Saxby Bridge Mortgages Pty Ltd v Saxby Bridge Pty Ltd [2000] NSWSC 433

New South Wales Supreme Court

CITATION : Saxby Bridge Mortgages Pty Ltd v Saxby Bridge Pty Ltd [2000] NSWSC 433 FILE NUMBER(S) : SC 1618 of 1999 HEARING DATE(S) : 3 December 1999 JUDGMENT DATE : 26 May 2000

PARTIES : Saxby Bridge Mortgages Pty Ltd & Anor v Saxby Bridge Pty Ltd JUDGMENT OF : Simos J at 1

J M Ireland QC D T Kell COUNSEL : (Plaintiff)

D J Hammerschlag (Defendant) Webster O'Halloran & Associates (Plaintiff) SOLICITORS : Atanaskovic Hartnell (Defendant) CATCHWORDS : Contract - express and implied terms - held: Plaintiff had failed to establish the express and implied terms alleged. Fiduciary duty - held: Plaintiff had failed to establish the fiduciary duty alleged. CASES CITED : Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 at 347; Hospital Products Limited v United States Surgical Corporation & Ors (1984-1985) 156 CLR 41. DECISION : Proceedings dismissed.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

SIMOS J

EQD1618/99 FRIDAY 26 MAY 2000 SAXBY BRIDGE MORTGAGES PTY. LIMITED & ANOR. v SAXBY BRIDGE PTY. LIMITED JUDGMENT The Proceedings Statement of Claim 1 HIS HONOUR: By their further amended statement of claim filed 24 November 1999 the plaintiffs alleged that since prior to 1995 the defendant had carried on the business of providing by its employed and sub-contract consultants ("consultants"), investment and insurance advice and investment and insurance products, including investment properties, superannuation policies and funds, life and general insurance products, managed funds and shares. The plaintiffs further alleged that in or about February 1995 John Brett Kingston, the second plaintiff, and Saxby Bridge Pty. Limited, the defendant, entered into an agreement (thereinafter called "the February 1995 Agreement") which was partly oral and partly in writing, the oral part of the agreement arising from conversations between the second plaintiff and Jeff Braysich on behalf of the defendant and the written part of the agreement arising from letters of 13 February 1995 from the second plaintiff to Jeff Braysich and 16 February 1995 from Jeff Braysich to the second plaintiff. 2 The statement of claim further alleged that the February 1995 Agreement contained express terms and conditions to the effect that the second plaintiff and the defendant would form a new company to operate under the name "Saxby Bridge Mortgages Pty. Limited", that the new company would occupy premises within those of the defendant on terms agreed between them, that the new company would otherwise adopt the logo and trade dress of the defendant so as to be identifiable by members of the public, including clients of the defendant, as an operating division of the defendant; that the new company would provide mortgage services which would be available to clients of the defendant; and that the shareholding of the new company would be held as to 80% by the second plaintiff and as to 20% by the defendant. 3 It was also alleged in the statement of claim that there were further express terms and conditions of the February 1995 Agreement, namely, that the new company would provide training and other assistance to consultants of the defendant from time to time as to the role mortgage finance might play in the investment strategies of clients of the defendant; that the defendant would instruct its employees and consultants to refer to the new company clients who were contemplating borrowing money for investment and other purposes; and that the new company would confer with such clients of the defendant and advise each such client and the consultant responsible as to the possibility and desirability of using mortgage secured finance arranged by the new company for such purposes having regard to the situation of the client. 4 It was further alleged in the statement of claim that the defendant would receive 80% of each initial commission or fee received from a client in respect of a settled loan secured by a residential mortgage and further that the defendant would receive a portion of the "trailing" commission received from the funds provider in respect of each such loan during its term. 5 It was further alleged in the statement of claim that it was an implied term and condition of the February 1995 Agreement that the parties would deal with each joint client with whom the first plaintiff consulted, who made an application for mortgage finance to the first plaintiff, who received an offer of mortgage finance as a result of an application made through the first plaintiff and who received mortgage finance as a result of an application made through the first plaintiff "in good faith in the interests of both of them". 6 It was further alleged that there was a further implied term and condition of the February 1995 Agreement that each of the parties would deal with each joint client in a way which was not in conflict with the interests of each of them in that joint client. 7 It was further alleged that in about March 1995 the second plaintiff and Jeff Braysich on behalf of the defendant agreed that the first plaintiff would be utilised as the new company; that the first plaintiff would thereupon commence business under the name Saxby Bridge Mortgages Pty. Limited; that the second plaintiff and Jeff Braysich would become directors of the first plaintiff; and that the shareholding in the first plaintiff would be held as to 80% by the second plaintiff and 20% by the defendant. 8 It was further alleged in the statement of claim that by taking up its shareholding in the first plaintiff and adopting the name "Saxby Bridge Mortgages Pty. Limited" the defendant by necessary implication, concluded a further agreement with the first plaintiff ("the Operational Agreement") which included terms and conditions as between the first plaintiff and the defendant corresponding to the terms and conditions of the February 1995 Agreement. In the course of the hearing it was conceded on behalf of the defendant that the defendant did become a party to such agreement (if any) as the Court should find with the defendant. 9 It was further alleged in the statement of claim, further and alternatively that at all times each of the first plaintiff and the defendant has owed a fiduciary duty to the other in relation to the relevant joint clients to deal with each such client in good faith in the interests of both of them and in a way which was not in conflict with the interests of each of them in that joint client. That allegation was particularised as follows:- "The relationship between the parties which involved them dealing with joint clients as though they (the parties) were a single enterprise and which involved them sharing the single income stream which might result from such dealings was one of trust and confidence." 10 It was further alleged in the statement of claim that there was an implied term in the February 1995 Agreement and in the Operational Agreement to the effect that it could not be terminated by either party other than on reasonable notice. 11 Certain further implied terms were alleged in the Operational Agreement including a term that the defendant would not operate any business competitively to the business known as "Saxby Mortgages" nor adopt a name for any of its other businesses which included the words "Saxby Mortgages". 12 It was alleged that the first plaintiff had performed the whole of its obligations under the Operational Agreement as a consequence of which members of the public had come to regard the first plaintiff as the defendant or as a part of the defendant's business structure and as a substantial part of the first plaintiff's client base had come to comprise the clients of the defendant and that in fact the first plaintiff's client base was substantially comprised of clients of the defendant by February 1999. 13 The statement of claim then alleged that on 24 February 1999 the defendant had given notice to the plaintiff purporting to terminate the agreement between the parties by letter from the defendant to the first plaintiff dated 23 February 1999 and had since that date treated it as terminated. It was alleged that the said notice was a wrongful repudiation of the Operational Agreement by the defendant because the letter purported to determine the Operational Agreement immediately when there was an implied term that it could not be terminated except on reasonable notice. 14 The statement of claim alleged that as a result of that breach the first plaintiff had suffered and would suffer certain particularised loss and damage including the loss of initial commission and trailing commission generated from clients of the defendant who would have become joint clients during the remaining term of the Operational Agreement and further that the first plaintiff would suffer loss and damage being loss of income during the period required to re-establish an identity and client base other than the defendant's clients. The statement of claim alleged further breaches of the Operational Agreement and of the fiduciary duties alleged. 15 The statement of claim also alleged breaches by the defendant of a tenancy between the first plaintiff and the defendant of certain premises being part of the premises occupied by the defendant by reason of the defendant's purported wrongful termination of the tenancy. 16 The plaintiffs sought and were granted certain interlocutory relief in respect of that occupation of the premises and in respect of telephone services relating to those premises and no further relief is presently sought in respect of those matters. 17 The plaintiffs then sought certain relief including a declaration that it was a term of the relevant agreement that it should not be terminated by either party other than on reasonable notice and that in the relevant circumstances eighteen months (or alternatively such other period as the Court may determine) was reasonable notice.