Drane v Aqualyng Holdings - [2016] QSC 139

SUPREME COURT OF QUEENSLAND

CITATION:

Drane v Aqualyng Holdings & Anor [2016] QSC 139

PARTIES:

ROBERT MAXWELL DRANE

(plaintiff)

v
AQUALYNG HOLDINGS AS REG NO 991180958

(first defendant)
and

AQUALYNG O&M PTE LTD REG NO 201412200Z

(second defendant)

FILE NO/S:

SC No 282 of 2015

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Cairns

DELIVERED ON:

17 June 2016

DELIVERED AT:

Cairns

HEARING DATES:

5 February 2016, 18 March 2016

JUDGE:

Henry J

ORDERS:

1.   The application filed 8 January 2016 (the summary judgment application) is dismissed.

2.   On the undertaking given by the defendants and Aqualyng Holding Pte Ltd that they will not sell, assign, mortgage, charge, encumber or otherwise deal with the sale shares without the plaintiff’s prior written consent pending the determination of the proceeding, the application filed 28 January 2016 (the application for receiver or injunction) is dismissed.

3.   I will hear the parties as to costs on a date to be fixed by the Registry on request by either party and absent such request costs are reserved.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – SUMMARY JUDGMENT – where parties are in dispute over consideration and security for the sale to the defendants of the plaintiff’s shares in a company – where the plaintiff (as vendor) seeks summary judgment on a discrete component of its broader claim against the defendants relating to the defendant’s liability to pay the final payment in accordance with the share sale agreement – where a dispute arose over whether warranty or indemnity claims had been made pursuant to the share sale agreement – where the defendants assert a counterclaim for damages for breach of warranties and indemnities under the share sale agreement and an entitlement to set-off an amount from the alleged defendant’s liability – whether the defendants’ counterclaim impeaches the plaintiff’s claim – whether the summary judgment should be granted

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – SET-OFF – WHAT MAY BE SET-OFF – EQUITABLE SET-OFF – GENERAL MATTERS – where parties are in dispute over consideration and security for the sale to the defendant of the plaintiff’s shares in a company –where the ultimate quantum of the overall purchase price remains in dispute – where the defendants plead they are entitled to set-off for breach of warranties and indemnities under the share sale agreement an amount for which they counterclaim against the plaintiff’s alleged entitlement – whether the defendants have an equitable ground to be protected from the plaintiff’s claim

EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – RELEVANT CONSIDERATIONS – BALANCE OF CONVENIENCE GENERALLY – where the plaintiff contends that contrary to the mortgage deed there had been an assignment and or dealing in the sale shares by the defendant without prior written consent – where the plaintiff seeks an order restraining the defendants and a third company from selling, assigning, transferring, mortgaging, charging or…

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: [2016] QSC 139
Decision Date: 17 June 2016

CaseChat Overview and Summary

The case of Drane v Aqualyng Holdings involves a dispute over the consideration and security for the sale of shares in Integrated Chemical and Environmental Systems Pty Ltd between the plaintiff, Drane, and the defendants, Aqualyng Holdings and Aqualyng O&M. The plaintiff sought summary judgment on a discrete component of the broader claim against the defendants relating to the final payment under the share sale agreement. The defendants counterclaimed for damages for breach of warranties and indemnities under the share sale agreement and sought to set off the amount claimed against the plaintiff's entitlement. The plaintiff also sought an order restraining the defendants and a third company from selling, assigning, transferring, mortgaging, charging, or otherwise encumbering or dealing with the sale shares. Additionally, the plaintiff sought the appointment of a receiver of the plaintiff's former shares.

The legal issues before the court were whether the defendants' counterclaim impeached the plaintiff's claim, whether the defendants had an equitable ground to be protected from the plaintiff's claim, whether the balance of convenience favoured granting the restraining order, and whether the appointment of a receiver was necessary to protect the plaintiff's secured property. The court considered the terms of the share sale agreement, the obligations of the parties under the agreement, and the circumstances of the case in determining these issues. The court found that the defendants' counterclaim did not impeach the plaintiff's claim, that the defendants had an equitable ground to be protected from the plaintiff's claim, that the balance of convenience did not favour granting the restraining order, and that the appointment of a receiver was not necessary to protect the plaintiff's secured property.

The court dismissed the application for summary judgment and the application for a receiver or injunction. The court reserved costs pending a request by either party. The court's reasoning was based on the terms of the share sale agreement, the obligations of the parties under the agreement, and the circumstances of the case. The court found that the defendants' counterclaim was not a valid defence to the plaintiff's claim, that the defendants had an equitable ground to be protected from the plaintiff's claim, that the balance of convenience did not favour granting the restraining order, and that the appointment of a receiver was not necessary to protect the plaintiff's secured property.

Orders

Orders of the court

1. The application filed 8 January 2016 (the summary judgment application) is dismissed.

2. On the undertaking given by the defendants and Aqualyng Holding Pte Ltd that they will not sell, assign, mortgage, charge, encumber or otherwise deal with the sale shares without the plaintiff’s prior written consent pending the determination of the proceeding, the application filed 28 January 2016 (the application for receiver or injunction) is dismissed.

3. I will hear the parties as to costs on a date to be fixed by the Registry on request by either party and absent such request costs are reserved.

Background

Background to the litigation

Each application falls for separate determination. However some appreciation of the nature of the overall dispute between the parties is required by way of background to both applications.Background The plaintiff owned the entire share capital, comprising three ordinary shares, in a company, Integrated Chemical and Environmental Systems Pty Ltd (“ICES”). ICES carried on businesses involving the design and construction of a variety of industrial water supply systems, provision of operation and maintenance, on and off site technical support, laboratory services for environmental support, temporary plant hire, supply of waste water treatment equipment and supply of chemicals.The agreement The plaintiff agreed to sell two of his shares (“the sale shares”) in a share sale agreement (“the agreement”) executed prior to June 2014.[1] The defendants were together the purchaser under the agreement with the second defendant being the transferee of the shares.[2][1] Affidavit of Robert Drane filed 20 January 2016 ex RMD2.[2] The agreement was with the first defendant described in short form in the agreement as Aqualyng, and second defendant, described in short form in the agreement as Aqualyng O&M. The agreement defined the purchaser as meaning “Aqualyng and any nominee” and nominee as meaning “Aqualyng O&M that is the transferee of the sale shares from the vendor”. The total purchase price for the sale shares under the agreement was the so called “initial purchase price” of $12,197,333, comprising $7,318,400 (60 per cent) in cash and $4,478,933 (40 per cent) worth of shares (“consideration shares”) in the capital of the first defendant, subject to adjustment pursuant to clauses 4.4 and 8 of the agreement.[3] Clause 4.4 dealt with adjustments up or down in the initial purchase price depending on whether the company’s net current assets were higher or lower than $600,000. Clause 8 dealt with reductions of a so called “final payment amount” of $1,097,760 by the amount of any resolved warranty or indemnity claims or unresolved outstanding warranty or indemnity claims by the defendants, giving rise to a so called “adjusted final payment amount”.[3] Agreement clause 4.2 read with clause 1.1. The agreement provided for the initial purchase price to be paid in different components on the completion date and final payment date respectively.[4][4] Agreement clause 4.5.Payment problems On the completion date, being 30 June 2014, the purchaser was required to pay:(a) $6,220,640, being the 60 per cent cash component of the initial purchase price of $7,318,400 less the final payment amount of $1,097,760; and(b) the value of $4,878,933, being 40 per cent of the initial purchase price, through procuring the issue of that value of consideration shares. The plaintiff’s claim against the defendants pleads the defendants have failed to procure the issue of the consideration shares to the plaintiff. It also pleads the defendants failed to prepare the necessary reports about the company’s net current assets required to determine any adjustment to the initial purchase price pursuant to clause 4.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Defence and Counterclaim of the defendants alleges, inter alia, breaches of the plaintiff’s obligation to co-operate in the defendants’ procuring of the various reports required by the agreement and deed and various breaches of warranty by the plaintiff.The summary judgment application The plaintiff makes application for summary judgment in respect of that part of its claim contained within the paragraphs of its pleading relating to the defendants’ liability to pay the final payment amount of $1,097,760 without adjustment on 30 September 2015. It seeks entry of judgment for the plaintiff against the defendants in that amount together with interest, as well as the plaintiff’s costs of and incidental to that part of its claim contained in the aforementioned paragraphs.Clause 8 adjustment It will be recalled the final payment amount of $1,097,760 adjusted for warranty or indemnity claims pursuant to clause 8, was to be paid on the final payment date of 30 September 2015. The plaintiff’s case in respect of this component of its claim is that there were no adjustments for warranty or indemnity claims pursuant to clause 8 and that accordingly the full final payment amount of $1,097,760 should have been paid on 30 September 2015. Clause 8 of the agreement relevantly provides:“8. Final Payment8.1 Payment of Final Payment AmountThe Purchaser must pay to the Vendor the Adjusted Final Payment Amount on the Final Payment Date as it directs.8.2 Determination of Adjusted Final Payment AmountThe Adjusted Final Payment Amount is the Final Payment Amount reduced by:(a) the amount of any Claim made against the Vendor by the Purchaser under the Warranties or the Indemnities in clauses 10, 11, 13 and 14, which on or before the Final Payment Date has been agreed, settled or finalised; and(b) the amount of any outstanding Claims made by the Purchaser against the Vendor under the Warranties or the Indemnities in clauses 10, 11, 13 and 14, which at the Final Payment Date has not been agreed, settled or finalised.8.3 Payment of left over balance of Final Payment AmountIf any balance of the Final Payment Amount remains after the Claim or Claims referred to in clause 8.2(a) or 8.2(b) have been agreed, settled or finalised after the Final Payment Date, that amount will be paid by the Purchaser to the Vendor in cleared funds immediately following such agreement, settlement or finalisation of the relevant Claim.8.4 Other terms(a) The Vendor agrees that it is not entitled to satisfy its obligation to pay any amounts payable by the Vendor to the Purchaser under clause 4.4 (adjustments) out of the Final Payment Amount.(b) Any payment released and paid to the Purchaser under this clause 8 is deemed to be a reduction in the Purchase Price.(c) Interest shall accrue at the rate of 6% calculated daily on the remaining balance of the Final Payment Amount from time to time from the Completion Date to the Final Payment Date and on the Final Completion Date the Purchaser must pay to the Vendor an amount equal to that accrued interest.”

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	Drane v Aqualyng Holdings & Anor [2016] QSC 139
PARTIES:	ROBERT MAXWELL DRANE (plaintiff) v AQUALYNG HOLDINGS AS REG NO 991180958 (first defendant) and AQUALYNG O&M PTE LTD REG NO 201412200Z (second defendant)
FILE NO/S:	SC No 282 of 2015
DIVISION:	Trial Division
PROCEEDING:	Application
ORIGINATING COURT:	Supreme Court at Cairns
DELIVERED ON:	17 June 2016
DELIVERED AT:	Cairns
HEARING DATES:	5 February 2016, 18 March 2016
JUDGE:	Henry J
ORDERS:	1. The application filed 8 January 2016 (the summary judgment application) is dismissed. 2. On the undertaking given by the defendants and Aqualyng Holding Pte Ltd that they will not sell, assign, mortgage, charge, encumber or otherwise deal with the sale shares without the plaintiff’s prior written consent pending the determination of the proceeding, the application filed 28 January 2016 (the application for receiver or injunction) is dismissed. 3. I will hear the parties as to costs on a date to be fixed by the Registry on request by either party and absent such request costs are reserved.
CATCHWORDS:	PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – SUMMARY JUDGMENT – where parties are in dispute over consideration and security for the sale to the defendants of the plaintiff’s shares in a company – where the plaintiff (as vendor) seeks summary judgment on a discrete component of its broader claim against the defendants relating to the defendant’s liability to pay the final payment in accordance with the share sale agreement – where a dispute arose over whether warranty or indemnity claims had been made pursuant to the share sale agreement – where the defendants assert a counterclaim for damages for breach of warranties and indemnities under the share sale agreement and an entitlement to set-off an amount from the alleged defendant’s liability – whether the defendants’ counterclaim impeaches the plaintiff’s claim – whether the summary judgment should be granted PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – SET-OFF – WHAT MAY BE SET-OFF – EQUITABLE SET-OFF – GENERAL MATTERS – where parties are in dispute over consideration and security for the sale to the defendant of the plaintiff’s shares in a company –where the ultimate quantum of the overall purchase price remains in dispute – where the defendants plead they are entitled to set-off for breach of warranties and indemnities under the share sale agreement an amount for which they counterclaim against the plaintiff’s alleged entitlement – whether the defendants have an equitable ground to be protected from the plaintiff’s claim EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – RELEVANT CONSIDERATIONS – BALANCE OF CONVENIENCE GENERALLY – where the plaintiff contends that contrary to the mortgage deed there had been an assignment and or dealing in the sale shares by the defendant without prior written consent – where the plaintiff seeks an order restraining the defendants and a third company from selling, assigning, transferring, mortgaging, charging or…