Litigation and Dispute Resolution

Agent’s commission – could a purchaser’s inspection of a property with an agent entitle that agent to the commission?

14 May, 2020

Commissioner Kenneth Hayne’s final report for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released yesterday to reveal his recommendations to re-install public trust in the conduct, practices, behaviour and business activities of the Industry.

In the anticipated wait for the final report to be released, the industry and regulators have been contemplating the Commissioner’s open-ended questions on the issues in the industry as set out in his interim report.  For the regulators and particularly ASIC, the Commissioner was heavily critical of their failure to take action against banks and superannuation providers.

The final report has now shed light on the recommendations for regulators, with the Commissioner making 76 recommendations.

Watching the watchmen: ASIC must bare its teeth

The Final Report provided a number of recommendations as to how ASIC performs its regulatory role.  One of the questions being whether breaches of the Corporations Act should be litigated, or ASIC should reach a negotiated agreement.  On this issue, the Commissioner recognised the inherit risks of litigation and noted that it is tempting to negotiate a settlement to avoid these risks.  However, he stated in the final report:

“litigation of the kind now under consideration is the exercise of public power for public purposes.  It is litigation by a public authority to enforce the law.  A private plaintiff can always choose not to pursue, to abandon or to compromise that plaintiff’s private rights.  A private plaintiff may take any of these steps for any reason or no reason.  But altogether different considerations arise in connection with the public enforcement of the law.

Breach of the law carries consequences.  Parliament, not the regulators, sets the law and the consequences.  There are cases where there is good public reason not to seek those consequences.  Prosecution policies have always recognised that there may be good public reasons not to pursue a particular case. But the starting point for consideration is, and must always be, that the law is to be obeyed and enforced.  The rule of law requires no less.  And, adequate deterrence of misconduct depends upon visible public denunciation and punishment.”

Accordingly, the Commissioner is inviting ASIC to take a more aggressive stance in its approach to litigation.  As ASIC is to enforce the law, it should be more inclined to do so through litigation.

As explored in our previous article, ASIC has recently made statements that it will take a strong stance to litigate first following the Commissioner’s suggestions in the interim report.  These criticisms were based on ASIC’s preference to negotiate enforceable undertakings as opposed to litigating.  The Commissioner made reference to this in the final report, pushing ASIC to adopt a policy of only accepting an enforceable undertaking in circumstances where the party offering it acknowledges that it has breached the law.

The Commissioner also recommended that infringement notices, functionally fines issued by ASIC, should only be used for administrative failures, and that where an evaluative judgment has to be made about a party’s conduct, or the party is a large corporation, they will not be enough to properly enforce compliance.

Feeding the beast: giving ASIC and the Courts the tools for the hunt

In response to the Final Report, Treasurer Josh Frydenberg has indicated that the Morrison Government will be increasing ASIC’s resources stating that they will introduce “the legislative framework necessary, providing the regulators with the powers and the resources to hold those who abuse our trust to account”.

Mr Frydenberg has also stated that the government has further committed to an expansion of the Federal Court’s jurisdiction in relation to criminal corporate crime in order to “ensure prosecution of financial crimes does not face delays as a result of heavy caseloads in the courts”.  This is in the context of the government’s recent provision of $70.1 million for ASIC’s enforcement capabilities and supervisory approach to pursue criminal prosecutions for financial misconduct and $41.6 million to the Commonwealth Director of Public Prosecutions to prosecute briefs from ASIC.

Other recommendations: where are the claws being sharpened?

The Commissioner also made a number of other recommendations regarding the powers and responsibilities of the regulators.  These include:

  • The “twin peaks” model of ASIC and APRA for financial regulation should be retained;
  • ASIC should take as its starting point to its enforcement the question of whether a court should determine the consequences of a contravention;
  • ASIC will be given the power to enforce all provisions in the Superannuation Industry (Supervision) Act 1993 that are, or will become, civil penalty provisions;
  • A new oversight authority should be established by legislation for APRA and ASIC, independent of the government, to assess the effectiveness of each regulator, and will be required to report to the minister twice a year;
  • APRA and ASIC should be subject to capability reviews at least once every 4 years;
  • The recommendations of the ASIC Enforcement Review Taskforce made in December 2017 that relate to self-reporting of contraventions by financial services and credit licensees should be carried into effect. These notably include;
    • Clarifying the ‘significance test’ in section 912D of the Corporations Act 2001 to ensure that the significance of breaches is determined objectively  rather than subjectively;
    • Introducing a self-reporting regime for credit licensees equivalent to section 912D of the Corporations Act 2001;
    • The obligation for licensees to report should expressly apply to misconduct by an employee or representative;
    • Significant breaches (and suspected breach investigations that are ongoing) must be reported within 30 days;
    • Increasing Criminal penalties for failure to report as and when required; and
    • Introducing a civil penalty option in addition to the existing criminal offence for failure to report as and when required.
  • It was also foreshadowed of a future recommendation of a specialist civil enforcement agency depending on ASIC’s progress in reforming its enforcement function.

Guiding you through the jungle: how does this effect you?

The effect of the final report on the financial industry is obvious, but its aftershock will no doubt have resounding impacts on corporate governance beyond the financial sector.  The Commissioner’s push for enforcing deterrence through the judicial system along with the Government (and Opposition’s) support for the recommendations may result in the dawn of a new age of regulatory attention on corporate governance.

The final report acts as a reminder for companies, and particularly directors, of the importance to monitor regulatory compliance and to avoid complacency about risk to ensure they avoid the ire of the regulator’s sharpened focus.

McCabes is experienced in advising its clients on regulatory compliance.  Company directors would be wise to seek advice now to ensure that they are complying with their duties.

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Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023