Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd

The dispute before the Court of Appeal of New South Wales concerned the enforceability of an agreement between Stellar Vision Operations Pty Ltd (appellant) and Hills Health Solutions Pty Ltd (respondent) regarding future supply contracts for patient entertainment systems. The agreement, in the form of a letter, stipulated that the parties would contribute equally to costs and split gross profits 50/50 for such future contracts. It also included an undertaking to commence good faith negotiations for a long-term agreement.

The primary legal issues before the court were whether the parties' agreement concerning future contracts was legally binding, and whether their relationship was fiduciary in nature. The court was also required to determine the correct method for quantifying damages, specifically concerning a deduction for future costs.

The Court of Appeal held that the agreement was binding, finding that the parties had demonstrated an intention to create legal relations. The court reasoned that the specific terms regarding cost-sharing and profit splitting, coupled with the undertaking to negotiate in good faith, indicated a commitment to a future arrangement. Furthermore, the court determined that the parties' relationship was fiduciary, arising from their mutual confidence and the undertaking by one party to exercise discretion affecting the other's interests. Regarding damages, the court found that a deduction for future costs, based on an unagreed model and speculative evidence, was improperly included in the primary judge's calculation.

Consequently, the Court of Appeal allowed the appeal, setting aside the previous orders. The court ordered that judgment be entered for the plaintiff (appellant) in an amount to be determined by short minutes of order, reflecting the court's calculation. The defendant (respondent) was ordered to pay the plaintiff's costs at first instance, and the respondent was ordered to pay the appellant's costs of the appeal.