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[2006] NSWSC 650
Supreme Court of NSW
2006-06-19
Bergin J, Mr P
Original judgment source is linked above.
Background 2 In 2002 Darren Gibson and James Dwyer (Gibson & Dwyer) commenced and subsequently operated a partnership business trading under the name "Ezysend" as an on-line freight business especially to internet trading houses (the partnership). On 15 January 2003 the partnership entered into a Service and Promotion Agreement with the defendant (the Agreement). The Agreement recites that the defendant had agreed to promote Ezysend as a "preferred supplier of freight management services to confirmed registered users" of the defendant. The Agreement also recites that Ezysend accepted "appointment" as a preferred supplier on the terms of the Agreement. 3 The partnership and the defendant agreed to develop and implement a Co-Branded Page to assist in the promotion of Ezysend's business. The Agreement included the following: 4. YAHOO'S PROMOTION OF THE SERVICES
4.1 Yahoo will promote the ezysend Services on Yahoo's branded sites on pages detailed in schedule 1.
4.2 Yahoo must not engage in a direct marketing campaign specifically targeted to users of ezysend Services where the objective of the campaign is to convert users of ezysend Services to the services of ezysend's Competitors.
4.3 Clause 4.2 does not prevent Yahoo from engaging in direct marketing of ezysend freight services to all Yahoo users who may also be ezysend users.
5.1 (a) ezysend will not enter into any form of agreement, promotion, partnership or build a co-branded page with a Yahoo! Competitor for a minimum period of 12 months effective from the Launch Date of the cobranded webpage. (b) Yahoo agrees not to enter into, renew, or undertake any similar distribution or partnership arrangement with any and ezysend's Competitors for the term of this Agreement.
5.2 In addition to Clause 5.1 and for the avoidance of doubt, ezysend must not enter into any agreement or arrangement with any of Yahoo's Competitors during the initial 12 month period that would involve any of the following:
(a) building any co-branded and co-promoted pages; (b) developing any level of system and process integration with Yahoo's Competitors.
5.3 In addition to Clause 5.1(b) and for the avoidance of doubt, Yahoo must not enter into any agreement or arrangement with any of ezysend's Competitors during the term of this Agreement that would involve any of the following:
(a) building any co-branded and co-promoted pages; (b) Yahoo will not build any form of integrated co-branded page with any other company for the purpose of supplying freight movements to online shoppers and auction winners or bidders.
5.4 Subject to clauses 5.1 and 5.2 nothing in this Agreement restricts ezysend's ability to provide payments, products and services to persons other than Customers.
7.11 All rights (under any applicable intellectual property right) granted in this Agreement are not sublicenseable, transferable or assignable, except that: (a) either party may use a third party web host, but all acts or omissions of the web host that would be a breach of this Agreement, are deemed to be the acts or omissions of the applicable party and constitute a breach of this Agreement by that party; (b) Yahoo may grant sublicenses to third parties that Yahoo has a business relationship with, which for the purposes of this Agreement means third parties that have Yahoo content visible from its website through a link or other means.
8.1 ezysend has the sole and exclusive right to use all Data Derived from the use of Customers of the ezysend Service for the purpose of delivering its services and risk management, in accordance with ezysend's standard terms of use and privacy policy, which must comply with industry best practice.
8.2 ezysend must use at least industry standard methods to protect the security of Customer Information.
8.3 With respect to Customers, ezysend must not: (a) Disclose the aggregate number or value of transactions requested or closed by Customers in a way where these can be separately computed; (b) Disclose any Customer Information about the Customer's selling/buying habits or preferences, demographics, customer profile or other characteristics; (c) Use Customer Information to promote any of Yahoo's Competitors, for example via a direct mail to CRU's or Customers; (d) Sell, rent or otherwise disclose Customer Information to any third party unless necessary for the delivery of ezysend Services; or (e) Use Customer Information to send unsolicited emails or marketing communications specifically targeted to any Yahoo's user, without Yahoo's consent excluding co-users.
8.4 ezysend must comply with applicable data protection and privacy laws and obligations. During the term of this Agreement, ezysend must ensure that the ezysend Site includes a privacy policy that:
(a) is easy-to-understand; (b) is linked at a minimum from the ezysend's Site's home page; (c) identifies the collection and use of information gathered in connection with the ezysend Services; and (d) offers Customers an opportunity to opt out from such collection and use if not relevant to the delivery of ezysend services.
8.5 ezysend must not use or include the Yahoo Mark or name in any marketing materials whatsoever without the prior written approval of Yahoo.
… 9. WARRANTIES AND INDEMNITY … 9.6. Yahoo indemnifies ezysend against all claims, damages, liabilities and judgments, including reasonable attorneys fees, related to: (a) a breach by Yahoo of any of its warranties under this agreement or in relation to the Yahoo Services;
… (e) any other claim arising out of or in connection with this Agreement.
11.1 The term of this Agreement shall continue for 12 months following the Effective Date unless terminated earlier under this Agreement (" Initial Term "). On expiry of the Initial Term the agreement will continue for a period not to exceed 90 days during which time a new term for the agreement will be negotiated.
11.6 Upon expiration or termination of this Agreement for any reason: (a) all rights granted under this Agreement will terminate; (b) ezysend must pay all amounts owed to Yahoo within 30 days of termination; and (c) each party must remove the other party's content and Marks from their servers
11.7 Notwithstanding Clause 11.6 and subject to clause 11.8, unless this Agreement was terminated due to ezysend's material breach of the Agreement, all provisions of this Agreement shall survive only to the extent necessary for ezysend to complete any Customer transactions which are pending at the time of expiration or termination and ezysend must handle all pending transactions as reasonably as required by Yahoo at the time.
11.8 Clauses 6.1 to 6.8 expire on termination of this agreement. With all outstanding monies owed to Yahoo being paid in accordance with Clause 6.2.
11.9 Clauses 8.1 to 8.5 and 12 survive expiration or termination of this Agreement.
14.5 The parties are independent contractors, and no agency, partnership, joint venture employee-employer or franchisor-franchisee relationship is intended or created by this Agreement. Neither party shall make any warranties or representations on behalf of the other party.
14.7 Neither party may assign its rights or novate its obligations under this Agreement without the prior consent of the other party.
14.8 This agreement contains the entire understanding and agreement of the parties, and supersedes any and all oral or written agreements or understandings between the parties, as to the subject matter of such Agreements. It may be changed only by a writing signed by both parties. The waiver of a breach of any provision of this agreement will not operate or be interpreted as a waiver of any other or subsequent breach. 4 On 14 December 2005 Dwyer, as Assignor, entered into a Deed of Assignment with Gibson, Patricia Gibson, Robert Gibson and Mohammad Moubayed (the Gibsons and Moubayed), as Assignees. That Deed provided as follows: RECITALS
A. The Assignor has agreed to sell his interest in the business he carries on in partnership with Darren Gibson to the Assignees ("the Agreement").
B. Under the Agreement the Assignor agreed to assign to the Assignees on completion the benefit of a "Service and Promotion Agreement" under an agreement dated 15 January 2003 ("the Contract") between the Assignor and Yahoo Australia and New Zealand Pty Ltd ("contracting party).
A. The Assignors have agreed to sell the business to the Assignee ("the Agreement").
B. Under the Agreement the Assignors agreed to assign to the Assignee on completion the benefit of a "Service and Promotion Agreement" under an agreement dated 15 January 2003 ("the Contract") between the Assignors and Yahoo Australia and New Zealand Pty Ltd ("contracting party").
We advise that Deeds of Assignment dated 14 December 2005 and 15 December 2005 have been executed assigning the interest in this contract from the partnership of Michael J Dwyer and Darren E Gibson trading as Ezysend to the partnership of Darren Gibson, Patricia Gibson, Robert Gibson and Mohamed Moubayed trading as Ezysend. Thereafter, the interest in the contract has been assigned to Whyked Pty Ltd trading as Ezysend.
We enclose by way of service copies of the said Deeds of Assignment. We request that you acknowledge receipt of same. 7 After the plaintiff commenced these proceedings the solicitors for the defendant wrote to the solicitors for the plaintiff on 28 April 2006 in terms that included the following: Clause 14.8 ( sic ) of the Agreement provides that neither party may assign its rights or novate its obligations under the Agreement without the prior consent of the other party (emphasis added).
Yahoo did not provide its prior consent to these assignments of Ezysend's rights and obligations under the Agreement as required by clause 14.8 ( sic ) of the Agreement. The correct Plaintiffs should be M J Dwyer and Darren E Gibson trading as Ezysend.
We invite you to amend your Statement of Claim in the above proceedings by 2 May 2006 to have the proper parties as Plaintiffs, failing which we will seek appropriate orders at the hearing on 5 May 2006. 8 On 2 May 2006 the plaintiff's solicitors wrote to the defendant's solicitors correcting their reference to clause 14.8, advising that the relevant clause was 14.7 and claimed: It is our contention that having regard to the absolute assignment in writing under hand of the assignors as acknowledged in your letter, by Section 12 of the Conveyancing Act 1919, Whyked is entitled to pursue all legal and other remedies in respect of the contract and make it a good discharge without concurrence of the assignors.
The Commercial List Statement 9 The plaintiff claims that it purchased the business of Ezysend "including the rights of Gibson and Dwyer in respect of the business" (par 3). The plaintiff alleges that the defendant breached the Agreement in various ways and seeks damages for loss of business opportunity, business interruption, significant expense in pursuing the conduct of the business and wasted director time and expense (par 11). The plaintiff makes an alternative claim that the Agreement was a "joint venture and involved the parties in a fiduciary relationship" (par 12). That claim includes: 13. It was an express or implied duty of the relationship that the Defendant by its servants or agents or otherwise would not unduly discriminate against the Plaintiffs or the business Ezysend in the operation of the business or otherwise.
13 The defendant claims that the proceedings should be summarily dismissed or struck out because the assignment to the plaintiff is ineffective on the bases that: (1) there was a contractual prohibition on assignment without the defendant's consent (contractual prohibition); and (2) bare rights of action are not assignable (not assignable). Contractual prohibition 14 The defendant claims that clause 14.7 of the Agreement is a clear contractual prohibition on assignment unless prior consent has been obtained from the defendant. It is not contended by the plaintiff that prior consent was obtained but the plaintiff submits that there is a reasonably arguable case that clause 14.7 does not apply to this assignment. 15 It is uncontroversial that parties may expressly or impliedly prohibit assignment of rights otherwise prima facie assignable: Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 (Finn, Sundberg and Emmett JJ) per Finn and Sundberg JJ at [32]. Such contractual conditions are legally effective: Don King Productions Inc v Warren [2000] Ch 291 at 319. 16 The defendant relied upon Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 in which the contract in question included a clause that "the employer shall not without written consent of the contractor assign this contract". Lord Browne-Wilkinson (Lords Keith, Bridge, Griffiths and Ackner agreeing), in dealing with whether the clause prohibited the assignment of accrued rights of action, said at 104: This distinction between assigning the right to future performance of a contract and assigning the benefits arising under a contract was largely founded on a Note entitled "Inalienable Rights?" by Professor R. M. Goode (1979) 42 M.L.R. 553 on Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262. 17 After discussing Professor Goode's article in some detail his Lordship continued at 105-106:
However, although I do not think that Professor Goode's article throws any light on the true construction of clause 17, I accept that it is at least hypothetically possible that there might be a case in which the contractual prohibitory term is so expressed as to render invalid the assignment of rights to a future performance but not so as to render invalid assignments of the fruits of performance. The question in each case must turn on the terms of the contract in question.
The question is to what extent does clause 17 on its true construction restrict rights of assignment which would otherwise exist? In the context of a complicated building contract, I find it impossible to construe clause 17 as prohibiting only the assignment of rights to future performance, leaving each party free to assign the fruits of the contract. The reason for including the contractual prohibition viewed from the contractor's point of view must be that the contractor wishes to ensure that he deals, and deals only, with the particular employer with whom he has chosen to enter into a contract. Building contracts are pregnant with disputes: some employers are much more reasonable than others in dealing with such disputes. … … parties who have specifically contracted to prohibit the assignment of the contract cannot have intended to draw a distinction between the right to performance of the contract and the right to the fruits of the contract. In my view they cannot have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should become vested in two separate people. I say again that that result could have been achieved by careful and intricate drafting, spelling out the parties' intentions if they had them. But in the absence of such a clearly expressed intention, it would be wrong to attribute such a perverse intention to the parties. In my judgment, clause 17 clearly prohibits the assignment of any benefit of or under the contract. 18 His Lordship concluded at 108: Therefore the existing authorities establish that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights. I regard the law as being satisfactorily settled in that sense. If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz., to ensure that the original parties to the contract are not brought into direct contractual relations with third parties. 19 Dwyer purportedly assigned to the Gibsons and Moubayed "the benefit of his interest" in the Agreement. The Gibsons and Moubayed purportedly assigned to the plaintiff "the benefit of" the Agreement. It was submitted that this case is distinguishable from the Linden Gardens Trust case because the prohibiting clause (14.7) in the present case does not prohibit the assignment of "the contract" but rather the "rights under" the Agreement. The plaintiff submitted that "rights under" the Agreement are different from rights or claims "arising out of or in connection with" the Agreement. In this regard the differences in expression between clauses 9.6 and 14.7 of the Agreement were highlighted. The plaintiff submitted that it was not the "rights under" the Agreement that were assigned and thus the assignment is not prohibited by clause 14.7 of the Agreement. 20 The views expressed by Lord Browne-Wilkinson in relation to the intentions of the parties in drafting the particular clause in the Linden Gardens Trust case are most persuasive but it must be remembered that the prohibiting clause with which his Lordship was dealing is different to that in the present Agreement. The Agreement in this case is also in a totally different environment to that with which his Lordship was dealing. In this case the Agreement deals with the launching of pages on the Internet and co-branded pages with "banner ads", "links" and "domains" acquired during the duration of the existence of the co-branded pages as part of the promotion of Ezysend's services. The intricacies of how the services were provided and/or were to be provided may have some bearing upon the breadth of the prohibition of assignment. It may be that the powerful logic in the Linden Gardens Trust case, that the parties would not have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should become vested in two separate people, is inapplicable in this case. 21 I am of the view that there is an arguable case that the "benefit" purportedly assigned is in a different category to "rights under" the Agreement and that the assignment may not be prohibited by clause 14.7. In those circumstances it is not appropriate to summarily dismiss the claim on the basis of the claimed contractual prohibition. Not assignable 22 The defendant submitted that the term of the Agreement was for 12 months from 15 January 2003 and that it has expired. In those circumstances, it was submitted, there were no rights (or benefits) to be assigned to the plaintiff. The plaintiff submitted that clause 11.1 envisages a "new term" being negotiated at the conclusion of the twelve-month period. Clause 11.1 provides that the Agreement is to continue after that 12 months for a period not exceeding 90 days, during which "a new term for the agreement will be negotiated". Although the expression "Initial Term" is defined to mean the period of 12 months following the date of the Agreement, clause 5.2 refers to "the initial 12 month period" and in clause 5.3 the expression "during the term of this Agreement" is used.
23 The defendant submitted that because the Agreement had expired there was an absence of any "rights" to be assigned and therefore the plaintiff had no genuine commercial interest in taking the assignment and enforcing it for its own benefit. In Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Lord Roskill said at 703: But it is today true to say that in English law an assignee who can show that can show that he has a genuine commercial interest in the enforcement of the claim of another and to that extent takes an assignment of that claim to himself is entitled to enforce that assignment unless by the terms of that assignment he falls foul of our law of champerty, which, as has often been said, is a branch of our law of maintenance. … If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance. 24 The question of what a "genuine commercial interest" is will depend upon the facts and circumstances of each case. However in Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 Cohen J said at 153: Examples may be given from the facts in the various cases concerned. For instance it was held that there was such an interest where the assignee was already a substantial creditor of the assignor with a right to enforce the debt ( Trendtex, [ Re Timothy's Pty Ltd and the Companies Act [1981] 2 NSWLR 706]) or where the assignee was the sole shareholder who was a guarantor of the overdraft of the assignor ([ re Daley; Ex Parte National Australia Bank (1992) 37 FCR 390]) or where the assignee was a debenture holder with an interest in protecting the value of its security ([ First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710]). 25 In National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd 132 ALR 514 Lindgren J said at 540: … the genuine commercial interest referred to in Trendtex is not a nebulous notion of the general commercial advantage of the assignee but something more specific and limited. In particular, it does not embrace an interest arising from an arrangement voluntarily entered into by the assignee of which the impugned assignment is an essential part, like the arrangement in the present case. Rather, the expression refers to a commercial interest which exists already or by reason of other matters, and which receives ancillary support from the assignment. 26 There is persuasive authority for the proposition that the Trendtex test of genuine commercial interest should logically be applied to both causes of action in contract and in tort (Monk at 152-153 and National Mutual at 537-539) however binding authority excludes the capacity to assign a right of action in tort: Poulton v The Commonwealth (1953) 89 CLR 540 at 602. The question of whether there is a genuine commercial interest in the plaintiff in relation to the action for breach of contract is a matter that should be decided at trial when all the evidence is on. It is not a matter that should be decided on a summary application. 27 However the TPA claims and the negligent misrepresentation claims are in a different category. In National Mutual Lindgren J referred to statutory claims under ss 52 and 82 of the TPA as "tort claims" or "analogous to tort claims" (at 538) and concluded that such claims were not assignable "if for no other reason, because it is relevantly only the claimants who could possibly satisfy the statutory descriptions of being persons who suffered loss or damage caused by the conduct described in the statutes" (at 539). These observations apply equally to claims under s 51AC of the TPA and claims under s 42 of the Fair Trading Act 1987 (NSW). The "claimants" in National Mutual are the equivalent of Dwyer & Gibson in this case. I respectfully agree with Lindgren J's observations. Accordingly the plaintiff's TPA claims (pars 18 to 21) and the negligent misrepresentation claim (pars 22-27) will be struck out. 28 There is also the claim in relation to the joint venture. The Agreement is clearly the entire Agreement between the parties and expressly provides that no joint venture relationship was intended or created by the Agreement (cl 14.5). There does not seem to me to be any proper basis upon which this aspect of the matter should be allowed to go to trial, at least in the form in which it is presently pleaded. Accordingly, paragraphs 12-17 will be struck out. Orders 29 I refuse to make order 1 in the Notice of Motion. Paragraphs 12 to 27 of the Commercial List Statement are struck out. 30 The plaintiff is to file an Amended Summons and Amended Commercial List Statement by 6 July 2006. I list the matter for directions on 7 July 2006. If the parties are unable to agree on a costs order I will hear argument on that day.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Whyked Pty Limited trading as Ezysend
Yahoo Australia and New Zealand Pty Limited
CITATION : Whyked Pty Limited trading as Ezysend v Yahoo Australia and New Zealand Pty Limited [2006] NSWSC 650
Don King Productions Inc v Warren & Ors [2000] Ch 291 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 CASES CITED : National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd 132 ALR 514 Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 Poulton v The Commonwealth (1953) 89 CLR 540 Trendtex Trading Corporation v Credit Suisse [1982] AC 679
(1994) 34 NSWLR 148
(1953) 89 CLR 540
(1992) 37 FCR 390