Cape, W.T. v Redarb Pty Limited

[1993] FCA 36

IN THE FEDERAL COURT OF AUSTRALIA )

No. ACT G34 of 1992

AUSTRALIAN CAPITAL TERRITORY	1
DISTRICT REGISTRY	1
GENERNL DIVISION	1

ON APPEAL FROM THE SUPREME COURT OF THE
AUSTRALIAN CAPITAL TERRITORY

(No. SC34 of 1990)

BETWEEN :	WILLIAM TIMOTHY CAPE
Appellant
AND :	REDARB PTY LIMITED
First Respondent
ROBERT JOHN YEOMANS Second Respondent

CORAM:	WILCOX, EINPELD & WHITLAM JJ
PLACE :	SYDNEY
DATE :	10 FEBRUARY 1993

16 FEB 1993

FEDERAL COUR I .

EXTEMPORE REZSONS FOR JUDGMENT	AUSTRALIA PRINCIPAL
REGISl RV

appeal cannor succeed. We chink iz will be no ~njuscice to

THE COURT: The issues raised by thls appeal are important to

the parties but they turn entirely upon the fac~s of the particular case. The critlcal facts are well-knohn to the parties and their legal advlsers and were referred to during submissions by counsel for the appellant. Under these circumstances we see no advan~age in a lezgthy judgmen~

reclting the fects. We have reached the clear n e w chat the

L.

anybody for us to express our reasons in summary form.

The learned trlal judge held that the persons acting on behalf of the receiver, Mr Yeomans, were at fault in accepting Mr Maidment's offer of 12 January 1990 on that day and without revealing its existence and terms to Mr Cape. Mr Yeoman's solicitor, Mr Chamberlain, had given an undertaking to Mr Crossin, the solicitor acting for both Mr Cape and !fix

Ransay, not to take any steps that day; the purpose of that undertaking being to allow Mr Crossin the opportunity to

.obtain further instructions from Mr Cape.

We have not called upon counsel for the receiver. So we have not had the advancage of hearlng whatever might be put in defence of the course taken by those ac~ing on hls behalf. Mr Neil QC, senior counsel for Mr Cape, has addressed us on the basis of the trial judge's finding of fault, as he was of course entitled to do. We approach the matter on that same basis, assuming without deciding for ourselves that the course taken on behalf of Mr Yeomans involved a breach of his

and manager, Redarb Pty Limlted.	fiduciary duty towards the company of which he was receiver
On that basis the critical issue in thls appeal is whether the companyrror the appellant as a shareholder of the company, suffered damage as a result of the breach. The company assets with which thls appeal is concerned, the two video shops referred CO in evidence as "Videoville Dickson" and "Videoville Erlndale", xere sold to anocher shareholder, Robert Maidment, for $350,000. The question 1s whether the trial judge ought to have found, on a balance of
probabilities, that, absent the breach of duty manifested by
the sale to Mr Maldrnent on 12 January 1990, there was a real chance that a greater sum would have been obtained.
Although other people had been interested in purchasing the two businesses some months earller, by January
1990 there were only three people who warrant conslderatlon as
'prospective purchasers. Mr Neil did not contend otherwise. The three people were Mr Maidment, Mr Cape and Peter Ramsay, a friend of Mr Cape. The trial judge thought that Mr Ramsay was acting on Mr Cape's behalf.
In October 1989 Mr Cape had made an offer EO purchase all the v~deo shops for $325,000. That offer was nor accepted; no one now suggests it should have been. Between October and 12 January he made no further offer, although it must immediately be acknowledged that, on 20 December, he
make good any difference between the sale prlce of the tiqo offered an undertaking to Kelly J, in the Supreme Court, to shops and $350,000. The effect, of course, was to puc In
place what Mr Nell descr~bed as a "floor prlce" of $350,000.

On 29 December 1989 Ramsay made an offer to

purchase the two shops for $425,000. At first blush thls appears a much superlor offer. Buc zhe offer included suppiy of a large quantity of videorapes and two other, less

valuable, outlets. It is difficult to determine what proportion of the $425,000 is properly ascribable to Dickson and Erindale. But an apportlonmenr. of a matching offer by >P Maidment, made on 5 January, which was undertaken by the latter's solicitors attributed only $290,000 to these two businesses.

More importantly, the Ramsay offer included a number
of conditions which it was not in the power of the receiver to
fulfil. We refer particularly to conditions regarding the
grant of new leases of the shops, a licence to use the name
"Vldeoville" and a restraint of trade covenant by Mr Haidlent.

Thls situation was polnted out to Mr Ramsay in a letter dated

9 January from Mr Yeomans' firm. The letter invlted a fresh

offer, on the basis of stipulated conditions which were possible for the recelver to accept. It is not suggested that this letter was insincere or couched in unreasonable terms.

Mr Ramsay contacted Alsai Pty Ltd concerning the use of the name. But he did noc make a new offer. If he had	learned immediately of the sale to Mr Maidment on 12 January,
this omission might not be considered particularly slgniflcant. It could be sald that he did not have much opportunity to reconsider the situation, although it must be added that the receivers had emphasised lts urgency. Eowever, surprisingly, FIr Ramsay apparently dld not become aware of the sale for some tune. On 30 January he wrote to tne recelver enquirlng the position and was told that the businesses were sold.
Under cross-examination Mr Ramsay admitted that, in the four weeks which elapsed between the invitatron to him to make a new offer and the letter informing h ~ m that the businesses were sold, he took no steps to put himself in a position to make a new offer. He received a letter from Alsar requesting information. He thought the request unreasonable, in relation to the nature and extent of some of the informatron sought. But he took no steps to resolve the position with Alsai.
Although Mr Ramsay gave evidence at the trial on behalf of the appellant he did not claim that, in the absence of the sale to M r Maidment, he would have put a new offer. In the whole of the circumstances, it is difficult to see b f r Ramsay as a serious bidder on 12 January.
So far as M r Cape is concerned, he had made no offer since October. Mr Cape was clearly interested ln forcrng
Maidment to increase h ~ s offer for the businesses. He apparently believed that the businesses had a speclal value to Mr I.lardment, who was much more knowledgeable about video shops than himself. He had been to Court more than once to frustrate the sale of assets to XI Maidmenc ac f~qures which he thoughc insufficient. But he seems not heve been ~ncerested in making his ohn bid. it is understandable why chls was so. In the absence of a restraint of trade covenaEt by Mr Maidment, which the receiver had no power to require, Mr Cape would be entering the video market in competition wlth an experienced and successful operator, Mr Maidment. It 1s understandable that he might have thought that his interests would be best served by allowlng Mr Maidment to have the businesses but at the maximum price.
In relation to Mr Maldment, it is posslble that he would have bid more than $350,000, if forced to do so. :Ve
.	accept that he was anxious to procure the buslnesses. It is
perhaps accurate to say that they had a special value to hlm. But there was no need for him to pay more than was necessary to beat the best offer of another bldder. This is not a case where the vendor mighc declde not to sell; the businesses had to be sold. It seems to us that it is irrelevant whecher F ! Maidment would have paid more if pressed. In the absence of some evidence suggesting that he would have been pressed,
$350,000 would have been enough to obtain the buslnesses.
We think that some insight Into the poslclon is furnished by Mr Cape's immediate reaction to news of the sale to Mr Maidment. He returned to the Supreme Court and
complained, unsuccessfully, that the recelver had acted fraudulenizly. But he made no claim that eicher he or !/S Rzmsay had been deprls7ed of the cpporcunlty of bldding more than $350,000. He made no offer to pay more than thaiz amounc. NeF.cher did hls filea Poincs of Clalm, prepared a few days lzter, concaln any such assertion. When the inacter cane tc
trial, Mr Cape swore an affidavit and was cross-examined. But neither his affidavit nor his oral evidence contained any claim that he had been interested in bldding more than $350,000 for the two businesses.
It should be borne in mind that the trial judge heard this case over many days. ~ l l the principal protagonists gave lengthy evidence. The trial judge had an opportunity of assessing then personalities and sincerity that is denied to us. In his reasons for judgment the trial judge said:

"It seems to me therefore that a seller properly advised as at 12 January 1990 would have expected to attract offers between $290,000.00 and $360,000.00. However, it would have been apparent that the only real buyer was Maidment . Maidment , as an unrestrained competitor had he purchased a rival chain, would be a formidable dlsincentlve to any other buyer, even Cape. Maidment could be confident of the Videoville name being available to him. He was most likely to be aware of the real potential of the businesses.

He would, obviously, only offer enough to top	the market. He could have bought the Hollywood
Boulevard chain so that he had no reason to be extravagant.
I am persuaded that, even if Cape had not been
lulled into quiescence, no better price would have been obtained than the receiver obtained. The evidence does not lead to any conclusion that, even li the sale had been postponed unzil
conditions improved, a net hlgher price in real
terms, after coszs of receivership, would have been obtained."

For this agpeal CO be upheld those findinc~s would have to be disturbed. Although l k Neil has taken us carefully through the evidence bearing upon the matter, we find ourselves unpersuaded that his Honour erred in his conclusion. The appeal should be dismissed with costs.

I certify that this and the preceding seven (7) pages
are a true copy of the Reasons for Judgment

of the Court.

Associate: ?i4A Dated: 10 February 1993

APPEARANCES

Counsel for the Applicant:	M Neil QC and Tim Johnstone
Solicitors for the Applicant:	Crossin Barker Gosling
Counsel for the Respondent:	P M Biscoe QC and W B Lofcus

Solicitors for the Respondent: Gallens Crowley and

Chamberlain

Dates of hearing:  9 and 10 February 1993