Zierholz@UC Pty Ltd v University of Canberra
[2019] ACTSC 310
•8 November 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Zierholz@UC Pty Ltd v University of Canberra |
Citation: | [2019] ACTSC 310 |
Hearing Dates: | 25-28 February 2019; 21-23 May 2019 |
DecisionDate: | 8 November 2019 |
Before: | Burns J |
Decision: | See [173]-[181] |
Catchwords: | CONTRACTS – Construction and Interpretation of Contracts –Whether the University of Canberra or the UCU Ltd breached contractual obligations owed to Zierholz – whether Zierholz breached its contractual obligations owed to the UCU Ltd TRADE AND COMMERCE – Misuse of Market Power – Whether the University of Canberra or the UCU Ltd contravened the Competition and Consumer Act 2010 (Cth) EQUITY – Fiduciary Duties – Whether the University of Canberra or the UCU Ltd owed fiduciary obligations to Zierholz |
Legislation Cited: | University of Canberra Act 1989 (ACT) s 4 Competition and Consumer Act 2010 (Cth) ss 46, 82 |
Cases Cited: | Breen v Williams (1996) 186 CLR 71 |
Texts Cited: | PD Finn (ed), Essays in Equity, (Law Book Co, 1985) |
Parties: | Zierholz@UC Pty Ltd (Plaintiff) University of Canberra (First Defendant) UCU Ltd (Second Defendant) |
Representation: | Counsel D Robens (Plaintiff) T Lynch (First and Second Defendants) |
| Solicitors Kamy Saeedi Law (Plaintiff) Griffin Legal (First and Second Defendants) | |
File Number: | SC 572 of 2016 |
BURNS J:
On or about 17 June 2011 the plaintiff company, Zierholz@UC Pty Ltd (Zierholz), executed a written agreement, described as a Microbrewery and Bar Licence (the licence agreement) to occupy specified premises within the University of Canberra in order to conduct a business as a bar. The licensor was the University of Canberra (the UC), a body corporate pursuant to s 4 of the University of Canberra Act 1989 (ACT). On the same day, Zierholz, the UC and the UCU Ltd (the UCU) executed a deed, described on its face as an Event Deed (the Event Deed). The business venture conducted by Zierholz was not successful. In these proceedings Zierholz claims damages from the UC and the UCU based upon alleged breaches of the licence agreement, the Event Deed, fiduciary duties said to be owed to Zierholz by the UC and the UCU, and based upon the provisions of the Competition and Consumer Act 2010 (Cth) (the CCA).
It is accepted that the UC and the UCU are able to be sued as legal entities.
It was not always easy to understand the exact nature of Zierholz’s case, particularly regarding its allegation of breach of fiduciary duties. Its case in that regard evolved over time, with certain aspects of its case being abandoned and others given greater prominence. The primary documents with regard to all of Zierholz’s claims are the licence agreement and the Event Deed. It is convenient to refer initially to those documents.
The licence agreement
The area the subject of the licence agreement encompasses part of the old student bar (which adjoined an outdoor area not the subject of the licence agreement, referred to as the beer garden) and a room adjoining the beer garden. The room adjoining the beer garden was initially intended to house the brewery. The licenced areas are marked A36 and A38 on a plan attached to the licence agreement.
As indicated, the licence encompassed only part of the relatively large space that had previously operated as the student bar. The remainder of that space continued to be occupied by the UC and the UCU.
The initial term of the licence agreement was a period of five years, commencing 1 July 2011 and expiring on 30 June 2016. The licence provided a base occupation fee of $100,000.00 plus GST per annum, payable by monthly instalments. It also provided for annual increments in the base occupation fee. The licence agreement provided that Zierholz was obliged to pay a Turnover Fee of 12.5% where its turnover exceeded the Turnover Fee Threshold in any financial year. The Turnover Fee Threshold was initially $1,000,000.00, increasing annually by 4%. The licence provided Zierholz with two five year options to renew.
The permitted use of the licenced premises by Zierholz was described as:
To use the Premises for:
1.a microbrewery including the sale of tap and bottled beer for retail and wholesale purposes for on and off premises consumption. Other alcoholic beverages for onsite retail consumption to include, but not limited to: wine, spirits and other items which are normally represented in a bar/ hotel, including music and hotel venue;
2.restaurant/ cafe for seating and dining, including the sale of take away pre-packaged hot and cold beverages and hot and cold food (including desserts) and snack items which may vary from time to time, including the sale of ancillary merchandise; and
3.excluding the sale of Japanese or Korean style food or the operation of a noodle bar.
Clause 9.1 provided that Zierholz acknowledged and agreed that the UC, as licensor, did not warrant that the licenced areas were suitable for any purpose, including the permitted use expressed in the licence agreement. Zierholz further acknowledged and agreed that, subject to clause 34 of the licence agreement, it had not been granted an exclusive right to the permitted uses, and other licences granted by the UC may have or allow similar or competing permitted uses. Clause 34.1 granted Zierholz the exclusive right to operate a microbrewery and to serve tapped beer from a permanent fixture at the UC. By clause 34.2, Zierholz acknowledged that from time to time other parties may be granted a licence to serve tapped beer from non-permanent fixtures at ‘one off’ events. The parties agreed that clause 34 did not confer on Zierholz any exclusive right to serve alcohol at the UC.
The Event Deed
The parties to the Event Deed were Zierholz, the UC and the UCU. The Event Deed provided the following “Background” to its operative provisions:
Background
A.UC and Zierholz have entered into a Licence over the Premises dated on or about the date of this Deed.
B.Pursuant to the Licence, Zierholz has been licensed by the University of Canberra to operate a microbrewery and entertainment venue (“Zierholz@UC”) on the Premises.
C.UCU is responsible for the provision of entertrainment functions at the University with the objectives of providing diverse and quality student and staff entertainment (“campus life”).
D.The Parties wish to work collaboratively, to promote campus life
E.The Parties wish to enter into an arrangement, where, upon the provision of notice:
(i)UCU can utilize Zierholz@UC for campus life functions; and
(ii)Zierholz can Block Out specific times, such that Zierholz can focus on its non university clientele.
Clause 2.1 of the Event Deed introduced the “Partnering Concept”:
Commitment
The Parties agree that their commitment to the Partnering Concept is a fundamental cornerstone of this Deed and commit to conduct themselves in performing their commitments and obligations under and arising out of this Deed in a manner entirely consistent with the Partnering Concept.
The term “Partnering Concept” is defined in clause 1 of the Event Deed as follows:
“Partnering Concept” means the overarching principle which shall govern and guide the contractual and working relationship between the Parties and which recognises and comprises the following objectives and principles:
(a)the establishment of a business relationship based on mutual trust;
(b)the shared intention to achieve, by constructively and harmoniously working together, the maximisation of the Parties’ respective benefits;
(c)openness, promptness, consistency and fairness in all dealings and communications between the Parties and their agents and representatives;
(d)non-adversarial dealings between the Parties and constructive mutual steps both to avoid differences and to identify solutions; and
(e)open, prompt and fair notification and resolution between the Parties or any differences or disputes which may arise or be apprehended.
Clause 3 is headed “Use of areas”. In it, the parties acknowledged that the premises subject to the licence to Zierholz were composed of two sub-areas known as A36 and A38. Adjacent to the premises were two sub-areas controlled by the UCU, referred to on the relevant plan as A37 and A33. I will refer to these sub-areas compendiously as “the sub-areas”. In clause 3.3 the parties acknowledged that, at various times, it may be advantageous for one of the parties to have exclusive use of some or all of the sub‑areas. By operation of clause 3.6, the parties agreed to meet prior to the opening of Zierholz, and then prior to the beginning of each calendar year, to identify times when a party was seeking to have a “Major Block Out”. This term is defined as exclusive use of a sub-area or sub-areas for a duration of longer than 24 hours. Where a party requested a Major Block Out, the other party would not unreasonably refuse it: clause 3.7. Where either party sought to reserve a “Minor Block Out”, it was required to advise the other party as soon as practicable of its intent, and provided the other party did not have an event planned for that period, consent to the request was not to be unreasonably withheld: clause 3.9. A “Minor Block Out” was defined as exclusive use of a sub-area or sub-areas for a duration of less than 24 hours. The parties agreed to meet and review Major and Minor Block Out bookings at the beginning of each quarter in any calendar year: clause 3.13. Zierholz was given the exclusive right to sell food and alcohol in the sub-areas for any Major or Minor Block Out period: clause 3.4. The UCU was given the exclusive right to hold Live Entertainment Events and Campus Life Events in the sub-areas: clause 3.5.
The UCU agreed that it would consult Zierholz regarding any Campus Life Events to be held in close proximity to the premises, and if Zierholz was of the reasonable opinion that the Campus Life Event would adversely affect its trade, Zierholz would raise its concerns with the UCU. In such a case, the UCU would use its best efforts to have the Campus Life Event moved to another site on campus and cause as minimal disturbance to Zierholz as possible: clause 3.15.
A “Campus Life Event” was defined as any event sponsored by the UC or the UCU for the purpose of promoting campus life; a “Live Entertainment Event” was defined as meaning any live entertainment performance event which had a ticketed admission.
Clause 4 addressed event remuneration. The parties acknowledged that there was an advantage in having the UCU host events in the sub-areas. For the duration of a “Live Entertainment Event”, the parties agreed that the UCU would be entitled to receive 70% of the profit from bar sales received by Zierholz during that period: clause 4.3. For the duration of a Campus Life Event requiring the use of all the sub-areas, and where the UCU incurred promotional and event costs, the parties agreed that the UCU would be entitled to receive 70% of the profit from the bar sales received by Zierholz during that period: clause 4.4. Clause 4.5 provided:
The parties agree that the trigger for the profit sharing arrangement defined in clauses 4.3 and 4.4 will be the incurrence of material event and promotional costs by UCU. The parties agree to negotiate the profit sharing arrangement in good faith.
Clause 8.1 of the Event Deed provided that the Event Deed was effective from the date of execution and remained in force for the period of the licence agreement, unless:
(a)the parties mutually agreed to terminate the Deed;
(b)the UC granted Zierholz a further term of the licence agreement, in which case the Event Deed would be automatically extended for the further term; or
(c)termination of the licence agreement occurred as permitted by that agreement.
Finally, clause 13.1 provided:
Nothing in this Deed will be construed so as to constitute a partnership between the Parties or so as to constitute either Party as the agent or representative of the other and in particular no Party will have the power or right to incur any obligation on behalf of the other to borrow moneys for, or in the name or, or to pledge the credit of the other Party or on their joint credit.
Zierholz’s pleaded case
The Statement of Claim filed by Zierholz alleged that from July 2009 onwards, representatives of the UC and the UCU made representations to representatives of Zierholz with a view to encouraging Zierholz to conduct a business on the UC campus.
Ultimately, however, Zierholz abandoned any reliance on those alleged representations.
Zierholz pleaded that on or about 17 June 2011 it entered into the licence agreement with the UC on terms:
(a)that it be granted the right to operate a microbrewery, bar and restaurant from within a part of the campus for an initial period, terminating on 30 June 2016;
(b)the annual rate was $100,000.00 plus GST, to increase in accordance with the terms of the licence;
(c)that 12.5% of any turnover exceeding $1,000,000.00 would be paid to the UC;
(d)that Zierholz was not permitted to promote its business on the UC campus without the UC’s written consent;
(e)that Zierholz would be granted the exclusive right to operate a microbrewery and serve tapped beer from a permanent fixture within the UC campus; and
(f)that the UC would encourage university staff to utilise the products and services provided by Zierholz for university functions.
Zierholz pleaded that it, the UC and the UCU entered into the Event Deed, which provided:
(a)an acknowledgment that the UCU was responsible for the provision of entertainment functions within the UC campus;
(b)an agreement that the parties would work collaboratively to promote “campus life”;
(c)an intention on the part of the UCU to utilise Zierholz for functions held by the UC and the UCU;
(d)that the UC, the UCU and Zierholz would commit to a partnership on the terms of the deed, including the establishment of a business relationship based on mutual trust and with the shared intention to achieve, by constructively and harmoniously working together, the maximisation of each of their respective benefits;
(e)that the UCU would have the exclusive right to hold events sponsored by the UC or the UCU for student and staff entertainment as well as live ticketed “entertainment performance events” in Zierholz;
(f)that Zierholz would have the exclusive right to sell food and beverages from its premises;
(g)that the UCU would endeavour to hold one or two events per week during the academic term within the Zierholz premises;
(h)that Zierholz would be consulted regarding any “Campus Life Events” to be held in close proximity to the Zierholz premises; and
(i)that Zierholz and the UCU would take 70% of the profit of the bar sales during events held in the Zierholz premises where the UCU has sponsored and promoted the event.
The final sub-paragraph above, as pleaded by Zierholz, does not accurately reflect the terms of the Event Deed. Clauses 4.3 and 4.4 of the Event Deed provide that the UCU will be entitled to 70% of the profits from bar sales received by Zierholz for the duration of a “Live Entertainment Event” and a “Campus Life Event” respectively.
Zierholz pleaded that, through the Event Deed, the UC and the UCU represented that the Zierholz premises would have “a primary purpose” of being used as a live entertainment venue.
From in or about February 2012 until in or about December 2015, Zierholz alleged that it committed funds to fit out the premises subject to the licence and traded in accordance with the licence. It further alleged that the UCU had access to its confidential information, including its revenue records, for the purpose of determining its entitlement to profits under the Event Deed.
Zierholz pleaded that by virtue of:
(a)it holding a licence to operate a food, beverage and events venue within the campus controlled by the UC;
(b)the restrictions placed on it and its ability to market events;
(c)it relying on the income from its trade;
(d)the terms of the Event Deed;
(e)the partnership between the UC, the UCU and it;
(f)the UC and the UCU having access to its confidential information, including trading figures; and
(g)representations said to have been made to it before the licence agreement and Event Deed were executed.
the UC and the UCU owed the following fiduciary duties to Zierholz:
(i)to exercise their powers in good faith and in the best interests of the partnership with Zierholz to promote the business of Zierholz;
(ii)to work towards the achievement of profits “within the venture”;
(iii)except with the express authority of Zierholz, not to compete with Zierholz for the sole benefit of the UC or the UCU; and
(iv)except with the express authority of Zierholz, not to act for their own interests in promoting a restaurant, bar and entertainment venue to the detriment of Zierholz.
As previously noted, Zierholz later abandoned any reliance on the alleged pre-contractual representations.
Zierholz alleged that the UC and the UCU breached their fiduciary duties (and, perhaps, the terms of the Event Deed) by opening a bar, restaurant and events venue on campus trading under the name “The Well” on 1 May 2015. It alleged that The Well was located in close proximity to the Zierholz premises, and that the UC and the UCU subsidised the costs of providing alcohol and food in that business.
Zierholz pleaded that the UC was in breach of its obligations under the licence agreement as it did not encourage its staff to utilise the products and services provided by Zierholz.
Zierholz further alleged that from July 2013 the UCU was in breach of its obligations under the Event Deed as:
(a)it did not endeavour to hold sufficient ticketed live entertainment events within Zierholz;
(b)it did not endeavour to hold sufficient events generally within Zierholz;
(c)it did not provide sufficient marketing to promote Zierholz;
(d)it did not seek to work with Zierholz;
(e)it did not commit to the partnership;
(f)it ran events in close proximity to Zierholz without its consent; and
(g)it competed against Zierholz.
Zierholz further pleaded that the UC and the UCU breached their fiduciary duties to it by:
(a)failing to promote Zierholz;
(b)failing to hold ticketed live events and general events within Zierholz;
(c)establishing a direct competitor, being The Well;
(d)subsidising the operation of The Well to assist it in competing with Zierholz; and
(e)accessing the confidential information disclosed by Zierholz and utilising that information for the benefit of trading The Well.
Zierholz also pleaded a claim under the CCA. It alleged that the UC and the UCU at all relevant times possessed a substantial degree of power in the market of providing food, beverages and entertainment venues to students and within the greater Belconnen market. Zierholz alleged that the UC and the UCU took advantage of their power in the market for the purpose of:
(a)eliminating or substantially damaging Zierholz; and
(b)deterring Zierholz from continuing to engage in competitive conduct in that market.
Zierholz also pleaded that the UC and the UCU had contravened the CCA by supplying goods or services through The Well for a sustained period at a price that was less than the cost to them of supplying such goods or services for the purpose of eliminating or substantially damaging Zierholz.
Zierholz pleaded that by reason of the breaches of the licence agreement, the Event Deed and their fiduciary duties, the UC and the UCU had received the benefit of income generated by The Well, that those benefits had been at Zierholz’s expense and that it would be unjust for the UC and the UCU to retain those benefits. It further alleged that between February 2012 and December 2015, Zierholz suffered losses as a consequence of the UC and the UCU breaching the licence agreement, the Event Deed, their fiduciary duties, making misrepresentations and engaging in anti‑competitive behaviour, and sought the following remedies:
(a)common law damages;
(b)a declaration that the UC and the UCU have contravened the CCA and the Australian Consumer Law;
(c)damages in accordance with s 82 of the CCA;
(d)equitable compensation;
(e)restitution;
(f)an account of profits;
(g)interest; and
(h)costs.
In its submissions in reply, Zierholz abandoned any suggestion that there was a partnership relationship between itself, the UC and the UCU. It maintained, however, that the parties were engaged in a joint venture “including the establishment of a business relationship based on mutual trust and with the shared intention to achieve, by constructively and harmoniously working together, the maximisation of each of their respective benefits.”
In its final written submissions, Zierholz expressed the amount of damages sought at a figure between $781,103.00 and $996,917.00, depending on whether damages are calculated by reference to losses sustained, or on the capitalisation of the business.
The case pleaded by the UC
With regard to the Event Deed, the UC agreed that it included provision for the parties entering into a “partnering” relationship, but denied that it made provision for the establishment of a partnership.
The UC denied representing through the Event Deed that Zierholz would have a primary purpose of being used as a live entertainment venue.
The UC denied that it owed any fiduciary duties to Zierholz. It denied that it had opened or operated The Well, but admitted that The Well sold food and beverages, and that events and other forms of entertainment took place at The Well. The UC denied that The Well was located in close proximity to Zierholz, pleading that it was located 172 metres away. The UC also denied the allegation that it had subsidised the cost of providing food and alcohol in The Well. It did not admit that The Well was a direct competitor to Zierholz.
The UC also denied:
(a)that it failed to promote Zierholz;
(b)that it failed to hold ticketed live events and general events within Zierholz;
(c)that it accessed confidential information disclosed by Zierholz and utilised that information for the benefit of trading The Well.
The UC denied any contravention of the CCA. It further denied that it had breached the licence agreement, the Event Deed, or the alleged fiduciary duties, and denied engaging in anti-competitive behaviour.
The UC pleaded that between about 10 July 2014 and 17 September 2014, it and Zierholz entered into an agreement for Zierholz to pay a reduced base occupation fee (the reduced base occupation fee agreement), and that one of the factors relied upon by the parties in connection with this agreement was the proposed establishment of The Well. The UC pleaded that it was an implied term of that agreement that it was in full and final settlement of any entitlement Zierholz may have to initiate legal action based on the establishment of The Well.
The UC also pleaded a counterclaim against Zierholz, but this was subsequently abandoned.
The case pleaded by the UCU
The defence filed by the UCU largely replicated that filed by the UC. I will only refer to the UCU’s defence to the extent that it differs from that filed by the UC.
The UCU admitted that under the Event Deed it originally held the exclusive right to hold live ticketed events in the premises subject to the licence agreement, but claimed that from or on about 10 May 2014 Zierholz held written permission to hold its own live ticketed events.
The UCU admitted that between about February 2012 and December 2014, it had access to Zierholz’s revenue records, but this was in accordance with the express provisions of the Event Deed.
The UCU admitted that it opened and operated The Well, which was a bar, restaurant and events venue.
The UCU also pleaded a counterclaim against Zierholz. That claim as pleaded is in three parts. The first part alleged that there were outstanding profit-sharing payments due under the Event Deed that had not been paid by Zierholz, totalling $13,034.35. The second part alleged that Zierholz had breached the Event Deed by refusing a request by the UCU between about 1 October 2014 and 31 December 2014 to meet to identify times when the UCU could book Live Entertainment Events for the 2015 calendar year and by refusing to allow Live Entertainment Events to be held in the licenced premises between about 1 January 2015 and 30 June 2016. The UCU claimed that by reason of these breaches it suffered loss. The third part of the claim alleged Zierholz breached the Partnering Concept found in the Event Deed in the period from 1 January 2016 to 30 June 2016 by failing to open its premises for trade. The UCU ultimately abandoned the third part of its counterclaim.
The UCU claimed:
(a)the sum of $13,034.35;
(b)common law damages for breach of contract;
(c)interest; and
(d)costs.
The reply by Zierholz
With regard to the allegation that it was an implied term of the reduced base occupation fee agreement that the agreement was in settlement of any claim which Zierholz may have based upon the opening of The Well, Zierholz asserted that the agreement related to issues of leaks from the ceiling of the premises and disturbance to its quiet enjoyment of the premises. It denied that the reduced base occupation fee agreement was connected with any claim, or potential claim, arising from the opening of The Well, or in relation to any of the alleged breaches of the licence agreement or Event Deed by the UC or the UCU.
With regard to the counterclaim pleaded by the UCU, Zierholz denied that it had refused to meet with UCU as alleged. It further denied that it had breached the Event Deed by refusing to allow Live Entertainment Events to be held at the premises. Zierholz admitted that it had not traded between January and June 2016, but denied any liability for the losses claimed by the UCU.
Pleading summary
The issues which arise for determination are:
(a)did the UC or the UCU owe fiduciary obligations to Zierholz;
(b)if so, did they breach those obligations;
(c)did the UC or UCU breach any contractual obligations owed to Zierholz;
(d)if the UC or the UCU breached fiduciary or contractual obligations owed to Zierholz, did Zierholz suffer any, and if so what, damage;
(e)did the UC or the UCU engage in conduct that breached the provisions of the CCA;
(f)if so, did Zierholz suffer any, and if so, what, damage;
(g)did Zierholz breach the terms of the Event Deed; and
(h)if so, is the UCU entitled to, and if so, what damage?
The relationship between the parties
Christoph Zierholz, a director of Zierholz, gave evidence that in 2005 he set up a brewery with an attached restaurant in Fyshwick. This business was profitable. In or around September 2009 he was approached by Peter Dahl who told Mr Zierholz that he was the current Director of the UCU, and that the new Vice-Chancellor of the UC wanted to “drive a rejuvenation of the hub area where the UCU had previously operated… their own student bar.” Mr Dahl said that the previous student bar had become rundown and had lost significant amounts of money in its last two years of operation. He said that the bar had been closed because it had a bad reputation, and described it as a “hose out venue”. Mr Dahl told Mr Zierholz that they were keen on rejuvenating that area and that while the UCU had run food and beverage outlets, they felt it would be better to outsource it because they lacked some of the expertise in that field. Mr Dahl told Mr Zierholz that Zierholz had a good reputation, and that a brewery on campus would be able to attract people to the campus, and they wanted to make the area an alternative retail shopping precinct for the Belconnen area. Mr Dahl suggested that Zierholz should consider moving its brewery to the UC as an attraction. Mr Zierholz testified that Zierholz had, at that time, been considering opening another bar in Canberra. Mr Zierholz told Mr Dahl that it would be very hard and expensive to move the brewery equipment to the UC, but he was prepared to look at the site to decide whether they could open a satellite bar, possibly with a smaller in-house brewery which would let them brew on the site and be an attraction.
Mr Zierholz visited the site at the UC “just before Christmas in 2009”. At that time it was simply being used for storage. Mr Zierholz had further meetings with Mr Dahl, which culminated in Zierholz providing an initial business plan to Mr Dahl and to Robert MacLean, the then Director of Commercial Services for the UC. The initial business plan was a rudimentary document which set out the objectives of the proposed venture, a proposal as to the form that any deal between the parties may take, and certain assumptions concerning projected revenue, including event revenue. This initial business plan was followed by a more comprehensive document, described by Mr Zierholz as a “prospectus style” document. As Zierholz has not pressed any submission based on the contents of these documents, it is unnecessary to refer to them in any greater detail.
After further negotiation, the parties entered into the licence agreement and the Event Deed.
Mr Dahl gave evidence of events that preceded the parties entering into the written agreements. This was adduced by Zierholz as setting the background to the claim and as relevant to the interpretation of the Event Deed. Mr Dahl said that for a short period he had been on the board of the UCU in his capacity as the Director of Campus Life for the UC. He fulfilled the role of the General Manager of the UCU. Mr Dahl stated that, in 2010, the UCU had the following concept of the direction in which it wanted to head:
The direction of the union was to first of all look at the experience for the students. In the main, the operations until that time had focused on the residential cohort of students, and there was some concern that it didn’t encapsulate the full cohort of students, even though we were obviously providing food services to the entire campus. So the direction that the union wanted to pursue was multifaceted. It was to try and draw on the outside ACT community to generate some life on the concourse, and the facilities that we had – including sporting facilities – it was looking at sport, grassroots sport, how could we connect up with sporting organisations across the ACT. There were various associations that we built up, including with the Kanga Cup, which was run by Capital Football. There were various other conversations going on with professional sporting organisations as well. Other parts to the strategy were to look at music and live entertainment, including comedy acts large and small. We pursued a relationship with Frontier Routing, part of the Mushroom Group, to bring music onto the campus.
Mr Dahl stated that the maximum capacity for events in the Refectory was 2000 people. He did not believe that in 2010 this was a suitable space for running a concert event, and that a bar space was much more suitable for such an event.
Mr Dahl stated that he first met Mr Zierholz in late 2010 or early 2011. At that time, the UCU had been discussing what to do with the space which had previously been occupied by the student bar. He approached Mr Zierholz with a view of “probing whether we could create a relationship and attract a microbrewery to the campus”. As part of the discussions to which he was a party, Mr Dahl said that there was a discussion about the necessity to share turnover with regard to live music events in order to make live events viable. He further said that there was a discussion about the need to phase in the introduction of the microbrewery, after testing the viability of the business. He was unaware of any direct request being made of Zierholz that the microbrewery be operational from the commencement of the licence agreement. In cross examination Mr Dahl agreed that he left the UCU in about mid-2012, and was not thereafter directly involved in its management or operations.
Mr MacLean gave evidence that between 2010 and late 2012 he was the Director of Commercial Services for the UC. In that role he was responsible for managing the commercial tenancies on the campus, which included food and beverage outlets. This also included the premises occupied by Zierholz. In that capacity, he was involved in discussions concerning the establishment of the Zierholz bar on campus. At the first such meeting, which he believed occurred around mid-2011, Mr Dahl from the UCU was present together with Mr Zierholz and Tony Rinaudo. Mr Rinaudo was employed as a manager of the business conducted on the campus by Zierholz. At that meeting Mr Dahl put forward a proposal that Mr Zierholz should run a bar at the campus which would sell tap beer and food, and that a brewery would be part of that by creating specific beers to attract people to the campus. Mr Zierholz stated that he was interested in the offer, but that he would need to consider it. At the same meeting there were discussions about the location of any such business, what potential commercial arrangements would apply and the timeframes for the commissioning of the brewery. Mr Dahl said that the space had been empty for quite some time and the Vice‑Chancellor wanted it occupied relatively quickly. Mr MacLean said that Mr Dahl stated that it was desirable that the premises be occupied by early 2012.
At a subsequent meeting in mid-2011 involving the same parties Mr MacLean said that there were further conversations about the brewery. His evidence was:
Christoph was keen to enter into some form of arrangement with the university because he understood that his business would be dependent upon both staff and student take up, but also potential foot traffic that came into the university. Peter Dahl, as the UCU representative, was keen to have a venue on campus that would provide nightlife and in doing so he was – had – he had an agenda, he stated, about providing campus nightlife after 5 pm, essentially that the campus would close down after 5 o’clock as people went off site. I was interested in having something open on the campus on Saturdays to provide food and drink, as most of the retail providers shut down over the weekend and the university was expanding into more courses available on a Saturday.
Mr MacLean said that as a result of the discussions, two separate documents were created, being the licence agreement and the Event Deed.
In cross examination, Mr MacLean said that he was aware that the fit out agreement provided a funding component from the University in relation to a sound system, and he was aware that the University would provide $400,000 towards the costs of the fit out.
Mr Rinaudo did not give any relevant evidence of events that he was involved in prior to the parties entering into the licence agreement and the Event Deed.
Does the evidence establish a fiduciary relationship?
An important aspect of Zierholz’s claim is the assertion that it, the UC and the UCU were in a fiduciary relationship; in other words, that the UC and the UCU were subject to fiduciary duties or obligations in their dealings with it. This assertion is important not only in its own right, as a basis for a claim for compensation, but also because Zierholz submitted that the existence of this relationship was relevant to the proper interpretation of their contractual obligations. It is therefore important to consider the nature of the relationship between the parties. It is convenient to consider this issue now.
In Essays in Equity, PD Finn (ed) 1985, at 246, Mason J suggested that “the fiduciary relationship is a concept in search of a principle”. Particular relationships are well recognised as giving rise to fiduciary duties. These include trustee and beneficiary (Keech v Sandford (1726) 25 ER 223), director and company (Woolworths v Kelly (1991) 22 NSWLR 189 at 225), lawyer and client (Tyrell v Bank of London (1862) 11 ER 934), agent and principal (McKenzie v McDonald [1923] VLR 134) and partnership (Trinkler v Beale [2009] NSWCA 30; 72 NSWLR 365). These categories are not exclusive; other relationships may also give rise to fiduciary duties.
In Breen v Williams (1996) 186 CLR 71 (‘Breen’), the appellant Breen sought access to medical records held by the respondent Williams, a medical practitioner who had provided her with certain medical treatment. The respondent agreed to provide those records, but only on conditions with which the appellant was unwilling to comply. The appellant sought access to the records, claiming, inter alia, that the respondent was obliged to provide access to the records as part of a fiduciary duty he owed to the appellant as his patient. In dismissing the appellant’s claim, Brennan CJ said, at 82:
Fiduciary duties arise from either of two sources, which may be distinguished one from the other but which frequently overlap. One source is agency; the other is a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of that other.
(References omitted)
In a separate, joint judgment, Dawson and Toohey JJ said, at 92-93:
The difficulty in dealing with the appellant's contention is that the law has not, as yet, been able to formulate any precise or comprehensive definition of the circumstances in which a person is constituted a fiduciary in his or her relations with another. There are accepted fiduciary relationships, such as trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners, which may be characterised as relations of trust and confidence. In Hospital Products Ltd v United States Surgical Corporation Mason J said:
''The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility."
Mason J did not intend to suggest that this description of a fiduciary relationship isolated those features from other relationships of trust and confidence which do not impose fiduciary obligations. It is not the case that whenever there is "a job to be performed", and entrusting the job to someone involves reposing substantial trust and confidence in that person, a fiduciary relationship arises. But it is of significance that a fiduciary acts in a representative character in the exercise of his responsibility.
(References omitted)
In a further judgment, Gaudron and McHugh JJ said, at 107:
As the law stands, the doctor-patient relationship is not an accepted fiduciary relationship in the sense that the relationships of trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company and partners are recognised as fiduciary relationships. In Hospital Products, Mason J pointed out that in all those relationships "the fiduciary acts in a 'representative' character in the exercise of his responsibility". But a doctor is not generally or even primarily a representative of his patient.
However, the categories of fiduciary relationship are not closed, and the courts have identified various circumstances that, if present, point towards, but do not determine, the existence of a fiduciary relationship. These circumstances, which are not exhaustive and may overlap, have included: the existence of a relation of confidence; inequality of bargaining power; an undertaking by one party to perform a task or fulfil a duty in the interests of another party; the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another; and a dependency or vulnerability on the part of one party that causes that party to rely on another.
In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (‘Hospital Products’), referred to in the above extracts from the judgments in Breen, Gibbs CJ, after observing that previous authorities provided no comprehensive statement of the criteria by reference to which a fiduciary relationship may be established, said, at 69-70:
I doubt if it is fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist. Fiduciary relations are of different types, carrying different obligations (see In re Coomber; Coomber v. Coomber, Jenyns v. Public Curator (Q.) and Phipps v. Boardman) and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose. For example, the relation of physician and patient, and priest and penitent, may be described as fiduciary when the question is whether there is a presumption of undue influence, but may be less likely to be relevant when an alleged conflict between duty and interest is in question. Moreover, different fiduciary relationships may entail different consequences, as is shown by the discussion of the respective positions of a trustee and a partner in relation to the renewal of a lease: see In re Biss; Biss v. Biss, Griffith v. Owen, and Chan v. Zacharia.
In the decided cases, various circumstances have been relied on as indicating the presence of a fiduciary relationship. One such circumstance is the existence of a relation of confidence, which may be abused: Tate v. Williamson; Coleman v. Myers. However, an actual relation of confidence – the fact that one person subjectively trusted another – is neither necessary for nor conclusive of the existence of a fiduciary relationship; on the one hand, a trustee will stand in a fiduciary relationship to a beneficiary notwithstanding that the latter at no time reposed confidence in him, and on the other hand, an ordinary transaction for sale and purchase does not give rise to a fiduciary relationship simply because the purchaser trusted the vendor and the latter defrauded him.
Another circumstance which it is sometimes suggested indicates the existence of a fiduciary relationship is inequality of bargaining power, but it is clear that such inequality alone is not enough to create a fiduciary relationship in every case and for all purposes…
(References omitted)
The authorities, including those cited above, establish that whether a fiduciary duty exists is heavily fact dependant. Certain indicia of such a relationship can be identified, such as an undertaking on the part of one party to act in the interest of another party, or dependence, influence or trust on the part of a party with regard to another. These stated indicia are not exclusive, but nor are they determinative.
The question whether a fiduciary relationship exists in a particular case, and the ambit of the fiduciary duties arising, will often, if not always, be so inextricably linked that they cannot sensibly be addressed separately. For example, in Breen, Dawson and Toohey JJ noted at 92 that “[w]hilst duties of a fiduciary nature may be imposed upon a doctor, they are confined and do not cover the entire doctor-patient relationship”.
In the present case, Zierholz laid particular significance upon the submission that it, together with the UC and the UCU, were engaged in a joint venture. It referred me to the decision of the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 (‘United Dominions’). Because of the importance attributed by Zierholz to that decision, I will refer to it in some detail.
United Dominions Corporation Ltd (UDC), Brian Pty Ltd (Brian) and Security Projects Ltd (SPL) were joint venturers in land development, most of which was financed by borrowing from UDC. UDC claimed that it was entitled to retain all of the proceeds of the land developed by the joint venture because of a “collateralization clause” in a mortgage given by it to SPL before the joint venture agreement was concluded. The collateralization clause, unbeknown to Brian, secured all amounts from time to time advanced by UDC to SPL on any account whatsoever or otherwise owing by SPL to UCD and whether advanced to SPL solely or jointly with another person. On the basis of amounts owing by SPL under other borrowing not connected with the joint venture, UDC claimed under the clause an entitlement to retain all profits from the joint venture, as SPL had been wound up. The issue before the High Court was whether UDC stood in a fiduciary relationship to Brian on the date that SPL gave UDC the mortgage containing the collateralization clause.
Gibbs CJ said, at 5, that while the written agreement described the parties as engaging in a joint venture, “that term was used in the not uncommon sense of a partnership for one particular transaction, and the agreement was plainly a partnership agreement”. His Honour then referred to authorities supporting the proposition that the “obligation to perfect fairness and good faith” is not confined to persons who are actually partners, but also “extends to persons negotiating for a partnership”. Gibbs CJ observed that it was clear that SPL stood in a fiduciary relationship to Brain, albeit that the parties were still negotiating the partnership agreement at the time. The next question was whether UDC stood in a fiduciary relationship to Brian at that time. Gibbs CJ noted that, at that time, UDC undoubtedly knew of the involvement of Brian, and said, at 7:
U.D.C. was not a financier dealing at arm's length with S.P.L. and entitled to leave it to S.P.L. to disclose the terms of the mortgage to the persons, including Brian, for whom S.P.L. was acting, but was in a relationship with those persons which, if not one of partnership, was one between persons who, intending to become partners, had already embarked on the partnership venture, of which the execution of the mortgage was an incident. Moreover, U.D.C. knew that it would be contrary to the understanding between the parties, later to be elevated into a formal agreement, if S.P.L. were to grant the mortgage on terms to which Brian did not agree and for purposes unconnected with the joint venture. There was no reason to believe that Brian had agreed or would agree to the inclusion of the collateralization clause, which was so obviously adverse to its interests. Although it is not easy to attempt to define the circumstances in which a fiduciary relationship will be found to exist (see the discussion in Hospital Products Ltd. v. United States Surgical Corporation) there was, in the circumstances of the present case, a relationship between U.D.C. and Brian based on the same mutual trust and confidence, and requiring the same good faith and fairness, as if a formal partnership deed had been executed.
(References omitted)
In a separate judgment, Mason, Brennan and Deane JJ said, regarding the meaning of the term “joint venture”, at 10-11:
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 C.J., Meinhard v. Salmon. 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 & Agency Co. Ltd..
(References omitted)
Mason, Brennan and Deane JJ rejected any suggestion that a fiduciary relationship could not arise until the parties executed their formal joint venture agreement. They were satisfied that the relationship between Brian, SPL and UDC had plainly assumed a fiduciary character before SPL gave the mortgage to UDC. Their Honours found it unnecessary to determine whether the relationship was a partnership or a joint venture to investigate and explore the possibilities of an ultimate joint venture or ventures. In either case, they said, the relationship was a fiduciary one. Dawson J, while agreeing with Mason, Brennan and Deane JJ, added, at 16:
Although the relationship between participants in a joint venture which is not a partnership will be governed by the particular contract rather than extrinsic principles of law, the relationship may nevertheless be a fiduciary one if the necessary confidence is reposed by the participants in one another. Of course, in a partnership the parties are agents for each other and this may constitute a separate reason for the fiduciary character of a partnership. There may be no such agency between participants in a joint venture but, as Dixon J. pointed out in Birtchnell v. Equity Trustees, Executors & Agency Co. Ltd., even in a partnership it is really the mutual confidence between partners which imposes fiduciary duties upon them and the same confidence may, in appropriate circumstances, be found to exist between participants in a joint venture.
The defendants referred me to the decision of the New South Wales Court of Appeal in Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; 85 NSWLR 196, (Barrett JA, with whom Meagher and Ward JJA agreed), where the relationship between contractual duties and fiduciary obligations (or alleged fiduciary obligations) was discussed. Barrett JA acknowledged that a fiduciary duty may exist in a contractual setting, citing with approval the statement of Mason J in Hospital Products at 97, “that contractual and fiduciary relationship may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship”. In Hospital Products, Mason J went on to say:
In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract, so that it is consistent with, and conforms to, them.
After referring to this passage from Hospital Products, Barrett JA said, at [100]:
The contractual terms are paramount. A fiduciary duty cannot detract from or contradict them. The two types of obligation – contractual and fiduciary – will, in general, co-exist only if and to the extent that the sanctions available for breach of contract (including any implied terms) are insufficient to deal with some possibility of unconscionable conduct to which one party is exposed.
After referring to Re E Dibbens & Sons Ltd (In liq) [1990] BCLC 577 and In re Goldcorp Exchange Ltd (In receivership) [1994] 2 All ER 806, Barrett JA said, at [107]:
The adequacy of remedies for breach of contract is therefore, in general, the determinant of whether there is scope for equity to play a supplementing role by way of the imposition of a fiduciary duty upon a contracting party; and the mere fact that one party puts faith and trust in the other is not of itself sufficient to bring equity to centre stage in that way.
An application for special leave to appeal to the High Court from the decision of the Court of Appeal was refused: [2014] HCATrans 30.
In the present matter, an examination of the pleadings and the written submissions provided on behalf of Zierholz reveals that it relies upon the following matters as establishing that the UC and the UCU owed fiduciary obligations to it:
(a)the terms of the Event Deed, but in particular the “partnering concept” expressed in that deed;
(b)the dependence of Zierholz on the UCU, as the UCU held exclusive rights to hold Live Entertainment Events and Campus Life Events within the sub-areas, and Zierholz was restricted in its right to conduct and advertise events;
(c)the relationship between it and the other parties was properly to be characterised as a joint venture, given:
(i)the non-exclusive rights to licence and share the use of the sub-areas;
(ii)the joint interest of all of the parties to work together, with the UCU promoting events and Zierholz running the venue, with the aim of sharing profits; and
(iii)the broader joint benefit in having a vibrant bar on campus.
(d)the relationship of mutual trust between the parties;
(e)the sharing of profits from bar sales;
(f)the ability which the UC and the UCU possessed to influence the trading and profitability of Zierholz;
(g)the access which the UC and the UCU had to confidential information of Zierholz, including its trading figures; and
(h)both the UC and the UCU knew that Zierholz relied on the income derived from its trading within the premises on the UC.
The obvious starting point in determining whether the UC or the UCU owed fiduciary obligations to Zierholz is the terms of the licence agreement and the Event Deed themselves. I will immediately observe that the contractual agreements were “arms-length” agreements in which neither the UC nor the UCU had any significant advantage in bargaining power. The fact that it was the UC and/or the UCU who approached Zierholz about it conducting a business at the UC does not change that conclusion. In that regard, it is interesting to note that the proposition put to Zierholz by Mr Dahl that it move its brewery operations from Fyshwick to the UC was not accepted by Zierholz, which put a counter proposal of establishing a subsidiary microbrewery on the campus. This demonstrates that the negotiations were conducted by parties who had relatively equal bargaining power with regard to the proposed agreement. As it transpired, the microbrewery was never installed by Zierholz.
The terms of the licence agreement are those which one would expect to find in an agreement governing the occupation of commercial premises. So far as is relevant to the submission made by Zierholz, the licence agreement restricted the way in which Zierholz could conduct its business in the premises, and more widely, by prohibiting it from undertaking promotional activity without the written consent of the UC. There is no complaint by Zierholz that any request for consent to undertake promotional activity was ever refused, but that is not an answer to the submission that this restrictive provision was an indicator of a fiduciary relationship. It is worthwhile noting that the UCU was not a party to the licence agreement, and that insofar as the licence agreement governs the legal relationship between Zierholz and the UC regarding Zierholz’s occupation of the subject premises, none of the terms are suggestive of some form of overarching or collateral fiduciary relationship. Some provisions of the licence agreement are apparently inconsistent with the existence of a fiduciary relationship as propounded by Zierholz. Clause 34 of the licence agreement, while giving Zierholz the exclusive right to operate a microbrewery and to serve tapped beer from a permanent fixture at the UC, reserved to the UC the right to licence others to serve tapped beer from non-permanent fixtures at ‘one off’ events. The licence agreement did not grant Zierholz the exclusive right to serve alcohol, nor did it restrain the UC from granting a licence to competing businesses.
Of far greater significance to Zierholz’s submission are the terms of the Event Deed. It is clear from the terms of the Event Deed that it was executed by the parties after the signing of the licence agreement, and “supersedes all previous agreements…between the Parties in connection with its subject matter.” What, then, is the subject matter of the Event Deed? The focus of the Event Deed is on the use by the parties to the Event Deed of the premises occupied by Zierholz under the licence agreement (sub-areas A36 and A38) and adjoining areas (sub-areas A37 and A33) occupied by the UCU. The terms of the Event Deed, and in particular the Partnering Concept expressed in the Event Deed, are primarily concerned with establishing a collaborative approach to the use of the adjacent sub-areas occupied by the UCU and Zierholz. The one relevant provision of the Event Deed that extends beyond addressing the use of these adjacent sub-areas is clause 3.15, which requires the UCU to consult with Zierholz regarding any Campus Life Event to be held “in close proximity to the Premises”, and for the UCU to use its best efforts to move any such event to another site on campus if Zierholz reasonably considers that the event will adversely affect its trade. Interestingly, the Event Deed does not place similar obligations on the UCU with regard to any other type of event which may be held in close proximity to Zierholz, including in sub-areas A37 and A33. In any event, the clear intention of the parties revealed in clause 3.15 is to protect the trade of Zierholz in its premises in circumstances where the UCU has the exclusive right to hold Live Entertainment Events and Campus Life Events in the premises occupied by Zierholz and the two adjoining sub-areas occupied by the UCU. The provisions of clause 3.15 do not indicate an intention that concepts in the Event Deed such as the Partnering Concept are to govern the relationship of the parties other than with regard to the subject matter of the Event Deed, being the collaborative use of the sub-areas to which it refers. Where the term “Partnering Concept” is in the Event Deed defined to mean “the overarching principle which shall govern and guide the contractual and working relationship between the Parties”, it expresses a principle which governs the relationship with regard to the collaborative use of the sub-areas to which the Deed applies. Similarly, the objectives and principles expressed in the definition of “Partnering Concept” apply with regard to the collaborative use of those sub-areas.
It is true that the terms of the Event Deed restricted the right of Zierholz to conduct certain types of activities in its own premises and in the adjacent sub-areas occupied by the UCU. Clause 3.5 reserved to the UCU the exclusive right to hold Live Entertainment Events and Campus Life Events in these areas. The restriction on Zierholz holding Campus Life Events was not significant when one considers that the definition of such events in the Event Deed effectively meant that such events were UC and UCU sponsored events; in other words the UCU and the UC retained the right to conduct their own events in the areas to which the Event Deed referred. These events were not, by definition, Zierholz events. In addition, it should not be forgotten that the terms of the Event Deed gave Zierholz access to, and use of, areas occupied by the UCU for it to conduct Zierholz events. The restriction on Zierholz holding Live Entertainment Events in the relevant areas was effectively a prohibition on it holding ticketed admission live entertainment events.
The prohibition on Zierholz holding Campus Life Events and Live Entertainment Events in the relevant areas was intended to protect the commercial interests of the UCU and the UC. In this way, the Event Deed expressly identified aspects of the commercial interests of the UC and the UCU which were to be isolated and protected from the commercial activities of Zierholz. This is relevant to determining whether any fiduciary relationship as described by Zierholz existed.
Clause 31.2(o) of the licence agreement certainly had the effect of restricting Zierholz’s right to advertise events that it was proposing to conduct. It was required to obtain the UC’s written consent to such advertising. This is a provision which clearly protected the interests of the UC by ensuring that any advertising did not compromise the interests of the University. Neither the licence agreement nor the Event Deed, in terms, imposed on either the UC or the UCU any positive obligation to advertise events that they or Zierholz intended to conduct in the relevant areas.
Whether the arrangement put in place by the Event Deed should be described as a joint venture is relatively unimportant. At a superficial level such a descriptor may be apt, as the parties agreed to work together in utilising the relevant areas with a view to mutual profit. Such an arrangement, however, may be contractual and does not necessarily establish a fiduciary relationship: United Dominions, per Mason, Brennan and Deane JJ, cited at [73] above. The question remains whether the particular facts of this case establish a fiduciary relationship.
As part of the arrangements put in place by the Event Deed, with a view to the collaborative use of the relevant areas, the parties could request that certain periods of time be “blocked out”, that is, that the requesting party would have the exclusive right to use the relevant areas for its own events or functions. This was effectively a mechanism for booking the use of the areas. The parties agreed that any such request would not be unreasonably refused. The Event Deed also provided guidance as to what may be considered reasonable, or alternatively unreasonable: clauses 3.8 and 3.12. The Event Deed specifically permitted the parties to protect their personal interests by refusing a request for a Minor Block Out where the party the subject of the request already had an event planned or an existing reservation for the relevant period. The Event Deed was silent with regard to the right of a party to refuse a request for a Major Block Out in similar circumstances, suggesting that the parties intended that the right of refusal in those circumstances was not absolute, but must be based on reasonable grounds.
There can be no doubt that the parties considered it to be in their mutual interest to collaborate in arrangements for the use of the relevant sub-areas. The obvious consequence of such an arrangement was the need to regulate how the UCU and Zierholz were to be remunerated for the use of their area by one or both of the other parties. The parties agreed in clause 4 to a limited profit sharing arrangement. With regard to a Live Entertainment Event, UCU was entitled to 70% of the profit from bar sales received by Zierholz: clause 4.3. For a Campus Life Event that (a) required the use of all of the sub-areas, and (b) where UCU had incurred promotional and event costs, the UCU was entitled to 70% of the profit from bar sales received by Zierholz: clause 4.4. It should be noted that the Deed made no provision for any profit sharing in the event of the UCU conducting a Campus Life Event that did not use all of the sub-areas or where the UCU had not incurred promotional and event costs; in such cases Zierholz was entitled to all profits. The “trigger” for the profit sharing arrangement found in these clauses was “the incurrence of material event and promotional costs by UCU”: clause 4.5.
As already noted, neither the UC nor the UCU had a contractual obligation to “promote” events, let alone to promote events with the aim of sharing profits with Zierholz.
It may readily be accepted that the parties mutually perceived benefits to themselves if Zierholz’s venture was a success, and the bar attracted patrons from the university and the wider community. The UCU and the UC would receive rent and any applicable share of profits. Where Zierholz’s turnover exceeded the Turnover Fee Threshold for any financial year, the UC was entitled to receive a Turnover Fee from it. The UC and the UCU could also expect to receive other intangible advantages if Zierholz’s venture was a success, including the improvement of amenity for staff and students. There can be no doubt that all of the parties perceived advantages to themselves if the Zierholz venture was successful, but this would also be the case where the relationship was merely contractual.
Zierholz referred to the “relationship of mutual trust” between the parties as a circumstance suggestive of a fiduciary relationship. The definition of “Partnering Concept” found in the Event Deed refers to an objective of “the establishment of a business relationship based on mutual trust”. This is found in the context of an arrangement for a specific and limited purpose, being the collaborative use of the relevant sub-areas in particular circumstances. The fact that trust exists between parties to an agreement, or that the agreement seeks to promote trust between parties, does not establish that the parties owe each other fiduciary duties.
Another circumstance cited by Zierholz as suggestive of a fiduciary relationship was the ability of the UC and the UCU to influence the trading and profitability of Zierholz. It is obvious that restrictions placed on Zierholz by the licence agreement and the Event Deed restricted its ability to do whatever it wanted in the licenced premises, and in the adjoining sub-areas occupied by the UCU. These contractual restrictions do not suggest a fiduciary relationship. The submission by Zierholz was really directed towards the ability of the UCU and the UC to affect its trade by determining how many events they would conduct, and particularly how many they would conduct within the areas the subject of the Event Deed. The relevant clause of the Event Deed is clause 3.11:
For the guidance of both Parties, UCU will be endeavouring to hold one or two Live Entertainment or Campus Life Events per week during the academic terms and will prioritise the associated Minor Block Outs for weekday nights. Similarly, Zierholz will be endeavouring to attract bookings from external Parties on some weekday and weekend nights.
In its written submissions, Zierholz suggested that the effect of clause 3.11 was to place on the UCU “a positive obligation…to hold events”. This submission misconstrues the clause. The clause is found in a part of the Event Deed which addresses the way in which the parties will approach the collaborative use of the relevant sub-areas. It comes immediately after clauses regarding the process by which the parties may block out those areas, and the circumstances in which a party may decline a block out request made by another party. Clause 3.11 sets out the then intentions of the UCU and Zierholz regarding how they intended to conduct their separate businesses so as to assist the other party in making decisions about requesting block out periods. For this reason the clause is expressed to be intended for the guidance of the parties. The clause neither obliges the UCU to hold events in the relevant sub-areas, nor does it, as submitted by Zierholz, set a benchmark for a level of events to be achieved.
Zierholz submitted that clause 3.8 of the Event Deed created an anticipation that the UCU would block out time to hold events for “Graduation, Orientation and ‘Stone Weeks’”. That clause provided:
For the guidance of both Parties, it is not expected that one Party will seek to Major Block Out more than 15% of the available time in any calendar year. Examples of Major Block Outs may include:
(a) December for Zierholz, to enable them to hold external Christmas work functions; and
(b) Graduation, Orientation, and “Stone Weeks” for UCU.
The language of this clause is not promissory. It did not oblige the UC or the UCU to hold events as submitted by Zierholz, just as it did not oblige Zierholz to conduct external Christmas work functions or to block out all of December. The clause was intended to provide guidance to the parties regarding what may be considered to be a reasonable request for a block out period.
To say, as Zierholz submitted, that to regard clauses 3.11 and 3.8 as not creating obligations on the part of the UC and the UCU would be to “undermine the express intention for the Partnering Concept” is to ignore the language of the clauses and the structure and subject matter of the Event Deed. The clauses, in fact, when properly interpreted support the Partnering Concept by assisting the parties to give practical effect to what would otherwise be amorphous concepts, and in day to day planning for the operation of their respective businesses.
The UC, by virtue of clause 5 of the licence agreement, had access to information about Zierholz’s trading, such as turnover figures, which would ordinarily be considered confidential. The obligation on the part of Zierholz to provide that information was in the context of the licence agreement providing an obligation by Zierholz to pay a Turnover Fee if its turnover for any financial year reached a particular figure. It is not uncommon in such cases for leases or licences to provide an obligation on the part of the leasee/licensee to provide evidence of turnover to the other party for the purpose of allowing the other party to satisfy itself that such a fee is or is not payable. This is not, in itself, an indicator of a fiduciary relationship. The licence agreement provided the UC with a limited right to use “Personal Information” of Zierholz, including a right to release such information to third parties in nominated circumstances: clause 32. Personal Information included information about Zierholz which was collected by the UC or on behalf of the UC.
The Event Deed provided that the UCU was entitled to review Zierholz’s revenue records after each UCU event for the purpose of determining what remuneration the UCU was entitled to receive from Zierholz under clauses 4.3 or 4.4. This information would ordinarily be considered confidential. The Event Deed made specific provision for the treatment of “Confidential Information”, but this term was narrowly framed to effectively confine the information to which it related to information provided by the UC or the UCU.
It is not disputed that the UC and the UCU knew that Zierholz was reliant on the income which it derived from the business it conducted on the campus.
It is important to consider the material as a whole in determining whether the UC and the UCU owed Zierholz the fiduciary obligations urged by Zierholz. It is also important, however, to recollect that the starting point is the contractual documents, and that the terms of the contractual documents will determine whether there is any scope for a finding that any such obligations existed. Any suggested fiduciary obligation must conform to the contractual agreements.
The first fiduciary obligation Zierholz submitted the UC and the UCU owed to it was an obligation to “exercise their powers in good faith and in the best interests of the partnership with [Zierholz] to promote the business of [Zierholz]”: see [25] above. I presume that the “powers” referred to includes the power to hold events on the campus and those powers which the UC and the UCU possessed by virtue of the contractual documents. The reference to “good faith” in the duty as alleged by Zierholz is not a reference to any allegation that there was to be implied into the contractual documents a duty to act in good faith, so that I will not consider that issue.
I can discern nothing in the material which suggests that either the UC or the UCU were obliged to hold events for the purpose of promoting the business of Zierholz. There are, indeed, good reasons for concluding that this was not the case. The UC was contractually entitled to permit events to be conducted on the campus which had no connection to Zierholz: clause 14.6(f) of the licence agreement. The UC had this right irrespective of any effect that such an event may have on the business of Zierholz (subject to the terms of the Event Deed). The licence agreement specifically addressed the issue of the UC promoting the business of Zierholz in clause 34.3, but only provided that the UC would “encourage University staff to utilise the products and services provided by [Zierholz] for University functions”. The Event Deed contained no provision inconsistent with clause 34.3 of the licence agreement, so that the Event Deed did not affect the operation of that clause. The contractual arrangements leave no scope for any equitable obligation of the nature suggested. I will address the issue of equitable principles concerning the misuse of confidential information after I consider the remainder of the fiduciary obligations alleged by Zierholz.
Zierholz no longer pressed any submission that it was in a partnership with the UC and the UCU. As I have already said, the Partnering Concept in the Event Deed had a narrow application. The terms of the Deed, properly understood, make it clear that the UCU and Zierholz were conducting separate, and at times competing, enterprises on the campus. Each reserved to itself, in working collaboratively in the use of the sub-areas to which the Event Deed applied, rights to prefer their own business interests over those of the other party.
The second fiduciary obligation urged by Zierholz was an obligation on the part of the UC and the UCU to work towards the achievement of profits in the venture. There is no scope to find that such a fiduciary obligation existed in light of the contractual documents. The Event Deed did provide that it was an object of the collaborative approach to the use of the sub-areas referred to in the Event Deed to maximise the parties’ respective benefits, but the Event Deed goes on to set out how that was to be achieved. It is not unimportant that the Event Deed, in the definition of the term “Partnering Concept” uses the term “respective benefits”, rather than referring to their mutual benefit.
The third obligation advanced by Zierholz was an obligation on the part of the UC and the UCU not to compete with Zierholz for their sole benefit, except with the express authority of Zierholz. There is no evidence which could support the existence of such an obligation. The terms of the licence agreement, relating to the UC, are to the contrary effect, and there is no provision in the Event Deed which had the effect of superseding the terms of the licence agreement. For the reasons I have already given, the contractual documents clearly recognised that the UCU and Zierholz were potential competitors, and that the UC was also a potential competitor and was entitled to grant licences to others to compete with the business conducted by Zierholz, subject to certain exclusive rights granted to Zierholz.
The final obligation which Zierholz advanced was an obligation on the part of the UC and the UCU not to act in their own interests in promoting a restaurant, bar, and entertainment venue to the detriment of Zierholz without its express consent. This is largely a reworking of the previous obligation advanced by Zierholz, and fails for the same reasons. The one possible exception is that the evidence would support a conclusion that information provided to the UC and the UCU by Zierholz, such as turnover figures, would almost certainly attract an obligation of confidentiality on the part of the UC and the UCU. This includes an obligation not to use the information for a purpose other than the purpose for which it was provided and to the detriment of Zierholz.
I am satisfied that, with the exception of the obligation of confidentiality referred to in the previous paragraph, neither the UC nor the UCU were subject to the fiduciary obligations advanced by Zierholz. Neither of those bodies exercised any relevant influence over Zierholz, nor were they the object of dependence or trust of such a nature as to require them to be subject to the suggested obligations. In addition, the contractual arrangements between the parties left no scope for any such obligations.
Alleged breaches of the contractual documents
The written submissions filed on behalf of Zierholz contained a list of events that Zierholz perceived as significant to its claim. The submissions, however, were not set out in such a way as to make it clear how all of these events were said to be relevant to Zierholz’s claim that the UC and the UCU had breached their contractual obligations. I will attempt to identify the breaches pleaded by Zierholz, and address them individually.
The first complaint is that the UC and the UCU breached the terms of the Event Deed by failing to hold “sufficient” events in the Zierholz premises, including ticketed live entertainment events. The relevant parts of the Event Deed appear to be the “Partnering Concept” as defined in the Deed and clause 3.11 (see [92] above).
The preliminary question to be answered is whether clause 3.11, either of its own force or in combination with the Partnering Concept, gave rise to any contractual obligation on the part of the UC and the UCU to Zierholz. Those parties submitted that the language of the clause was non-promissory, referring to each party “endeavouring” to hold functions with a particular frequency and/or on particular days, and citing National Territory Education Union v La Trobe University [2015] FCAFC 142; 254 IR 238. In that case, it was alleged that La Trobe University was in breach of an enterprise agreement which, inter alia, expressed the commitment of the University to job security, and expressed the principle that “wherever possible” redundancies were to be avoided and compulsory retrenchment used as a last resort. The Union claimed that the University had breached those provisions of the agreement. With regard to the approach to be taken to the construction of the agreement, both Jessup and White JJ in separate judgments, accepted that parties to an enterprise agreement may interlude in the agreement “matters which are in the nature of statements of aspiration or commitment and not themselves intended to be enforceable obligations or entitlements”: per White J at [109]. Jessup J went further by saying that the inclusion of such material in enterprise agreements was a “practice of long standing”: at [30]. Other than as an example of the proposition that an agreement may contain both provisions that are intended to create enforceable obligations and those that are not, I do not find this decision to be particularly useful due to the existence of the practice referred to by Jessup J and the content of the particular enterprise agreement.
To make it clear, the opening of The Well did not breach either the terms or the spirit of the Partnering Concept found in the Event Deed. The Event Deed, and the Partnering Concept, were restricted in their operation to a proposed collaboration between the parties regarding the use of adjoining sub-areas identified in the Event Deed.
Zierholz complained that in or around July 2015 it was prohibited by the UCU from holding a live ticketed event in its premises on 4 July 2015. The documentary evidence establishes that on 19 May 2014 Mr Roff sent an email to Mr Zierholz confirming that discussions were taking place about “the Zierholz and UCU partnership.” Mr Roff said:
In the meantime, please take this email as a statement from UCU that there is no impediment to Zierholz organising its own student events as and when it so chooses. I would only say that we should stay in close communication so that we are not both, for example, running a Stonefest on the same day.
To the extent that this correspondence was said by the UCU to constitute permission for Zierholz to hold its own live ticketed events (see [43] above), this is clearly incorrect, as subsequent events demonstrated.
Mr Kidson gave the following evidence about the proposed event:
What was involved in you organising that event?---Firstly, I – to find out if we were able to do a ticketed event was number one. Obviously, working out what AV equipment we were - - -
Yes. Just stopping you there. Trying to find out whether you could hold a ticketed event?---Correct.
What, if anything, did you do?---There was an email, I can’t give you dates when that was asked or who I sent it to - I believe it was Maggie Barnes I sent the email to, asking the question where we stood, because I had been told that we were allowed to go ahead and do our own events.
So you just said that you were told that you were able to go ahead and do your own events?---M’mm.
Who told you that?---Testing my memory here. I really can’t recall how I came to that assumption at this time, but I had it under good advice that we were allowed to proceed with events. I can’t remember if it was through a meeting or an email with the UCU or with - or definitely the UCU. But there was definitely communication, so that’s why I was trying to confirm with Maggie if this was the case.
You said that you sent Maggie Barnes an email?---Yes.
Do you recall when that was?--- Definitely prior to July 4th, I’m going to say up to a month if not three weeks prior to 4 July.
Did you receive any response?---Yes, I did.
How did you receive a response?---Received a response from Maggie Barnes, can’t remember word for word, but the ins of the email was telling us that we’d be breaking the deed if we went ahead with a ticketed event.
On 22 May 2015, Michael Palic, General Manager, Hospitality and Events, at the UCU emailed Ms Barnes, Manager Procurement and Contract at the UC, stating:
We became aware of an upcoming ticketed event in Zierholz - Coda Conduct, advertised for the 4th July, 2015. This morning, I approached Jeremy Kidson to gain an understanding about how this event will proceed and where we, (both UCU and Zierholz) stand with the booking and hosting of upcoming ticketed events in Zierholz. As you know, we are awaiting a resolution of the issues surrounding the event deed and leasing arrangement between Zierholz, UCU and the Unviersity. Jeremy said that you had sent him an email, granting approval for Zierholz to schedule events and said that he would then contact you to forward on this email to me. I am a little confused by this information and would appreciate your clarification and advice on this issue as a matter of urgency.
Later that day Ms Barnes replied:
Michael - I am a bit confused also, I have not sent an email granting approval for Zierholz to schedule events. I did however, send him an email in Feb which provided him with copies of all the signed documentation (with approval), and advised him that there was nothing to stop Zierholz from putting on their own events as per clause 3.
It appears that there may have been some confusion on the part of Zierholz regarding its entitlement to hold live ticketed events in the period from May 2014 onwards. There is no evidence, however, that the UCU specifically agreed to waive its exclusive right to hold such events in the area governed by the Event Deed: see clause 3.5. The communications between the UCU and Zierholz simply refer to Zierholz’s entitlement to hold “events”, an entitlement guaranteed by the combined effect of the licence agreement and the Event Deed. In the absence of any evidence that the UCU had waived its rights under the Event Deed, it was entitled to complain that Zierholz’s proposed event was in breach of its contractual obligations.
Zierholz ultimately held the event as a free event, and made a loss. It also complained with regard to this event that it was obliged to hire its own sound system for the event as the UCU would not permit the use of its sound system. The event which Zierholz conducted was not one conducted jointly or collaboratively with the UCU such that the terms of the Event Deed were applicable; this was a Zierholz event, and the terms of the Event Deed, and in particular the Partnering Concept, did not apply.
The next matter raised by Zierholz concerned a ‘bar crawl’ organised in July 2015 by the UCU, to be held in August that year. It complained that it was not on the list of bars to be visited, and was not invited by the UCU to participate. In its written submissions, Zierholz does not make it clear how these actions by the UCU are said to breach either the licence agreement or the Event Deed. It appears that its complaint is that the UCU’s conduct was contrary to the Partnering Concept in the Event Deed. The bar crawl was not an event which was to be conducted by the parties collaboratively in the sub-areas to which the Event Deed applied, so that the Partnering Concept had no application.
On 17 July 2015, Mr Kidson sent an email to Mr Palic at the UCU and to Matt O’Brien, the Chief Executive Officer at the UCU. In that email Mr Kidson complained that the UCU and the UC were not living up to the spirit of the representations that had been made to Zierholz before it commenced its business on campus, and suggested that Mr Zierholz could “give a full account of the agreement between UCU and Zierholz”. Mr Kidson went on to say: “In essence, the Event Deed merely represents a shortened version of our arrangements turned into contractual form (read legalese language).” Later in the same email, Mr Kidson said:
The Deed is meant to encapsulate the agreement between UC, UCU and Zierholz where the parties work together to make Zierholz the key venue for events.
Not surprisingly, Mr O’Brien in an email to Mr Palic, referring to the above email from Mr Kidson, said:
I think that we need to hold the line that what is signed represents the agreement and there is no point in discussing anything that is not in the agreement. I now also think that we are best to get advice on termination of the agreement for breach. Our grounds would be the extended period of nil payment.
The reference to “nil payment” in the above appears to be a reference to a failure by Zierholz to pay to the UCU its share of profits for some past events. In an email to Mr Palic dated 10 July 2015, Mr Kidson said:
We are conscious of the fact that we have not yet been able to provide all remuneration for past event profit sharing to UCU but these are tough economic times and as such, we would hope that UCU would understand that the best way for Zierholz to generate profit and thus be able to pay any outstanding debts is if UCU work together with us to make Zierholz profitable as well as a great place for Campus Life Events which is the core objective of the Event Deed.
It is tolerably clear that Zierholz had, for some time, harboured the view that the terms of the Event Deed did not reflect, or adequately reflect, what it understood to be the ‘deal’ it had made with the other parties, particularly by reference to alleged pre‑contractual representations. Zierholz has now disavowed reliance on any pre‑contractual representations, so that its rights and obligations are to be determined in accordance with the terms of the contractual documents. I cannot discern in those documents, and particularly the Event Deed, any intention to make Zierholz “the key venue for events”, or that the UC or the UCU undertook any obligation to conduct events of such a number or nature as to ensure the financial viability of Zierholz.
I also observe that the pre-contractual discussions between the parties was based on the proposition that Zierholz would establish a brewery in part of the premises it occupied at the UC, and that this would attract both student patrons and patrons from the wider community. This simply did not occur, and the evidence establishes that the venture by Zierholz was undercapitalised from the start, and that it had significantly underestimated its trading costs.
In his email of 17 July 2015, Mr Kidson suggested that a meeting be convened. This apparently occurred soon thereafter, because on 29 July 2015 Ms Barnes sent an email to Mr Zierholz stating that she understood the outcome of the meeting to be:
1.You conformed (sic) that you wish to continue to conduct your business on Campus and wish to provide a service that meets the needs of the students and staff, as well as bring in more people from the community.
2.You would like to renegotiate the event deed.
3.UC will look at the heating problems you are experiencing to see what can be done to provide a more comfortable temperature.
4.You will consider and advise on repayment options of the current debt to UC/UCU.
5.You will consider the Event deed and provide Vicki with your ideas on how you would like to see the Event Deed work.
6.Vicki will open negotiations with UCU once she has item 5.
From this document it may be observed that the UC and the UCU were amenable to renegotiating the Event Deed, but were waiting on Zierholz to provide its views on how the Deed should be amended.
On 30 July 2015, Mr Zierholz sent a long email to Ms Barnes in which he initially said that he “did not really want to renegotiate” the Event Deed, as he believed there would be no issue “if the parties involved abided by what it represents”. Later, however, Mr Zierholz stated that he had been trying to devise a framework of how the UCU and Zierholz could “jointly run some events and agree on a fair profit share for those events.” As part of his proposal, Mr Zierholz wanted guidelines developed, or a separate agreement drafted, that would identify “ways how the UC can help us operate a successful venture… in a way as compensation for giving up any real benefits which would have otherwise been derived from the existing deed, which after all was a contract between UCU, Zierholz and UC…”.
With regard to point 5 in the email from Ms Barnes (see [152] above), Mr Zierholz said that he was “looking at providing a document outlining a way to clarify and simplify the joint running of events.” It is quite clear from this communication that Zierholz still wanted to renegotiate the Event Deed, and that it did not perceive the terms of the Event Deed as being favourable to it. Zierholz effectively ceased trading at the UC at the end of 2015, at which point its complaints about the Event Deed had not been resolved. In an email dated 19 January 2016, Ms Williams told the Vice-Chancellor about the state of affairs with Zierholz:
He hasn’t left yet, but he cannot confirm a reopening date. He is close to operating insolvent. His lease runs to July, and he needs to make a decision at the moment about taking up the option for a further 5 years. We met yesterday with solicitors, where I was trying to map the way forward with (further) lease concessions and what he needed to continue to operate. If he was genuine about wanting to take up the option and continue operations, he should have had a business plan about what that would need to look like. He didn’t.
We almost got there on an agreed way forward, with a commitment from UCU to put events back into Zierholz, then Christoph stated he wanted compensation for losses over the last 2 years, but again couldn’t say what that was. He labours the point that UCU have acted in an anti-competitive way and that has ruined his business. Both UCU and Zierholz claim breaches of the Event Deed.
The meeting closed with a request for Zierholz to detail what a business plan would look like for him to continue operating.
Zierholz’s complaints about the conduct of the UC and the UCU must be assessed against the following:
(a)the contractual relationship between the parties did not generally prohibit the UC and the UCU competing against Zierholz on the campus;
(b)to the extent that Zierholz did have exclusive rights under the licence agreement and the Event Deed, there is no convincing evidence that the UC or the UCU denied it those rights;
(c)there is no convincing evidence that the UC or the UCU engaged in anti-competitive behaviour by improperly subsidising the operation of The Well;
(d)Zierholz had decided by September 2014 that it was not content with the terms of the Event Deed, and communicated to the UC and the UCU its desire not to hold events for the UCU so that it could concentrate on its “core business”. This situation effectively continued until Zierholz ceased trading;
(e)by July 2015 Zierholz was in breach of its obligations under the event profit sharing provisions of the Event Deed; and
(f)Zierhlz had a longstanding grievance based on the assertion that the UC and UCU have not made good on alleged pre-contractual representations, which it now accepts had no effect on its legal relationship with the UC and the UCU.
At [106] above, I left open the possibility that the UCU may have breached an obligation of confidentiality which it owed to Zierholz. The allegation made by Zierholz was that the UCU used confidential information disclosed by Zierholz for the benefit of trading The Well. The document relied upon by Zierholz in support of this claim was a business case for the proposed new bar (then referred to as “The Bottleneck”) which set out a revenue assumption for the new bar as $455,000 per annum, and noted that such a figure put Bottleneck “at about 50% of the current trading income for Zierholz.” Assuming for present purposes that this information is correct, and that confidential information provided by Zierholz was used to determine Zierholz’s trading income, I am at a loss to see how that information could have assisted the UCU in its trading in The Well. The approximate annual turnover figure of $910,000 for Zierholz, as derived from the above, says nothing about how much it was costing Zierholz to brew its beer products, or to purchase its other requirements or to otherwise conduct its business, so that it provided no information about profitability. The information would have been most useful as a yardstick to assess the extent that the operation of the new bar may affect Zierholz’s trading, remembering that the revenue figure of $445,000was only an assumption. So, even if the UCU did make reference in this document to confidential information obtained from Zierholz, it did not use that information for the purpose alleged.
Anti-competitive behaviour
Zierholz complained that the UCU took active steps to block trade from entering its premises by placing barriers in front of a staircase leading from the Refectory level to the beer garden adjacent to Zierholz during a concert in October 2015. As I understand it, this is alleged to be anti-competitive behaviour contrary to the CCA. By an email dated 8 May 2015 to Mr O’Brien in the UCU, in the context of the upcoming concert in the Refectory, Mr Kidson noted that on prior occasions the UCU had erected barriers in front of the staircase. He acknowledged that there was a need for security at such events, but suggested it had to be achieved in such a way as to avoid an adverse impact on Zierholz’s business. Mr O’Brien responded later that day offering to “look to change our setup to avoid the need for fencing at the top of the stairs to Zierholz”. Mr O’Brien went on to observe that the event operated on a “no pass-out” basis, so that patron flow between the venues during the show should be minimal.
Mr Kidson gave evidence that about 300 people attended the concert, but the trading in Zierholz that night was “very quiet”. Despite his earlier email correspondence with Mr O’Brien, the stairwell was blocked by a temporary fence. Mr Kidson made no complaint about the presence of the fence on the evening.
I will accept for present purposes that the UC and the UCU had, at the relevant period, a substantial degree of power in the market of providing food, beverages and entertainment venues to students within the UC campus and the greater Belconnen market. I am not satisfied that either the UC or the UCU took advantage of their power in the identified market by, for a period likely no longer than a few hours, placing a temporary block on the use of the stairs from the Refectory level to the area outside Zierholz’s premises. The expression “take advantage of” in s 46 means no more than “use”, and does not require conduct that is predatory or morally blameworthy: Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177; Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; 205 CLR 1 . What must be “used”, however, is their power in the market. The relevant market, as identified by Zierholz, is that of providing food, beverages and entertainment venues. In placing a temporary fence at the top of the stairs during a concert held by the UCU in the Refectory neither the UC nor the UCU were using the marker power identified by Zierholz.
In addition, any use of the relevant market power by the UC or the UCU must be demonstrated to be for one of the purposes set out in s 46(1). There is no evidence of the purpose for which the temporary fence was placed at the top of the stairs, but it is inherently unlikely that the purpose was to eliminate or substantially damage Zierholz as a competitor, or to deter or prevent it from engaging in competitive conduct in the identified market. The fact that the fence was only in place during a particular concert held by the UCU in the Refectory suggests very strongly that the installation of the temporary fence was not for the purpose of affecting Zierholz’s trading. At best, it could only have had such an effect for a few hours over the nearly four years that Zierholz traded at the UC. Mr Kidson himself acknowledged that the temporary installation of the fence may have been for security reasons, and it is worthwhile noting that the fence did not preclude access by patrons to Zierholz; there were other routes available for patrons to access its premise. It is also worthwhile noting that it was most unlikely that there would have been any flow of customers from the Refectory to Zierholz that evening because those attending the concert could not get a “pass-out” to allow them to return to the Refectory if they left the venue before the end of the concert.
In addition, Zierholz complained of alleged anti-competitive behaviour by the UCU at the 2013 Stone Day festivities organised by the UCU. Mr Rinaudo gave evidence that Ms Leotta and a number of volunteers from the UCU stood at the top of the stairs leading from an area called the Hub to the level on which Zierholz was situated, telling students to head to the lawns area where the Stone Day festivities were being held. Mr Rinaudo said the people so directed were “heading towards the stairwell area” and were “forced” to go to the Stone Day festivities. Mr Rinaudo’s description of students being forced to attend the Stone Day festivities was not the subject of any amplification, undoubtedly because no actual force was used. There is no evidence that any of those who were directed to the lawns area were previously intending to go to Zierholz. There is no suggestion that any threats or intimidation were used, so that those directed by Ms Leotta or the volunteers retained the ability to choose not to attend the Stone Day festivities. These events occurred for a short period on one day, so that it can hardly be said that the purpose of the conduct was to eliminate or substantially damage Zierholz as a competitor.
Zierholz also complained that UCtoberfest festivities were held by the UCU in the Refectory area in 2013, and that the stairwell leading from the Refectory level to the level on which Zierholz was situated was initially blocked by a temporary force, with a security guard. This was eventually removed after complaints were made to the UCU. For the same reasons I have given with regard to the concert in 2015 and the 2013 Stone Day festivities, Zierholz has failed to prove any breach of the CCA with regard to this event.
The failure of the UC and the UCU to call witnesses
Zierholz was critical of the failure of the UC and the UCU to call a number of witnesses identified by Zierholz as having been involved in dealing with it during the relevant period. It submitted that the principles expressed in Jones v Dunkel (1959) 101 CLR 298 applied, such that I should infer that these witnesses would not have assisted the defendant’s case. In Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361, Heydon, Crennan and Bell JJ expressed the effect of the “rule” in Jones v Dunkel, at [63]:
The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case… The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn…
(References omitted)
Later, at [64], their Honours cautioned:
The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party.
Zierholz submitted that the failure of the defendants to call witnesses permitted this Court to draw inferences that those witnesses would not have assisted the defendants:
(a)to explain the surrounding circumstances at the time of execution of the Event Deed;
(b)to show that the UC or the UCU took steps to hold events and to work with Zierholz with an intention to maximise the parties respective benefits;
(c)to show that rent reductions were provided to Zierholz for loss of trade, as asserted by the defendants;
(d)to prove that Zierholz refused to take events in 2015; and
(e)in disproving evidence of anti-competitive behaviour.
It is not clear to me to what “surrounding circumstances” Zierholz is referring in paragraph (a) above, or how any “explanation” would have been relevant.
For the reasons that I have given regarding the proper interpretation of the Event Deed, there was no requirement for the UC or the UCU to call evidence of the nature referred to in paragraph (b).
Whilst the UC pleaded that it had reduced Zierholz’s rent in 2014 partly by reason of the proposed establishment of The Well (see [40] above), it made no reference in its final submissions to that matter or to any suggestion that any such reduction was in settlement of any claim by Zierholz arising out of the opening of The Well. I take it that that aspect of the UC’s defence was abandoned. As such, the occasion for the drawing of the suggested inference does not arise.
The refusal of Zierholz to take events from the UCU in accordance with the terms of the Event Deed has been established by the evidence called by Zierholz itself and by the contemporary documents. There is no occasion for the drawing of any inference as suggested by Zierholz.
The evidence with regard to alleged anti-competitive behaviour was thin. Some of the events referred to by Zierholz were trivial. There was no necessity for the defendants to call evidence on those issues because the evidence led by Zierholz lacked cogency.
Damages
It is not uncommon for courts in dismissing a claim for damages to indicate what damages would have been awarded if the plaintiff had been successful. Because of the multitude of claims advanced by Zierholz in this proceeding, all of which have been unsuccessful, it is not possible to attempt to assess damages, if for no other reason than the impossibility of determining issues of causation.
Conclusion – Zierholz’s claims
Zierholz has been unsuccessful with regard to its claims based in breach of fiduciary duty, breach of contract and breach of the provisions of the CCA. There will be judgment for the UC and the UCU against Zierholz on these claims.
The claim by the UCU against Zierholz
The UCU’s counter-claim is for:
(a)$13,034.35 for profit share from bar sales from the UCU sponsored events in 2014 in the premises covered by the Event Deed; and
(b)damages for the loss of opportunity to host events in Zierholz’s premises in 1 January 2015 to 30 June 2016.
There appears to be no real dispute that the amount of $13,034.35 was not paid by Zierholz to the UCU as was its obligation under the profit sharing provisions of the Event Deed.
To the extent that the UCU seeks damages for loss of opportunity to host events in Zierholz in 2015 and the first half of 2016, I do not think this should be allowed. The finding I have made establishes that from late 2014 onwards Zierholz was in breach of its obligations under the Event Deed by refusing to accept bookings. The evidence establishes that the UCU was content to allow Zierholz to take that position, pending possible renegotiation of the Event Deed. This constituted an effective waiver by the UCU of its right to conduct events in the premises during that period.
There will be judgment for the UCU against Zierholz in the sum of $13,034.35 plus interest calculated from 19 December 2014 (the date of the last invoice) until judgment.
Orders
There will be judgment for the defendants on the plaintiff’s claim.
There will be judgment for the second defendant/counterclaimant (UCU) against the plaintiff on the counterclaim in the sum of $13, 034.35 plus interest calculated from 19 December 2014 until judgment.
There will be judgment for the plaintiff against the first defendant/counterclaimant (UC) on the counterclaim.
Unless any party seeks a different order within 28 days of the date of publication of these orders and reasons, I order that the plaintiff pay the costs of the defendants as agreed or assessed on the plaintiff’s claim, the plaintiff is to pay the costs of UCU on UCU’s counterclaim, and the plaintiff and the UC are to bear their own costs with regard to the UC’s counterclaim.
| I certify that the preceding one hundred and eighty-one [181] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: |
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