Australia: E-Alert: More than a matter of semantics - never make a promise you cannot keep

Last Updated: 2 April 2018
Article by Gina Bozinovski

The recent decision of Semantic Software Asia Pacific Ltd v Ebbsfleet Pty Ltd [2018] NSWCA 12 (Semantic Case) serves as a warning to directors and companies of the risk in making needlessly daring promises in contractual agreements.


In 2012 and 2013 Semantic Software Asia Pacific Ltd (Semantic), a software development company, raised money from investors to fund the research and development of new software. During this period, Ebbsfleet Pty Ltd and McGee Pty Ltd, as trustees of a self-managed super fund (together referred to as Ebbsfleet) entered into 10 separate share issue agreements with Semantic for the subscription of 6.5 million shares for a total value of $1,625,000 (Share Agreements).

The investments were preceded by extensive communications between Ebbsfleet and Semantic's sole director Mark Bradley (Bradley) as well as an "Investor Pack" provided by Semantic. The documents within the Investor Pack made a number of representations to prospective investors as to the potential returns an investment may yield. The promises ranged from a 'guarantee' that shares would triple within two years and went so far as to claim that shares would increase tenfold "within three years or sooner".1

Pursuant to the statements made in the Investor Pack, Bradley, personally and on behalf of Semantic, again assured Ebbsfleet that the shares would triple in value within two years of issue.

The Problematic Promise

Clause 46 of the Share Agreements stated that:

The Director of the Company, Mark William Bradley, a Party to this Agreement as Guarantor in respect of this clause, warrants that Investor's Issue Shares shall triple in value within two years from the date of this Agreement and should Issues [sic] Shares not so triple in value, Mark William Bradley must transfer additional shares from his personal and/or beneficial shareholdings sufficient to effect said tripling in the value of Investor's Issue Shares.
Mark William Bradley further warrants that he must retain at least 10,000,000 shares in his beneficial ownership to satisfy this Guarantee...
(emphasis added)

This clause ultimately encompassed three promises to Ebbsfleet, these being that:

  1. The shares would triple in value within three years;
  2. In the event the shares do not triple in value within this period, Bradley must personally provide adequate shares to sufficiently effect the tripling that was promised; and
  3. Bradley must personally hold 10,000,000 shares in Semantic so as to be able to fulfil the second promise.

Ultimately the shares did not "triple in value". Rather, they crashed to such a low that throughout proceedings, the court deemed them to be "essentially worthless".2Furthermore, Bradley sold all of his shares following the execution of the Share Agreements.

The First Court Appearance

Proceedings commenced in the Supreme Court of NSW in 2017 on two grounds.3 Firstly, Ebbsfleet claimed that Bradley and Semantic were in breach of the Share Agreements by breaching the warranty given as to the value of the shares.

The second cause of action was based on misleading and deceptive conduct. Ebbsfleet alleged that the representations as to the future value were made without reasonable basis and that the statements were accordingly misleading for the purposes of the Australian Consumer Law.4

The Supreme Court in the first instance found in favour of Ebbsfleet on both grounds and against both Semantic and Bradley.

As Bradley no longer owned any shares in Semantic, the breach could not be remedied through a 'share transfer' as stipulated in clause 46. The court held, however, that the wording in clause 46 did not make a transfer of shares the exclusive remedy available to Ebbsfleet.5

In respect of the breach of contract, Semantic and Bradley were ordered to pay damages so as to place Ebbsfleet in the position as if the contract had been performed and the warranty been made good – an ultimate return of $4,875,000.

For the misleading and deceptive conduct, Bradley was ordered to pay Ebbsfleet an amount equivalent to the value of the lost investment ($1,625,000). The court noted "[a]s the shares are worthless, or practically worthless, [Ebbsfleet] have lost virtually all of that investment".6

The effect was that both Bradley and Semantic would be required to pay to Ebbsfleet an approximate total of $6,500,000 for the contractual breach and misleading and deceptive conduct claim.

The Appeal

The decision of the Supreme Court was appealed by Semantic and Bradley.7 Semantic argued that the clause 46 warranty was made solely by Bradley and not by Semantic.

Semantic further argued that Stevenson J erred when he held that Semantic was also joined in the making of all warranties in the relevant schedule of the Agreement, due to a separate clause that stated:

6.4 "[Semantic] warrants to [Ebbsfleet] that:
The Warranties are true and accurate in all respects"

Stevenson J held that the failure to meet the clause 46 warranty therefore resulted in a breach by both Bradley and Semantic.

The Court of Appeal agreed with Semantic and upheld the view that the clause 6.4 warranty simply constituted a promise and affirmation that Bradley had given the warranty in clause 46. Their Honours stated that clause 6.4 only bound Semantic to those warranties which Semantic itself made and did not extend to any contractual promise made by Bradley.8 It was held that the operation of clause 6.4 did not have the effect of joining Semantic into the warranty under clause 46 as that had expressly stated to be given by Bradley alone.9

Whilst the Court of Appeal overturned the primary judge in respect of the contractual promises purportedly made by Semantic, it upheld Stevenson J's decision in respect of clause 46 and the warranties binding Bradley.10 It affirmed the finding that Bradley alone had warranted the share value and that Bradley alone was liable to Ebbsfleet for the breach.11 In doing so the Court of Appeal also affirmed that relief was not limited to the transfer of shares.12

In respect of the misleading conduct, the Court of Appeal overturned the original judgement, finding there to have been insufficient reliance by Ebbsfleet on the representations.13

Accordingly, the damages were reduced by over $1,500,000, with Bradley alone required to pay damages of approximately $4,950,000.

The Outcome

The decision serves as a salient reminder to never make a promise you can't keep. Parties to a contract must take the utmost care in the promises they make and avoid making unnecessarily bold warranties or statements, particularly as they relate to future performance.

The promises you make are more than just a matter of semantics.


1 Ebbsfleet Pty Ltd as trustee for Ebbsfleet Superannuation Fund v Semantic Software Asia Pacific Ltd (No 3) [2017] NSWSC 78 [23]

2 Ibid [128].

3 Ebbsfleet Pty Ltd as trustee for Ebbsfleet Superannuation Fund v Semantic Software Asia Pacific Ltd (No 3) [2017] NSWSC 78.

4 Competition and Consumer Act 2010 (Cth) Sch 2 s 18.

5 Ibid [58].

6 Ibid [128].

7 Semantic Software Asia Pacific Ltd v Ebbsfleet Pty Ltd [2018] NSWCA 12.

8 Ibid [163].

9Ibid [152].

10 Ibid [147].

11 Ibid [168].

12 Ibid 154].

13 Ibid [186].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Gina Bozinovski
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions