Australian Pure Fruits Limited v Nical Holdings Pty Ltd
[2000] VSC 552
•12 December 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 7900 of 2000
| AUSTRALIAN PURE FRUITS LIMITED | Plaintiff |
| v. | |
| NICAL HOLDINGS PTY. LIMITED | Defendant |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 11 DECEMBER 2000 | |
DATE OF JUDGMENT: | 12 DECEMBER 2000 | |
CASE MAY BE CITED AS: | AUSTRALIAN PURE FRUITS LTD. v. NICAL HOLDINGS PTY. LTD. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 552 | |
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CATCHWORDS:
Interlocutory injunction – contract to sell shares – whether completed agreement between parties – shares sold to third party – injunctive relief inappropriate.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr R. Randall | Tress Cocks & Maddocks |
| For the Defendant | Mr J.R. Dixon | Scanlon Carroll |
HIS HONOUR:
The defendant is the owner of six $1 fully paid shares in the issued capital of Freedom Foods (Aust) Pty Ltd. The six shares represent a majority of the shares in Freedom Foods. The defendant's managing director is John Francis Cann.
By letter of 18 August 2000 written by the defendant's solicitors to the plaintiff, the defendant's solicitors confirmed that the defendant was prepared to sell its shares to the plaintiff. The letter reads:
"FREEDOM FOODS (AUST) PTY LTD
We act on behalf of Mr John Cann and Nical Holdings Pty Limited.
We are instructed by Mr Cann that Australian Pure Fruits Limited has agreed to purchase the shareholding of Nical Holdings Pty Limited in Freedom Foods Pty Ltd for the following consideration:
· $A150,000 upon signing of the Sale Agreement;
· $A100,000 in twelve (12) consecutive monthly instalments;
· 250,000 fully paid $1 Shares in Australian Pure Fruits Limited.
We enclose for your information the following documents:
1. Shareholders Agreement made 23 August 1999;
2.Memorandum and Articles of Association of Freedom Foods (Aust) Pty Ltd.
Our instructions are that the transfer by Nical Holdings Pty Limited of its majority shareholding is with the blessing and encouragement of the remaining shareholder GEW Nominees Pty Ltd. However, in practice, regulation 73(3) of the Articles of Association together with Clause 51A(c) and 51B(c) would negate the effect of regulation 36 of the said Articles.
We are further instructed that our client has indicated that acceptance of the offer is conditional upon documentation being prepared and executed expeditiously, and we will await a response from your company's solicitors with the draft documents.
Please do not hesitate to contact the writer should you require any additional information."
Thereafter, there was considerable to-ing and fro-ing between the solicitors for the parties concerning the terms of their agreement.
For instance, in a letter dated 18 September 2000 from the defendant's solicitors to the plaintiff's solicitors, there appears this paragraph:
"I also understand that the charge over the company which is accompanied by collateral personal guarantees from Mr Cann is to be discharged at settlement and provision needs to be made for this position in the document" (share sale agreement).
By letter of 22 September 2000 from the plaintiff's solicitors to the defendant's solicitors, the plaintiff proposed that the sum of $150,000 not be paid over upon the signing of the sale agreement but "in cash at settlement".
In the draft sale agreement sent by the plaintiff's solicitors to the defendant's solicitors on 9 November 2000, it was proposed that the sum of $150,000 be paid as to $10,000 on completion of the sale and the further sum of $140,000 on or before 30 days from the completion date.
Without going into the matter in any further detail, it is clear that as at 9 November the parties were not agreed as to the terms of their bargain.
It is also equally clear that, as at that date, it could not be said that the documentation in relation to the share sale had been prepared and executed expeditiously.
On 10 November 2000 the defendant's solicitors wrote a letter to the plaintiff's solicitors which contained the following paragraph:
"In relation to the Westpac debenture and the personal guarantees provided by my client, Mr Cann has instructed me that he requires a release from all security provided by him rather than an indemnity by the purchaser."
On 13 November the defendant's solicitors sent the following letter to the plaintiff's solicitors. The letter reads:
" 'NICAL' TO 'AUSTRALIAN PURE FRUITS'
I refer to your last fax of November 10 and my subsequent telephone conversation and advise that I have been instructed by my client to propose the following in relation to settlement of the matter:
1.Settlement take place on November 30 at which time payment of $150,000 be made together with the allocation of the 250,000 shares in your client's company.
2.A release from the Westpac debenture and my client's personal guarantees take place simultaneously whereby your client pays out the Westpac debt or provides alternative security to Westpac satisfaction to enable the release to be obtained.
As discussed in our telephone conversation I refer you to your correspondence of 22 September in which it is stated that $150,000 is to be paid at settlement.
Please advise your client's instructions."
On 14 November, the plaintiff's solicitors sent the following letter to the defendant's solicitors:
"RE:Australian Pure Fruits Limited purchase from Nical Holdings Pty Limited.
Your Client: John Cann
We refer to your facsimile of 13 November 2000 and are instructed that the matter may proceed on the following basis:
1.Settlement to take place on 30 November 2000 at which time payment of $150,000 will be made together with allocation of 250,000 shares in Australian Pure Fruits Limited.
2.At settlement funds will be made available to discharge the debenture given by Freedom Foods to Westpac. The obtaining of a release of personal guarantees will be a matter to be resolved between your client personally and Westpac.
If settlement is required at a Westpac office would you please let us know, failing which we presume settlement will take place at your office.
We look forward to hearing from you."
By an agreement dated 28 November, the defendant agreed to sell the shares to a company called Beckhampton Pty Ltd.
On 29 November 2000 the defendant's solicitors informed the plaintiff's solicitors that the defendant did not propose to proceed with the sale of the shares to the plaintiff.
On 6 December the plaintiff filed a writ in the Court whereby it seeks:
"1.An order declaring that the agreement referred to in paragraph 4, or the November agreement, hereof is binding upon the Defendant and legally enforceable by the Plaintiff."
The agreement referred to in paragraph 4 of the statement of claim is an agreement said to have been made on or about 16 August 2000 between the plaintiff as purchaser and the defendant as vendor.
"2.An order that the Defendant specifically perform the said agreement or the November agreement.
3.A permanent and interlocutory injunction restraining the Defendant by its officers, employees, servants and agents from selling, disposing of, transferring, encumbering, or howsoever dealing with six $1 shares held by it in the issued capital of Freedom Foods (Aust) Pty Ltd .
4.Damages pursuant to section 38 of the Supreme Court Act (Vic) 1986."
On that same day I granted an interim injunction to the plaintiff restraining the defendant from selling, transferring, disposing of, encumbering or howsoever dealing with six $1 shares held by it in the issued capital of Freedom Foods Aust Pty Ltd until 4.30 p.m. On 7 December 2000 or until further order.
I now have before me an application by the plaintiff for an order that the injunction continue to the trial of the proceeding.
The defendant opposes the continuation of the injunction on two main grounds.
In the first place, it contends that there has never been any concluded agreement between the parties because the parties were never able to agree that as part of the agreement for the sale of the shares the plaintiff would obtain from Westpac not only a discharge of the debenture given to Westpac by Freedom Foods, but a release of the personal guarantees given to Westpac by Mr Cann. That, it is said, was a fundamental term of the agreement so far as the defendant is concerned, and in the absence of such a commitment by the plaintiff, there has never been a concluded agreement between the parties.
The second ground upon which the defendant relies is the failure of the plaintiff to prepare and execute the appropriate documentation expeditiously as stipulated in the letter of 18 August 2000.
That condition was also vital to the company because of the parlous financial situation of Freedom Foods.
The evidence before me is that if Freedom Foods does not receive a substantial injection of capital funds almost immediately, the probability is that it will be placed in receivership. In that regard, see Exhibit D to the affidavit of John Francis Cann sworn 8 December 2000, which is the Freedom Food Report dated 3 August 2000 prepared by the Charles Consultancy Group.
If the sale of shares to Beckhampton proceeds, Beckhampton is to immediately inject substantial working capital into Freedom Foods to protect its investment and to protect the employees, creditors and customers of Freedom Foods.
Unless the sale of the shares to Beckhampton goes ahead, there will be insufficient funds available to pay the dozen or so employees of Freedom Foods over the Christmas period and, in fact, Freedom Foods will in all probability become insolvent before Christmas.
Having considered the material placed before me by the parties in this matter, I am of the view that it is strongly arguable that there was no concluded agreement between the parties at the time the defendant agreed to sell its shares in Freedom Foods to Beckhampton. Nor had the plaintiff complied with the condition attached to its offer by the defendant, namely, that the documentation in relation to any sale of the shares to the plaintiff be prepared and executed expeditiously.
In that situation, the application for a continuation of the injunctive relief granted by me on 6 December 2000 is refused.
If it subsequently transpires that my conclusion in this matter is erroneous, I consider that any loss suffered by the plaintiff as a consequence could be adequately compensated for by an appropriate award of damages.
The plaintiff's summons filed in the court on 7 December 2000 is dismissed with costs to be taxed, including reserved costs, and paid by the plaintiff.
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