William Roberts Lawyers was incorporated in June 2005, with our first office located in Albion Place, Sydney. Within 18 months, the firm had outgrown these premises, relocating to Pyrmont. William Roberts has gone from a 2-man practice, to a practice that now employs in excess of 35 staff members. As a result, and to accommodate future growth, we are now located in our new offices at Goulburn Street, Sydney.
Our youthful exuberance is the basis for the enthusiasm, commitment and justice that we seek to bring to all our legal matters. We continue to ensure that our lawyers improve their advocacy skills through training and development such as conducting moot trials, participation in and preparation of internal seminars, as well as comprehensive mentoring systems.
Now that we have turned five, we look to the future. The short-term future sees our Melbourne practice open its doors shortly. In the long-term, we hope to become a national commercial litigation practice with the same personal commitment to the core values that we hold today.
Misleading and deceptive market announcements: Company director held personally liable
The cases:
ASIC v Citrofresh International Ltd (No 2) FCA 27 (2 February 2010)
ASIC v Citrofresh International Ltd (No 3) FCA 292 (29 March 2010)
Key points:
It is important for directors who draft and/or authorise market announcements to verify their accuracy and validity, otherwise they may be personally liable.
A director's statutory duty of care and diligence under s 180 of the Act is based on an objective standard - lack of personal experience concerning the subject matter of the announcement will not lower the standard required.
A director cannot discharge their duties under the Act by relying on the judgments of the third party consultants who are not the correct experts on the subject sought to be advised.
Background:
Managing Director and CEO of Citrofresh International Ltd (“CIL”), Mr Ravi Amrit Narain, was responsible for authorising and causing CIL to make a misleading and deceptive ASX announcement that boldly described a range of its disinfectant products as “barrier protection” that would “act as an invisible condom” for “post-coital application”, and amongst other things claimed these products were a “a global solution to reduce and eventually stop the spread of HIV”. On this release, the share prices of the company increased from $0.23 to $0.70 following the announcement. This prompted the Australian Securities and Investment Commission (“ASIC”) to commence legal proceedings against CIL and Mr Narain for making misleading and deceptive statements about Citrofresh products.
CIL ultimately consented to judgment against it before Justice Goldberg for contravention of s 1041H of the Corporations Act 2001 (Cth) (“Act”) where Mr Narain escaped liability at first instance. However the full federal court allowed an appeal against the decision in favour of ASIC and remitted it back to Goldberg J for the determination of whether Mr Narain had breached his duty of care and diligence owed to the company and its members, and whether the statement released was in fact misleading or deceptive. (See ASIC v Narain [2008] FCAFC 120, 3 July 2008).
Outcome:
ASIC v Citrofresh International Ltd (No 2) FCA
It was held that Mr Narain’s conduct was in contravention of s 1041H of the Act which prohibits a person from engaging in conduct that is misleading or deceptive or likely to mislead or deceive in relation to a financial product or service. Mr Narain was also found to have breached his statutory obligation under s 180 of the Act to exercise his powers and discharge his duties with a degree of care and diligence that a reasonable person in the position of director or officer of the corporation in the corporation’s circumstances with the same responsibilities would have exercised.
The misleading statements:
There were five statements reviewed by the court which ASIC relied upon with respect to their misleading and/or deceptive nature.
Unchallenged expert medical evidence was led by ASIC and concluded that each of the statements in the release either had no basis or no evidence to suggest the Citrofresh disinfectant was anything like a vaccine, nor could be deemed effective as a “barrier protection” or have any effect in the reduction or prevention of HIV or other STDs. The court was satisfied the statements were indeed misleading and deceptive.
Importantly, since Mr Narain was involved in the actual drafting and approval of the ASX announcement, the court held that he was personally liable for contravening s1041H of the Act and for causing CIL to contravene the provision.
Objective standard of care: Lack of experience is no shield
Mr Narain made multiple submissions asking the court to take into account his inexperience in the governance of public companies when determining the standard of care and diligence that was required of him in the exercise of his statutory duties, as well as with regard to any pecuniary penalty calculations and considerations. However the court held Mr Narain could not be excused on grounds of inexperience from ‘exercising the appropriate degree of skill and care required of a company director especially one who was a managing director and chief executive officer’.
Non-expert third party reliance is insufficient
The court also held that while Mr Narain had sought the assistance of at least two external advisers in the drafting of the relevant ASX announcement, these third parties were not experts in the area of science, infectious diseases or their treatment, and as a result, Mr Narain was not entitled to rely on them for the accuracy of the statements.
The net still too loose as iiNet is let off the hook
In a landmark decision handed down by the Federal Court of Australia, it was held that internet service providers (ISPs) were not liable for copyright infringements of their users with particular reference to films and television programs.
The third largest ISP in Australia, iiNet, was successful in its defence after Justice Cowdroy found, in Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24, that iiNet provided a service that does not serve the purpose of infringing copyright
Primary argument:
The primary argument by the major motion picture studios was that the ISP had failed to take any reasonable steps to stop the infringing of copyright by its users and/or subscribers and by doing so authorised the copyright infringement.
Judgment:
Justice Cowdry found for the respondents for, inter alia, the following reasons:
the provision of an internet service is not equivalent to providing the means for copyright infringement. Justice Cowdry further noted that iiNet did not create or have control over the BitTorrent system, which is a peer-to-peer system that allows large volumes of data to be distributed; and
in response to the contention with regard to the relevant powers to prevent copyright pursuant to s 101(1A)(a) of the Copyright Act, his Honour considered that the use of a scheme for notification, suspension and termination of iiNet’s user accounts was not within the scope of a reasonable step within the meaning of the Act.
Summary:
With the vast publicity accorded to this case, Justice Cowdry noted the disappointing result for the 34 applicants (representing the major motion picture studios) and acknowledged the ever increasing rate of copyright infringement in today’s age of technology. The Federal Court was of the view, however, that iiNet was not responsible for its users gaining access to the BitTorrent system and infringing copyright. We now await the decision by the applicants as to whether an appeal will be filed.
William Roberts has relocated!
We are excited to announce that William Roberts has moved to new bigger and better premises. Our new details are:
Street address - Level 22, 66 Goulburn Street SYDNEY NSW 2000
Post office box - PO Box 20424 WORLD SQUARE NSW 2002
Document Exchange (DX) remains unchanged - DX 11591 SYDNEY DOWNTOWN
Phone and fax numbers remain unchanged
t + 61 2 9552 2111
f + 61 2 9552 1911
It's your fault I got drunk! Duty of care meets personal responsibility
It is an oft-lamented trend of our times that people seldom accept responsibility for their actions, but increasingly seek to attribute blame to others for their mistakes.
The High Court this month was faced with a decision, in C.A.L. No 14 Pty Ltd v Motor Accidents Insurance Board; C.A.L. No 14 Pty Ltd v Scott [2009] HCA 47 (“Scott’s Case”), about what steps a third party must take to protect a person from the consequences of their own actions.
The facts of the matter, in brief, are these: Mr Scott attended a hotel, at which he voluntarily drank alcohol, first with a friend and later by himself. At a point in time, the friend suggested that Mr Scott leave his motorcycle and his keys with the proprietor of the hotel, to avoid a breathalyser which was rumoured to be operating in the area, and instead call his wife to take him home. Mr Scott agreed to this proposition, gave his keys to the proprietor and arranged for his motorcycle to be locked up at the hotel.
As the night went on, Mr Scott was offered a ride home by his friend’s wife but declined that offer. The proprietor later offered to call Mr Scott’s wife to collect him from the hotel, but Mr Scott declined that offer in abrupt and offensive terms. Some time passed, then Mr Scott requested the return of his keys and motorcycle, repeatedly declared himself ‘right to ride’ in response to questions by the proprietor, and eventually rode away. Mr. Scott was thereafter involved in an accident on the roads, which cost him his life.
Mrs. Scott, his widow, claimed against the hotel and its proprietor alleging negligence. It was alleged that there existed a duty of care on the part of the hotel to take reasonable care to avoid Mr Scott riding his motorcycle while intoxicated, and that the proprietor had breached that duty by failing to:
refuse to return the keys or motorcycle to Mr Scott;
telephone Mrs Scott to collect her husband;
personally drive Mr Scott home; or
otherwise manifest some resistance to the attempts of Mr Scott to ride home.
The High Court decisively rejected the contentions of Mrs. Scott, refusing to accept that a duty of care existed, that the alleged duty of care was breached or that the postulated breaches caused the death of Mr Scott.
The Court was quick to note that some of the alleged breaches, if they were held to be breaches of a duty, would have required the proprietor to restrain Mr. Scott, refuse to hand over Mr Scott’s property or otherwise interfere with Mr. Scott’s autonomy – thereby committing the torts of detinue and false imprisonment. Further, the High Court observed that Mr. Scott had shown resistance to all offers of assistance and could not be presumed to be willing to disclose his wife’s phone number or submit to being driven home.
The High Court stressed that there is no general duty of care on the part of those serving alcohol to monitor and minimise the service of alcohol or to protect customers from the consequences of the alcohol they choose to consume. That is the case regardless of the statutory requirements upon publicans to refrain from serving alcohol to intoxicated persons. To find otherwise would necessitate an ‘interfering paternalism’ that conflicted with individual autonomy and responsibility.
Rather, the Court held the accountability to drink responsibly and to minimise the potential harm flowing from drinking was a matter more fairly placed on the drinker than the seller of drink.
That finding concurred with the decision of Callinan J of the High Court in Cole v South Tweed Heads Rugby League Club Ltd. In that matter, the Court dismissed a similar complaint by a drinker, but most of the members of the Court refused to adopt Callinan J’s finding about the duty of care issue, deciding the case on other grounds. In Scott’s Case, the High Court has decisively put to rest the idea that a proprietor must protect a person from the consequences of their own decision to drink.
iiNet - caught in a torrent?
Should an ISP be liable for its customer's copyright infringement? This is the central issue at hand in the landmark case between the Australian Federation Against Copyright Theft (AFACT) and iiNet.
AFACT is an industry body comprising of 34 film studios and owners of motion pictures and television programs, including Roadshow films, Walt Disney, Paramount and Sony.
In November 2008, AFACT lodged a claim against iiNet for allowing subscribers to download pirated films through peer-to-peer (P2P) networks. AFACT claims iiNet is liable primarily because of their failure to take “reasonable and appropriate” steps to stop their customers from making the alleged copyright breaches. AFACT is taking legal action against iiNet seeking either damages or an injunction, under sections 115 and 116 of the Copyright Act 1968 (Cth), provisions dealing with copyright infringement.
Breakdown of Infringing Action:
Having a copy of a film stored on iiNet user’s computer, available online for downloading using P2P network BitTorrent.
Transferring the data packets that make up the film where a request is made over BitTorrent, making available the film to the public
iiNet continuing to provide service despite knowledge of the infringing activity.
Prior to submitting their claim, AFACT retained the services of DtectNet Software APS (DtectNet) to investigate the suspected unauthorised transfer of copyright files by users via P2P networks. Two investigators became iiNet subscribers and traded files on the company network. Notices were subsequently sent to the ISPs with lists of internet addresses requesting that the ISP disconnect the users. These requests were not actioned by iiNet.
Issues and Implications:
Irrespective of the outcome of the case, some outstanding issues arise regarding the online legal arena. Should ISPs act as police and monitor the service usage of their customers? To alleviate their liability, iiNet have drawn a parallel to Australia Post, who iiNet submit would not be liable for drugs transferred via their postal services.
While the case has been at trial, two journalists have updated the public in real-time using Twitter. Although video and audio live media recordings are still prohibited, the court, aware of the journalists twittering, have tacitly approved it.
A central question that comes to mind is why did AFACT choose to take action against iiNet? If they are held liable, will AFACT continue to take legal action against larger internet service providers as the next step? Only time will tell.
Tort of Negligence - Tracing the Problem Back to its Roots
Case note and commentary
Facts
In 1981, Sydney Water operating under its statutory authority installed a water main into an underground sandy trench running parallel to Edmondson Avenue, Austral NSW (a semi-rural area). The water main caused a blockage in the free flow of water where it traversed the opening of a culvert pipe. As a result, excess water built up underground and was affecting root systems of the surrounding vegetation, including a eucalyptus tree.
The water main was installed in accordance with the standard engineering practice at the time.
In 2001, a violent storm caused the eucalyptus tree to collapse on to a passing vehicle. One of the occupants, Mr. Turano, was fatally injured.
Subsequent investigation found that the tree was affected by a root pathogen, the introduction of which was facilitated by the excess water caused by the blockage. While the storm was the immediate cause of the collapse, the root pathogen contributed in weakening the root system and making it more susceptible to collapse.
An action was brought by Mrs Turano, the widow of the man killed in the incident. Sydney Water Corporation appealed to the High Court after it was unsuccessful in the NSW Court of Appeal.
The High Court’s decision
In reaching its decision, the Court looked at the temporal relation between Sydney Water's conduct, MrsTurano's injury and whether the relationship between them gave rise to a duty of care. The Court looked at the interval of time between installation of the water main and the collapse – noting that during this time the tree was growing on Crown land, and under the control of the council, not Sydney Water.
Sydney Water additionally argued that the Court of Appeal relied on hindsight reasoning to reach its conclusion on the issue of duty of care. The High Court agreed with Sydney Water’s submissions. Rather than working backwards from the injury with the benefit of hindsight, the correct approach is to assess the actions of Sydney Water at the time of the work being carried out. As such, the work practices at the time of installation were relevant, and the Court asked the following question;
whether in 1981, a water authority acting reasonably ought to have obtained the advice of an arborist on the impact of its proposed works on vegetation growing in an unpopulated, semi-rural area.
The High Court ultimately found that injury to road users as a result of the collapse of a nearby tree was not a reasonably foreseeable consequence at the time of installing the water main.
A victory for common sense, but a Pyrrhic victory for Sydney Water?
One issue not addressed by the Court in its decision is whether the risk of such an occurrence may now be reasonably foreseeable to Sydney Water, having had the benefit of the evidence of the litigation, especially that of an arboreal expert and a consultant engineer, and whether this will:
negate the ‘temporal relation’ element of the test, as Sydney Water now being aware that such an event can occur should check the drainage of all existing water mains; or
affect the reasonable foresee ability of such an event when dealing with future installations of water mains – essentially requiring consideration to the issue of tree collapse and injury to road users to be undertaken for all future installations.
Under NSW statute, a person is not acting negligently unless it can be proved that a risk was foreseeable, not insignificant and in the same circumstances a reasonable person would have taken precautions to prevent such risk.Further, in determining whether a reasonable person would have taken precautions against the risk, the court is to consider the probability and likely seriousness of the harm, the burden of taking precautions against the risk and the ‘social utility’ created by the activity which creates the risk.
While this case may have highlighted the possibility of such risks materialising and the serious harm it can cause, it is very much open to debate on whether as a matter of practicality, the burden of checking the entire Sydney Water infrastructure can be in proportion to the likelihood of such risk materialising, or whether a reasonable person in the position of Sydney Water will abandon or substantially modify carrying on the process of supplying water because of such a risk.
Minimum bid secures the deal
In Peter Smythe v Vincent Thomas [2007] NSWSC 844, an eBay user placed an advertisement to sell a rare aircraft, with bidding starting at a minimum of $150,000.00. A fellow eBay user placed a bid for the aircraft at $150,000.00. This bid was the only bid that was made on the aircraft and the online auction ended.
After the auction had ended, the seller withdrew his offer to sell the aircraft and refused to complete the transaction with the winning bidder.
Contesting the withdrawal of the seller, the winning bidder alleged that as he was the highest bidder and his bid met the description of a minimum bid, a contract for the sale of goods had been entered into. The winning bidder submitted that the terms and conditions of eBay, which both users accepted upon registration with eBay, were binding. In particular, the winning bidder relied on the following eBay terms and conditions of registration:
“…if you receive at least one bid at or above your stated minimum price…you are obligated to complete the transaction with the highest bidder upon the item's completion, unless there is an exceptional circumstance…”
In relation to the above, the seller submitted that the only repercussion for any breach of the eBay terms and conditions was that a user could be banned from using eBay. The seller argued that there was no binding and enforceable agreement as between the seller and buyer of goods on eBay.
After consideration of the submissions made by the seller and winning bidder, the Supreme Court of New South Wales held that a binding and enforceable contract had been entered into by the seller and the winning bidder. The Court ordered that the seller had to execute (specifically perform) the contract and sell the aircraft to the winning bidder.
LAW9000
A legal firm without systems or procedures to manage its matters, people, and risk invites the potential for disaster.
We recognize the importance of not only practicing good law, but also adopting and implementing effective business practices within our firm. It is with this in mind that we have undertaken certification to the LAW9000 Standard.
LAW9000 is a legal management best practice standard that has been developed by QL Incorporated and SAI Global Limited. The Standard is supported by the College of Law and is based on the ISO9001 standard that has revolutionised quality systems and control across many different industries since the 1980s. LAW9000 has the added advantage of being adapted specifically toward the legal profession and is aimed at promoting a process approach to developing, implementing, and improving the effectiveness of a quality management system.
The introduction of LAW9000 within our firm is aimed at ensuring that clients’ needs are met and to ensure high levels of internal and external stakeholder satisfaction. This is particularly vital in the legal industry which requires effective change management to deal with frequent legislative and regulatory changes. Clients may also be confident of engaging a legal service provider that has the strongest quality controls in place with regular risk assessments that produce an effective corrective and preventative action system. Moreover, the longer term strategic benefit of the Standard’s approach can also mean reduced costs through the effective management of potential problems, and reductions in risk exposure.
Certification to the Standard is an ongoing process that promotes continuous improvement. External auditors will assess William Roberts on a regular basis and conduct surveillance audits on the status of the quality system to ensure that the LAW9000 Standard is being adhered to.
William Roberts is committed to achieving certification to the LAW9000 Standard. This is a long-term commitment, and will encourage a constantly evolving quality management system that will act as the foundation for the provision of excellent legal service.
William Roberts is Carbon Neutral
William Roberts commissioned an emissions report from the Carbon Reduction Institute to investigate our impact on the environment and determined and implemented measures to take in order to reduce this impact.
Our aim is to reduce greenhouse gases from entering the atmosphere, and we achieve this by purchasing the same number of 'carbon credits' (one credit represents saving one tonne of carbon dioxide from the atmosphere) as our equivalent carbon liability.
Other efforts to reduce our impact include liaising with carbon neutral suppliers and implementing a clause in our supplier engagement agreements that details minimum requirements for engagement.
William Roberts' objective was to be carbon neutral by 2010 - we achieved this feat by late 2008. By developing internal awareness programs and through team commitment, we are pleased to call ourselves "carbon neutral".
What's in a name? 'Employees' and 'independent contractors'
In Hollis v Vabu Pty Ltd ("Hollis' Case"), Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ remarked that "[t]he nature of employment relationships has changed greatly since the age of feudal status".
In Hollis’ Case, the High Court was required to determine whether an unidentified bicycle courier that collided with a bystander (Hollis), was an employee of the courier business, or an independent contractor. In determining that the bicycle courier was an employee of the courier business, Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ considered that, inter alia, the following facts were of paramount importance:
1. the bicycle courier was not providing skilled labour; was unable to make an independent career; was unable generate any goodwill as a bicycle courier; and was not operating his own enterprise;
2. the bicycle courier had little control over the manner of performing the work; nor was he able to refuse work;
3. the bicycle courier was "presented to the public and to those using the courier service as emanations of [the courier business]" and the bicycle courier was required to wear a uniform bearing the logo of the courier business;
4. the bicycle business superintended the bicycle courier’s finances and produced pay summaries; and
5. there was considerable scope for the actual exercise of control by the courier business over the bicycle courier.
It must be noted, however, that the above considerations are by no means an exhaustive list.
In Aufgang v Kozminksy Nominees Pty Ltd ("Aufgang’s Case"), the issue of whether a person is an employee or an independent contractor was held to be a question of degree in which numerous factors have to be considered; yet, none of which are determinative as "[t]he totality of the relationship is that which has to be considered".
Aufgang’s Case concerned the determination of whether the plaintiff doctor was an employee of the defendant’s medical practice, or alternatively, whether the plaintiff was an independent contractor. In determining that the relationship was that of employee and employer, Smith J stated that, in addition to the right to control, indicia of the nature of the contracting relationship included:
1. the right to have a particular person do the work;
2. the right to suspend or dismiss the person engaged;
3. the right to the exclusive services of the person engaged;
4. the right to dictate the place of work, hours of work, etc;
5. whether the work involves a profession, trade or distinct calling on the part of the person engaged;
6. who provides the place of work and equipment;
7. whose goodwill is created as a result of the work;
8. ownership of any saleable assets created by the work;
9. the person paying business expenses of any significant proportion; and
10. the payment to the person in question of remuneration without deduction for income tax.
Smith J also accepted that these indicia can be no more than a guide and the actual terms and terminology of the contract will always be of considerable importance, because “[t]he ultimate question will always be whether a person is acting as the servant of another of on his own behalf”.
Aufgang’s Case dealt with the situation where the agreement between the contracting parties was never reduced to writing. In those instances where the agreement between the parties is recorded or documented, it has been stated that when construing the terms of that contract, the aim, object and commercial purpose of the contract may be examined in order to establish the factual matrix in which the parties contracted.
As outlined in Reilly v Tobiassen ("Reilly’s Case"), however, the proper characterisation of the relationship between contracting parties is a matter of law and cannot be determined by any description given to the relationship by the parties themselves. Further, whilst the terms of any contract may be relevant in determining the contractual relationship, the concern of the Court will be that of substance rather than form.
Accordingly, one must be hesitant in rapidly accepting the existence of a specific contractual relationship, simply because at least one contracting party refers to the agreement in such a way. One ought delve below the surface and assess the nature of the contractual relationship for what it really is … regardless of what it may be (incorrectly) named.
Termination of Contracts at Common Law
Right to terminate at common law
Effected by a party who has a right, termination will bring about the conclusion of the contract. Further, the terminating party will have a right to claim damages against the other party.
Termination of a contract, however, effected by a party who does not have a right to terminate, will have the opposite effect. That is, the other party will be likely to have a right to claim damages from the terminating party.
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limted [2007] HCA 61 In the case of Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (“Koompahtoo”), the High Court stated that there are three situations in which a party may terminate a contract at common law:
1. where the other party has renunciated (formerly “repudiated”) the contract;
2. where the other party has breached an essential term (condition) of the contract (note that a breach of a non-essential term (warranty) will give rise to a right to damages only, without a right to terminate the contract);
3. where there has been a sufficiently serious breach of an intermediate term. The decision in Koompahtoo was the first instance in which the Court has confirmed the doctrine of “intermediate terms”.
Renunciation In Koompahtoo, Gleeson CJ, Gummow, Heydon and Crennan JJ (“the majority”) defined renunciation as: “[C]onduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract… The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.”
Breach of essential term
The majority in Koompahtoo stated that the approach to be used in determining whether a term of a contract is an essential term is to consider: “[T]he common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and… the commercial purpose it served.”
Establishing that a term breached was an essential term will require reference to all the circumstances in relation to the purpose and formation of the contract.
Serious breach of intermediate term The majority in Koompahtoo stated that with respect to intermediate terms (something more than a mere warranty), a party will be entitled to terminate if the breach goes to the “root of the contract”, by depriving that party of a substantial part of the benefit under the contract.
The Court made clear that the starting point ought always be the construction of the contract – that is, the contractual terms themselves dictate the remedies to which a party is entitled.
Thereafter, consideration ought to be given to the nature and seriousness of the breach and the adequacy (or otherwise) of damages as remedy for the breach.
The majority said: “[T]he intention that is relevant is the common intention of the parties, at the time of the contract, as to the importance of the relevant terms and as to the consequences of failure to comply with those terms. This is a question of construction of the contract to be decided in the light of its commercial purpose and the business relationship it established.”
Steps for consideration A useful summary, prepared by Ross Foreman of Counsel, was set out at page 54 of the March 2008 edition of Law Society Journal. A flow chart based upon this summary follows:
Have the common law rights to terminate been expressly excluded by the contract?
If the answer is no, identify the conduct of the other party that is relied upon to justify the termination
Apply the relevant test to determine whether the conduct amounts to renunciation of the contract
If that conduct does not amount to renunciation, but amounts to a breach of contract, determine whether the term breached is a condition, intermediate term or warranty (consider the intention of the parties and the test of essentiality).
If the answer is yes...
Prima facie right to terminate
If it amounts to breach of an essential term...
If the term is intermediate, determine whether the breach goes to the root of the contract
Prima facie right to terminate
If it amounts to a serious breach of an intermediate term...
Prima facie right to terminate
What you get is what you see
23 May 2008, Australian Financial Review (First)
When Robert Ishak and Bill Petrovski mapped out the vision for their law firm, William Roberts (their first names), the key question they asked was: If I were a corporate client, what would I want? The answer, Ishak says, was transparency.
"But this means whole transparency, or 'Show me your file'," Ishak says. "It was much easier for us to do starting with a blank canvas than it is for a major law firm to go back and change things."
When William Roberts creates or receives an important document, it is scanned immediately and made available for the client to view via a web−based interface. Clients use a Google−like search function to find what they need; pleadings, file notes, letters and accounts are all made available at any time of the day or night.
Ishak says the firm's insurance clients keep a close watch on the progress of key matters and have conducted random audits on bills. So far, there have been no surprises.
"Over the past three years, the demands from the insurance market has changed. Clients are becoming more sophisticated," he says. "They have increased what is required from the law firm, especially in terms of reporting."
He has observed other law firms' reporting systems that involve the manual input of data from client files into
spreadsheets to provide client updates.
"What we have is everything electronic," Ishak says. "Not only do we give them access [to the system], but we give them links to Austlii [Australasian Legal Information Institute] and parliamentary legislation.
"So if I cite a section in my advice and they want to read the whole of the section, they go straight to it. It is about making things easier for the client."
The approach also makes things cheaper. Ishak says the traditional process of preparing a legal letter − dictation, word processing, the solicitor making amendments, the typist making those amendment, then the solicitor signing off − "adds cost at every stage, but once you get the technology, the processes and the systems right, we can focus on what we do best: advising on the law and appearing in court".
William Roberts opened for business in Sydney in July 2005 and was built on insurance work. Ishak says the firm's low overheads allowed it to compete in a tough market. It now offers a broad range of commercial advice and has recently begun examining class actions. The use of technology has not only allowed William Roberts to create sophisticated reporting systems, but also to synthesise what can be complex and confusing information when briefing counsel.
"William Roberts have used technology not for its own sake but to convey complex information concisely and accurately," says Sydney barrister Michael Lee, who has been briefed by the firm several times.
The firm has 15 professional staff and is looking for five more. Ishak says that when he talks to young lawyers about their experiences being interviewed by large firms, he is "surprised that other firms don't ask technical questions. I will ask about the Evidence Act, I will ask about the latest case law on particular areas − and I will expect a response. The typical response is, 'I didn't know I had to answer legal questions'.
"But sometimes the legal knowledge isn't there."
One of William Roberts's major insurance clients recently awarded it a corporate responsibility and sustainability award. This was based in part on its adoption of "green" principles, including using public transport when attending court and encouraging the receipt of files electronically.
Ishak says "going green saves the practice money".
"It saves on printing costs, paper costs, shredding costs, secure paper disposal costs," he says.
"It is not entirely for altruistic purposes."
- James Eyers
William Roberts win for insurers relying on exclusion clauses
On 9 April 2008, Associate Justice Harrison of the Supreme Court of New South Wales delivered judgment in favour of CGU-VACC Insurance Limited in a pivotal case on exclusion clauses contained in contracts of insurance.
The factual circumstances that gave rise to litigation were that Mr King entered into an insurance contract. Mr King loaned the vehicle to his son. Without permission, Mr. King’s son allowed an intoxicated and unlicensed individual to drive the vehicle. This individual was then involved in a collision.
Following the collision, Mr King made a claim pursuant to the insurance contract. The insurer refused the claim in reliance on an exclusion contained in the contract of insurance. The exclusion stated that the insurer would not pay for loss or damage in circumstances where the driver of the vehicle was not licensed or was affected by intoxicating liquor, such that the driver’s capacity to control the vehicle was diminished.
As a consequence of the refusal by the insurer to indemnify Mr King, proceedings were commenced in the Local Court of New South Wales for, inter alia, breach of contract. The factual circumstances of the collision, namely that the driver of the vehicle was not licensed and was affected by intoxicating liquor, were not contested.
Mr King argued that the insurer was in breach of the contract of insurance and that the exclusion clause, when properly construed, did not operate to exclude liability in circumstances where the driver was not authorised by the insured to drive the vehicle.
Mr King submitted that if the exclusion clause were strictly interpreted then, arguably, the policy would not respond in instances such as if a vehicle were stolen by a person intoxicated by liquor and subsequently written-off by the thief. It was argued that this result would be so ‘…surprising, startling, ridiculous, preposterous and astonishing’ that such a construction of the exclusion clause ought fail. It was submitted that the correct interpretation of the exclusion clause should be limited to excluding liability in circumstances where the insured person had authorised the use of their vehicle by a drunken or unlicensed person.
In response, the insurer argued that Mr King was unable to prove that the insurer was in breach of contract by failing to pay the claim pursuant to the insurance contract. The insurer submitted that the interpretation of exclusion clauses ought be determined by construing a clause according to its natural and ordinary meaning, read in the light of the contract as a whole. It was argued that the exclusions were clear and ascertainable.
The court rejected the argument made by Mr King. The court found that the exclusion clause was not ambiguous and was ‘…abundantly clear and sweeping’. In reaching this decision,.
In April 2008, Mr King appealed the decision to the Supreme Court of New South Wales. In his appeal, Mr King submitted that the Magistrate:
• construed the exclusion clause in such a way that it did not mean what it said;
• was in error when he found that the effect of the clause was clear beyond the possibility of misunderstanding;
• was in error when he construed the clause.
Alternatively, construing the exclusion clause in reference to the facts rather than the law: the Magistrate:
• had regard to case law that was not relevant to the question before him in the circumstances of the case; and
• wrongly held that the clause was capable of bearing the meaning contended for by the insurer.
Associate Justice Harrison rejected all of the above points and confirmed the decision of Magistrate Heilpern. In upholding the decision, Associate Justice Harrison agreed that the words appearing in the exclusion clause were unambiguous.
Associate Justice Harrison concluded that in instances where an exclusion clause does not give rise to absurdity or inconsistency, then the Court must give effect to the words contained in the exclusion clause, notwithstanding that the result may appear to be capricious or unreasonable.
Associate Justice Harrison's decision is subject to appeal recently filed by Mr King.
A binding obligation on a vendor to sell?
On 6 December 2007, Justice McDougall of the Supreme Court of New South Wales held in Dencal Pty Limited v CB International Pty Limited that a heads of agreement (agreement) executed prior to the sale of land does not create a binding obligation on the vendor to procure the sale to the purchaser.
In July 2007, Dencal Pty Limited (‘Dencal’) and CB International Pty Limited (‘CB International’) executed an agreement. Under the agreement, CB International agreed to procure the sale to Dencal, and Dencal agreed to purchase the freehold and plant equipment, goodwill and business of a hotel located in Sydney.
The agreement set out the terms and conditions upon which CB International would procure the sale of the hotel to Dencal and provided for an exclusivity period, whereby CB International was barred from exchanging contracts of sale with another purchaser prior to 3 August 2007.
Under the agreement, if Dencal was satisfied with the due diligence, they were required to notify CB International by the deadline date 3 August 2007, that they wished to exchange contracts. Dencal was then required to exchange contracts on terms acceptable to CB International by this date. This term was limited, however, by a clause that stated that the terms and conditions contained in the agreement were ‘subject to a formal exchange of contracts’.
Both parties then entered into negotiations relating to the terms of the contract of sale, however, no contract of sale was executed by 3 August 2007. On 3 August 2007, CB International withdrew from the transaction in order to negotiate with other potential purchasers.
Dencal brought proceedings in the Supreme Court of New South Wales, alleging that the agreement with CB International created a right vested in Dencal to purchase the hotel within the exclusivity period and an obligation upon CB International to procure the sale to Dencal.
Dencal submitted that, considered as a whole, the agreement itself dispelled the prima facie effect of the clause limiting the agreement prior to the exchange of contracts. In response, CB International submitted that the agreement did not create a binding obligation on the vendor to sell to Dencal prior to the exchange and execution of formal contracts.
The Court found in favour of CB International. Justice McDougall held that the agreement created no binding obligation on CB International to procure the sale of the hotel to Dencal. Moreover, it was said that Dencal had no enforceable right to require CB International to procure the sale. Rather, the Court held that CB International was entitled to withdraw from the transaction at any point prior to the exchange of contracts for the sale of land and business.
Easement anguish for Westfield
On 3 October 2007, the High Court of Australia unanimously dismissed an appeal brought by Westfield, thereby limiting the use of existing easements for the benefit of adjoining properties.
The dispute before the Court was regarding an easement that was created in 1988 (easement). The easement created a right of way in favour of land owned by Westfield on which the shopping centre known as ‘Skygarden’ was located (‘Skygarden land’) and imposed a burden on land upon which the shopping complex ‘Glasshouse’ was located (‘Glasshouse land’). The terms of the grant of easement stated that ‘full and free carriageway’ for vehicles and persons were allowed to ‘go, pass and repass…for all purposes…to and from’ the Glasshouse land to the Skygarden land.
Dispute over the terms of the easement arose when Westfield, which is the current proprietor of two parcels of land adjacent to Skygarden land, sought to utilise the right of way to benefit the proposed redevelopment of three surrounding properties. The principal submission made by Westfield was that the term ‘for all purposes’ contained in the grant of easement encompassed the purpose of accessing Skygarden, and from there travelling to some further property.
At first instance, the Supreme Court of New South Wales granted relief to Westfield, finding that the terms of the easement were sufficiently broad to allow access to other properties through the Skygarden land. In reaching this decision, Justice Brereton considered that the use of the right of way to access adjacent properties through the Skygarden land would have been contemplated at the time of the grant.
The New South Wales Court of Appeal, however, overturned this decision adopting a narrow construction of the terms of the easement. The Court of Appeal said that the decision of Brereton J was the product of an error in preparedness to look for the intention or contemplation of the parties to the grant. In contrast, the Court of Appeal found that, prima facie, the terms of the easement only allowed the right of way to benefit the Skygarden land and not adjoining properties.
On appeal, the High Court of Australia held that the Court of Appeal had not erred in overturning the decision of Brereton J. Agreeing with the decision of the Court of Appeal, the High Court stated that courts should not look to the facts, circumstances or intentions of the parties at the time of grant, except in circumstances where it is necessary to do so to make sense of the terms contained in an easement. Significantly, the High Court found that the terms of the easement did not use the word ‘across’ in relation to Skygarden. The only terms contained in the easement that were used in relation to the Skygarden land were ‘to and from’. As such, the High Court determined that the wording of the easement tended to suggest that the purpose of the grant was to give access to and from the Skygarden land, but not access to adjacent land reached only by going across the Skygarden land.
