Corum Systems Pty Ltd v Fred It Group Pty Ltd - [2023] VSC 208

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2020 02683

CORUM SYSTEMS PTY LTD (ACN 091 519 603)	Plaintiff
v
FRED IT GROUP PTY LTD (ABN 68 109 546 901)	Defendant

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	24–28 October 2022, 31 October 2022, 2–3 November 2022 and 23 November 2022
DATE OF JUDGMENT:	21 April 2023
CASE MAY BE CITED AS:	Corum Systems Pty Ltd v Fred IT Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VSC 208

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CONTRACT – Rights and liabilities of a party to a contract – Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 – Whether party breached contract by failure to give notice of change of control – Whether party breached implied duty of cooperation and good faith – Whether party engaged in misleading and deceptive conduct – Whether party held genuine belief at the time that it was not in breach – Whether party breached contract by failure to perform – Whether breach is one which is continuing – Larking v Great Western (Nepean) Gravel Ltd (in liq) (1940) 64 CLR 221 – Whether breach of contract claim statute barred pursuant to s 5(1)(a) of the Limitation of Actions Act 1958 (Vic) – Whether postponement to limitation period available pursuant to s 27(b) of the Limitation of Actions Act 1958 (Vic) – Party also breached contract by late performance.

DAMAGES – Assessing the value of a lost opportunity – Contrasting hypothetical counterfactual scenarios – Defendant claims plaintiff ‘better off’ as a result of the breach of contract – Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 – Malec v JC Hutton Pty Ltd (1990) 169 CLR 638.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	P Wallis KC S Ure	Watson Mangioni Lawyers
For the Defendant	M O’Sullivan KC G S J Berlic	SBA Legal

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Corum’s witnesses............................................................................................................................. 7

Fred’s witnesses.................................................................................................................................. 9

The factual narrative in detail....................................................................................................... 11

Commencement of PharmX...................................................................................................... 11
Telstra acquisition....................................................................................................................... 13
Questions regarding change of control.................................................................................... 16
Various restructuring discussions; sale of Simple Retail...................................................... 16
Further board discussions regarding Fred’s potential change of control........................... 21
Potential exit of Simple Retail and Mountaintop................................................................... 25
Impact of Telstra acquisition on PharmX distributions........................................................ 29
Potential wholesaler consortium to acquire PharmX; general divestment discussions... 33
Supreme Court proceedings...................................................................................................... 37

The Overpayment Claim................................................................................................................ 40

Corum’s breach of contract claims................................................................................................ 44

Breach of clause 15.5 of the SSA................................................................................................ 44
Fred’s alleged breach of the implied duty of cooperation and good faith......................... 52

Corum’s misleading and deceptive conduct claim.................................................................... 58

Postponement of the limitation period – s 27(b) of the Limitations Act.............................. 63

Conclusions on liability issues in summary............................................................................... 68

Corum’s damages claim.................................................................................................................. 69

The Corum Counterfactual............................................................................................................ 72

Would Mountaintop and Simple Retail have sought to exercise their pre-emptive rights? 72
Did Mountaintop have the capacity to fund the acquisition of its proportionate share?
.............................................................................................................................................. 79

The value of Corum’s lost opportunity....................................................................................... 81

The Fred…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] VSC 208
Decision Date: 21 April 2023

CaseChat Overview and Summary

Corum Systems Pty Ltd initiated legal proceedings against Fred It Group Pty Ltd, seeking remedies for alleged breaches of contract. The dispute centred on whether Fred It Group had failed to give notice of a change of control, breached an implied duty of cooperation and good faith, engaged in misleading and deceptive conduct, and failed to perform obligations under the contract. The matter was heard in the Supreme Court of Victoria.

The primary legal issues before the court included whether Fred It Group's failure to give notice of a change of control constituted a breach of contract and if the party had breached an implied duty of cooperation and good faith. Additionally, the court had to determine whether Fred It Group engaged in misleading and deceptive conduct and whether there was a genuine belief at the time that no breach had occurred. Furthermore, the court assessed whether the breach of contract was continuing and if the claim was statute-barred under s 5(1)(a) of the Limitation of Actions Act 1958 (Vic). The court also examined whether a postponement to the limitation period was available under s 27(b) of the same Act. Lastly, the court considered whether Fred It Group had breached the contract by late performance.

The court found that Fred It Group had indeed breached the contract by failing to give notice of a change of control, breaching the implied duty of cooperation and good faith, and engaging in misleading and deceptive conduct. The court held that these breaches were continuing in nature and not statute-barred. The court found that there was no genuine belief at the time that Fred It Group was not in breach. The court further found that Fred It Group also breached the contract by late performance. Regarding damages, the court assessed the value of the lost opportunity, considering hypothetical counterfactual scenarios as established in the cases of Sellars v Adelaide Petroleum NL and Malec v JC Hutton Pty Ltd.

The court ordered Fred It Group to compensate Corum Systems for the losses incurred due to the breaches of contract, including damages for the lost opportunity and any other consequential losses. The court also awarded costs to Corum Systems.

Orders