Coffee and a Case Note

“I’m not paying you if that grain catches fire!”  

An ethanol manufacturer stored grain at a refinery.  An insurance policy obliged the insurer to indemnify the manufacturer.  

The policy had exclusions for “spontaneous combustion… spontaneous fermentation or heating or any process involving the direct application of heat”: [4]  

One morning, smoke was detected in one of the refinery’s bays. Emergency services attended, found a “burnt smell” in one bay, and significant damage in two others. These discoveries led to destruction of the relevant stockpiles.  

The manufacturer made a claim.  

An expert concluded the damage was caused by “self-heating”: [11]. 

This turned the parties’ attention to the exclusions.  There had been negotiation between the parties before they entered into the policy, including re the exclusions: [20].   

The Court counselled caution when applying the contra preferentum rule as there had been negotiations: [32].  The manufacturer noted the referee could not point to the cause of the self-heating, which might (or might not) have been rain. 

The Court found the lack of precision about the cause of self-heating was not doubt that self-heating occurred: [36] to [38].  The manufacturer’s appeal was dismissed. The insurer did not have to pay out.  

Pretty lit!

Take a syndicate of lottery winners, most of whom work at the same factory. They're up $40M.  

Take a disappointed member of a former, different syndicate also chiefly made up of workers from the same factory.  

Our disappointed former member sues, seeking some of $40M, and loses. Having lost, a cost order is made against him.  

The lottery winners (who also "won" the litigation) made a number of offers during the litigation, suggesting that they pay a small sum of money to settle the claim.  

Having made offers to pay, and having to pay nothing after judgment is handed down, they sought their costs on the indemnity or solicitor / client basis.  

They had to confront the Court's position that the offers might have been derisory.

Today’s plaintiff was a shareholder, not a director (but the wife of one of the directors) and the financial controller of a Co.  

The Co enjoyed some success and embarked on a restructure.   The company would “run bare” and pay profits in the form of licence fees to a third party. 

That third party would distribute those fees to the trustees of discretionary family trusts.  

Crucially: our plaintiff's right to a distribution from the discretionary trust was as a secondary beneficiary of the family trust *for so long as she remained married*.  

Got it?  

Formerly, the plaintiff held shares in an asset-owning company.   Following the restructure, the value of her shares were vastly reduced as the company "ran bare" and her rights to share in profits were discretionary and dependent on marriage.  

Sadly, during the restructure, our plaintiff’s marriage broke down.  She sued alleging commercial unfairness; corporate oppression.  At first instance she failed.  

On appeal, she failed too. 

Crucially, the matters raised on appeal - her reduced entitlement to profits following a restructure - were not evidence of actual conduct, but were “resultant”: [40] and [41]   Oppression is concerned with conduct, not outcomes. The plaintiff was unable to take the Court to any relevantly unfair conduct.

So what does the exclusion clause exclude?  

A lender relied on valuations in advancing money. The loans were defaulted on. The lender tried, and failed, to sell the property to satisfy the outstanding sum.  

The lender then sued the valuers. The valuers cross-claimed against their insurer.  The insurer attempted to rely on an exclusion clause set out at [6].   

The clause excused the insurer from paying out to the valuers if the loss was caused by a valuation being given lender who was not an ADTI supervised by APRA *and* if the valuation agreement did not include a certain “prudent lender” clause.  

The issue was: the lender was not an ADTI supervised by APRA, and the agreement did not include the prudent lender clause, *but* the absence of the clause did not cause the loss!  

The insurer said: the mere absence of the clause means we don’t have to pay: [12].  

The insureds said: the absence of the clause did not cause the loss. It was caused by something else. So you *do* have to pay: [13]  

The Court agreed with the insureds: [23].  An element of its reasoning was that the policy had retrospective effect, reaching back to a time before APRA even existed: [33].  

And so: what did this exclusion clause exclude? Not this particular claim.

Corporate oppression and wine in a can! Hooray!  

(Lots in this one. Broad brushstrokes only, I’m afraid.)  

An Australian co, ACo, sells wine in a can. A Japanese co, JCo, produces cans. 

One of JCo’s subsidiaries, JSub, competes with ACo, especially in China and Japan.  In 2012, JCo bought 60% of the shares in ACo. JCo entered into an agreement with the other ACo shareholders including a good faith term.  JSub continued to compete with ACo. ACo asserted JSub was required to pay it licence fees for its wine tech. ACo’s financial performance slackened. Tensions rose. Relationships broke down. A deadlock emerged.  JCo commenced proceedings seeking to wind up ACo.  

The other shareholders in ACo commenced a s232 oppression suit seeking a share sale.  

First instance: oppression suit dismissed, including on the basis that the good faith term was not breached.   

On appeal the oppression point was pressed.  Held: a majority shareholder can be found to have acted oppressively, even if it does not breach any agreement: [142]. 

However, the Court distinguished the facts from an analogous 1950s decision about rayon manufacturing: [147].   On foundations including that above, the conduct was found not to be commercial unfair; not oppressive: [154].   The appeal was dismissed.

In 2005 Dad and his wife, D1, established a super fund. 

They were the trustees and beneficiaries of the fund.  Before Dad’s death his son from a previous marriage, P, was appointed as trustee in his place. P was also Dad’s financial manager and guardian, and held his Power of Attorney.  

In 2015 Dad died. His executor was D2.  

In 2018 D1 and D2 entered into a deed apparently confirming D2’s replacement of P as trustee of the fund with retrospective and apparently automatic effect from the date of Dad’s death: [28].  

The Court had to consider (i) whether P was appointed trustee in his personal capacity or as Dad’s attorney, (ii) whether P’s appointment ceased on Dad’s death, and (iii) whether D2 was validly appointed as P’s replacement trustee: [6].  

Re (i) and (ii): P was appointed in his personal capacity, not pursuant to the PoA meaning his appointment did not end on Dad’s death: [75].  Re (iii): the appointment and removal of a trustee must be in accordance with the trust deed. 

In this case P’s purported removal and D2’s purported appointment was not: [105].  

The judgment considered other juicy issues such as s17A of the SIS Act and quia timet injunctions, but hopefully the above is enough to get your day started.

I say that we are not moving online.  We have already moved.  So have our clients. 

This is the audio from a CLE video I delivered for the fine folks at the University of New South Wales in 2019. 

It is a bit of a "deep dive" into three problems lawyers who advise creators and others with an online presence face, and some solutions to those problems.

It might all sound a little technical and fiddly, but I pride myself on being able to discuss this sort of stuff in an approachable way. I hope you leave with that impression.

Using my loose terminology (which I invented for this talk) we cover:

(a) The “torrent” problem, and the possibility of seeking “site-blocking orders”, whether in respect of the service provider or the search engine; 

(b) The "mystery misfeasor" problem, and how Norwich orders and UCPR r5.2 might have a role to play; and 

(c) The social media (mis)management problem, the danger of comments and the possible safety (or otherwise) of likes.

I hope there's some value here for you with this talk!

An indemnity costs order – for costs beyond the ordinary “party / party” order – sometimes feels like the pot of gold at the end of a rainbow: enticing but, too often, elusive.  

Today we deal with the tail end of a larger dispute.  The second defendant was successful and the beneficiary of an ordinary costs order against the plaintiff.  

Today’s application sees the second defendant seeking a variation of that order to become an indemnity costs order.  The second defendant asserted that the plaintiff’s conduct of the litigation was so unusually unreasonable it should ground an indemnity cost order: [8].  

The Court accepted that: [15].  In so finding it noted: the failure to comply with a guillotine order, leading new evidence in a “reply” affidavit: [16], failing to cause expert evidence to comply with the Code: [17], and the failure of the plaintiff’s solicitor to make himself available for his “crucial” cross-examination, leading to two adjournments: [18].  

At [24] attributed the plaintiff’s “plainly unreasonable” to the lawyers, though on instructions.   

While not making cost orders against the lawyers, the Court commented ominously: “who should ultimately be liable is a matter of determination between the plaintiff and her legal advisers.”

Today, James takes us through the method he employs when sharing content, with an appropriately huge nod to Gary Vaynerchuck along the way. Hope there's some value here for you!

Our plaintiff, P, is an irrigation company. It owns pipes.  

One pipe is on D’s property. P is the beneficiary of an easement for it.  

D wanted to develop the site, including putting a driveway over the pipe. P’s engineer assessed the risk of the driveway damaging the pipe to be high: [14].  P demanded that all works cease and received no substantive reply.  

P sought an interlocutory injunction to prevent D performing works on the land. D, essentially, consented.  

The outstanding issue? Costs.  UCPR 42.19 says, usually, a plaintiff who discontinues must pay the defendant’s costs.  

P sought its costs arguing (i) it had no choice but to commence proceedings, (ii) D had acted unreasonably, and (iii) P had been substantially successful: [26].  The Court found it was unreasonable for D not to respond to P’s demand: [58]. 

If D had said it was prepared to change the DA then the costs would have been avoided: [59].  This was so unreasonable as to merit a costs order in P’s favour.