Illusory consideration and uncertain terms – arguments of last resort?

Kirralee Young has had a success in a shareholder dispute in the Court of Appeal regarding illusory consideration and uncertainty in respect to the interpretation of a shareholders agreement. 

The decision relates to a dispute between the parties relating to the meaning and operation of certain funding provisions in a shareholders agreement. The agreement regulated their rights as equal shareholders in a company. In broad terms, one shareholder provided the intellectual property and expertise for the business and the plaintiff was required to provide funding. Despite the agreement being in place for over 12 months, one shareholder contended that the agreement was void and uncertain because the funding provisions were illusory and uncertain in the sense that they did not impose a definitive obligation on the other party to provide such funding. i.e there was an unfettered discretion.

It cannot be doubted that promises with no substance, or that are ‘illusory’, are not good consideration. For example, A cannot promise to buy B’s goods in return for ‘whatever A feels like paying’. This type of consideration is discretionary and without substance and is therefore not good consideration.  Nor can it be doubted that a promise is not illusory because the promisor has some discretion in how its obligations are to be performed. It is only necessary that there be an obligation that the promise be performed and that the discretion is contained within the defined parameters. 

The question in this case was whether the discretion was completely unfettered. The plaintiff argued that it did not have a completely unfettered discretion as to the provision of funding because it was required to act in good faith under the agreement and pursuant to duties arising at common law and in equity.  The defendant argued these duties were not fetters on the discretion because they could not be specifically enforced.

The Court of Appeal found in favour of the plaintiff that the consideration was not illusory consideration nor were the provisions uncertain and ultimately that the shareholders agreement was valid. They further found that good faith obligations can act as a fetter and that they did not need to be specifically enforceable. It was enough that those obligations could sound in damages only.

Further details of the case can be found here .

Public Inquiry under the Charitable Fundraising Act 1991 into RSL Lifecare Limited, RSL NSW & Ors

Steven Cominos appeared on behalf of 2 former directors of RSL Lifecare Limited at the public inquiry under the Charitable Fundraising Act 1991 (NSW) (CFA). During the inquiry, various allegations were made against RSL Lifecare and a number of its former directors regarding the use of funds derived through fundraising activites, in relation to compliance with the CFA’s requirements and regarding the exercise of their fudicuary duties in receiving consultancy fees. Neither of the former directors for whom Mr Cominos appeared were referred to any regulatory body for investigation or further action.

Baca v Union Standard International Group

Steven Cominos appeared for the Respondent, a margin FX issuer, in an international arbitration involving a claim brought by a former client. The Respondent was successful in upholding its decision to confiscate the claimant’s profits relying on the terms of its product disclosure statement. Those terms permitted the confiscation of profits due to the claimant having engaged in price latency arbitrage trading and its failure to disclose its use of plug-in software when executing margin FX trades on the Respondent’s platform. All the claimant’s allegations of breaches of the Corporations Act by the Respondent and that the relevant contractual terms were ‘unfair terms’ under the ASIC Act were also rejected.

Rekrut and Scott v Champion Homes Sales Pty Ltd; Champion Homes Sales Pty Ltd v Rekrut and Scott [2018] NSWCATAP 97

From the New South Wales Civil & Administrative Tribunal Appeal Panel:

COSTS – NCAT Internal appeal – amount in issue in excess of $30,000 – r 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) and cl 20(4) of the Consumer, Trader and Tenancy Tribunal Regulation 2009 (NSW) – no issue of principle

COSTS – general rule that costs follow the event – application of the rule and discretion – no issue of principle

Michelle McMahon appeared for Adam Rekrut and Sandra Scott.

Stojic v Stojic [2018] NSWCA 28

In the New South Wales Court of Appeal:

SUCCESSION – wills, probate and administration – probate and letters of administration – validity of will – whether the deceased knew and approved the contents of the will – where suspicious circumstances exist - where testator has read the will – where findings of fact insufficient to determine testator’s knowledge and approval of the will - more findings necessary to resolve disputed questions of fact – new trial ordered

David Smallbone appeared with David Rayment for the Appellant.

Sabharwal v Minister for Immigration and Border Protection [2018] FCA 10

From the Federal Court of Australia:

MIGRATION – application for judicial review of a decision of the Minister to refuse a visa under s 501(1) of the Migration Act 1958 (Cth) – whether Minister misconstrued or misapplied s 501(6)(d)(i) of the Act – whether Minister required to give consideration to a psychologist’s report

Dr Stephen Tully appeared pro bono for the applicant.

Wickham & Arnett [2018] FCCA 80

From the Federal Circuit Court of Australia:

FAMILY LAW – Parenting – Twins aged 7 – one twin currently spending three hours per fortnight with the father; the other refusing to do so – father seeking orders for the children to spend time with him each alternate weekend and for half of the school holidays – mother seeking a no time order – where the mother alleges that the father perpetrated severe coercive and controlling family violence during and after the parties relationship which included hitting and pushing her, grabbing her by the throat, spitting on her, verbally abusing and threatening to kill her, damaging property, and taking or threatening to take the children in order to coerce her into agreeing to his demands including a demand to drop an ADVO application – where the mother agreed to the father spending time with the children for three years after the final separation but ended time soon after the children told her that the father had assaulted his current partner – where the father denies assaulting his current partner – where the father made some limited admissions about being violent to the mother but otherwise denied the mother’s allegations – where the father blamed his behaviour on the mother allegedly having mental health issues – where the court accepts the mother’s evidence and considers that there is an unacceptable risk of the children being exposed to family violence in the father’s unsupervised care - Independent Children’s Lawyer agreeing but proposing an order for long term supervised time – no benefit to the children in such an order – order made that the children spend no time with and have no communication with the father.

Michelle McMahon appeared for the Independent Children's Lawyer.

Sydney Tools Pty Ltd v Robert Bosch (Australia) Pty Ltd [2017] NSWSC 1709

From the Supreme Court of New South Wales:

CONTRACTS - existence of a contract - “postal rule” - whether Trading Agreement contained obligation to supply absent acceptance of an order - - HELD: no executed contract - no obligation to supply - PRACTICE AND PROCEDURE - Practice Notice SC Eq 3 para 50 - “stop-watch” method of trial

David Rayment appeared for the Defendant.

Elias v Alloha Formwork & Construction Pty Ltd [2017] NSWSC 1546

From the Supreme Court of New South Wales:

BUILDING AND CONSTRUCTION – Home Building Act 1989 – Statutory warranties – Breach – Calculation of damages for cost of rectification of defects – Calculation of delay costs
CONSUMER LAW – Australian Consumer Law s 18 – Misleading or deceptive conduct – Whether defendants made representations – Whether representations were misleading or deceptive – Whether plaintiffs relied on representations
CONTRACTS – Breach of contract – Consequences of breach – Right to damages – Whether plaintiff entitled to costs of rectifying defects in building or cost of demolition and rebuild
CONTRACTS – Building and construction – Formation – Whether first defendant entered into contract with plaintiffs – Whether contract varied by agreement
CONTRACTS – Remedies – Damages – Remoteness of damage – Whether plaintiff’s impecuniosity must be taken into account in determining what loss is reasonably foreseeable
CONTRACTS – Termination of contract – Repudiation – Whether first defendant repudiated contract – Whether plaintiffs accepted repudiation
NEGLIGENCE – Duty of care – Breach – Whether third defendant breached duty of care in issuing construction certificates – Whether plaintiffs suffered loss as consequence of defendants’ breach

Michelle McMahon was led by Andrew Pickles SC for the plaintiffs.

LFDB v SM [2017] FCAFC 178

From the Full Federal Court of Australia:

PRIVATE INTERNATIONAL LAW – appeal from the dismissal by the primary judge of an application under s 72(1) of the Trans-Tasman Proceedings Act 2010 (Cth)to set aside the registration of a judgment of the High Court of New Zealand in relation to proceedings under the Property (Relationships) Act 1976 (NZ) – whether enforcement of judgment would be contrary to public policy in Australia

Dr Christopher Ward SC and Dr Stephen Tully successfully appeared for the respondent.

Rekrut and Scott v Champion Homes Sales Pty Ltd; Champion Homes Sales Pty Ltd v Rekrut and Scott [2017] NSWCATAP 187

From the NSW Civil & Administrative Tribunal:

APPEAL – whether leave to appeal should be granted – whether Tribunal below failed to give adequate reasons – whether Tribunal below failed to consider claims – whether no evidence to support findings made below
  
EXTENSION OF TIME – whether extension of time needed – application of Civil and Administrative Rules 2014 (NSW) rr 6 and 13 and Interpretation Act 1987 (NSW) s 76 – whether extension of time should be granted

Michelle McMahon appeared for Adam Rekrut and Sandra Scott.

Rizeq v Western Australia [2017] HCA 23

From the High Court of Australia:

Constitutional law (Cth) – Courts – State courts – Federal jurisdiction – Diversity jurisdiction – Where appellant resident of New South Wales – Where appellant indicted for offence against law of Western Australia – Where matter between State and resident of another State within meaning of s 75(iv) of Constitution – Where District Court of Western Australia exercising federal jurisdiction – Whether provisions of State Act picked up and applied as Commonwealth law – Whether s 79 of Judiciary Act 1903 (Cth) operates in respect of s 6(1)(a) of Misuse of Drugs Act 1981 (WA) – Whether s 79 of Judiciary Act 1903 (Cth) operates in respect of s 114(2) of Criminal Procedure Act 2004 (WA).

Criminal law – Appeal against conviction – Where trial by jury in federal jurisdiction – Where majority verdict of guilty returned – Whether unanimous jury verdict required by s 80 of Constitution – Whether majority jury verdict permitted under s 114(2) of Criminal Procedure Act 2004 (WA).

Words and phrases – "accrued jurisdiction", "diversity jurisdiction", "Federal Judicature", "federal jurisdiction", "jurisdiction", "matter", "picked up and applied", "power", "State jurisdiction", "State legislative capacity", "trial by jury".

Dr James Stellios assisted Matthew Howard SC in representing the appellant.

Australian Building and Construction Commissioner v Parker [2017] FCA 564

From the Federal Court of Australia:

INDUSTRIAL LAW – coercion – taking of action against another person – intent to coerce – need for an intent to negate choice – need for a high degree of compulsion

INDUSTRIAL LAW – intention – onus to establish affirmatively that action was not actuated by the reason alleged

INDUSTRIAL LAW – the taking of industrial action 

INDUSTRIAL LAW – breach of enterprise agreement

INDUSTRIAL LAW – accessorial liability – knowledge of essential matters which make up offence

INDUSTRIAL LAW – breach of civil penalty provisions

PRACTICE AND PROCEDURE – stay of proceeding pending resolution of criminal proceedings – stay refused – alleged contraventions “not substantially the same” 

PRACTICE AND PROCEDURE – Briginshaw standard – need to consider gravity of matters alleged 

PRACTICE AND PROCEDURE – withdrawal of an admission in defence – leave granted

Matthew White SC appeared with Michael Rennie for the Applicant.

Estate MPS, deceased [2017] NSWSC 482

From the New South Wales Supreme Court:

SUCCESSION — Family provision — Close personal relationship — Elements — Living together, domestic support and personal care — Separate residences — Nature and quality of relationship — Social intimacy
 
SUCCESSION – Family provision — Close personal relationship — Elements — Provision of domestic support and personal care — Not for fee and reward
 
SUCCESSION — Family provision — Conduct disentitling — Character and conduct of applicant — Need to examine totality of relationship
 
SUCCESSION — Family provision — Capacity of applicant to manage affairs — Form of relief — Protective orders

PROTECTIVE JURISDICTION —Family provision application – Capacity for self-management — Conduct of proceedings without tutor — Form of relief – Protective orders

Kim Morrissey appeared with Madeleine Bridgett for the Plaintiff.

Bates & Arthur and Anor [2017] FamCAFC 73 (26 April 2017)

From the Family Court of Australia:

FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – LEAVE TO INTERVENE – Application in an appeal by the father seeking leave to intervene in an appeal – Where the Court is satisfied that allowing the application would not cause any injustice to the applicant – Where in the circumstances, it is in the interests of justice that the application for leave to intervene be granted – Application to intervene granted.

Dr Christopher Ward SC appeared with Madeleine Bridgett for the First Respondent.

Dattilo v Commonwealth of Australia (as represented by the Department of Infrastructure and Regional Development) [2017] FCA 329

From the Federal Court of Australia:

PRACTICE AND PROCEDURE – application for a stay pending application for special leave to appeal to High Court – application dismissed, with costs

David Rayment appeared for the Commonwealth.

Uren v Commonwealth of Australia (as represented by the Department of Infrastructure and Regional Development) [2017] FCAFC 30

From the Federal Court of Australia:

ADMINISTRATIVE LAW– whether the Federal Circuit Court (Commonwealth Tenancy Disputes) Instrument 2015 (Cth) (Instrument) was ultra viress 10AA(3) of the Federal Circuit Court of Australia Act 1999 (Cth) to make provision for and in relation to all or any of specified matters in respect of a Commonwealth tenancy dispute – whether a provision of the Instrumentcommenced before the day the Instrument was registered for the purposes of s 12 of the Legislation Act 2003 (Cth)

APPEAL AND NEW TRIAL – appeal from Federal Circuit Court of Australia – claimed errors in fact-finding by primary judge – claimed errors in primary judge’s exercise of discretion in s 94 of theResidential Tenancies Act 2010 (NSW) that it was appropriate to make a termination order for a residential tenancy agreement – whether error by the primary judge in suspending the order for vacant possession – whether to grant application that, in an appeal, the Court receive further evidence

CONSTITUTIONAL LAW– separation of judicial and executive powers – whereResidential Tenancies Act 2010 (NSW) conferring power on State Tribunal was made the applicable law for Commonwealth tenancy disputes in the Federal Circuit Court of Australia involving land in New South Wales – whether acquisition of property other than on just terms – whether there was a “matter” within the meaning of Ch III of theConstitution – whether it was beyond the legislative power of the Parliament to make s 10AA of the Federal Circuit Court of Australia Act 1999 (Cth) and the Federal Circuit Court (Commonwealth Tenancy Disputes) Instrument 2015 (Cth)

LANDLORD AND TENANT – application by Commonwealth as lessor to the Federal Circuit Court of Australia for a termination order for a residential tenancy agreement where the tenant had been in continual possession of the same residential premises for a period of 20 years or more – whether errors in primary judge’s exercise of discretion in s 94 of theResidential Tenancies Act 2010 (NSW) that it was appropriate to make a termination order for a residential tenancy agreement

PRACTICE AND PROCEDURE – application for an adjournment – whether leave should be granted to amend grounds of appeal – whether to grant application that, in an appeal, the Court receive further evidence

David Rayment appeared for the Commonwealth.