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[2009] VSC 67
defendant. Drake’s applications for declarations on the implied reasonableness term and the Schedule 3 limitation were dismissed; the remaining cost questions were left for trial, with submissions invited on...
The court read the joint venture agreement as requiring broad sharing of costs connected with operating or benefiting the business, rather than limiting shared costs to Schedule 3. It also held that the agreement’s express good-faith and commercial-practice obligations made a further implied term about reasonable costs unnecessary. Questions about specific fees, profit margins, and staff or overhead allocations could not be finally resolved without evidence about the actual items, so those matters were left for trial.
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2,070 words · generated 29/09/2026
Drake Australia Pty Ltd and Platypus Telecommunications Pty Ltd made a written joint venture agreement on 16 November 2005. Their venture was to establish and promote “Drake Connect”, bringing together Platypus’s wireless application expertise and Drake’s marketing, management and business-promotion expertise ([1], [4]). The judgment records that discussions had begun around November 2004 and that the parties had entered a Memorandum of Understanding on 15 December 2004. However, the judge said the earlier discussions and the evidence about the precise nature of the business did not assist with the general interpretation questions being decided at this stage ([3]).
No linked legislation citations have been extracted yet.
The agreement provided for the parties to share certain costs equally. Its clauses used broad language: cl 5.3 referred to all Costs associated with establishing and operating the business, while cls 6(m) and 7(f) referred to all Costs incurred by the business or by either party on its behalf or for its benefit ([11]). At the same time, cl 1.1 defined “Costs” by reference to the items in Schedule 3. That schedule included items such as customer referral incentives, registration costs, intellectual property costs and “Costs of either party in administering the Joint Venture” ([6], [11]).
The business operated until about 31 May 2007. Platypus’s accounts showed no Net Revenue and an operating loss. Drake challenged the accounts and various categories of costs claimed by Platypus ([14]). It asked the Court to determine preliminary questions, including whether the agreement contained an implied reasonableness requirement and whether shared costs were confined to Schedule 3. Drake also sought declarations about fees charged by a party for services, profit margins, and staff or overhead expenses ([15]).
Mandie J decided the general contract-interpretation questions but did not decide every application of the agreement to particular expenditure. The Court rejected the proposed implied term and the proposed Schedule 3-only limit. It left the questions about service fees, amounts above actual disbursements, and staff or overhead expenses for trial on evidence about the particular items ([26]–[30]).
The first issue was whether a term should be implied to require costs to be reasonably incurred and reasonable in amount. The judge concluded that cl 5.1(a) already addressed the concern. That clause required the business to be conducted in accordance with “best commercial practice and proper skill and care” and required both parties to act in good faith ([9], [16]).
The judge explained that the good-faith obligation protected each party from dishonest and probably reckless conduct against the other party’s interests. The requirements of best commercial practice and proper skill and care also addressed negligent conduct and poor business practice. If Drake could show that costs, whether as to category or amount, were incurred negligently or contrary to best commercial practice, that could constitute a breach of the agreement ([17]).
The additional implied term was therefore unnecessary for business efficacy. The judge also considered that it could be inconsistent with cl 5.1(a), because it might shift the onus of proof from the party challenging costs to the party that incurred them. The point was not that every cost was automatically proper, but that the express contractual standard was the applicable provision identified by the Court for addressing the concern ([16]–[17]).
The second central issue was how to reconcile the Schedule 3 definition with the broad operative cost-sharing clauses. Drake argued that the definition and schedule controlled, and that the operative clauses should be read down to match them. Platypus argued that the operative provisions expressed the dominant intention and extended beyond the list ([18]–[19]).
The Court acknowledged an apparent tension. Schedule 3 items 1 to 6 were mainly preliminary or specific costs, while item 8 referred broadly to costs of administering the joint venture. The judge observed that administration might ordinarily mean organisational, bookkeeping and accounting functions, rather than the whole operation of the business, such as sales and advertising ([20]).
Even so, the Court rejected Drake’s narrow construction. It considered it unreasonable, artificial and uncommercial to read down the clear and wide wording of the operative clauses by reference to item 8 of Schedule 3 ([21]). One possible way to reconcile the provisions was to treat “administering the Joint Venture” as synonymous with operating the business. Another was to treat Schedule 3 as inclusive rather than exclusive, despite the definition’s use of “means” ([22]). The judge ultimately preferred the view that the operative clauses were sufficiently clear to prevail in the context of the agreement as a whole ([23]).
The commercial consequence was significant for the interpretation question: costs of operating the business and costs incurred for its benefit were intended to be shared equally. A construction excluding such items as sales and advertising costs would conflict with the plain wording of the operative provisions and would be unreasonable and uncommercial ([24]). The same broad construction applied to “the Costs of the Joint Venture” deducted in calculating Net Revenue. In the judge’s view, restricting that phrase to the Schedule 3 list would also conflict with ordinary commercial concepts of net revenue ([25]).
The judgment does not set out a broad account of the law before this decision, or discuss later developments in the law. It is a decision about construing this agreement, on the preliminary questions referred to Mandie J. The judgment does not cite earlier cases as the basis for a general rule, and it should not be read as establishing that a particular cost-sharing clause will always prevail over a schedule or definition.
Before the Court answered the questions, the parties had competing readings of their own agreement. Drake’s interpretation treated Schedule 3 as an exhaustive list. Platypus’s interpretation treated the broad operative clauses as covering costs beyond that list ([18]–[19]). The Court resolved that disagreement by reading the provisions together, paying particular attention to the breadth of the operative language and the context of the agreement ([20]–[25]).
After this preliminary decision, the general construction question was resolved in favour of the broader scope: the costs of operating the business and costs incurred for its benefit were to be shared equally. The Court also held that the agreement did not need an additional implied reasonableness term because cl 5.1(a) supplied relevant express standards ([16]–[17], [23]–[25]). However, the judgment did not finally determine whether particular service charges, profit margins, or staff and overhead allocations fell within the agreement. Those issues remained dependent on trial evidence ([28]–[30]).
Accordingly, the decision’s practical significance in this dispute lies in its construction of the specific clauses, not in a complete determination of each disputed amount or a comprehensive statement of contract law.
At [16], the judge said that cl 5.1(a) was “entirely sufficient to deal with” the concern about unreasonable costs. In plain English, the Court considered the existing obligation to use proper commercial standards and care adequate to address the issue, so it did not add a further contractual promise.
At [17], the judge explained that negligent or commercially improper costs could breach the agreement. The passage also identifies a procedural concern: an implied term might alter who had to prove whether costs were reasonable. The Court considered that possible shift inconsistent with cl 5.1(a)’s intended operation. The judgment does not decide whether any particular cost was negligent or commercially improper.
At [21], the judge described Drake’s Schedule 3-only reading as “unreasonable, artificial and uncommercial”. In plain English, the Court considered that such a reading did not fit the clear language and business purpose of the cost-sharing clauses.
At [23], the judge stated that the wording in cls 5.3, 6(m) and 7(f) was “so clear and decisive” that those provisions overrode the definition of Costs in the circumstances contemplated by cl 1.1’s introductory qualification. This was the key step in resolving the apparent tension between the definition and the operative provisions.
At [24], the judge said the parties intended to share equally costs incurred in operating the business and costs incurred for its benefit. The judgment gives sales and advertising as examples of costs that a Schedule 3-only reading might wrongly exclude. That does not decide whether every claimed sales or advertising expense was actually incurred for the business or was otherwise properly chargeable.
At [28]–[30], the Court drew a line between general construction and item-specific questions. It considered the available evidence inadequate to decide the treatment of service fees, amounts above actual payments, and staff or overhead costs. In plain English, those questions required examination of the actual charges and how they were incurred.
The reasoning is most directly relevant where a written agreement contains both a definition or schedule that appears limited and operative clauses that use broader language about costs. The key comparison here was between “the costs set out in Schedule 3” and clauses referring to “all Costs” connected with establishment, operation, or benefit to the business ([6], [11], [20]).
The judgment may also be relevant where a party asks a court to imply a reasonableness term despite an express contractual standard governing conduct. Here, the agreement required good faith, best commercial practice, and proper skill and care ([9], [16]–[17]). The decision’s reasoning depended on those particular express terms and their perceived coverage of the concern.
A further fact pattern involves a preliminary application seeking broad declarations about categories of expenditure before the evidence about individual items is complete. The Court decided the general meaning of the agreement but deferred questions needing item-specific evidence ([28]–[30]). That distinction is important: the judgment supports neither a blanket conclusion that all disputed charges were recoverable nor a blanket conclusion that they were excluded.
The decision should be read with its limits in view. The Court did not determine whether any particular service fee was a cost within the agreement, whether a specific profit margin had been charged, or whether a particular overhead allocation was connected to the venture. The evidence about those questions was left for trial.
The judgment supplied here does not identify any later decisions that applied, followed, distinguished, or otherwise treated Drake Australia Pty Ltd v Platypus Telecommunications Pty Ltd. It also contains no later-court history. On the supplied text alone, it is therefore not possible to describe how subsequent courts have treated the decision.
Within this judgment, Mandie J did not cite other cases or explain that a prior authority was being applied, distinguished, or overruled. The reasoning is presented through the text and structure of the agreement and the particular preliminary questions. Any account of later treatment would require sources beyond the judgment supplied here, which are not available for this analysis.
For a research note, the safe description is that the 2009 Supreme Court of Victoria decision resolved specific construction questions concerning this joint venture agreement. The supplied judgment establishes the court’s own reasoning and disposition, but not its subsequent citation history or current precedential status.
Several issues were expressly left unresolved. First, the Court did not decide whether fees charged by a party for software licensing or other services supplied to the joint venture were Costs. It said that question was premature and required evidence about the particular fees and items ([28]).
Second, the Court did not finally decide whether Costs could include an amount above what a party actually paid or disbursed. The judge tentatively thought Drake was correct in relation to profit margins, but considered that the issue should be resolved at trial using precise evidence about the disputed items ([29]). That tentative observation is not a final declaration.
Third, the Court did not decide whether staff or overhead expenses were excluded when they were not specifically incurred for the joint venture. The judge noted that the proposed distinction between general expenses and those specifically incurred for the business might be elusive and left the issue for trial ([30]).
Finally, the judgment ends by inviting submissions about whether any positive declaration should be made and about costs of this aspect of the proceeding ([31]). The text supplied does not record the result of those submissions or the later trial. It therefore does not establish the ultimate accounting outcome between the parties.
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CONTRACT - joint venture agreement - preliminary questions - definition of "Costs" to be shared under the agreement - whether term should be implied requiring costs to be reasonably incurred and of reasonable amount - whether appropriate to determine all questions at this stage.
**1 The Court is asked to determine a number of questions[1] concerning the proper construction of a joint venture agreement in writing between the plaintiff ("Drake") and the defendant ("Platypus") dated 16 November 2005 ("the Agreement").
2 Broadly speaking, the Agreement provides for the parties to share certain costs of or associated with the joint venture business equally and the plaintiff contends that there should be a term implied in the Agreement that the costs incurred by each party would not be unreasonably incurred or of an unreasonable amount and the plaintiff further or alternatively contends that the word "Costs" where used in the Agreement bears a particular confined meaning.
3 The Agreement arose out of discussions between representatives of Platypus and representatives of Drake that commenced in or about November 2004. A "Memorandum of Understanding" (MOU) dated 15 December 2004 was entered into between Drake and Platypus. The MOU refers to an arrangement whereby the parties would provide and manage the application of wireless communication solutions to independent contractors who provide their services to corporate enterprises. Further discussions and communications ensued which resulted in the Agreement of November 2005. The parties do not contend, and I do not think, that the "matrix" of the prior discussions and communications, or such evidence as there is of the precise nature of the business, is of any assistance in determining the questions of general interpretation that, as will be seen, I have decided are appropriate to determine at this stage.
4 The Agreement recites that Platypus has expertise in wireless application solutions and that Drake has expertise in marketing, management and business promotion and that the parties will combine together to establish and promote the business "Drake Connect" in accordance with the Agreement.
5 Clause 1.1 contains a number of definitions and is prefaced by the provision that:**
In this Agreement unless the subject matter or context otherwise requires the following words and expressions shall have the following meanings...
6 The important definitions, for present purposes, are:
**7 The Terms and Conditions (attached to the Agreement) refer to the Services to be provided as a digital mobile telephone service selected by the Customer and a "mobile application service" provided by Platypus.
8 The Agreement contains the following relevant provisions.
The parties agree that the Business shall be conducted as a commercial venture in accordance with best commercial practice and proper skill and care applicable to the operation of a business in this field, with both parties to act in good faith at all times and to provide all reasonable assistance to the other for the operation of this Agreement.
**10 Clause 5.4 provides that the Agreement is initially implemented for the establishment and operation of the Mobile Telephone Services but that the parties may develop additional services to be operated by the business particulars of which will be evidenced in writing.
**12 Clauses 6 and 7 of the Agreement, in addition to dealing with costs to the extent set out above, allocate the responsibilities of the parties in relation to the joint venture business. Platypus agrees, inter alia, to provide the Mobile Telephone Services, address concerns and complaints by customers, keep books of account for the business and provide monthly statements of accounts to Drake and pay for goods or services provided to the business. Drake agrees, inter alia, to use Platypus as its preferred supplier for its corporate mobile phone requirements and use reasonable endeavours to refer customers to Platypus to use the Mobile Telephone Services. The Agreement further provides that Drake has the right at any time to audit the business and the performance of Platypus (cl.8.1) and that Platypus agrees to conduct the business on an "open book" basis (cl.8.2).
13 Clause 22.1 provides that the Agreement embodies the entire agreement between the parties and supersedes any prior agreement or understanding between them and that there are no agreements, representations or warranties oral or written between the parties other than those in the Agreement.
14 The joint venture business operated until about 31 May 2007. Platypus has produced accounts for the period showing that the business had no "Net Revenue," within the meaning of the Agreement, but operated at a loss. Drake challenges these accounts and various categories of costs said by Platypus to be covered by the Agreement.
15 In that context, Drake seeks declarations as follows (and these are the matters raised for determination as separate questions):**
(a) means the categories of expense or outgoings specified in Schedules 3 of the JVA and does not include any other category of expense or outgoing;
(b) does not include fees charged by a party to the Joint Venture for software licensing or other services supplied to the Joint Venture;
(c) does not include any amount by way of profit margin or otherwise in excess of the actual amounts paid or disbursed by a party to the Joint Venture;
(d) does not include any amount calculated by way of allocation of the expenses incurred by a party in respect of staff or overhead expenses where such expenses were not specifically incurred for the purposes of the Joint Venture."
**16 I consider that this issue can be shortly dealt with. In my opinion it is unnecessary, in order to give business efficacy to the Agreement, to imply a term that the costs incurred would not be unreasonably incurred or of an unreasonable amount. Whatever might have been the position otherwise, the provision in cl.5.1(a) of the Agreement is entirely sufficient to deal with this question - indeed it might be thought to cover the precise field of concern.
17 The parties agree, by cl.5.1(a), that they will act in good faith. That aspect of the provision protects each party from dishonest, and probably reckless, conduct contrary to the interests of the other. But the provision goes further and requires the Business to be conducted "with best commercial practice and proper skill and care." Thus each party is protected against the negligent conduct, and any poor business practice, of the other. In the present context, if Drake could show that any costs incurred (whether as to category or quantum) were incurred negligently or contrary to best commercial practice, that would be a breach of the Agreement having appropriate consequences. The implied term is unnecessary and to the extent that, by virtue of the implied term, the "onus of proof" would shift from the party challenging the costs to the party incurring the costs it would also be inconsistent with the intent of cl.5.1(a).**
**18 Drake submitted, in effect, that the definition of "Costs," by the incorporation of the cost items listed in Schedule 3, was the governing provision and that, to the extent that cll.5.3, 6(m) and 7(f) appeared to embrace a wider concept or category of costs, those provisions had to be read down to harmonise with the definition and with Schedule 3.
19 On the other hand, Platypus submitted the opposite, namely, that cll.5.3, 6(m) and 7(f) expressed the dominant intention of the parties with regard to the costs to be shared and overrode the definition and Schedule 3 to the extent that the latter contained a narrower definition of "Costs."
20 On the face of it, there is a contradiction between the definition of "Costs" and the list in Schedule 3 and the other provisions concerned with costs. Clause 5.3 refers to "all Costs" associated with the establishment and operation of the Business and cll.6(m) and 7(f) both refer to "all Costs" not only incurred "by" the Business but also incurred by either party "for the benefit of" the Business. These wide provisions may be contrasted with the cl.1.1 definition incorporating referring to "the costs set out in Schedule 3." Looking at Schedule 3, items 1 to 6 are primarily costs of a preliminary nature or very specific - item 8 is the only item of a broad nature and it refers to costs of either party in "administering the Joint Venture." Prima facie, the administration of the Joint Venture would not cover the whole operation of the Joint Venture business but would refer principally to organisational, bookkeeping and accounting functions. Prima facie, administration would not include such matters as sales and advertising.
21 I am unable to accept Drake's submission because it seems to me that it is an unreasonable, artificial and uncommercial construction to read down the very clear and wide words of the operative provisions of the Agreement by reference to the language used in item 8 of Schedule 3.
22 There is much to be said for the view that "administering the Joint Venture" should be treated as synonymous with "operating the Joint Venture business." That interpretation would result in a consistency and harmony between the definition and the other provisions on the question of costs. Alternatively, if "administering the Joint Venture" is to be understood as referring to a concept of administration which is narrower than the operation of the business as a whole, then Schedule 3 and the definition might appropriately be regarded as inclusive rather than exclusive despite the use of the word "means" in cl.1.1. It might be thought that Schedule 3 was intended to clarify that certain categories of costs were included rather than intended to limit the scope of the costs otherwise covered by the operative provisions of the Agreement.
23 However I think that the better view is that the language contained in cll.5.3, 6(m) and 7(f) is so clear and decisive as to the parties' intention that those provisions must be taken to override the definition of "Costs" - in the prefatory words of cl.1.1, "the subject matter or context otherwise requires."
24 Reading the Agreement as a whole, the parties clearly intended that the costs incurred in operating the business and any costs incurred for the benefit of the business should be borne equally. An interpretation which excluded, for example, the sharing of sales and advertising costs, would be unreasonable and uncommercial in addition to being contrary to the plain meaning of three express provisions.
25 Further, the definition of "Net Revenue" in cl.1.1 provides for deducting "the Costs of the Joint Venture" from the revenue generated. The plaintiff submitted that the word "Costs" in that definition should bear the same meaning as in the definition of "Costs" (i.e. as listed in Schedule 3) but, if that were so, there would have been no need to add the words "of the Joint Venture." I consider that the better view is that the expression "the Costs of the Joint Venture" should be read as having the same scope as I have found to be intended by the words used in cll.5.3, 6(m) and 7(f). The interpretation advanced by the plaintiff is also contrary to ordinary commercial concepts of "net revenue."**
**26 Drake's application for a declaration as to the alleged implied term will be dismissed.
27 Drake's application for a declaration that "Costs" in cll.5.3, 6(m), 7(f) and the definition of "Net Revenue" means the categories specified in Schedule 3 and does not include any other category of costs will also be dismissed.
28 As regards Drake's application for a declaration that such "Costs" do not include "fees charged by a party to the Joint Venture for software licensing or other services supplied to the Joint Venture," I consider that this question is premature and cannot be determined on the evidence presently before the Court. It should be determined at trial in the context of evidence about the particular fees and other items relevantly in issue.
29 As regards Drake's application for a declaration that such "Costs" do not include "any amount by way of profit margin or otherwise in excess of the other amounts paid or disbursed," I tentatively think that Drake is correct in relation to profit margins but I consider, again, that the question should not be determined on the evidence presently before the Court but should be determined at trial in the context of precise evidence about the particular items that are relevantly in issue.
30 As regards Drake's application for a declaration that such costs do not include "staff or overhead expenses where such expenses were not specifically incurred for the purposes of the Joint Venture," Drake sought to distinguish between general staff or overhead expenses and staff or overhead expenses specifically incurred for the Joint Venture business. This distinction, even if valid, may perhaps be elusive and I think that it is preferable, again, that this whole question be determined at trial in the light of all the evidence.
31 I will hear submissions as to whether any positive declaration should be made and as to the costs of this aspect of the proceeding.**
[1] The relevant order of the Master reads "in accordance with Rule 47.04, the Plaintiff's claims for relief as set out in paragraphs A.1 and A.2 of the prayer for relief in the amended statement of claim be tried as a separate question before any other question in the proceeding."
Drake Australia Pty Ltd
Platypus Telecommunications Pty Ltd [2009] VSC 67
Drake’s applications for declarations on the implied reasonableness term and the Schedule 3 limitation were dismissed; the remaining cost questions were left for trial, with submissions invited on any positive declaration and costs.