Crawfords Leisure Group Pty Ltd v Sovereign Hotel Group Pty Ltd
[2012] VCC 47
•1 March 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST – GENERAL DIVISION
Case No. CI-11-01553
| CRAWFORDS LEISURE GROUP PTY LTD | Plaintiff |
| v | |
| SOVEREIGN HOTEL GROUP PTY LTD | Defendant |
---
JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 & 28 February 2012 | |
DATE OF JUDGMENT: | 1 March 2012 | |
CASE MAY BE CITED AS: | Crawfords Leisure Group Pty Ltd v Sovereign Hotel Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 47 | |
REASONS FOR JUDGMENT
---
Catchwords: Contract – Agreement for purchase of shares in company owning gaming venues – Need for approvals to be obtained from Victorian Commission for Gambling Regulations – Funds provided by an applicant for shares were to be regarded as an unsecured loan until approvals obtained – Implied duty upon applicant to provide necessary information for submission to the Commission – Approvals not obtained from Commission – Whether applicant for shares entitled to repayment of monies.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Hyde | Kliger Partners |
| For the Defendant | Mr B. Murphy | Rockwell Bates |
HIS HONOUR:
1 The defendant, Sovereign Hotel Group Pty Ltd (Sovereign) is a company with investments in gaming venues. From February 2008 to March 2010, Mr Mark Lo Guidice was a director of Sovereign. Mr Lo Guidice is the sole director and shareholder of the plaintiff, Crawfords Leisure Group Pty Ltd (Crawfords). In late 2008, Sovereign was in need of capital. Each of the directors undertook the task of seeking out new investors. Sovereign, as an investor in gaming venues, was subject to oversight by the Victorian Commission for Gambling Regulations under the Gambling Regulation Act 2003.
2 Mr Lo Guidice discussed the investment possibility with Mr Chris Judd, whom he knew because of Mr Lo Guidice’s association with the Carlton Football Club. Mr Judd, because of his public profile, was reluctant to have public disclosure of any investment in Sovereign. Provided the investment remained confidential, Mr Judd was apparently prepared to invest the sum of $500,000. Mr Lo Guidice and Mr Mario Scerri, another director of Sovereign (and at that time its Chief Executive Officer), discussed the matter with Sovereign’s solicitor, Ms Elizabeth Priddle, of Bazzani Scully Brand Lawyers. Ms Priddle advised that it would be difficult to guarantee that any investment by Mr Judd would be able to remain confidential. Both then and later, Ms Priddle investigated various options for structuring the investment to avoid disclosure.
3 On 30 January 2009, Crawfords and Sovereign executed a document headed “Share Application Agreement” and Crawfords provided the sum of $500,000 to Sovereign. The document was signed by Mr Lo Guidice on behalf of Crawfords and by Mr Scerri on behalf of Sovereign. Both parties understood that the $500,000 had been provided by Mr Judd and was being invested through Crawfords.
4 The Agreement provided that:
a.It was necessary for the “source of [Crawfords’] funds … and all other necessary or appropriate governmental approvals and consents” as required by the Victorian Commission for Gambling Regulations or the Gambling Regulation Act 2003 (referred to in the Agreement as “the Approvals”), to be obtained be Sovereign.
b.The application for shares was made by Crawfords “in contemplation of securing the Approvals and thereby having the shares issued to it”.
c.“Unless and until” the Approvals and consents were obtained, the $500,000 provided was to be “recorded and treated” by Sovereign as “an unsecured non interest-bearing loan in favour of [Sovereign] repayable upon ninety days’ written notice by the applicant”.
d.“The unsecured loan may be used for any purpose that [Sovereign] determines in its sole discretion from time to time”.
e.“The unsecured loan shall be repaid in full by [Sovereign] within twelve months of the date of this Agreement”.
f.When the approvals had been obtained, and Crawfords had provided other specified documents, Sovereign was to issue 333,333 shares in Sovereign to Crawfords.
5 The approvals and consents of the Commission were not obtained. No application was in fact ever submitted, as Mr Judd’s requirement of confidentiality could not be guaranteed. On 17 December 2010, Crawfords wrote to Sovereign seeking repayment of the $500,000. Sovereign refused to repay the money. On 4 April 2011, the Writ was issued. On 25 November 2011, Sovereign issued and later served upon it a Share Certificate for 333,333 shares in Crawfords’ name.
6 The defences relied upon Sovereign are:
a.Crawfords had breached a term to be implied by law into the Agreement to “render all reasonably necessary assistance including the provision of relevant and necessary information” to Sovereign in order to secure the approvals, by Crawfords “failing to provide information and details requested by the defendant, the defendant’s solicitors and the Commission in relation to the plaintiff’s source of funds”.
b.The parties varied the Agreement to extend “any previously agreed period for repayment [of the $500,000] for the period necessary to give effect to the parties’ desire that the Commission’s approval be obtained”.
c.The plaintiff had “waived its rights to insist on strict compliance with any obligation on the part of the defendant … to repay the unsecured loan to it”.
d.The issue of the Share Certificate on 25 November 2011 had the effect of repaying in full the unsecured loan and discharging forever and releasing the defendant from any further obligation or liability.
e.The Agreement provided that, “No action shall lie against [Sovereign] its directors, officers, employees and agents in respect of providing [Sovereign] with the funds, the terms of the unsecured loan or the issuing of the shares”.
f.Crawfords should not be permitted to resile from representations it made to Sovereign that:
i.“It would assist [Sovereign] in obtaining the Commission’s approval in so far as that approval was dependant upon information [in] the possession, custody, control or knowledge of the plaintiff”.
ii.“It would not bring any action against [Sovereign] its directors, officers, employees and agents”.
Witnesses
7 Three witnesses gave evidence at the hearing, Mr Mark Lo Guidice on behalf of the plaintiff, and Mr Mario Scerri and Ms Elizabeth Priddle on behalf of the defendant. Each witness had very limited recollection of events apart from what was recorded in the contemporaneous documents. These were primarily the file notes and correspondence of Ms Priddle.
Background facts
8 On 6 August 2008, Ms Priddle saw Mr Lo Guidice in conference. He raised with Ms Priddle a general query in relation to footballers investing in Sovereign and whether they would be listed on the Commission’s public website.
9 On 8 August 2008, Ms Priddle’s file note of a conversation with Mr Lo Guidice recorded, “Footballers – not on website if less than 5%. Not through Crawfords. Loan of money only?”
10 On 11 November 2008, Ms Priddle spoke again by telephone with Mr Lo Guidice. She recorded, “Another scenario. Chris Judd. $500,000 to Crawfords Leisure Group … Not put Judd on public record”.
11 On 12 November 2008, Ms Priddle saw Mr Lo Guidice and Mr Scerri. She recorded, “Bare trust to Crawfords. Invest first in Sovereign Capital. Email Co. name of Judd. Need to prove source of funds”.
12 On 19 November 2008, Ms Priddle wrote to Sovereign and Mr Scerri with the letter copied to Mr Lo Guidice. It referred to “telephone discussions with Mario Scerri and Mark Lo Guidice in relation to proposed new investors” in Sovereign and noted as an “issue”, “certain investors who do not wish their investments in Sovereign to be on the public record”. Ms Priddle suggested that, “we should write to the Commission and indicate that there are some investors wishing to purchase shares in Sovereign on the above basis, that is those shares are to be held by a bare trustee, and that the investment is to be made on a confidential basis”. The letter also noted, “In relation to new investors who have currently advanced funds to a Sovereign entity without having obtained approval from the Commission as associates of Sovereign and without that investment being notified to the Commission … we confirm we had discussions with Mario Scerri and John Nicholson that any investments would be made to Sovereign Capital Pty Ltd and would be treated as loans to Sovereign which would later be converted to shares once approval was obtained to the relevant shareholder who had made the investment in Sovereign Capital Pty Ltd. Please confirm that these arrangements are still applicable”.
13 On 19 November 2008, Mr Lo Guidice sent an email to Ms Priddle, which in material parts read, “As discussed last Friday we need to prepare a Trust Deed. CLG will acquire an additional 333,333 for an amount of $500,000. Crawfords Leisure Group P/L, Level 10, 256 Queen Street, Melbourne will hold 333,333 Sovereign Hotel Group P/L shares on behalf of Three Zebras Pty Ltd ACN 102463221, 29 Hinton Lane, Prahran”.
14 On 24 November 2008, Ms Priddle recorded a telephone call with Mr Lo Guidice as follows, “Returned call. Prepare bare trust. Prepare letter to VCGR. Wants to get money across to SHG. Should be done as a loan arrangement until approval obtained and/or VCGR confirm will not be an issue. Can be returned if investment does not proceed”.
15 On 2 December 2008, Ms Priddle wrote to the Victorian Commission for Gambling Regulations enquiring whether in the circumstances set out in the letter, the Commission would permit investments in Sovereign by “investors wishing to invest in a confidential manner”. On 5 December 2008, the Commission responded, making it clear that, “The Commission will require details of the source of funds provided by each investor” and noting that, “The general rule is that those shareholders with 10% or more of ordinary or preference shares are required to lodge associate forms”, those with less than 10% are dealt with “on a case by case basis” and “all approved associates names are included on the Commission’s website”.
16 It was agreed by the parties that Crawfords held more than ten per cent of the shares in Sovereign. Crawfords would therefore be “required to lodge associate forms” disclosing “persons who, or entities which, have a relevant financial interest or power and can significantly influence the gaming business or hold a relevant position.”
17 On 11 December 2008, Ms Priddle sent a copy of her letter to the Commission dated 2 December, and the Commission’s response, dated 5 December, to Sovereign and to Mr Scerri and Mr Lo Guidice. On 22 December 2008, Ms Priddle had a meeting with Mr Scerri. In her notes, she recorded the following as one of a number of matters discussed: “Investment of Chris Judd. Letter to Mark. Not one hundred per cent guarantee. Not Crawford entity”. Ms Priddle confirmed in a letter sent the following day to Sovereign and to Mr Scerri, “In relation to the proposed ‘confidential’ investors, we confirm we shall forward a letter to Mark Lo Guidice in relation to same”. Ms Priddle said that she did not write to Mr Lo Guidice until 11 February 2009.
18 On 30 January 2009, Crawfords and Sovereign executed the “Share Application Agreement” and Crawfords paid the sum of $500,000 to Sovereign. There was no issue between the parties that this was the money provided to Crawfords by Mr Judd. On 11 February 2009, Ms Priddle wrote to Crawfords and Mr Lo Guidice. She said that the letter was a “standard” letter that she sent to all investors in Sovereign, seeking the information required for submission to the Commission. The letter noted, “Sovereign have advised us that you have completed an application form for further shares in the Sovereign Group”. The letter listed the information Ms Priddle required from Crawfords, including that it “provide evidence as to where your source of funds/money will come from to acquire the shares” and indicating that this information was required for submission to the Commission.
19 On 13 February 2009, Ms Priddle recorded a telephone conversation with Mr Lo Guidice as follows: “Crawfords Leisure Group. Chris Judd. $250,000 borrowed from ANZ. $250,000 from earnings. Tax returns. Write a letter. Held on trust. Evidence of where funds come from … less than 5%. Not to be disclosed usually. VCGR letter”.
20 On 26 March 2009, Ms Priddle wrote to Sovereign, Mr Scerri and Mr Lo Guidice. The letter commenced, “We refer to telephone discussions with Mark Lo Guidice, and confirm his advice that a proposed ‘confidential’ investor to Sovereign Hotel Group Pty Ltd has paid an amount of $500,000 to Crawfords Leisure Group Pty Ltd on the basis that Crawfords Leisure Group Pty Ltd would hold those funds as a bare trustee for the confidential investor”. The letter referred to the earlier enquiry made to the Commission and enclosed a copy of the December 2008 correspondence. The letter noted that if Crawfords were “to act as the bare trustee for the confidential investor” this would be likely to lead to listing of the investor on the Commission’s website. The letter continued, “It would be preferable if the bare trustee was an entity or individual unrelated to any currently approved associates of Sovereign Hotel Group Pty Ltd. Even in this event, we cannot totally guarantee the new investor’s details will not be disclosed. If it is not possible to appoint a trustee that is not associated with an approved associate of Sovereign Hotel Group Pty Ltd, ie, not at Crawfords Leisure Group Pty Ltd, we can proceed on that basis with the request that the new investor’s details not be disclosed”. The letter asked the addressees to advise, “if you wish to proceed with the above”.
21 In September 2009, Ms Priddle had a further exchange of correspondence with the Commission concerning investors in Sovereign and the disclosure requirements. On 9 October 2009, Ms Priddle again wrote to Crawfords and Mr Lo Guidice noting, “We have yet to receive a response to our letter dated 11 February 2009”. The letter referred to the exchange of correspondence with the Commission in September 2009 and enclosed a copy of the letter from the Commission dated 16 September. The letter continued, “You will note that the Commission still requires details of the name of the shareholder, the number of shares purchased, the overall percentage of shareholding in Sovereign Hotel Group Pty Ltd as well as a general comment on the source of funds being utilised to purchase the shares (eg. bank finance, personal funds etc). Please provide the above information in relation to the application for 333,333 shares in the amount of $500,000 as referred to in our letter dated 11 February 2009. We also had previous correspondence with your office as to shareholdings in Sovereign Hotel Group Pty Ltd which would be held beneficially on behalf of the parties. Please advise if this further allotment of shares is to be held in such manner, and the entities that will hold the beneficial interest of those shares”.
22 On 8 December 2009, Ms Priddle recorded a telephone conversation with Mr Lo Guidice which contains the following note: “333,333 shares to Crawfords for $500,000. Never got a response from him.” During her evidence, Ms Priddle was asked about this note and she said, she was referring to the “need to advise the Commission and give general comment regarding the consideration”.
23 On 11 December 2009, the Chief Financial Officer of Sovereign, Mr Bruce Whittaker sent an email to Mr Lo Guidice stating in part: “I need written confirmation of the entity that the $500K was invested by and whether it is held in trust and if so, the details. I also need confirmation of the source of funds. Notification to VCGR is pending waiting on this information”.
24 On 21 December 2009, Mr Whittaker sent another email stating, “I was wondering how you were going with the information on the $500K investment”. Further emailed queries were sent by Mr Whittaker and Mr Scerri to Mr Lo Guidice on 13 January 2010. Mr Lo Guidice responded to Mr Scerri on 14 January 2010 in relation to an unrelated matter, then noted, “In relation to the other $500,000 investment, we will work through that as a separate matter”.
25 On 12 March 2010, Mr Lo Guidice resigned as the director of Sovereign. On 17 December 2010, Mr Lo Guidice wrote to Mr Scerri and Sovereign requesting that “the $500,000 loan be refunded in full immediately in accordance with the terms and conditions of the Agreement”.
26 On 22 December 2010, Mr Scerri responded in part as follows: “As you would be aware, this investment is made on behalf of Chris Judd and your intention was to hold this investment on his behalf in Crawfords Leisure Group. On several occasions Elizabeth Priddle has confirmed and requested information from you on source of funds, etc. To date this information has not been received (a copy of all correspondence can be forwarded to you on request). Once we received the necessary documents to obtain approvals, the twelve month time frame will commence.”
27 Mr Judd did not give evidence. Mr Lo Guidice said that he was in regular contact with Mr Judd and had reported to him about what had happened with his money. On 10 February 2009, Mr Craig Leetham, the Chief Financial Officer of Crawfords, wrote to Mr Judd and Three Zebras Pty Ltd. His letter read in part: “Please note that an application for shares/units in the Sovereign Hotel Group (SHG) has been lodged with the Victorian Commission for Gaming Regulations (VCGR). While the application is pending and subject to the standard regulatory reviews, the funds have been held in a fixed interest deposit account”.
28 On 18 January 2010, in response to an email from Mr Judd’s accountant, Mr Leetham wrote, “Following from our conversation last week, I hereby confirm for you that Three Zebras Pty Ltd has an indirect interest in the Sovereign Hotel Group (SHG) via the Crawfords Leisure Group. The interest in SHG totals $500,000. Attached is a letter showing the earnings on the money whilst it was awaiting approval from the Victorian Commission for Gaming Regulations (VCGR). It is my understanding that Mark Lo Guidice (of Crawfords Group) and Chris are meeting next week to discuss the finer details of the shareholding arrangement”. Mr Lo Guidice was copied in on Mr Leetham’s emails. He could not, however, provide any further explanation during his evidence for Mr Leetham’s statements that the application for shares had been “lodged” with the Commission and was “awaiting approval”.
Analysis of the issues
29 It is appropriate to have regard to the context in which the agreement was reached, or the “surrounding circumstances”, in construing its terms. In my view the most significant factors were:
a.The parties were aware that the $500,000 dollars had been provided to Crawfords by Mr Judd.
b.Mr Judd had indicated that he was only prepared to proceed with the investment in Sovereign if his involvement was not subject to public disclosure by the Commission.
c.Sovereign’s solicitor, Ms Priddle, was investigating options for structuring the investment to ensure, so far as possible, that Mr Judd’s investment remained confidential.
30 The correspondence and Ms Priddle’s file notes make it clear that she, Mr Scerri and Mr Lo Guidice were all aware of these matters. Mr Lo Guidice said in evidence, “The directors [of Sovereign] knew that Chris Judd was providing the money and Elizabeth Priddle knew where the money was coming from”. He agreed that Crawfords had not given Ms Priddle “permission to provide … this information to the Commission until it could be guaranteed one hundred percent that the source of the funds was going to be kept confidential”. He agreed that he did not give Elizabeth Priddle permission to communicate the evidence of the source of funds to ”the Commission … until she could tell us that the source of funds was going to be confidential”. He said he refused to give permission but “everyone was fully aware of the source of funds … because it couldn’t be kept confidential, no guarantee were given that it could be kept confidential”.
31 Ms Priddle said that during 2009 she had a number of conversations with Mr Mario Scerri as to why information about the investment of $500,000 was “not being provided as requested”. She said she “assumed it was the nature of the confidential investment and that the information wasn’t forthcoming because of that issue”. Ms Priddle agreed in her “professional role” she had looked at “several ways that one may overcome that issue within the parameters of the statute or the regulations” but said that in the end, “I wasn’t able to – there wasn’t a way of giving Mr Lo Guidice or the confidential investor a hundred per cent guarantee it would remain confidential”.
32 Mr Scerri said that a number of requests for information had been made of Mr Lo Guidice about the investment. The explanation provided by Crawfords for not providing the source of funds “was always around that confidentiality” [as] “Chris Judd didn’t want his name to appear on a public register, being involvement in a gaming industry company”.
33 The plaintiff’s claim relies upon the provisions of the Share Application Agreement entered into between the parties on 30 January 2009. The Agreement provided that “unless and until” the relevant approvals had been obtained from the Commission, the $500,000 was to be “recorded and treated” by Sovereign as “an unsecured non interest-bearing loan … repayable upon 90 days’ written notice by the applicant”. The financial records of Sovereign show that this was how the $500,000 was treated. The plaintiff relies upon the letter from Mr Lo Guidice to Mr Scerri and Sovereign dated 17 December 2010 requesting that “the $500,000 loan be refunded in full immediately in accordance with the terms and conditions of the Agreement”. The Agreement provided further that “The unsecured loan shall be repaid in full by [Sovereign] within 12 months of the date of this Agreement”. Accordingly, in the absence of the relevant statutory approvals being obtained from the commission, one would have expected the $500,000 to have been repaid by Sovereign to Crawfords on 30 January 2010 or 90 days after the letter dated 17 December 2010.
34 The principal matter relied upon by Sovereign by way of defence was the failure by Crawfords to provide the necessary information regarding the source of the $500,000 to enable the necessary approvals to be sought and obtained from the commission. It was clearly understood by both Crawfords and Sovereign that the approvals process involved the submission of the identity of the investor or the person beneficially entitled to the investment and documentary evidence as to the source of the funds.
35 Defendant’s counsel, Mr Murphy, in final submissions said that in fact the Commission had been notified of the proposed investment and the Commission had not sought information concerning the source of funds. There was, however, no evidence of those matters although, at the time the defendant’s solicitors delivered the Share Certificate for 333,333.33 shares in Sovereign to the plaintiff’s solicitors on 9 December 2011, it was stated in the accompanying letter that, “Given a recent issue of shares, the shareholding of your client has fallen below ten per cent, and accordingly, it was not necessary to disclose the Victorian Commission for Gambling Regulations the source of the funds, and as such, the attached Share Certificate could now be issued”. This was, however, long after the issue of proceedings and the demand made by Crawfords for the repayment of the sum of $500,000.
36 Sovereign submitted that the Agreement was subject to a condition to be implied by law that Crawfords would co-operate and provide the necessary assistance so that Sovereign was not prevented from obtaining the benefit of the Agreement. Mr Murphy submitted that the benefit of the Agreement to Sovereign was in obtaining an injection of capital in return for the issue of shares. This was subject to the obtaining of the necessary approvals from the Commission. This could only be done with the co-operation of the plaintiff, both by authorising the disclosure of the identity of the person providing the funds and the documentary evidence required by the Commission as to the source of funds.
37 Crawfords had refused to allow the transaction to be submitted to the Commission if there were any risk of public disclosure of the investment by Mr Judd. Although Crawfords had not supplied documentary evidence relating to the source of funds, it had given details of Mr Judd’s identity and his company, Three Zebras Pty Ltd, and the general source of funds, half by way of bank advance and half from his earnings. It is probable that if Mr Judd’s identity as the investor had been allowed to remain confidential, that the required documentary evidence as to the source of funds, would have been provided by Crawfords for submission by Sovereign to the Commission.
38 I am satisfied in this case that a general obligation to co-operate was to be implied by law into the Agreement. How that obligation was to operate would, however, depend upon the factual context or surrounding circumstances. All of the relevant parties were aware of Mr Judd’s reluctance to have public disclosure of his involvement in the gaming industry and throughout much of 2009 the confidentiality issue remained unresolved despite the efforts of Ms Priddle to attempt to structure the investment in such a way that the identity of the investor would not be disclosed. In these circumstances, I do not consider that there was any obligation upon Crawfords to authorise the disclosure to the Commission of Mr Judd (and his company) as the source of investment funds.
39 Apart from the circumstances in which the $500,000 was paid by Crawfords to Sovereign and the Share Application Agreement was executed by the parties, other provisions of the Agreement support this conclusion:
a.“Unless and until” the necessary approvals had been obtained by Sovereign, the $500,00 was to be “recorded and treated” by Sovereign “as an unsecured non interest-bearing loan”.
b.The Agreement provided two circumstances in which the monies might be repaid, firstly, prior to the necessary approvals having been obtained, “upon 90 days’ written notice by the applicant”, and secondly, if the approvals had not been obtained, at the expiration of 12 months from the date of the Agreement the monies were to be deposited in a bank account nominated by the applicant within 30 days of that period expiring.
d.The $500,000 might be used by Sovereign “for the purposes of working capital or any other purposes as decided by [Sovereign] from time to time”.
40 In these circumstances it can be seen that the Agreement foreshadowed that the funds might be repaid either at the expiry of 12 months from the date of the Agreement or, presumably earlier, if 90 days’ written notice were given by the applicant. In the first case, Sovereign would have a further 30 days to repay the money and in the second case, a further 90 days to make the payment. In the meantime, no interest was payable, the monies were unsecured and the company could use the monies for any purpose it decided.
41 The defence pleaded a variation of the Agreement to extend “any previously agreed period for repayment [of the $500,000] for the period necessary to give effect to the parties desire that the Commission’s approval be obtained”. No submissions were addressed in respect of this matter and there was no evidence of any express variation or circumstances which might have given rise to an implication that the parties had agreed to vary the express terms of the Agreement in the manner alleged.
42 It was submitted that, by entering into the Agreement, Crawfords had represented that it would be bound by the terms of the Agreement including the term implied by law that it would provide the necessary information and evidence of the source of funds. Crawfords’ failure to provide that information constituted a waiver of its rights to insist upon strict compliance with any obligation on the part of Sovereign to repay the unsecured loan or, alternatively, gave rise to an estoppel which should prevent Crawfords from resiling from its obligation to assist Sovereign in obtaining the Commission’s approval, insofar as that approval was dependant upon information in the possession, custody, control or knowledge of the plaintiff.
43 I consider that these defences should also fail for the reasons I have earlier stated. The evidence is that Sovereign was well aware of Mr Judd’s requirement of confidentiality in relation to the investment and that, until Crawfords could be satisfied that Mr Judd’s identity would not be disclosed as a result of the approvals process, the information about the source of funds was not to be submitted to the Commission. Throughout 2009, all the relevant parties, including Sovereign’s solicitor Ms Priddle, operated on the basis that the application to the Commission could not proceed until a structure could be devised which would result in Mr Judd’s identity being kept confidential.
44 The defence also relied upon a provision in the Agreement whereby Crawfords acknowledged “that no action shall lie against [Sovereign], its directors, officers, employees and agents in respect of providing [Sovereign] with the funds, the terms of the unsecured loan or the issuing of the shares”. This matter was only referred to in passing in Mr Murphy’s final submissions. In my view, where the Agreement specifically provided for Sovereign to repay the unsecured loan, either upon 90 days’ written notice or at the expiration of 12 months after the Agreement was entered into, the relevant clause of the Agreement relied upon by the defendant in its defence could not be interpreted as a general bar on such recovery, if repayment were not made by the defendant.
45 The defence also alleged that the issue of the share certification on 25 November 2011 had the effect of repaying in full the unsecured loan and discharging forever and releasing the defendant from any further obligation or liability. This defence is untenable for the following reasons:
a. the purported issue of shares took place after the issue of proceedings and the plaintiff had an accrued right to have the $500,000 repaid;
b. there was no evidence of submission of information relating to the source of the $500,000 to the Commission, or the obtaining of the approvals required by the Agreement.
Conclusion
46 In the circumstances, I consider that the plaintiff has made out its claim and is entitled to judgment for repayment of the sum of $500,000. I will hear further from the parties as to the form of the judgment and in relation to the ancillary issues of interest and costs.
- - -
Certificate
I certify that these 15 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 1 March 2012.
Dated: 1 March 2012
Caroline Dawes
Associate to His Honour Judge Anderson
0
0
0