In the matter of Elsmore Resources Ltd [2016] NSWSC 856

In the matter of Elsmore Resources Ltd [2016] NSWSC 856

The guarantee in the settlement agreement given by the third defendant (Mr Fung) for $2,209,000 was unjust to the extent it exceeded the plaintiff's actual loss, as it was not reasonably necessary for the plaintiff's legitimate interests and imposed an unreasonable burden. The contractual term was varied under the Contracts Review Act 1980 (NSW) so Mr Fung was liable only for the amount actually lost (the funds raised by share subscriptions, less what had been recovered), plus any applicable interest. Mr Fung was not misled as to the amount of loss, and there was sufficient consideration for his agreement due to the mutual releases. Knowing assistance in breach of trust was otherwise...

Jurisdiction
Australia
Judgment Date
23 June 2016
Procedural Posture
Civil / Final Judgment After Hearing (following Summary Judgment Against Other Defendants)
Outcome
Judgment for the Plaintiff against the Third Defendant varied to the Plaintiff's actual loss (amount raised by subscriptions less recoveries), plus interest; judgment sum reduced accordingly; parties to bring in agreed short minutes of order to give effect within 14 days, including as to costs.
Legal Topics
['contracts Review Act 1980 (nsw)' 'guarantees and Indemnities' 'misleading or Deceptive Conduct' 'innocent Misrepresentation' 'knowing Assistance in Breach of Trust' 'statutory Trusts Under Corporations Act' 'consideration in Contract' 'enforcement and Variation of Settlement Agreements']
['contracts' 'equity' 'corporations Law' 'consumer Law' 'trusts'] ['contracts Review Act 1980 (nsw)' 'guarantees and Indemnities' 'misleading or Deceptive Conduct' 'innocent Misrepresentation' 'knowing Assistance in Breach of Trust' 'statutory Trusts Under Corporations Act' 'consideration in Contract' 'enforcement and Variation of Settlement Agreements']

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Procedural Posture

Civil / Final Judgment After Hearing (following Summary Judgment Against Other Defendants)

Legal Issues

  1. 1 ['Whether the settlement agreement (Handwritten Terms), requiring a personal guarantee from the third defendant, should be set aside or varied under the Contracts Review Act 1980 (NSW)' 'Whether section 6(2) excludes the application of the Contracts Review Act to the guarantee' 'Whether the contract fails for want of consideration' 'Whether there was misleading or deceptive conduct by non-disclosure under s 18 of the Australian Consumer Law' 'Whether there was an actionable innocent misrepresentation as to the amount of loss or debt' 'Whether the third defendant was liable for knowing assistance in breach of trust for application of subscription funds']

Ratio Decidendi

The guarantee in the settlement agreement given by the third defendant (Mr Fung) for $2,209,000 was unjust to the extent it exceeded the plaintiff's actual loss, as it was not reasonably necessary for the plaintiff's legitimate interests and imposed an unreasonable burden. The contractual term was varied under the Contracts Review Act 1980 (NSW) so Mr Fung was liable only for the amount actually lost (the funds raised by share subscriptions, less what had been recovered), plus any applicable interest. Mr Fung was not misled as to the amount of loss, and there was sufficient consideration for his agreement due to the mutual releases. Knowing assistance in breach of trust was otherwise...

Court Disposition

Judgment for the Plaintiff against the Third Defendant varied to the Plaintiff's actual loss (amount raised by subscriptions less recoveries), plus interest; judgment sum reduced accordingly; parties to bring in agreed short minutes of order to give effect within 14 days, including as to costs.

Orders

  • ["Judgment entered for Plaintiff against Third Defendant for the amount of Plaintiff's actual loss by way of share subscriptions less recoveries, plus any applicable interest (quantum to be determined in orders)." 'Parties to bring in agreed short minutes of order to give effect to the judgment, including as to...