Whyked Pty Limited trading as Ezysend v Yahoo Australia and New Zealand Pty Limited

Whyked Pty Limited trading as Ezysend v Yahoo Australia and New Zealand Pty Limited - [2006] NSWSC 650 - NSWSC 2006 case summary — Zoe

[45]

In the premises the Plaintiff claims an account of the business opportunities foregone and/or the value of the advertisements assuming that the Plaintiff would have had to pay for them in the same or equivalent media and/or equitable compensation in respect of the loss and damage caused to Ezysend. 10 The plaintiff also makes a claim against the defendant that it has in trade or commerce, in connection with the supply or the possible supply of services to Ezysend, engaged in conduct that is unconscionable in contravention of s 51AC of the Trade Practices Act 1974 (Cth) (TPA). The particulars to that claim are that Ezysend was required to deal exclusively with the defendant and that it did not have the benefit of legal advice in the preparation and signing of the Agreement. It is alleged that the defendant's conduct was inconsistent with its conduct in similar transactions and that it did not supply or intend to supply the Internet services to Ezysend. The plaintiff makes claims under ss 52, 82 and 87 of the TPA and/or s 42 of the Fair Trading Act 1987 (NSW) (the TPA claims). 11 There is a further claim that the defendant made false and/or erroneous representations to Ezysend and that the misrepresentations were made negligently (negligent misrepresentation). The Motion 12 The defendant filed a Notice of Motion on 15 May 2006 returnable on 26 May 2006 seeking summary dismissal of the proceedings or alternatively orders that parts of the Commercial List Statement be struck out. The hearing time of the Motion was extended by reason of a number of oral applications made by the plaintiff consequent upon orders made by me in Chambers on 23 May 2006, suspending the operation of orders I had made on 5 May 2006 and listing the matter on 26 May 2006. Those applications were firstly for an order that the plaintiff's Motion was an abuse of process and secondly that I disqualify myself. Those applications were refused. Those applications and the Motion were heard on 2 and 19 June 2006 when Mr P King, of counsel, appeared for the plaintiff and Mr DB Studdy, of counsel, appeared for the defendant.

[48]

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.

[49]

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.

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