Campbell v Backoffice Investments Pty Ltd

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HIGH COURT OF AUSTRALIA

FRENCH CJ
GUMMOW, HAYNE, HEYDON AND KIEFEL JJ

DOUGLAS RONALD CAMPBELL AND ANOR  APPELLANTS

AND

BACKOFFICE INVESTMENTS PTY LTD
AND ANOR  RESPONDENTS

Campbell v Backoffice Investments Pty Ltd
[2009] HCA 25
29 July 2009
S435/2008

ORDER

1.        Appeal allowed.

2.        Set aside paragraphs 3 and 4 of the orders of the Court of Appeal of the     Supreme Court of New South Wales made on 19 May 2008.

3.        Respondents' application of 4 February 2009 for leave to further amend     notice of contention refused.

4.        Special leave to cross-appeal refused.

5.        Remit the matter to the Court of Appeal of the Supreme Court of New          South Wales for further hearing and determination in accordance with the       reasons of this Court.

6.        Appellants to file and serve written submissions as to costs within 14 days of the date of this order. Respondents to file and serve written submissions       in reply within 7 days of the service of the Appellants' submissions.

On appeal from the Supreme Court of New South Wales

Representation

A J L Bannon SC with J T G Gibson for the appellants (instructed by Rodd Peters Commercial, Media and European Lawyers)

J T Gleeson SC with T L Wong for the respondents (instructed by Watson Mangioni Solicitors)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

  1. On 24 January 2005, Backoffice Investments Pty Ltd ("Backoffice"), a company controlled by Timothy Weeks, entered into a share sale agreement ("SSA") with Douglas Campbell and his companies, Healthy Water (NSW) Pty Ltd ("Healthy Water") and Sentinel Construction Managers Pty Ltd ("Sentinel"), to purchase, for $850,000, one of the two issued shares in Healthy Water.  Under agreements between the three companies (together referred to as the "service agreements"), the two men were to work as joint managing directors of Healthy Water.  By April 2005, they had fallen out.  Backoffice and Mr Weeks sued Mr Campbell and Sentinel in the Supreme Court of New South Wales.  They alleged oppression.  They sought an order that Mr Campbell buy back the share[1].They also claimed damages for breach of contractual warranty, breach of an implied duty to cooperate, and for misleading or deceptive conduct based, inter alia, on pre-contractual representations[2].  The facts giving rise to the claims and details of the relevant contractual documents are set out in the joint judgment[3].

    [1]Pursuant to the Corporations Act 2001 (Cth), ss 232 and 233. Hereinafter referred to as a "buy-back order".

    [2]In contravention of s 42 of the Fair Trading Act 1987 (NSW).

    [3]Reasons of Gummow, Hayne, Heydon and Kiefel JJ at [76]-[87] and [103]-[130].

  2. The primary judge found for Backoffice and Mr Weeks on the oppression claim and ordered that Mr Campbell repurchase the share in Healthy Water for $853,000[4].  Healthy Water by this time was an empty shell, its assets having been disposed of by a provisional liquidator appointed by the parties.  Her Honour held that the claim for misleading or…

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Details
Case
[2009] HCA 25
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal concerning a dispute arising from the sale of a share in a company, Healthy Water (NSW) Pty Ltd. The parties involved were Mr Douglas Campbell and Sentinel Construction Managers Pty Ltd (appellants), and Mr Timothy Weeks and Backoffice Investments Pty Ltd (respondents). The core of the dispute involved allegations of misleading and deceptive conduct, breach of warranties, and oppression in relation to the sale of a 50% share in Healthy Water from Mr Campbell to Backoffice Investments.

The legal issues before the High Court included whether the vendor's conduct constituted misleading or deceptive conduct under trade practices legislation, specifically in relation to financial information provided before and incorporated into the share sale agreement. The court also had to determine if the purchaser suffered loss or damage as a result of the vendor's conduct, considering principles of causation and reliance, and the effect of a contractual warranty by the purchaser that they had not relied on warranties other than those expressly given in the agreement. Furthermore, the court examined whether the vendor's conduct was oppressive, unfairly prejudicial, or unfairly discriminatory against the purchaser under the Corporations Act 2001 (Cth), and whether an order for the repurchase of shares could be made in circumstances where the company's business had been sold and its shares were worthless. Finally, the court considered whether the vendor had breached warranties contained within the share sale agreement.

The High Court allowed the appeal, setting aside certain orders of the Court of Appeal of the Supreme Court of New South Wales. The court refused the respondents' application for leave to further amend their notice of contention and refused special leave to cross-appeal. The matter was remitted to the Court of Appeal for further hearing and determination in accordance with the High Court's reasons. The court's reasoning, as indicated by the outcome, involved a detailed consideration of the application of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)), the Corporations Act 2001 (Cth), and general contractual principles to the specific facts of the transaction, including the nature of the representations made, the warranties provided, and the overall conduct of the parties.

Orders

Orders of the court

1. Appeal allowed.

2. Set aside paragraphs 3 and 4 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 19 May 2008.

3. Respondents' application of 4 February 2009 for leave to further amend notice of contention refused.

4. Special leave to cross-appeal refused.

5. Remit the matter to the Court of Appeal of the Supreme Court of New South Wales for further hearing and determination in accordance with the reasons of this Court.

6. Appellants to file and serve written submissions as to costs within 14 days of the date of this order. Respondents to file and serve written submissions in reply within 7 days of the service of the Appellants' submissions.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

FRENCH CJ GUMMOW, HAYNE, HEYDON AND KIEFEL JJ
For these reasons I agree that special leave to cross-appeal in relation to the buy-back order should be refused.Conclusion I agree with the orders proposed in the joint judgment. In 1993, Mr Douglas Campbell, the first appellant, established a business that was later conducted by Healthy Water (NSW) Pty Ltd ("Healthy Water"), a company of which Mr Campbell was the sole director and shareholder. By 2004, Healthy Water had an established business supplying and maintaining filtered water systems. Mr Campbell sought to sell part or all of the company or its business. Towards the end of 2004, Mr Timothy Weeks, the second respondent, became interested in the possibility of buying an interest in the company or its business. For a time there was talk of establishing a joint venture between interests associated with each of Mr Campbell and Mr Weeks. The suggestion was that a new company, in which each side would have a 50 per cent interest, would buy Healthy Water's business. This approach was later abandoned in favour of a sale of one of the two issued shares in Healthy Water. In late 2004, Mr Weeks was given documents describing some aspects of the financial affairs of Healthy Water. On 14 December 2004, Mr Weeks offered $850,000 as the price for a 50 per cent share in Healthy Water. During the latter part of December 2004 and the first weeks of January 2005, lawyers for the parties negotiated about both the structure of the transaction and the terms of the agreements that were to be made to effect it. On 24 January 2005, the parties executed four agreements:(a)A share sale agreement between Mr Campbell, a company controlled by Mr Campbell (Sentinel Construction Managers Pty Ltd ("Sentinel") – the second appellant), Healthy Water, and a company Mr Weeks controlled (Backoffice Investments Pty Ltd ("Backoffice") – the first respondent) by which Backoffice agreed to buy one of the two issued shares in Healthy Water for $850,000.(b)A shareholders agreement between Healthy Water, Mr Campbell, Backoffice and Mr Weeks.(c)Two services agreements, one between Healthy Water, Backoffice and Mr Weeks and the other between Healthy Water, Sentinel and Mr Campbell.Sale of the share was completed on the same day. Three aspects of these agreements should be noticed immediately. First, the share sale agreement contained warranties by the vendor, including a warranty that to the best of Mr Campbell's knowledge, all information given by or on behalf of Healthy Water or its advisers to Backoffice or its advisers material to the sale was "substantially accurate and complete and not misleading". Secondly, the services agreements provided, in effect, for Backoffice and Sentinel to make available to Healthy Water the services of Mr Weeks and Mr Campbell respectively as joint managing directors. Thirdly, while the shareholders agreement regulated the rights and obligations of the shareholders, neither that agreement, nor the constitution of Healthy Water, provided any truly effective mechanism for resolving disagreements between the Weeks and the Campbell interests.

Ratio Decidendi

Legal Principle Established

Established by: FRENCH CJ, GUMMOW, HAYNE, HEYDON AND KIEFEL JJ

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