Police and Community Youth Clubs NSW Ltd v Millenium Training and Hyper Martial Arts Pty Ltd [2012] NSWSC 754

Supreme Court New South Wales

Medium Neutral Citation: Police and Community Youth Clubs NSW Ltd v Millenium Training and Hyper Martial Arts Pty Ltd [2012] NSWSC 754 Hearing dates: 29/06/2012 Decision date: 09 July 2012 Before: Fullerton J Decision: 1. Summons dismissed. 2. Plaintiff to pay the first and second defendants' costs of the appeal. Catchwords: Appeal from Local Court - contract - termination of agreement - breach of implied term Legislation Cited: Local Court Act 2007 Category: Principal judgment Parties: Police and Community Youth Clubs NSW Ltd (Plaintiff) Millenium Training and Hyper Martial Arts Pty Ltd (1st Defendant) Kim Burke (2nd Defendant) Representation: Counsel: A Vincent (Plaintiff) M Bennett (Defendants) Solicitors: Thomsons Lawyers (Plaintiff) Cordato Partners (Defendants) File Number(s): 2011/409349 Decision under appeal Jurisdiction: 9109 Date of Decision: 2011-11-23 00:00:00 Before: O'Shane LCM

JudgmenT 1HER HONOUR: The plaintiff appeals the decision of O'Shane LCM of 23 November 2011 in which she entered a verdict for the defendants, with costs, on a statement of claim to which the plaintiff claimed an entitlement of $30,000 plus interest following termination of an agreement with the defendants under which those monies were paid. 2The plaintiff, the Police & Community Youth Clubs NSW Limited ("PCYC") is a not for profit, community organisation with clubs situated throughout NSW providing extracurricular programmes for young people. Mr Gardiner held the position of Chief Executive Officer. 3In April 2010, the first defendant, Millenium Training and Hyper Marial Arts Pty Ltd ("Hyper"), entered into a licence agreement with a corporation based in the USA, identified in the proceedings as Hyper LLC ("Hyper LLC"), to use and promote Hyper LCC's intellectual property and martial arts programs in Australia and New Zealand ("the Licence Agreement"). The second defendant, Ms Burke, was an officer of Hyper and for all relevant purposes the person with whom the Hyper LCC negotiated the licence and with whom the plaintiff dealt in Australia. Mr Osborne was the president of Hyper LLC. 4On or about 1 December 2010, following pre contractual negotiations between the parties, the plaintiff and Hyper entered into a Memorandum of Understanding ("MOU") whereby Hyper agreed to design and develop a "Hyper Martial Arts Development Program" ("the Development Program") for which the plaintiff would pay $30,000. 5Under the MOU it was agreed that the Development Program would contain the following elements: (a) Identification of potential instructors and provision of approved candidates for PCYC-Hyper training days; (b) A PCYC-Hyper curriculum and teaching manual, providing martial arts instruction and grading over an annual 4 [school] term cycle; (c) PCYC-Hyper character development materials for use as part of the PCYC-Hyper martial arts curriculum; (d) Curriculum, manual and materials for a PCYC-Hyper school-based character program covering areas such as values, bullying, self motivation, and fitness; (e) PCYC-Hyper branded achievement recognition devices such as clothing patches. Clothing patches are to be designed by both parties and supplied through Hyper; and (f) A PCYC-Hyper website for communication, promotion and celebration of events and achievements to be created as per development proposal. 6It was also agreed that the Development Program, as constituted, would be subject to specific contract and invoicing arrangements. In accordance with those arrangements on or about 16 December 2010 the plaintiff paid Hyper the sum of $30,000 on presentation of an invoice in that amount dated 27 October 2010 for the design and delivery of the development program. It would appear at that time that it was anticipated that the program would be created and provided by 1 January 2011 with a view to its implementation thereafter. 7On 17 December 2010 the terms of the MOU were adopted by the plaintiff and Hyper, such that, as expressly provided for in the MOU, it became the agreement between the parties ("the Agreement"). 8On 23 March 2011 Mr Osborne of Hyper LLC forwarded an email to Ms Burke attaching a notice dated 18 March 2011 giving 30 days notice of termination of the Licence effective from the date of receipt alleging a material breach of the licence agreement. On the same date and also by email Mr Gardiner was informed by Mr Osborne that Hyper and Ms Burke were no longer endorsed by Hyper LLC and could not deliver the Development Program as the Licence Agreement had been terminated. It was clear from the terms of the email that there was an existing relationship between the correspondents and that it was Mr Obsorne's intention to deliver the development program independent of Hyper making whatever adjustments to the agreement that were sought by the plaintiff and to compensate it for any inconvenience resulting from the termination of the Agreement with Hyper. 9On 6 April 2011 Mr Gardiner issued a notice of termination on behalf of the plaintiff and sought repayment of the $30,000 advanced the previous year in the following terms: I understand that you no longer hold the licence for Hyper in Australia. It is also my understanding that none of the work outlined in the MOU relating to a payment be(sic) PCYC last year of $30,000 has been undertaken and completed. 10By return email Ms Burke asserted that she continued to hold a licence from Hyper LLC and that the work done by Hyper to that date was in accordance with what she described as "the requirements and specifications discussed and detailed at our last meeting". The evidence makes clear that this is a reference to the meeting in February 2010 to which later reference will be made. 11The plaintiff commenced proceedings in the Local Court in May 2011 to recover the $30,000 paid pursuant to the Agreement. The statement of claim relied upon breach of two contracts, only the first of which was relied upon as grounding the right to terminate, namely breach of an implied term of the agreement by reason of what was said to be the termination of the licence between Hyper and Hyper LLC which entitled it to use and promote the intellectual property of Hyper LLC in this jurisdiction. It was this breach that was said to amount to a repudiation of the agreement which was accepted by the plaintiff. In the alternative, the plaintiff relied upon breach of a further agreement, wherein the second defendant, in her own capacity and as the authorised representative of Hyper is alleged to have agreed with the plaintiff (by its solicitors) to repay the sum of $30,000 on receipt of confirmation from the plaintiff as to how it became aware that Hyper LLC contended that the licence had been terminated ("the Confirmation Agreement"). 12At the hearing the plaintiff also relied upon what was said to be Hyper's failure to deliver the development program as a further breach grounding the right to terminate and an additional basis upon which it claimed a right to the return of the monies paid under the Agreement. 13The claim was defended on the basis that: (a) the defendants were not in breach of the Agreement and that the plaintiff did not otherwise have a right to terminate; and/or (b) the Confirmation Agreement, as pleaded, was denied. 14In entering a verdict for the defendants, the learned Magistrate made clear the basis upon which she found against the plaintiff on the essential factual finding underpinning the relief sought in the statement of claim, namely whether the plaintiff had proved a valid termination of the Agreement on either of the bases Mr Gardiner nominated in his email of 6 April 2011. In essence she found that at all material times Hyper was licensed by Hyper LCC to promote and distribute its intellectual property and martial arts programs and that there was no evidence to support the contention that Hyper had failed to deliver the development program in accordance with its contractual obligations.