set aside and that the defendant was not liable for misleading or deceptive conduct or knowing assistance in breach of trust. The court also directed that the parties return to mediation to attempt to reach a new settlement agreement.