The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 13) [2022] NSWSC 444

30 Jun The Checkout Pty Ltd v Cordell Jigsaw Productions Pty Ltd; Morrow v Cordell Jigsaw Productions Pty Ltd (No 13) [2022] NSWSC 444

This case is of interest because it is an illustration of a situation where non-disclosure by one partner of a potential benefit to the partnership constitutes misleading or deceptive conduct.

Facts

Julian Morrow and Nicholas Murray, both with their own respective companies, founded a joint venture known as The Checkout Pty Ltd to create a consumer affairs television series. ‘The Checkout’ series was successful with six seasons produced for the Australian Broadcasting Corporation (“ABC”) between 2013 and 2018. Mr Morrow was involved in further discussions following the original 2018 television series for a new consumer affairs television program, of which Mr Murray was unaware. He then negotiated a Share Sale Agreement with Mr Murray for him to sell his shares in The Checkout for the terms that Mr Murray’s company receives 2% of The Checkout’s cash budget if subsequent seasons of the show were produced. Mr Morrow continued talks with the ABC regarding not a new consumer affairs show, but a new season of The Checkout. Mr Murray upon becoming aware of this, emailed ABC executives, leading to the ABC informing Mr Morrow that before any new season of The Checkout could be greenlit, a Quit Claim Deed must be executed releasing The Checkout and the ABC from legal claims. Mr Morrow became aware of the correspondence between Mr Murray and the ABC during discovery in these proceedings and claimed the emails were defamatory and expressed injurious falsehoods.

Additionally, Mr Murray brought his own claim asserting that Mr Morrow’s failure to disclose plans to produce another season of The Checkout breached an implied term in the Joint Venture Agreement, and that this constituted misleading and deceptive conduct. He claimed that in doing so, Mr Morrow also breached his director’s duties relating to his own company and The Checkout.

Decision

Firstly, Justice Stevenson found that Mr Morrow did not successfully establish his claim in the Commercial Proceedings as he could not prove any resulting damage caused by Mr Murray failing to execute the Quit Claim Deed. Regarding Mr Murray’s claims in the Commercial Proceedings, Justice Stevenson found them to be successful. He found there was an implied term in the Joint Venture Agreement which Mr Morrow had breached, requiring parties to inform each other of opportunities to continue production of The Checkout or a similar show and to allow the joint venture to benefit from this. This was enshrined in the Agreement as it stated Mr Murray’s company and Mr Morrow’s company would ‘a. cooperate and do such things as are necessary to enable the other party to have the benefit of the JV Agreement;… b. inform the other party of any opportunity to produce any further series of The Checkout (or any equivalent or similar consumer affairs program) for the ABC…’ [at 106].

Secondly, Justice Stevenson found that Mr Morrow failing to disclose his discussions with the ABC amounted to misleading or deceptive conduct. This is because Mr Murray’s company had a reasonable expectation to be notified regarding discussions pertaining to commissioning another season of The Checkout. Mr Morrow deliberately withheld his discussions with the ABC because had Mr Murray known, he would not have entered the Share Sale Agreement. Justice Stevenson endorsed the view in Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 where Justice Sackville stated, ‘…unless they give rise to a reasonable expectation that if some relevant fact exists it will be disclosed, mere silence will not support the inference that the fact does exist…’ [at 533]. Therefore, Justice Stevenson asserted that the silence of Mr Morrow regarding his discussions with the ABC in 2019 was misleading or deceptive conduct.

Thirdly, Justice Stevenson stated Mr Morrow had duties as director of his company and The Checkout under sections 181, 182, and 191 of the Corporations Act 2001 (Cth). In particular he was required to ‘exercise his powers and duties in good faith…and for a proper purpose’, ‘not improperly use his position…to gain advantage for himself…’, and ‘give Mr Murray, as his co-director, notice of any material personal interest he had in any matter relating to the affairs’ [at 133] of The Checkout. Justice Stevenson found that Mr Morrow should have disclosed the possible renewal of The Checkout to Mr Murray if he was to be in line with his director’s duties. He found that Mr Murray was entitled to rescind the Share Sale Agreement under s 237 of Australian Consumer Law, due to Mr Morrow’s company’s misleading or deceptive conduct and because Mr Murray did not breach their obligations under the Agreement.

Note that the Court applied the Defamation Act 2005 (NSW) as the alleged defamatory statements were published before the amendments on 1 July 2021. In the Defamation Proceedings, Justice Stevenson asserted that four of the six instances of alleged defamation were defamatory due to the damage to Mr Morrow’s reputation that resulted from Mr Murray’s statements claiming that Mr Morrow had conducted misleading or deceptive conduct. Mr Murray had repeated his defamatory statements to many people to attempt to ensure that those Mr Morrow was speaking with in the ABC would not seek to work with him further. Justice Stevenson decided Mr Morrow should be awarded aggravated damages for his defamation claim. This is available ‘where a respondent’s conduct towards a plaintiff is found to have been improper, unjustifiable or lacking in bona fides’ [at 927]. Mr Morrow is to be awarded $30,000 for Mr Murray’s defamatory statements and an additional $5,000 for aggravated damages. Additionally, Mr Morrow did not prove any loss in relation to his claim of injurious falsehood, and therefore could not receive a remedy for it.