Hanger Holdings v Perlake Corporation SA & Anor

A contractual termination clause referring to a material breach may be engaged by a breach which seriously affects the benefit expected from performance, even though the breach is not repudiatory. A failure to keep and provide financial records required by the contract was material where the information was needed to verify commission payments. The breach was irremediable because the records had not been created and could not be reconstructed.

A domain name is intangible personal property. A contractual provision requiring its transfer on termination may therefore create an equitable interest in favour of the intended transferee. A later purported transfer cannot defeat that prior equitable interest.

Hanger Holdings claimed ownership of the domain name blackjack.com and associated goodwill against Perlake Corporation SA and Simon Croft. Under a 2003 agreement, Perlake acquired the online gambling business and was required to provide financial records and pay commission. The agreement entitled Hanger Holdings to terminate for material breach and recover the domain name and trade mark.

Hanger Holdings alleged persistent failures to provide accounts, transaction information and commission. Mr Croft denied breach and relied on a purported loan agreement under which Perlake’s assets passed to him on its dissolution. The central issues were whether the breaches were material and irremediable, whether termination was effective, whether a domain name could be the subject of an equitable interest, and whether the loan agreement defeated Hanger Holdings’ rights.

1. Material breach. The contractual meaning of material breach was accurately stated in National Power plc v United Gas Company Ltd, namely a breach which was or, if unremedied, was likely to become serious in its effect on the benefit expected from the contract. Perlake persistently breached the obligations to keep accurate records, provide audited financial statements and provide transaction details. Those failures materially affected Hanger Holdings’ ability to verify commission and were therefore material.
2. Irremediability and termination. The failures identified in the 5 August 2015 notice were irremediable. The evidence established that financial records had not been kept for at least part of the relevant period, so they could not later be produced retrospectively. The agreement was accordingly terminated under clause 9.2 on 11 August 2015, the deemed date of service.
3. Nature of the rights. A domain name is intangible personal property. The court adopted the reasoning in Tucows.com Co v Lojas Renner SA and relied on the observation in OBG Ltd v Allan that a domain name may be intangible property. Goodwill is likewise intangible personal property, as illustrated by Reuter v Mulhens. Clause 9.2 therefore created an equitable interest in the domain name and goodwill in favour of Hanger Holdings upon termination.
4. Loan agreement. The purported loan agreement was not genuine. The cumulative anomalies in Mr Croft’s evidence, the absence of supporting documents and the lack of evidence of the alleged advance showed that it had been created in or around September 2015 to avoid the consequences of the contractual breaches and Perlake’s dissolution. The court therefore did not need to decide the anti-deprivation issue raised by reference to Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd.
5. Hanger Holdings acquired an equitable interest in the domain name and trade mark on termination. No later transaction or purported transaction deprived it of that interest, and it remained entitled to call for assignment of the legal interest and related relief.