Ansearch Ltd v Wavtech Pty Ltd
[2007] WASC 59
•16 MARCH 2007
ANSEARCH LTD -v- WAVTECH PTY LTD [2007] WASC 59
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 59 | |
| Case No: | CIV:1123/2006 | 24 JANUARY & 12 MARCH 2007 | |
| Coram: | MASTER NEWNES | 15/03/07 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application for summary judgment refused | ||
| B | |||
| PDF Version |
| Parties: | ANSEARCH LTD WAVTECH PTY LTD |
Catchwords: | Practice and procedure Application by plaintiff for summary judgment for specific performance Whether triable issue Turns on own facts |
Legislation: | Nil |
Case References: | Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184 Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Foran v Wight (1989) 168 CLR 385 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WAVTECH PTY LTD
Defendant
Catchwords:
Practice and procedure - Application by plaintiff for summary judgment for specific performance - Whether triable issue - Turns on own facts
Legislation:
Nil
Result:
Application for summary judgment refused
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr H R Robinson
Defendant : Mr M Levitan
Solicitors:
Plaintiff : Haydn Robinson
Defendant : Melvyn Levitan
Case(s) referred to in judgment(s):
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Foran v Wight (1989) 168 CLR 385
(Page 3)
1 MASTER NEWNES: This is an application by the plaintiff for summary judgment for an order for the specific performance of an agreement, dated 27 July 2005, made between the plaintiff and the defendant.
The background
2 The matter previously came before me on the plaintiff's application for summary judgment for the sum of $800,000, being the purchase price of the shares the defendant agreed to purchase from the plaintiff under the agreement: see Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184. On that application I found that, as the purchase price was only payable upon delivery of a signed, registrable transfer of the shares, and as that had not occurred, the purchase price had not become payable.
3 The plaintiff has now brought an application to amend the writ and statement of claim to seek specific performance of the defendant's obligations under the contract and for judgment for specific performance.
4 It is necessary for the purposes of the present application to canvass only a limited part of the evidence.
5 On 4 April 2003, the plaintiff (then known as Optum Health Ltd), the defendant and Optum ES Pty Ltd ("Optum ES") entered into an agreement (the "Shareholders' Agreement") pursuant to which the plaintiff and the defendant agreed, among other things, to subscribe for 800 shares and 200 shares respectively in Optum ES at a price of one cent per share. It appears from the recitals to the Shareholders' Agreement that Optum ES had been formed to develop and commercialise a unique water purification technology. Under the Shareholders' Agreement the plaintiff was responsible for funding the commercialisation and development of the technology.
6 The Shareholders' Agreement provided, among other things, that if within two years from the date of the agreement the plaintiff spent an amount less than $2 million, but more than $1 million, on commercialisation and development then "50% of [the plaintiff's] shareholding in [Optum ES] will be transferred to [the defendant]".
7 On 25 July 2005, the defendant entered into the agreement with the plaintiff (the "25 July 2005 agreement"), which is the subject of the plaintiff's claim in this action. The 25 July 2005 agreement is in the form of a letter on the letterhead of the defendant and has been signed by both parties. It is expressed to be "on a without prejudice basis to [the defendant's] rights in the Shareholders Agreement" and provides, in
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- essence, that, in consideration of payment of the sum of $800,000, the plaintiff will transfer 650 shares in Optum ES to the defendant. Payment is to be made within 30 days. The payment of $800,000 is to be in full and final settlement of any claims that the plaintiff, Optum ES or the defendant "may have or have had against each other at any time during their relationship with each other."
8 Under the 25 July 2005 agreement, a royalty is to be paid by the defendant to the plaintiff and the plaintiff expressly accepts that, apart from its rights as a shareholder, it will have no further rights in respect of the assets of Optum ES, including the water purification technology. The 25 July 2005 agreement also provides that upon execution of the agreement the plaintiff is to give up any engineering or marketing work on behalf of Optum ES and upon payment of the sum of $800,000 the directors who represent the plaintiff will resign from the board of Optum ES.
9 On 14 September 2005, the parties entered into a further agreement, among other things, extending the time for completion of 25 July 2005 to 5 pm on 21 September 2005. It was not in issue that the defendant did not settle on that date and refuses to settle at all, contending that the 25 July 2005 agreement was subject to the defendant obtaining finance to complete the agreement, which finance it was unable to obtain.
10 The defendant also contends that at the expiration of the two year period specified in the Shareholders' Agreement, that is, as at 5 April 2005, the plaintiff had spent only $1.272 million on commercialisation and development and accordingly the defendant became entitled to half of the plaintiff's shares in Optum ES. That is, the defendant became entitled to 400 of the plaintiff's 800 shares in Optum ES, giving the defendant a total of 600 shares and leaving the plaintiff with 400 shares. The defendant counterclaims against the plaintiff for the 400 shares it says it is entitled to pursuant to the Shareholders' Agreement.
11 As I observed in my earlier judgment, how the Shareholders' Agreement relates to the 25 July 2005 agreement was never made clear in the evidence. No explanation appears from the affidavits filed in the application for summary judgment. What does emerge, however, is that the defendant now contends, among other things, that the plaintiff is not in a position to transfer 650 shares in Optum ES to the defendant under the 25 July 2005 agreement because, by operation of the Shareholders' Agreement, the defendant is already entitled to 400 of the plaintiff's
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- 800 shares in Optum ES, leaving the plaintiff beneficially entitled to only 400 shares.
The plaintiff's submissions
12 Counsel for the plaintiff submitted that the plaintiff had at all relevant times been ready, willing and able to settle the sale of the shares under the 25 July 2005 agreement.
13 The plaintiff's counsel referred, among other things, to a letter of 2 February 2006 from the plaintiff's solicitors to the defendant's solicitors in which demand was made for payment of the purchase price of $800,000 by 5 pm on 10 February 2006 and in which it was said that the plaintiff was ready, willing and able to complete settlement of the sale. The defendant's solicitors replied on 8 February 2006 saying, among other things, that the agreement was at an end as the defendant had been unable to obtain finance for the purchase. The defendant's solicitors said that any action by the plaintiff to enforce the agreement would be strenuously defended. I should observe in passing that in that letter the defendant's solicitors also demanded that the plaintiff transfer 50 per cent of its shareholding in Optum ES to the defendant pursuant to the Shareholders' Agreement.
14 Counsel for the plaintiff submitted that as the defendant had clearly indicated that it would not settle, the plaintiff was not required formally to tender performance. He referred to Foran v Wight (1989) 168 CLR 385.
15 It was submitted on behalf of the plaintiff that it was clear from the terms of the 25 July 2005 agreement that it superseded the terms of the Shareholders' Agreement relating to the transfer of half of the plaintiff's shares in Optum ES in the event of a shortfall in expenditure by the plaintiff.
16 Although the 25 July 2005 agreement was expressed to be "without prejudice" to the defendant's rights under the Shareholders' Agreement, it was made at a time when the defendant's rights, if any, to a transfer of half of the plaintiff's interest in Optum ES had already crystallised. Further, it was a term of the 25 July 2005 agreement that it was in full and final settlement of any rights either party had against the other up to that time. The 25 July 2005 agreement must therefore have been intended by the parties to extinguish any such entitlement of the defendant under the Shareholders' Agreement.
(Page 6)
The defendant's submissions
17 It was submitted on behalf of the defendant first, that there had been no tender of a registrable transfer of the shares by the plaintiff and accordingly the plaintiff was not entitled to an order for specific performance of the agreement. Alternatively, it was submitted that the plaintiff's failure to tender the transfer demonstrated that the plaintiff was not ready, willing and able to perform its own obligations under the agreement and that specific performance should be refused on that basis.
18 It was also contended that, by virtue of the effect of the Shareholders' Agreement, the plaintiff was unable to perform the 25 July 2005 agreement as the plaintiff now held beneficially only 400 shares in Optum ES. Counsel submitted that the plaintiff's argument, that the 25 July 2005 agreement was intended simply to replace the Shareholders' Agreement, could not be right because even after the transfer of shares contemplated by the 25 July 2005 agreement, the defendant would continue to be a shareholder in Optum ES and in that capacity would continue to be subject to rights and obligations under the Shareholders' Agreement.
19 It was further argued by counsel for the defendant, first, that specific enforcement of the contract would impose hardship on the defendant. It was not to the point that the hardship was not caused or contributed to by the plaintiff; it was sufficient that, as at the date of the decree, it would result in hardship to the defendant amounting to oppression which outweighed the inconvenience to the plaintiff of being left without the remedy.
20 Secondly, counsel submitted that specific performance should be refused because the defendant could not perform the agreement, having been unable to obtain finance to enable it to do so. It was submitted that specific performance will be refused if, for whatever reason, the defendant cannot perform the obligation sought to be enforced.
The relevant principles
21 I set out the principles applicable to an application of this nature in my earlier judgment and I will simply repeat the fundamental principle that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. If after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary
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- judgment must be refused: Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 335.
The merits of the application
22 The 25 July 2005 agreement appears to have been prepared without the assistance of legal advice. The unfortunate result is that it is not clear precisely what the parties intended by the prefatory words, that the agreement is "on a without prejudice basis to [the defendant's] rights in the Shareholders Agreement".
23 While there appears to be some force in the plaintiff's argument that the 25 July 2005 agreement must have been intended to supplant the provisions of the Shareholders' Agreement requiring the transfer of half of the plaintiff's interest in Optum ES in the case of a shortfall in expenditure, that is not necessarily the only interpretation. It is not, for instance, apparent whether, at the time the 25 July 2005 agreement was entered into, the parties had ascertained whether or not the plaintiff's total expenditure had met one or other of the thresholds specified in the Shareholders' Agreement.
24 In the absence of any evidence as to the circumstances in which the 25 July 2005 agreement was entered into, I do not consider it can be said to be clear from the prefatory words whether the parties sought to preserve the defendant's rights in the case of a shortfall in expenditure under the Shareholders' Agreement or, as the plaintiff contends, to extinguish them, or otherwise.
25 I should say in that context that the evidence filed in relation to this matter appeared obviously incomplete, various parts of the correspondence being annexed to different affidavits and manifest gaps being left unexplained. There is no comprehensive, or comprehensible, explanation of the overall dealings between the parties. It may be that when the full factual picture emerges the rights of the parties will clearly appear, but for the moment that is not the case.
26 As matters stand, I do not, therefore, consider it can be said there is no real question to be tried. It seems to me there is an arguable issue as to the proper construction of the 25 July 2005 agreement, with the result that it is uncertain whether the plaintiff is still the beneficial owner of 800 shares in Optum ES or whether it is liable, pursuant to the Shareholders' Agreement, to transfer 400 of those shares to the defendant, so that it currently owns only 400 shares beneficially. That is, there is, in
(Page 8)
- effect, an issue as to whether the plaintiff is able to perform the 25 July 2005 agreement.
27 It follows that I am not satisfied that this is an appropriate case for summary judgment for a decree of specific performance. It is therefore unnecessary to consider the other matters raised by the defendant in opposition to this application.
28 I would allow the application to amend the writ and statement of claim but I would dismiss the application for judgment.
29 I will hear the parties on the orders to be made and on the question of costs.
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