Litigation and Dispute Resolution

From Administrator to Official Liquidator – Impartiality, Cost and Qualification

26 August, 2015

By its very nature, capitalism epitomises struggle.  Just as the God of Norse mythology, Odin, would reward a fallen warrior’s struggle with a seat in Valhalla, capitalism rewards those who are victorious in the struggle for wealth creation.  In the words of the High Court, capitalism can involve the “deliberate and ruthless” conduct of commercial rivals who set out to economically “injure each other”.[1]  Economists coin the process one of “creative destruction”.  Although capitalism is not perfect, it may well be the least imperfect of rival ideologies.

Good faith mollifies the harsh edges of commercial competition

Good faith represents a standard of conduct for commercial parties. Good faith, in essence, sets out to make competition less ruthless.  In a contractual setting, good faith may be an express term of a contract, or it may be implied by the courts (either as a matter of fact or as a matter of law).

The evolving Australian statutory setting is an increasingly important factor in determining the application of good faith in the commercial environment.  The Australian Consumer Law (ACL) aims to protect consumers.  For example, section 21 — unconscionable conduct — extends the scope of the common law notion of unconscionable conduct. The extension comes via the ACL allowing a court to consider a wide range of factors to determine whether conduct has been unconscionable.  The concept, good faith, is included in this range of factors.[2]  Additionally, the ACL’s unfair contract term protections depend on the notion of fairness.  The notion of fairness is integral in considering the concept, good faith.[3]  Importantly, the ACL’s unfair contract term protections will extend to small business contracts on 12 November 2016.[4]

An express obligation to act in good faith — enforceable?

The Victorian Supreme Court recently considered an express obligation to act in good faith in North East Solutions Pty Ltd v Masters Home Improvement Australia Pty Ltd (Masters).[5]

Under a written contract, North East Solutions (NES) agreed to build a Masters store for Woolworths.  The contract included an express term of good faith where the contract could only be terminated if the “parties, acting reasonably and in good faith, were unable to resolve”[6] their differences in relation to constructions costs.  The rapid rollout of Masters stores meant that precise design details were not available at the time of contracting.  Disagreement over construction costs ensued.  Woolworths claimed that the good faith obligation was insufficiently certain to be enforceable and, in any case, was only an agreement to negotiate in good faith.

Justice Croft ruled in favour of NES. Given the surrounding context, the expressed obligation of good faith was clear and had a “sensible and ascribable meaning”.[7]  His Honour quoted Sir Anthony Mason’s depiction of the concept of good faith to include three related notions, namely “an obligation on the parties to cooperate in achieving the contractual objects (loyalty to the promise itself); compliance with honest standards of conduct; and compliance with standards of conduct that are reasonable having regard to the interests of the parties”.[8]  Woolworths’ conduct lacked good faith as it acted with “extraneous objects in mind”[9] which were not fully disclosed to NES (plans for another location and undisclosed construction-cost budgets).  The obligation required this information to be shared to enable both parties to resolve their differences.

Australian statutory developments and good faith

Justice Croft also drew attention to the recent Full Court of the Federal Court Decision in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 321 ALR 584 (Paciocco).[10]  This case involved the issue of bank fees and whether they constitute a penalty at common law or equity.

In Paciocco, Chief Justice Allsop noted the importance of the “will of parliament”[11] in considering the concept, good faith.  The issue concerned the equivalent ACL consumer protections contained in the Australian Securities and Investments Commission Act 2001 (Cth); these relate to financial transactions.  His Honour remarked that it is “difficult to accept the notion that ruthless commerce, red in tooth and claw, is now acceptable in Australia.”  We agree.

Good faith will cover three-quarters of Australia’s Gross Domestic Product (GDP)

The ACL provides protection to consumer transactions.  Consumer spending accounts for roughly 60% of Australia’s GDP.  As of 12 November 2016, unfair contract term protections will also cover small business contracts.  Small business transactions make up about 15% of GDP (not counting those transactions already embedded in the consumer classification).[12]

By the end of 2016, three-quarters of the final spending in Australia’s economy will be expressly cloaked in a statutory obligation of good faith.  Of the remaining commercial activity, as Masters demonstrates, good faith can be of sufficient clarity to be an enforceable obligation.

Have we reached Valhalla?

The gates of Valhalla are in sight.  A reasonable mind could ask, if three-quarters of the economy’s transactions are cloaked in some form of statutory obligation of good faith, perhaps the time is ripe to ask not whether a general obligation to act in good faith in the commercial setting exists, but to ask in what form the obligation exists, and whether there are any exceptions to it.

Although some clarity on these issues from the High Court is desirable, the implication for commercial parties is clear: the obligation, good faith, will play a larger role in mollifying the “red in tooth and claw” nature of commerce.

[1]              Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177, 191 (Mason CJ, Wilson J).

[2]               ACL ss 22(1)(l)–(2)(l).

[3]               See for example ACL ss 24(1)(a)–(c).

[4]              Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth), amending the Australian Securities and Investments Commission Act 2001 (Cth), and the Competition and Consumer Act 2010 (Cth).

[5]               [2016] VSC 1.

[6]               [2016] VSC 1 [6] (Croft J).

[7]               [2016] VSC 1 [56] (Croft J).

[8]              [2016] VSC 1 [59] (Croft J); quoting Sir Anthony Mason, “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 Law Quarterly Review 66.

[9]               [2016] VSC 1 [84]–[87] (Croft J).

[10]             On appeal to the High Court.

[11]             Paciocco v Australia and New Zealand Banking Group Ltd (2015) 321 ALR 584, 653 [303] (Allsop CJ).

[12]             Parliament of Australia, Research Paper Series 2015–16, Statistical snapshot: Small Business Contribution to Economic Performance in Australia <>.

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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