Cig (WA) Pty Ltd v Blondie Capo Pty Ltd - [2021] WASC 12

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CIG (WA) PTY LTD -v- BLONDIE CAPO PTY LTD [2021] WASC 12
CORAM:   MASTER SANDERSON
HEARD:   23 NOVEMBER 2020
DELIVERED          :   19 JANUARY 2021
PUBLISHED           :   19 JANUARY 2021
FILE NO/S:   CIV 1867 of 2020
BETWEEN:   CIG (WA) PTY LTD
Plaintiff

AND

BLONDIE CAPO PTY LTD
First Defendant

MARK ROWSTHORN
Second Defendant

Catchwords:

Summary judgment - Evidence to be put before court - Whether application ought be pursued in light of the evidence

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed

Category: A

Representation:

Counsel:

Plaintiff	:	C Chenu
First Defendant	:	P Edgar
Second Defendant	:	P Edgar

Solicitors:

Plaintiff	:	Annabelle Hughes Barrister & Solicitor
First Defendant	:	Arnold Bloch Leibler
Second Defendant	:	Arnold Bloch Leibler

Case(s) referred to in decision(s):

MASTER SANDERSON:

This is the plaintiff's application for summary judgment. I have concluded summary judgment ought not be granted and generally speaking, I would do no more than give brief reasons for coming to that conclusion. But this case illustrates procedural difficulties which frequently arise in summary judgment applications and which warrant comment. Further, there is an issue of law which was raised in the course of argument which, while unresolved, is a matter which requires highlighting.
As counsel for the plaintiff said during the course of his submissions, the claim is very simple. It can be outlined by reference to the statement of claim which was indorsed on the writ of summons filed 18 August 2020. By a written share sale agreement made on or about 29 August 2020, the plaintiff, the first defendant and the second defendant agreed the plaintiff would sell to the first defendant 239 fully paid ordinary shares in the issued capital of Blondie Trading. The second defendant agreed to guarantee the obligations of the first defendant. He also provided certain other undertakings to the plaintiff.[1] Under the agreement there was, what is defined as a 'deferred payment' of $1,800,000.[2] The deferred payment was to be paid by the first defendant to the plaintiff on 31 July 2020.[3] Despite demand the payment was not made.[4] The plaintiff sues for the amount of the deferred payment and, in the alternative, seeks payment by the second defendant under the guarantee.
[1] Writ of Summons – Statement of Claim filed 18 August 2020 [5].
[2] Writ of Summons – Statement of Claim filed 18 August 2020 [6.1.4], [8].
[3] Writ of Summons – Statement of Claim filed 18 August 2020 [6.1.5], [8.2].
[4] Writ of Summons – Statement of Claim filed 18 August 2020 [11].
The application was supported by an affidavit of Shaun Phillip Clark sworn 1 October 2020. Mr Clark is the sole director of the plaintiff.[5] He confirms the contents of the statement of claim to be true and correct and states in his affidavit he believes there is no defence to the action.[6] The so‑called technical aspects of O 14 of the Rules of the Supreme Court 1971 (WA) having been satisfied the evidentiary onus shifts to the defendants to show there is an arguable case.
[5] Affidavit of Shaun Phillip Clark sworn 1 October 2020 [1].
[6] Affidavit of Shaun Phillip Clark sworn 1 October 2020 [12].
In answer to the plaintiff's claim, the defendants filed an affidavit of the second defendant sworn 27 October 2020. In pars 1 through to 22 of his affidavit, Mr Rowsthorn sets out the background to the parties entering into the share sale agreement. Nothing in those paragraphs is controversial. Mr Rowsthorn then refers to certain clauses in the share sale agreement, in particular cl 6.1 and cl 6.2 dealing with the seller's warranties, cl 6.3 which the seller acknowledges the buyer has entered into the agreement in reliance on the warranties and cl 8 which is a 'no known claims' clause. Mr Rowsthorn then sets out a series of allegations about Mr Clark's conduct which, he says, gives rise to a claim by the first defendant against Mr Clark. To indicate the nature of these claims it is enough if I quote paragraphs which appear under the heading '31 May 2018 correspondence':
33.On 31 May 2018 at 4:07pm Mr Clark sent an email to Lee Stephens, General Manager of Saracen Metals Pty Limited (Saracen), attaching a copy of SMS Rental's assets cost build up rate card in relation to 785C, D10T and 777F machines, being machines regularly hired by Saracen by SMS Rental. Attached hereto and marked with the letters 'MR-13' is a copy of this email and its attachment.
34.I am informed by Tony Monaghan, Chief Executive Officer of SMS Mining Services (Mr Monaghan), and believe that:
(a)at the time Mr Clark engaged in this email correspondence:
i.SMS Rental and Saracen were parties to a Rental and Maintenance Contract, pursuant to which Saracen was granted an option to purchase certain equipment from SMS Rental; and
ii.SMS Rental was continuing to hire several machines to Saracen;
(b)by providing Saracen with detailed knowledge of SMS Rental's pricing structure in the assets costs build up rate card, Mr Clark:
i.disclosed, without authorisation, valuable intellectual property belonging to SMS Rental (and to the wider Rivet Group);
ii.acted contrary to SMS Rental's commercial interests;
iii.enabled Saracen to calculate the margin charge‑out rates under the Rental and Maintenance Contract then on foot between the parties, and the margin charge‑out rates to be applied under any future tendered contracts; and
iv.impacted the Rivet Group's ability to re‑tender for the renewal of its Rental and Maintenance contract with Saracen in 2019-2020 at the margin charge‑out rates it had traditionally applied in its dealings with Saracen.
Mr Rowsthorn details four instances relating to correspondence which he says amount to Mr Clark breaching his confidentiality obligations to the plaintiff. The last tranche of correspondence dates from 6 February 2019. In par 32, Mr Rowsthorn says he became aware of this correspondence 'in around December 2019'. It was shown to him by a Mr Sweeney. There would also seem to have been some involvement of a Mr Tony Monaghan in bringing the correspondence to the attention of Mr Rowsthorn. It is not entirely clear from the affidavit how these two men – Mr Sweeney and Mr Monaghan – interacted with Mr Rowsthorn. What is important is that the information was provided to Mr Rowsthorn in December 2019.
Subsequent to the filing of Mr Rowsthorn's affidavit, Mr Clark filed a further affidavit sworn 30 October 2020. Attached to that affidavit is a series of emails passing between Mr Clark and Mr Rowsthorn. The email exchange begins on 14 July 2020 (attachment SPC4). Mr Clark refers to the payment due on 31 July 2020 and enquires whether there is any difficulty. The email exchange continues and it is marked by conviviality on both sides. For instance, Mr Rowsthorn sent an email on 20 July 2020 congratulating Mr Clark on the birth of a child. Nowhere in this email exchange is there any reference to the alleged breaches by Mr Clark of the share sale agreement. In fact, the exchange culminates in an email of 30 July 2020 in which Mr Rowsthorn goes to some lengths to explain the financial position of the first defendant and why the payment then due could not be made.
Subsequent to Mr Clark's second affidavit, Mr Rowsthorn swore a further affidavit on 17 November 2020. In that affidavit, as well as raising matters which went beyond what was in his first affidavit, Mr Rowsthorn said:
43.I did not refer to Mr Clark's Unauthorised Email Correspondence in my SSA Email Correspondence with Mr Clark. This is because in December 2019, about four months after entering into the Share Sale Agreement with CIG, Mr Sweeney mentioned to me in general terms some concerns he had about Mr Clark communicating with competitors and that there were some emails to that effect. I did not see or review those emails at that time.
44.At the time that I exchanged the SSA Email Correspondence with Mr Clark, I had not read or reviewed the Unauthorised Email Correspondence or considered its implications. I subsequently obtained copies of and reviewed the Unauthorised Email Correspondence in about August 2020.
The principles applying to applications for summary judgment are well understood. It is reserved for the clearest of cases. It is not, generally speaking, an occasion to resolve disputes of fact. The version of events most favourable to a defendant must be assumed. Looking at the evidence provided by Mr Rowsthorn in his first affidavit, it must be accepted that he has raised a triable issue. Whether the defence would rely upon the Australian Consumer Law or innocent misrepresentation or breach of contract or some other defence is not to the point. Taken in isolation, the evidence raises a serious question to be tried and summary judgment is not appropriate.
In a case such as this, the plaintiff's solicitors find themselves in a difficult position. No doubt when Mr Clark was shown Mr Rowsthorn's affidavit he was amazed. He would have pointed out that if these very serious allegations had any basis in fact, Mr Rowsthorn, in his email exchange, would have referred to them. Mr Clark, not unreasonably, would have suggested to his solicitors Mr Rowsthorn's evidence was concocted and was nothing more than an excuse for a cash poor company not meeting its commitments. Doubtless Mr Clark's views would have been expressed in strong terms.
It is frequently the case in summary judgment applications and in applications to set aside a statutory demand this issue arises. Frustrating though it may be for a plaintiff (or a defendant in a statutory demand case) there really is little point in pressing on to a hearing. True it is that not every statement made in an affidavit must be accepted, no matter how improbable or unlikely the evidence. But once a person commits on affidavit, he or she is entitled to have the sworn testimony accepted. There will be cases when external evidence will establish the deponent is not to be believed on his or her oath. Such cases are rare. As difficult as it may be to accept, there are occasions when pursuing an application simply is not warranted.
On the other hand, a party who is intending to raise serious allegations such as those raised by Mr Rowsthorn really must provide full and complete evidence. It may be in preparing his first affidavit, Mr Rowsthorn overlooked the correspondence passing between him and Mr Clark in July 2020. But whether or not that was overlooked by Mr Rowsthorn, it is a matter which his solicitors should have enquired. In other words, they should have ensured that all of the relevant documentation was available before Mr Rowsthorn swore his affidavit. In saying that, I am not being critical of the defendants' solicitors. There may be good reason why attention was not directed at the email exchange. But on the face of it at least, there seems to have been a serious omission. Furthermore, when programming orders were made in this matter, no leave was given to the defendants to file a second affidavit of Mr Rowsthorn. If the defendants had been refused leave to rely on the second affidavit, the defendants may have found themselves in a very difficult position.
Two points are to be drawn from all of this. First, evidence from a defendant which appears to be in the nature of 'recent invention' but which nonetheless establishes a defence to the claim should lead to serious consideration as to whether or not the claim ought be pursued. Difficult though that decision may be, advice to a client to accept the inevitable and concede the defendants should have leave to defend and move the action on as swiftly as possible may be the best option. The second point is that a defendant needs, in an affidavit in response to an application, to ensure all relevant material is before the court. If that is not done in an answering affidavit, there is a risk of an incomplete evidentiary record being the basis upon which the application is determined.
The matter of law which requires comment arises out of cl 4.5 of the share sale agreement. That clause reads as follows:
4.5Deferred Payment
(a)Subject to clause 4.5(9b), the Buyer must pay the Deferred Payment to the Seller in Immediately Available Funds on the Deferred Payment Date.
(b)The Buyer may set off the amount owing in respect of any Claim against the obligation to pay the Deferred Payment. To the extent that there is a bona fide Claim made by the Buyer on the Deferred Payment Date, which has not been agreed or terminated, the Buyer may defer the payment of an amount of the Deferred Payment if the amount of the Claim is equal to or in excess of the Deferred Payment, until such time as the Claim has been finally agreed or determined.
(c)No later than 2 Business Days after the date the Seller receives the Deferred Payment, the Seller must provide a written confirmation of such receipt to the Buyer.
It was common ground between the parties that as at the date the deferred payment became due, there was in existence no 'claim'. It was the plaintiff's position that meant the first defendant was required to make payment of the $1,800,000 and any claim in relation to breach of confidentiality or any claim the first defendant might have against the plaintiff should be deferred until payment was made. In other words, the plaintiff maintained cl 4.5 was in the nature of a suspension clause. The defendants' answer was to say under the Australian Consumer Law one of the remedies available to the defendants was to have the share sale agreement set aside. If such an order was made, the defendants submitted, the suspension clause would be of no force and effect.
Counsel for the plaintiff, in his oral submissions, conceded the defendants' argument might be correct. In the context of an application for summary judgment he was right to do so. It does seem, however, that the question of the breadth of a suspension clause is yet to be determined. While there is some authority to support the proposition suspension clauses cannot prevent a defence being raised which would have the effect of setting aside an agreement, there is considerable doubt on the issue. It must await determination in the future.
In the circumstances, the application for summary judgment ought be dismissed. The costs of the application, including reserved costs, should be costs in the cause.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
19 JANUARY 2021