CONTRACT – breach of contract where applicant and respondent entered into standard form contract for purpose of trading commodities (Contract) – where difficulties in advancing claims based on amendments to standard form contracts without legal assistance and on oral agreements – reliability of oral evidence of conversations that took place many years prior to commencement of proceedings – where claims directed at failure of respondent’s related entities to complete purchases pursuant to eight contracts entered into with suppliers of commodities (Commodities Contracts) – where applicant claimed respondent breached the Contract, subsequent agreement alleged to be partly oral and partly written between the applicant and respondent (Previous Entitlements Agreement) and oral agreements for commission entered into prior to each of the Commodities Contracts (Procurement Contracts) – where applicant was not a party to the Contract and has no standing to enforce the Contract, alleged Procurement Contracts or alleged Previous Entitlements Agreement – where alleged Procurement Contracts and alleged Previous Entitlements Agreement not established – where claims for breach of the Contract, Previous Entitlements Agreement and Procurement Contracts dismissed
CONSUMER LAW – misleading or deceptive conduct – false or misleading representations – where applicant alleged respondent made false or misleading representations as to funds held by the respondent in a bank account personally and in the name of a company of which the respondent was the sole director and shareholder – where representations were not made prior to entry into contract between applicant and respondent – where applicant did not relevantly rely on representations – claim dismissed
TORTS – tort of deceit – false or misleading representations – where claim in deceit arises out of same facts as claim for misleading or deceptive conduct – where applicant did not relevantly rely on representations – claim dismissed
LIMITATION OF ACTIONS – where applicant’s causes of action under the ACL, in deceit and for breach of contract, with the exception of the Previous Entitlements Agreement, are statute barred – where applicant filed an Amended Statement of Claim – consideration of the ‘relation back’ rule – where only Previous Entitlements Agreement arose claims do not arise out of the same or substantially the same facts as previous claims
[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
Smyth v Zou [2023] FCA 409
Case
[2023] FCA 409
Decision Date
CaseChat Overview and Summary
In the Federal Court of Australia, Mr Smyth, a commodities trader, brought proceedings against Ms Zou, the sole director and shareholder of various companies, alleging breach of contract, misleading or deceptive conduct, deceit, and limitation of actions. The claims arose from the failure of Ms Zou's companies to complete purchases pursuant to contracts for commodities. Mr Smyth claimed Ms Zou breached a contract, a subsequent agreement, and oral agreements for commission. The court had to determine whether Mr Smyth had standing to enforce the contracts and whether the claims were statute-barred.
The court found Mr Smyth lacked standing to enforce the contract, subsequent agreement, and oral commission agreements as he was not a party to these contracts. The claims based on alleged misrepresentations about funds held by Ms Zou were also dismissed as these representations were not made before the contract was entered into and Mr Smyth did not rely on them. The claims for misleading or deceptive conduct and deceit were dismissed for similar reasons. Additionally, the court found that Mr Smyth's causes of action were statute-barred, except for the claim regarding the subsequent agreement. The court concluded that the 'relation back' rule did not apply to the amended claims, as they did not arise from the same or substantially the same facts as the previous claims.
The court dismissed the proceedings in their entirety, ordering Mr Smyth to pay the costs of the respondent. This decision highlights the importance of having legal standing to enforce contracts and the need for clear and timely evidence in support of claims, especially when they involve complex commercial transactions and multiple parties.
Orders
Orders of the court
1. The originating application dated 5 June 2019 is dismissed.
2. The applicant is to the pay the costs of the respondent.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
By reason of these findings, the proceedings must be dismissed.BACKGROUND The following background facts were not in dispute. Mr Smyth was at all material times a commodities trader. Ms Zou was the sole director and shareholder of: (a)AGE from 23 November 2010 to 21 September 2015; (b)Hong Kong Victoria International Group (HKV) in the period between approximately 2010 and 2015; and(c)AMG in the period between approximately May 2013 and May 2018. Between late January and early February 2012, Mr Smyth, Ms Zou and Mr Li attended two informal meetings. The first meeting was at the Kam Fook Restaurant (Kam Fook meeting) and the second was at the Zilver Restaurant (Zilver meeting). Both restaurants were in Chinatown, Sydney. Mr Li introduced Mr Smyth to Ms Zou as an experienced commodities trader and as a person capable of finding sellers for Australian commodities for Ms Zou’s Chinese clients. On or about 7 February 2012, Mr Smyth and Ms Zou signed the Contract. On or about 27 February 2012, AGE entered into a contract to buy 1,800,000 tons of steam coal over a period of 12 months from Enerse Coal Cl SAS (Enerse Contract). On or about 11 March 2012, AGE entered into a contract with ZMT Resources Pty Ltd to purchase 600,000 tons of iron ore fine in 12 shipments (ZMT Resources Iron Ore Contract). On or about 6 April 2012, AGE entered into a contract with Pro Petroleum Dev Inc to purchase 2,750,000 tons of diesel over a 12 month period (Pro Petroleum Contract). On or around 18 April 2012, AGE entered into a contract with PT Allied Coal to purchase 600,000 tons of steam coal in 12 shipments (PT Allied Coal Contract). On or about 27 April 2012, AGE entered into a contract with Glencore to purchase 130,000 tonnes of Australian steam coal under terms including delivery at the port of Newcastle (Glencore Contract). Ms Zou authorised Mr Smyth to make arrangements to charter an appropriate vessel to attend the port of Newcastle, take delivery of the relevant coal and to on-ship the coal to the port of Zhoushan in China. On 2 May 2012, Mr Smyth on behalf of AGE, entered into a voyage charter with The Sanko Steamship Company Ltd (Sanko) for the ship “Yuritamou” to deliver 130,000 tonnes of coal from Newcastle to China. On or about 24 July 2012, HKV issued a letter of intent to Atlas Ore Limited to buy iron ore fines (Atlas Iron Ore LOI). Pursuant to the letter of intent, HKV was to purchase 1,800,000 tons of iron ore in 12 shipments. On or about 4 July 2013, AMG issued a document to Laikera Holding Corporation LLC entitled “ICPO” (Laikera Holdings ICPO).Under the ICPO, AMG expressed an intention to purchase 1,800,000 tons of iron ore. In or around February 2014, AMG signed a document entitled “Sale and Purchase Contract of Indonesian Coal” with CV ES Holding, to buy 60,000 tons of “Indonesian Steam Coal” (CV ES Holding Contract).WITNESSESMr Smyth’s witnesses Mr Smyth relied on four affidavits that he swore in the proceedings and affidavits from Mr Stefan Bartley, Mr Peter Quirk, Mr Hugh Keller and Mr Scott Wilson.Mr Smyth
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Sections 131 to 133 of the Corporations Act 2001 (Cth) (Corporations Act) provide for circumstances where a contract is purportedly entered into for a company prior to its registration. Section 131(1) of the Corporations Act relevantly provides:(1)If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract:a.Within the time agreed to by the parties to the contract; or b.If there is no agreed time – within a reasonable time after the contract is entered into. Ratification of a pre-incorporation contract by a newly registered company may occur by way of express or implied ratification: Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319 at [81]-[82] (Basten JA). In Aztech at [81], Basten JA (Handley JA agreeing) cited, with approval, the following statement by the primary judge in Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2004] NSWSC 967, on the circumstances in which ratification may occur:49…Express ratification occurs when the alleged [principal] has, by unequivocal language or conduct, acknowledged that the contract is his. Implied ratification may arise in various ways. It often occurs when the alleged principal, although not expressly acknowledging the contract as his own, acts in a way which can only be explained on the basis that he accepts the contract as his own. The essence is, in either case, a manifestation of the principal’s intention to be bound.50Determining whether there has been ratification, in the sense relevant to the law of agency, therefore depends on an assessment of the conduct of the alleged principal.(Emphasis added.) Basten JA added two qualification to this statement at [82] and relevantly, stated the following with respect to implied ratification of pre-registration contracts: …It is likely that conduct will more usually involve implied ratification...Where ratification is implied from conduct, it may well be conduct directed to the other party (or a third person), in circumstances where the relevant implication may reasonably be drawn by the other party. Collateral contracts In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64, Gibbs CJ held:A representation made in the course of negotiations which result in a binding agreement may be a warranty - i.e., it may have binding contractual force - in one of two ways: it may become a term of the agreement itself, or it may be a separate collateral contract, the consideration for which is the promise to enter into the main agreement. In either case the question whether the representation creates a binding contractual obligation depends on the intention of the parties. Determining the intention of the parties is an objective enquiry to be undertaken by reference to the words and conduct of the parties. The relevant question is what a reasonable person in the position of the parties would necessarily have understood to have been intended: Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [22] (French CJ, Kiefel and Bell JJ); see also Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [24]-[25] (Gaudron, McHugh, Hayne and Callinan JJ).