How The Facts Of The Case Of Southern Fairway Investments Pty. Ltd.

FACTS OF THE CASE

Southern Fairway Investments Pty. Ltd., and Jakabar Pty Ltd (second defendant, and it being a wholly subsidiary company from the First Defendant) performed a Memorandum of Understanding or “MOU”. The MOU was executed in the way of a “deed” on the 12 of June 2008 where the parties would “use reasonable endeavours to negotiate by 30 august 2008 (and in any event no later than 30 October 2008) a Gas Supply Agreement” with the purpose to end of entering into a GSA (Gas Supply Agreement).

The Gas supply agreement was not concluded. Southern Fairway Investments Pty Ltd., argued that it could not be performed because the defendant had breached the “MOU” as the defendant did not negotiate as they had promised. The plaintiff company
is claiming damages by $221 million caused by the breach of the MOU due to it frustrated the opportunity of the plaintiff company to concluding the GSA.

Mr.
Ronald William Baldwin (First Plaintiff) was hired under an agency contract for Icon Energy with the purpose of introducing potential buyer or buyers of gas from Icon Energy (First Defendant). Mr Ronald William Baldwin was entitled to receive a commission upon conclusion of the contract with the prospectus buyer or buyers. Additionally Mr Baldwin was offered an option to purchase share in Icon Energy Limited upon completion of the contract with the prospectus buyer or buyers.

Mr Ronald William Baldwin is claiming that his contract with Icon Energy delimited an implied term with the objective that Icon Energy Ltd., was required to negotiate and bring to a life the agreement with Southern Fairway Investments Pty. Ltd., with the purpose of concluding the GSA.

Mr Ronald William Baldwin is claiming that Icon energy has breach the implied term because Icon Energy Ltd., unwillingness to conclude the contract bring him a loss amounted to $ 52.4
million.

Mr Ronald William Baldwin claim is subject of the effective claim by Southern Fairway Investments Pty. Ltd., due to Mr Ronald William Baldwin Claim are subject to the claims made by Southern Fairway Investments Pty. Ltd.

The MOU estipulate that the contractual parties will use their “reasonable endeavours” to negotiate a GSA using what they stipulated in the scheduled terms of the MOU. The MOU contained a clause in the schedule 2 mentioning, “These terms and conditions are indicative only and are submitted as a means of encouraging discussions”

The defendants plead for the rejection of the claims made by the first plaintiff on the base that the agreement to negotiate was uncertain and thereby unenforceable . Additionally the defendants are claiming that the plaintiff claim does not constitute a judicious cause of action.

CAUSE OF ACTION

Southern Fairway Investments Pty.
Ltd., is claiming the failure of the defendants to negotiate the MOU as it was established in the Schedule 2 of such agreement which were the terms and conditions enforceable under the GSA.

On the other hand the defendants are arguing that such terms and conditions stipulated in the Schedule 2 of the MOU were indicative only. They never were intended to create legal relationship and it was not considered an offer and acceptance for the GSA. They mentioned that Schedule 2 of the MOU clearly specified that the intention of it was to encourage the negotiations towards the formation of the GSA. In addition they argue that the MOU is lacking of certainty, which makes the MOU unenforceable.

In regards Mr Ronald William Baldwin (first plaintiff) the defendants claimed that the agency contract performed did not contain such implied term. The defendants also claimed that the facts alleged by Mr Ronald William Baldwin as losses were unsustain due to MOU was merely indicative to be able to calculate the losses because there was not agreement reached by Southern Fairway Investments Pty. Ltd., and the Defendants.

A SUMMARY OF THE JUDGEMENTS INCLUDING DISSENTING JUDGEMENTS WHICH SHOULD
INCLUDE:

THE SUPREME COURT DECISION

Philip McMurdo J (Reporting Judge) found that the MOU cannot be enforceable due to this agreement to negotiate was uncertain. His Honour based his approach analysing all the possible reviews under the Australian Law Framework to establish if the MOU was enforceable at some extent.

Phillip McMurdo J analyse all the possible cases where an agreement to agree could be enforceable such as Coal Cliff Collieries Pty. Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1., where the judgement of Kirby P recognised the prospect of and agreement to agree to be enforceable.

His Honour considered instead, that the MOU was a merely agreement to negotiate such as it states in the Schedule 2 “terms and Conditions” of the previous mentioned agreement with the purpose of the formation of a Gas Supply Agreement .

But the core issue establish by Phillip McMurdo J is to determine if the MOU imposed any obligation which gives the MOU certain legal content which allow the claimant to demonstrate if a party has failed to negotiate according with the MOU.

Philip McMurdo J highlighted the observations and the jurisprudence that the plaintiff used to base his pleadings. His Honour discussed the reasoning by the majority in Coal Cliff Collieries case where it was established that depending on the terms of the contracts, the promise to negotiate could be enforceable . Then he established that the conclusion of taken in this particular case did not support the plaintiff case.