Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd
[2002] VSC 366
•30 August 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2041 of 2001
| ENERKA APEX BELTING PTY. LTD. | Plaintiff |
| (ACN 080 570 574) | |
| v | |
| VICKERS SYSTEMS PTY. LTD. | Defendant |
| (ACN 008 587 040) |
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JUDGE: | HABERSBERGER J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 3-6 and 10 DECEMBER 2001 | |
DATE OF JUDGMENT: | 30 AUGUST 2002 | |
CASE MAY BE CITED AS: | ENERKA APEX BELTING PTY LTD v VICKERS SYSTEMS PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 366 | |
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CONTRACT - Agreement to purchase hose and hydraulics stock – Whether agreement included payment of a premium for goodwill – Question of fact.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A.T. Schlicht | Herbert Geer & Rundle |
| For the Defendant | Mr J.W.S. Peters | Baker & McKenzie |
HIS HONOUR:
The Proceeding
In this proceeding, Enerka Apex Belting Pty. Ltd. (ACN 080 570 574) ("Apex") sued Vickers Systems Pty. Ltd. (ACN 008 587 040), which traded as "Frederick Duffield" ("Duffield"), for $308,831.77, being the balance of the purchase price due under an agreement to purchase a hose and hydraulic business. Although that was how the agreement was pleaded, the evidence led on behalf of Apex never suggested that the whole of that business had been sold. Apex's case was that the agreement eventually reached with Duffield was that Duffield would purchase the hose and hydraulic stock at an agreed price, which consisted of the cost or book value (which in fact was the same) of the stock plus a premium of 25% for goodwill. Duffield's case was that it agreed to purchase the stock at cost but never agreed to pay any amount for goodwill. The amount now in dispute in the proceeding represents the 25% premium plus the goods and services tax ("GST") thereon.
Shortly before the hearing commenced, I granted Duffield leave to file and serve a counterclaim, which alleged that its acceptance of the amount of $1,123,024.62 as the cost of the stock before GST, had been based on the mistaken belief that that amount represented the cost price of the stock, whereas in fact, a higher price than the cost price of the stock had been used by Apex to calculate that amount. However, after considering sample documents recently discovered by Apex as a result of the last minute bringing of the counterclaim, Duffield indicated, on the last day of the hearing, that it was not proceeding with the counterclaim.
The Parties
Apex was a subsidiary of an overseas company, UniPoly-Enerka Holdings BV. Its core business was the manufacture and supply and maintenance of conveyor belts. Duffield and Aeroquip, Asia Pacific ("Aeroquip") were both divisions of the defendant, which had recently been acquired by Eaton Corporation ("Eaton"), which was incorporated in the United States of America. Duffield was a hose and hydraulic fittings manufacturer.
The Factual Background
In the second half of 2000 it was decided by the parent company of Apex to sell its non-core businesses. This included Apex's hose and hydraulic business, which consisted of the sale and servicing of hoses and hydraulic equipment to the mining industry. Most of the business was centred in the North Queensland region which was serviced from the Mackay branch of Apex. Out of total sales of approximately $4.3 million, $3.35 million or 76% were made to six coal mining companies, including Kestrel Coal Pty Ltd ("Kestrel"). The gross profit margin on these sales was approximately 23%. Apex had a written contract for the supply of hose and hydraulic equipment to Kestrel, which was due to expire on 17 June 2001. It was not completely clear whether Apex had a forward purchasing agreement ("FPA") with any of the other coal mining companies, although Mr Graham Lenz, the Queensland Regional Manager of Apex, said in evidence that he believed Apex had a short term (two to three month) contract with BHP Coal Pty Ltd and an ongoing but expired FPA with the Thiess Namoi Joint Venture at the Alliance Colliery.
Pursuant to the instruction of Apex's parent company, Lenz contacted a number of companies in about September or October 2000 asking whether they would be interested in acquiring the hose and hydraulic business of Apex. In particular, he spoke to Mr Robert McLean of Duffield. Lenz said that Duffield was Apex's preferred purchaser of the business as it was not a competitor with the core business of Apex. On 13 November 2000, McLean sent a report to his superiors on a contact he had received from an employee of an unnamed company (which was clearly Apex). The report contained statements such as:
"It is clear that we have lost significant business to our competitors during the past two years in particular, in fact two thirds of turnover has been eroded from our Mackay Branch sales figures.
. . .
An opportunity such as this does not often present itself in our industry.
. . .
With this new strategy we have an opportunity to become the most significant supplier of hose and hydraulic products to the Region. We will have a significant competitive advantage.
We have no other option, at hand, other than to close down our current operations in it’s [sic] present form. . . ."
On 21 November 2000, there was a meeting in Mackay between Lenz and Mr David Landgren, the Managing Director of Apex, and Mr Stewart Tonks, the General Manager of Duffield. There was little disagreement about the substance of this conversation. Langdren said to Tonks that Apex wished to divest itself of all of its non-core businesses including the hose and hydraulic equipment business, and that Apex wanted this completed before Christmas because it was important to inform the people in the business of their future prior to them going on annual leave. Landgren told Tonks that:
(a)Apex was looking to sell all the stock in the business at cost or book value;
(b) there was to be an amount of goodwill;
(c) there would be an amount for some ancillary equipment;
(d)there would be a transfer of employees in the services division located at the Kestrel Mine; and
(e) Apex would not be transferring the debtors of the business.
Tonks replied that Duffield was interested in the purchase of the business but he required further information. He also informed Landgren that an American owned company had recently acquired Duffield and that its approval would have to be obtained.
On 23 November 2000, Lenz sent an email to Tonks which contained the further information requested at their meeting in Mackay. In that email, Lenz estimated the current stock value at:
"$800,000 Hydraulic $120,000 Industrial $50,000 Consignment Stock (This can be returned) These are current stock levels and shall decrease during the course of the coming month. A official [sic] stock-take will be conducted at the end of November. I will be able to give an accurate stock value when this is complete."
The letter went on to set out the value of the "major current contracts" and the figure for total sales and the current number of staff.
On 28 November 2000, Landgren and Tonks spoke by telephone. According to Landgren, in that conversation Tonks advised him that there was a problem about goodwill in that he could not show a separate goodwill figure in respect of the purchase of the business to his superiors in the United States of America. Landgren suggested to Tonks that the goodwill figure could be absorbed into the value of the stock and therefore goodwill would not have to be shown as a separate item. Tonks replied that such a proposal could work, but he did not say that he agreed with or approved such a step. According to Tonks, he informed Landgren that Duffield would in all likelihood not proceed with contractual negotiations if a figure representing goodwill had to be paid in addition to the cost price of the stock. This was not because goodwill could not be shown, but because Duffield was not buying the business and therefore was not prepared to pay goodwill. He denied that they discussed increasing the value of the stock by an amount for goodwill. He said that:
"We also discussed characterising as part of the stock figure a sum of 'goodwill'. Thus, if the cost price of the stock was $1 million, I said it may be possible to attribute say 75% ($750,000) to the book value and 25% ($250,000) to goodwill."
In a letter to his superior, Mr Andrew Phillips, dated 29 November 2000 Tonks stated:
"I spoke to David Landgren, Managing Director of Apex again last night and he still seems keen to do something with us. I did indicate to him if we get into discussions whereby a figure had to be paid for goodwill, then that probably would make it almost impossible for us to proceed. He then made the suggestion that (this was a thought I had also), if it was purely the value of stock to be negotiated, and we could agree as acceptable to us and also to them, then any actual (goodwill) figure could be included in the value of stock.
…
I suppose if we want to proceed further and it certainly is looking as though it is too good to walk away from, we need to get someone from here to go with an Apex representative to their customers to ensure that the contracts between Apex and the customer actually exists, the value of the contracts, the terms of those contracts and the preparedness of the customer to transfer those contracts to Frederick Duffield. All this would have to happen probably late next week or early the following week.
David Landgren is also quite prepared to work in with us in leaving the stock where it is in its current building until we have the time to get our building extended and in a suitable condition to accept the stock. It might be also the fact that he is prepared to not only negotiate on the value of the stock but the terms of payment." (Emphasis added)
By an email dated 1 December 2000, Lenz sent to Tonks information about the six employees Apex was proposing to transfer to Duffield. On 5 December 2000, in a further email, Lenz informed Tonks of some plant and equipment which Apex would be interested in selling to Duffield "in the business change". The book value of these assets was $58,570.
On 7 and 8 December 2000, Mr Keith Hawkins, the Financial Controller of Aeroquip and Company Secretary of the defendant, Ms Carol Muller, Duffield's Branch Manager in Mackay and McLean, met with Lenz and Mr Robert Smith of Apex at Apex's office in Mackay. Lenz said that he showed them the Kestrel FPA and later sent a copy of it to McLean at his request. On 10 December 2000, Hawkins wrote to Phillips and Tonks concerning his visit. After a detailed analysis of the proposal, including drawing up a table which showed Duffield's profit increasing from $140,000 to $657,000 per year if it maintained Apex's level of sales, Hawkins concluded:
"In short I recommend that we make an effort to purchase the inventory and partner with the services company. The initial inventory will be around $1.2M (including $160k on consignment at Kestrel) and we could get away with offering a lower value due to the fact that Apex-Enerka do not want to upset the end user. We have a golden opportunity to get back into the mining industry in a market we have suffered within in the recent past. … The Apex move … is a cheap gain that we are unlikely to ever see again and we should not risk getting the business by offering too cheap to put the opportunity at risk. My recommendation would be to reduce our offer by the amount of obsolete stock we can identify (from the stocktake schedules Bob McLean took from the Apex meeting) pay that value without a discount but do not pay any 'goodwill' by increasing inventory value, as this is just unnecessary, there should be an attempt to spread the payment over 3-4 months." (Emphasis added)
Lenz said that he had been told by Landgren that he was not happy for any of the Duffield people to meet with Apex's customers until Apex had received a letter of intent. Therefore, on 11 December 2000 Lenz emailed Hawkins and McLean requesting that "a letter of intention and a offer [sic] of arrangement" be put in place within the next two days.
On 12 December 2000, Tonks responded by faxing a letter to Landgren. It stated:
"This letter serves as an expression of intent by Frederick Duffield to proceed with the arrangements as discussed between Graham Lenz of your company and our Bob McLean and Keith Hawkins.
…
Our proposed offer is conditional upon the successful transfer of any current forward purchasing agreements in place with Apex-Enerka relevant to these arrangements and to the final approval of Eaton Aeroquip.
In this Letter of Intent, our proposal for the purchase of the stocks is as follows:
75% of stock value as purchased
25% of stock value in lieu of goodwill. …" (Emphasis added)
On 13 December 2000, Landgren telephoned Tonks and rejected his offer. Landgren said that Tonks then asked him how he could justify an amount for goodwill. Landgren said that he would explain this in a letter. He subsequently sent a letter dated 13 December 2000 to Tonks. He proposed the sale of "our Hose and Hydraulic business" on the following terms:
"· The transfer of two Apex-Enerka staff …
·Apex-Enerka will commit Graham Lenz to assist in the transfer of all contracts and customer relationships, however as previously discussed cannot warrant their transfer.
· Duffield will purchase the following assets at the listed values …
·Duffield would purchase all Apex-Enerka Hose & Hydraulic stock at current book value, this accurate quantity is being finalised.
·A premium payment on the book value of the stock being 25% of the value or $250,000 whichever is the greater."
The letter continued:
"This premium is sought as compensation for the fact that Apex-Enerka will hand over all customer details, as well as stock and assets, and enter a restriction of trade agreement for the Hose and Hydraulic business in Mackay.
As you are aware the business consists of annual sales of approx. $3,547,000, with a margin of $832,000. The direct sales costs would be approx. $200,000 with the transferring staff, this would give Duffield a contribution of $632,000.
Given this situation we consider the 25% or $250,000 (whichever the greater) as a reasonable premium, over the book value of the stock."
Landgren agreed that at this stage there still was no agreement about payment of the premium.
On 14 December 2000, at the request of Tonks, Phillips telephoned Landgren. According to Landgren, he was told by Phillips that he did not want any of Apex's staff; he wanted the ancillary equipment but did not want to pay for it; he could not see a reason to pay goodwill separately; and could not show the 25% premium over the stock figure as goodwill. Phillips agreed that he said he did not want the staff, but denied that he said he would not pay for the ancillary equipment. He wanted it and was prepared to pay for it. Phillips said that he informed Landgren that Duffield would not purchase the stock if a premium was payable on top of the cost price of the inventory. This was because Duffield would purchase all of the stock, irrespective of its condition and resale value. According to Phillips, any alternative approach including a premium would mean that Duffield would "cherry pick" the inventory and only purchase the items it wanted. Phillips said that he told Landgren that insistence by him on the premium was a "show stopper". (Hawkins gave evidence that he heard Phillips during a telephone conversation use on more than one occasion the words "show stopper" if the 25% premium was insisted upon.) Phillips also said that in this conversation he mentioned dissatisfaction by Kestrel with Apex's performance. I am satisfied, however, that this topic was first raised in a later conversation and not during the conversation on 14 December 2001. Phillips thought his source was McLean, but on the evidence I find that McLean did not speak to any Kestrel people until a few days after this.
Following this conversation, Landgren sent a revised letter of response to Duffield's Letter of Intent of 12 December 2000. This letter was emailed to Tonks by Landgren with a note saying that he had conceded "certain points" in his conversation with Phillips. Landgren said that he included in his letter a calculation of the book value of the stock plus 25%. At that time the book value of the stock was $1,006,461 and with a 25% premium this figure became $1,258,076.20. Landgren did not suggest that he explained to either Phillips or Tonks how this figure was calculated. The terms of the proposed agreement set out in Landgren's letter of 15 December 2000 were as follows:
"· Apex-Enerka will commit our Regional Manager, Graham Lenz to assist in the transfer of all contracts and customer relationships, however as previously discussed we cannot warrant their transfer.
·Duffield would purchase all Apex-Enerka Hose & Hydraulic stock, currently this is at a value of $1,258,076.20.
·Apex-Enerka will agree to a restricted trade agreement that will not enable us to trade in the hose and hydraulic business in Mackay for a determined period.
·Apex-Enerka would invoice the stock to Duffield in Jan 2001, payment will be made on delivery."
Landgren said that Tonks rang him on 15 December 2000 and asked for a change in the wording of the letter dated 15 December 2000. He asked that the first sentence be altered by replacing the word "business" with the word "inventory". Tonks agreed that he made this request. The first sentence would therefore read:
"Thank you for the Letter of Intent dated 12/12/00, for Frederick Duffield to proceed with the purchase of our hose and hydraulic inventory."
Landgren said that Tonks told him that the reason why he needed the letter to be altered was that the letter in its present form could not be shown to the American holding company as it would be seen that Duffield was purchasing a business and accordingly paying goodwill. Tonks denied this. He said that the alteration was necessary because Duffield was not buying a business. Whatever the explanation, Landgren made the requested change and sent the final version of this letter later on 15 December 2000. He said that he thought they then had a deal.
On 16 December 2000, Landgren had a further conversation with Phillips and he made a note of it on his copy of the final version of the letter of 15 December. Landgren told Phillips that he was seeking a letter of agreement to reflect his letter of 15 December. Phillips promised Landgren that he would get an appropriate letter to him by Christmas. Phillips said that he gave Landgren his word and pledged Eaton's reputation that Apex would be not be let down on this deal. Phillips did not refer to this conversation in his witness statement, but in cross-examination he said that he now believed that it did take place and that he did not "remember it initially when I was casting my mind back to these events." Phillips said that he thought that the reference to the letter by Christmas and giving his word and pledging Eaton's reputation were all mentioned in the conversation on 14 December. I am satisfied, however, that Landgren's evidence is correct in respect of this conversation.
On the basis of those assurances, Landgren instructed Lenz to take the Duffield representatives to meet with the Kestrel management to discuss the transfer of the existing Kestrel contract from Apex to Duffield. On 18 December 2001, McLean spoke with Mr Bob Browne of Kestrel and two days later Lenz took McLean and Mr Jeff Farrugia of Duffield to visit the Kestrel mine.
On 22 December 2000, Phillips sought the approval of his superiors in the United States of America for the proposed purchase. He forwarded the final version of Landgren's letter of 15 December 2001. Although that letter contained the figure of $1,258,076, Phillips advised his superiors that "… the working capital investment in inventory is approximately A$900,000 …" on the basis that he expected the figure to drop before the purchase occurred.
On 10 January 2001, Landgren had another telephone conversation with Phillips. He produced telephone records which showed that such a conversation occurred. Landgren said that he rang Phillips seeking the letter of agreement from Duffield which had been promised prior to Christmas but had still not been received. He stated that Phillips informed him that he was unable to send the letter yet as he was still waiting on approval from Kestrel of the contract with Duffield. Phillips also said that he felt that the goodwill associated with the business was not warranted given that his people had told him that Apex's reputation with customers was poor and that there were no fixed contracts in place. Phillips stated that he could only guarantee payment for the stock at 100% of the book value and could see no reason to pay for goodwill. Landgren said that he strongly disputed the statements by Phillips that his company had a poor reputation with customers and that there was no basis for an amount for goodwill. Nevertheless, Landgren understood that Phillips was maintaining his objection to paying a premium for goodwill. By the same token, Phillips agreed that Landgren was continuing to insist that a premium for goodwill would have to be paid.
Phillips made no reference to this conversation in his witness statement, but said in evidence that he believed "the call … could have taken place." He did not want to dispute anything that Landgren said about the conversation. Again, Landgren had made a note of this conversation on the final version of the letter of 15 December, and I am satisfied that it occurred. I consider that this conversation shows that the parties were still negotiating about whether or not there would be a premium for goodwill. It also indicates to me that Phillips understood that the tentative figure of $1,258,076.20 in Landgren's letter of 15 December 2000 included a premium for goodwill. Otherwise, why was goodwill discussed on 10 January 2001?
On the same day, Lenz sent an email to McLean expressing concern "that things seem to be stalled." He pointed out that the letter of intent had still not been received by Landgren. Lenz continued:
"Andy tells David Landgren that because of the relationship or rather lack of it at Kestrel that they will be changing the amount to be offered for the stock.
…
You need to remember a number of things. Duffield only need buy the stock from Apex, the business associated is a bonus …"
In his witness statement, Lenz said that by the words "the business associated" he meant:
"… the services division which provided ongoing work to Kestrel and other nearby mines. The point I was making there was that this services division had in fact purchased more equipment from Apex than Kestrel did direct through the FPA Contract."
However, in cross-examination he agreed that "the business" he was referring to was “the business from the existing Apex customers together with business from the mining services arm" then being conducted by former employees of Apex.
Around this time the Apex people started to get nervous because there was still no response to Landgren's letter. Lenz apparently re-opened negotiations with other companies. By letter dated 31 January 2001, Austfluid Link ("Austfluid") wrote to Apex expressing interest in acquiring the business. Lenz responded by sending Austfluid a similar letter to the one to Tonks dated 23 November 2000. One change was that the estimated value of hydraulic stock had increased to $900,000.
Landgren said that, in late January 2001, he received a copy of a written proposal which Duffield had made to Kestrel for the management of its requirements for hydraulic and industrial hose and fittings. In that proposal, it was stated that Duffield had agreed in principle to "the acquisition of inventory related to [the] hose and fitting business activities" of Apex, conditional on a formal contract being issued by Kestrel to Duffield. On 8 February 2001, there was a meeting at Kestrel between Lenz and Bob Smith on behalf of Apex, Tonks and McLean on behalf of Duffield and Browne on behalf of Kestrel, and, on 16 February 2001, a contract was entered into between Kestrel and Duffield for a period of two years from 1 March 2001.
Consequently, on 16 February 2001, Tonks sent a letter to Lenz concerning "acquisition of hydraulic hose and fittings inventory and equipment." Lenz saw this as the letter of intent he had been waiting for. It stated:
"I refer to our letter dated 12 December 2000, and other communications. We are now in a position to move forward in order that we acquire stock in your possession at various sites commensurate with our discussions.
…
At the time of possession, we would need to confirm present stock levels and values.
We propose paying for that inventory in three equal payments for an agreed value of the stock at the time of possession. The first payment being made on possession; the second a month later; and the third and final payment a month thereafter.
Our official order number P13571 applies to this purchasing agreement.
…
We look forward to your favourable response and to proceed with these arrangements as quickly as possible. Should you have any queries please do not hesitate to contact the undersigned." (Emphasis added)
Tonks said that at the time he wrote the letter he was unaware that Landgren was still insisting on a premium for goodwill. Phillips said that he thought that "the whole deal had been agreed" when this letter was sent, "subject just to that final stock-take." I examine the circumstances surrounding this letter further below.
Apex then sent a letter to its "valued customers and suppliers" advising that "our current supply of Hose and Fittings is being handled directly through Duffield Mackay as of 1st March 2001." Duffield conducted a random check of the stock on 2 March 2001 but discrepancies were revealed. As a result, a stock-take of the entire inventory of the business took place on 3 and 4 March 2001. There was a dispute between the parties, which it is not necessary to resolve, as to whether Duffield rejected some stock worth approximately $130,000. What is clear is that, after some adjustments were made to fill in gaps in the stock list, the total value of the purchased stock was calculated to be $1,123,024.62. Mr Mark Partington, the Branch Accountant for Apex, who assisted with the recording of the stock-take split the stock into the three sites where it was held and added to the total amount on the stock list a premium of 25% ($280,756.16), giving a total of $1,403,780.78, exclusive of GST. Lenz then emailed the stock list to McLean and Tonks and to Duffield's office in Mackay late on 4 March. That email read:
"The following is the report on the final stock as agreed with your Jeff [Farrugia] this afternoon. He has sent through the stock count sheets and this is the stock report to support that. There is a minor change to the value between the stock count and this report as the count report had not priced a handful of items. I couldn't located Keith [Hawkins] or Jeff's email so you might be able to forward for me."
However, all that had been agreed with Farrugia were the stock numbers, not the dollar figures and not the premium.
On 5 March 2001, McLean emailed the stock list to himself. Later that day, he emailed it to Hawkins and to Mr Trevor Gawne, the Financial Controller at Duffield. McLean then sent an email to Lenz asking whether he had a copy of the order number supplied and whether Lenz wanted to raise an invoice for the first payment. Although McLean acted as though he was authorising the transaction to proceed, he said that he did not have that authority and he could not recall whether he spoke to Phillips or Tonks before doing so. Lenz advised McLean that he had the order number but asked him to send a copy of the actual order. Lenz also advised McLean that he would arrange for Apex to raise an invoice for the first instalment. On the following day, McLean sent the email to Phillips, but the latter was not sure that he received the attachment.
By an invoice dated 7 March 2001, Apex billed Duffield for the amount of $1,403,780.78 plus GST of $140,378.07 making a total of $1,544,158.85 for "the purchase of stock as detailed on the attached listing." That amount was said to be payable by three monthly instalments of $514,719.62 commencing on 7 March 2001. Landgren said that he instructed the accounts staff not to refer to goodwill and/or premium on the invoice. However, enclosed with the invoice was the stock list which did show the 25% increase.
Tonks accepted that he received Lenz's email although he did not recall seeing it. Further, he firmly denied seeing the attached stock list. Rather surprisingly, he said that he may not have opened the attachment even if he had received the email. He said that he made no enquiries on 5 March 2001 to find out what the final price was. This was despite the fact that he was the person at Duffield with the responsibility for ensuring that this sale was correctly concluded and the stock list was the document which would tell him the amount which Duffield would have to pay for the stock. Tonks said that he expected it to take a few days for the final price for the stock to be determined. Yet Tonks said that he was "pretty certain" that McLean told him on 5 March 2001 that he had given the go ahead to Lenz for Apex to send an invoice to Duffield. He could not recall whether he asked McLean what the final figure was, but he did not believe he knew that amount before receiving the invoice from Apex on 9 March 2001.
Hawkins said that he received McLean's email with the stock list attached on 5 March 2001 and that he opened the attachment. He saw that the 25% premium had been added. His cross-examination continued:
"You saw that on 5 March?---Yes.
Did you do anything in respect of that?---I contacted Mr Tonks in Sydney.
On Monday 5 March?---Yes.
You told Mr Tonks there was a problem?---Yes.
You said the problem was they have charged the 25 per cent on top of the stock value?---Or words to that effect yes.
What did Mr. Tonks say to you?---That he would look into it, that he would get in touch with Apex whether that was Mr Landgren or someone else I don't know.
After contacting Mr Tonks on 5 March did you do anything else in respect of this stock list?---No."
This evidence was, of course, quite inconsistent with Tonks' recollection.
Tonks said that it was not until 9 March 2001 that he received the invoice from Apex by mail. He saw that the premium had been added to the cost price of the stock. Tonks said that he was "taken aback by it". At first, he did not speak to anyone about this because he:
"wanted some time to think about it because we'd actually taken possession of the stock and we'd used some of the stock … and … we'd … secured the contract with Kestrel so I felt we were in a very difficult position."
Phillips agreed that he knew on or about 8 or 9 March 2001, at the latest, that the premium had been added on, because on 11 March 2001 he sent the following email to Tonks:
"You need to contact David Landgren and remind him of the agreement you had with him. Can you do that and advise. I don't want to be too hard and we don't want to upset Graham Lenz but we are taking all the inventory including the old and slow moving stuff so to pay a premium seems excessive. Let me know what's going on."
Phillips said that, at this stage, his attitude was that there was an agreement between the parties that Duffield would pay only book value or cost value for the stock.
Tonks said that, after receiving Phillips' email, he attempted to speak to Landgren, but was told that he was away. As he was unable to reach Landgren by telephone, Tonks sent him an email, on 14 March 2001, requesting that Landgren call him as:
"I would like to have a word with you on the stock purchase."
In his witness statement, Landgren said that, on 9 or 12 March 2001, he received a telephone call from Tonks, who asked for the invoice to be changed so that it did not refer to the stock list. Tonks said that this was necessary so that the invoice did not reveal, when shown to his American superiors, that Duffield had paid an amount for goodwill. When he was cross-examined, Landgren could not recall whether Tonks had referred to his American superiors on this occasion. Landgren agreed to make the change and an amended invoice was sent on 16 March with the reference to "the attached listing" deleted. The facsimile cover sheet contained the following message: "Copy of invoice as discussed." Landgren was not asked why it took four or seven days to send that invoice following his conversations with Tonks.
Landgren stated that he "then" received an email from Tonks on 15 March asking to speak to him in respect of the stock purchase. Landgren said that, on 16 March 2001, he telephoned Tonks who informed him that he was getting some pressure from his superiors in regard to inventory levels throughout the organisation and that with the recent purchase of inventory from Apex, this was compounding his problems. Tonks said he was concerned as to the value of some of the stock and its use and also that he had paid a 25% premium. He said that he would have to write some of the stock off and that he wanted a reduction in the purchase price. Landgren refused. He said that Tonks was trying to negotiate after the event and his superiors should understand that Apex had in fact written off $130,000 worth of stock and, of that, $30,000 worth had been given to Duffield for free. Further, the Duffield personnel had selected and approved all the stock themselves. Landgren then told Tonks that he should tell his superiors that Apex had purchased approximately $263,000 worth of stock from Duffield in the four months prior to the acquisition, which was business that they would not have got if Duffield had not been interested in buying the business. Tonks then asked if he could have extended time for payment of the instalments and Landgren agreed that the due date could be changed from the 7th of each month to the 21st of each month giving him an extension of 2 weeks for the payment of each instalment.
Tonks denied that there were two conversations with Landgren. He said that Landgren telephoned him, on the evening of 15 March 2001, in response to his email of the previous day. Tonks stated that he told Landgren that the invoice had a 25% premium on it, which was contrary to their agreement, and it had to be removed. In his witness statement, Tonks said that:
"Landgren agreed that the reference to the 25% premium should not have been shown. He said words to the effect that he was annoyed with his staff who had prepared the invoice. He said that he would remove it and send another invoice. I understood from our conversation that I would get a fresh invoice with a lower sum, adjusted by subtracting the 25% premium."
In his oral evidence, when it was put to Tonks that he had asked for the invoice to be changed so that it did not refer to the stock list, which showed the premium for goodwill, he replied:
"No, I don't believe that's the case. I believe I asked him to change the invoice because we had not agreed to pay the 25 per cent premium over and above the agreed value. I think that was the case …"
Later, he was asked:
"Mr Tonks, did you ask Mr Landgren to amend the invoice so as to reduce the price?---Yes, I would say that I did.
Are you saying that you would say? Did you say it or not?---I can't be certain of that. I can't be certain. … I told him that we were unable to pay the premium and it was not to be included."
However, he reiterated that it was his understanding at the end of the conversation that he would receive an amended invoice for a lower figure, being the value of the stock, plus GST. Although there was disagreement about whether there were one or two conversations between Tonks and Landgren, and Tonks denied the substance of the first conversation (see paragraph 35 above), he agreed with virtually everything that Landgren said was discussed in the conversation referred to in paragraph 36 above. On that issue, I accept Tonks' evidence that there was only one conversation because it makes more sense chronologically and because the wording of Tonks' email of 14 March 2001 does not read as though Tonks and Landgren had spoken recently about changing the invoice so that it did not refer to the stock list.
Tonks said that he received the amended invoice on 16 March 2001. He conceded that he noticed immediately that it did not reduce the purchase price. He said that he:
"decided it was pointless calling Landgren again as I had been over it many times with him. I thought that because we had started using the stock and taken possession of the premises, it was not desirable to become involved in a dispute with Apex particularly in circumstances where the agreement was clear. … I decided that I would pay in accordance with our correspondence and that was that we would not pay a 25% premium. I made up my mind I would not call him again; I would ignore him and just pay what we had agreed."
Tonks said that he arranged with Gawne to pay in accordance with the agreement to pay the purchase price to Apex by three instalments: $514,719.62, $514,719.62 and $205,887.85. When he was asked why he decided to pay the instalments in that way, Tonks replied:
"There was no real particular reason to pay like that, I just decided that we would pay the first two as we had agreed and there was really no other reason for doing it."
He was pressed as to why he did not arrange for three equal instalments as he had previously proposed.
"There is no real reason why we did that, I didn't even think about doing that, it never crossed my mind."
Tonks agreed that he did not raise with Phillips the "predicament" that he was in following receipt of the amended invoice, still for the amount of $1,544,158.85. He did not ask Phillips to speak to Landgren.
"I didn't do that for a number of reasons. I was responsible for it, and I'd made up my mind that I was going to pay in accordance with what we had agreed, and that was that we would not pay the 25 per cent premium."
On 26 March 2001, Tonks did eventually report to Phillips. He sent an email which read:
"I did speak to David Landgren about a week ago after you asked me to do so. I told him that as stated before we were unable to consider the premium he had shown on his invoice. In addition we were concerned the value of the stock had grown from the initial figure of about $1m. Also we had learnt that some of the low pressure hose included in the stock may now not be sold to Kestral [sic] as they had recently awarded the hose type to Alfagomma. He did agree to re issue the invoice and also agreed to extend the payment terms. The new invoice does not show the premium and did not show the extended dates although he did say he would extend by 3 weeks. We have already used some of the stock and will be relying on this stock of staple adaptors until we get another line of supply organised. … Andy I think after this stock-take we should be able to rid ourselves of further quantities of stock sufficient enough together with sales to make the bringing on of the Apex stock over a period of time almost neutral. Also it may be that we will not be able to take on all Apex stock because it is so over what we planned and did our calculations on. Some of the industrial hose may be harder to move if Kestral [sic] do not take it. However Bob Smith has told Bob McLean he will have no trouble in selling it. … I have also sent you a letter I got from David Landgren after you had spoken to him prior to the 14 December 2000. I think this sets it out quiet [sic] well and is very different to what we now face." (Emphasis added)
Tonks was unable to explain why he did not tell Phillips in the email that the amended invoice was still for the same price.
"I – really I don't know why I've not put it in there. … It is a significant omission and I do not have an explanation as to why I've not put it in there."
Later, he said:
"… it's an obvious error and I – I've made a mistake, it was certainly not my intention to do that. I just have to say that it's an error."
On the basis of what Tonks said in the email, Phillips not surprisingly thought that "that was the end of the matter."
On 19 March 2001, Duffield paid the first instalment of $514,719.62. On 24 April 2001, Duffield paid the same amount, as the second instalment. Mr Ben Khoo, an Accountant with Apex, said that, as a result of the second payment being a few days late, on or about 21 May 2001, he spoke to Gawne to ensure that the third payment was paid promptly. During that conversation Khoo was told that Duffield had some concerns with the invoice and would contact Apex shortly. Khoo advised Landgren of this conversation and the latter immediately rang Tonks to determine what the problem was. Tonks said that he would be emailing something to Landgren. The following email was then sent by Tonks to Landgren on 21 May 2001:
"We have now paid some $1.03mil for the stock in your Slade Point warehouse and are now due for our final payment. There are a number of issues that have arisen since our initial take over of this stock which are now of considerable concern.
A. It was initially indicated there were a number of FPAs and as it has turned out there is only one.
B. The industrial hose side of the Kestral [sic] business has been awarded to a competitor.
C. We have not been able to determine any usage patterns from Apex even though I know an attempt was made to provide this info.
D. It would appear some of the stock purchased will not be able to be used. Since taking some of this stock we have had to carry out mechanical tests on it for use on hose either purchased from Apex and our own hose and these tests have indicated significant failures and we will not use the product. Indeed it will have to be dumped.
E. There is now to be seen a considerable mismatch of stems (inserts) and bodies (ferrules) making it impossible to make up completed hose ends. The surplus will also have to be dumped.
F. It was indicated to us a value of sales from Apex in hose and fitting business of some $1.9mil in 6 months of sales and yet we cannot see that type of sales at this stage. Indeed far from it.
We submitted a business plan to our superiors to move ahead with this proposal based on figures given to us, I am sure in good faith, by Apex. In addition we had not allowed for some $1.5mil in stock the initial indication given to me was some $900,000.00 which grew to about $1.2mil. Eventually the final invoice came in at $1.5 which included a figure for commission of some 25%. It was made perfectly clear from the start we could NOT consider this premium. You have subsequently altered your invoice to delete the wording but left the final value the same. Andy Phillips indicated to you during a conversation by telephone just prior to Christmas we would take all your stock at value. We have not checked on the value of each item but did validate the physical stock at the time of take over. We really have taken your word for its value and am sure we have paid its full value as purchased by Apex. Under the circumstances Apex got a very good deal. I know this from personal experience. I cannot pay the final amount knowing it includes a premium for the stock when you were advised we could not proceed under those circumstances and when I have a clear directive it is not to be paid. Also the above issues need to be addressed and quantified." (Emphasis added)
After receiving the email Landgren rang Tonks and reminded him that the premium had been known to him throughout the process and that they had made two payments and had no grounds to renege on the third. Landgren told Tonks that Apex would take legal action if Duffield did not pay.
Landgren said that, on 22 May 2001, Phillips rang him and told him that Duffield would not be paying the third instalment as Duffield had discovered that some of the stock was not of great use, that Landgren should recall him saying that he felt there was not sufficient goodwill in the business to justify a 25% premium, and that he would only pay the book value of the stock. Landgren said that he reminded Phillips that he had never agreed to the sale price being only the stock figure, or that Duffield would not have to pay a premium. Landgren said that the invoice clearly showed a 25% premium, and that Tonks knew of the 25% figure for goodwill as he had asked Landgren to change the invoice to ensure that the American superiors did not see the goodwill component. Landgren said that Phillips did not answer when he asked him why Tonks would have authorised the payment of the first two invoices if Duffield had never agreed to pay the premium. In his evidence at the hearing, Landgren stated that he said to Phillips that Tonks knew there was a premium "because he in fact tried to negotiate it out after the event."
Phillips denied that he had spoken to Landgren in May 2001.
"I really don't think I did. I certainly can't remember that phone call."
He said that he was in Sydney on 22 May 2001 and that there was nothing in his telephone records to suggest that he had telephoned Landgren on that day. Phillips was not cross-examined about this conversation. Although it would not be at all surprising if Phillips had rung Landgren in an effort to head off threatened litigation, I cannot be satisfied on the above evidence that such a call took place. I note that this finding means that the defendant cannot rely, as its counsel sought to do, on the "negotiating out after the event" statement referred to in the previous paragraph.
On 24 May 2001, Apex's solicitors, Herbert Geer & Rundle, sent by facsimile a letter of demand for the final payment of $514,719.61. On the following day, Duffield paid $205,887.85, being the outstanding amount less the 25% premium. On 25 May 2001, Herbert Geer & Rundle sent a further letter of demand for the sum of $308,831.77 When that sum was not paid this proceeding was commenced on 30 May 2001.
Phillips and Tonks were cross-examined about the failure to pay any part of the third payment on time. Phillips said that he was always of the view that the full amount of the stock figure had to be paid, regardless of any complaints about the quality of the stock. He denied that the $205,887.85 was only paid because of the letter of demand from Apex's solicitors. Tonks rejected the claim that his email of 21 May 2001 meant that he was intending not to pay any part of third instalment. He said that he had made up his mind to pay the $205,887.85, but then conceded that he had hoped Apex would give a further reduction because of the other issues he had raised. Like Phillips, Tonks denied that the $205,887.85 was only paid because of the solicitors' letter of demand.
The Critical Conversations and Events
I have already made a number of findings about what conversations and events occurred or did not occur in the preliminary negotiations. Before turning to what I consider to have been the first critical event, I wish to make a general comment about the evidence of the witnesses, in particular the more important witnesses, such as Landgren, Lenz, Phillips and Tonks. In my opinion, all of the witnesses were trying to give their evidence truthfully, in respect of events as they now recalled them. Not surprisingly, virtually all of them were shown to be mistaken about certain events or at least to have had some gaps in their recollection. Nevertheless, despite some criticisms I am now about to make, I do not consider that any of the witnesses were guilty of deliberately lying as distinct from imperfect recollection or faulty reconstruction. I believe that they all thought they were telling the truth.
Another preliminary comment is that counsel for both parties attempted to portray the other side as being a more than willing and over anxious participant in the transaction. Mr Schlicht of counsel, who appeared for the plaintiff, opened his case on the basis that the transaction represented a "golden opportunity" (Mr Hawkins’ words) for Duffield to overcome the financial difficulties its business was currently experiencing in Queensland. Mr Peters of counsel, who appeared for the defendant, submitted that, because it intended to continue to serve the existing customers in the core business of conveyor belts, Apex needed to sell the stock (much of which would soon be redundant) to a satisfactory purchaser who would continue to service the needs of its remaining customers such as Kestrel. He submitted that by early 2001, Apex's ability to command any premium for the sale of a "business" or the facilitating of customer contacts had been substantially reduced because Apex had closed its service arm, its former employees from that area had commenced to form a strategic alliance with the defendant and its stock being offered for sale at book value could have been bought elsewhere from the same suppliers for the same cost. In my opinion, there is truth in both approaches, and whilst they should not be given too much emphasis, they are worth bearing in mind when one is analysisng the critical conversations and events.
In my opinion, the first critical event was the sending of the letter of 16 February 2001 by Tonks to Lenz. Mr Peters submitted that this letter was a further offer or counter-offer by Duffield. He argued that the commencing reference to "our letter dated 12 December 2000" reinstated the offer made in that earlier letter, which was to purchase the stock at 100% of book value. A mechanical stock-take was to occur to confirm the "stock levels and values". Mr Peters submitted that Apex accepted the offer by arranging for the mechanical stock-take to occur, by ceasing to supply its customers from 1 March 2001 and by ceasing negotiations with Austfluid. Thus, he argued, there was then a contract between the parties, subject only to counting and calculating the cost or book value of the stock. (As it turned out, the book value was the cost.)
Despite Mr Peters' valiant argument, I do not agree with this analysis. Both Phillips and Tonks knew that, in the prior negotiations, Landgren had been insisting that Duffield pay a premium for goodwill in addition to the cost or book value of the stock. They also knew that their negotiating position had been to reject this proposal, but importantly they also knew that there had been some discussions about building the premium into the figure for stock. Mr Peters made much of the point that Mr Schlicht had not put forward any reason why Phillips or Tonks would want to hide from their superiors in the United States the fact that Duffield was paying something for goodwill. One could, but should not, speculate why this might have been the case. The real question is, was there a request that any premium be included in the figure for stock, even if that meant increasing that amount. I find that Phillips and Tonks had contemplated the possibility of the amount of the premium increasing the figure for stock. Tonks and Landgren had certainly discussed it on 28 November 2001. This is how I read Tonks' letter to Phillips on 29 November 2000. Further, this was how Hawkins understood the suggestion when he recommended in his report of 10 December 2000 against paying "any 'goodwill' by increasing inventory value." (Emphasis added). Tonks' letter of 12 December 2000, which contained the 75%/25% proposal, was simply a negotiating tactic, in my opinion. I cannot accept that he seriously thought that this device, which would not result in Apex receiving one dollar extra, would satisfy Apex. Moreover, I do not agree that the reference back to the letter of 12 December 2000 meant that the offer that was being made by Tonks in his letter of 16 February 2001 was 100% of book value and no premium. The reference in the letter of 16 February was not just to the letter dated 12 December, it was to that letter "and other communications." Thus, all of the letters and conversations after 12 December were incorporated and they did not contain any resolution of the question of whether or not a premium was to be paid.
Mr Peters correctly submitted that it was a question of objectively viewing the correspondence and conversations to decide what agreement, if any, had been reached between the parties and that it was not permissible to take into account one person's subjective view.[1] However, it seems to me that when Tonks wrote in his letter of 16 February 2001 that Duffield proposed paying "an agreed value of the stock", the reasonable by-stander, knowing the history of the negotiations, would have understood that it was intended that the question of the premium was still being left open. I do not accept Mr Peters' submission that the context requires "an agreed value of the stock" to be read as referring only to the position to be ascertained at the stock-take. In my opinion, the parties intended that phrase to refer also to the unresolved question of the premium. The position would have been different if Tonks had spelt out that Duffield would pay only the cost or book value of the stock. Further, I do not consider that Phillips and Tonks could have legitimately thought they had finalised the deal at that stage. In my opinion, the brinkmanship in respect of the payment of a premium continued.
[1]Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Spunwill v BAB Pty Ltd (1994) 36 NSWLR 290 at 299 per Santow J
Whilst it is correct that Duffield was not buying a business in the broadest sense, it seems to me that Duffield always intended to purchase more than simply the stock. The need to successfully substitute Duffield for Apex in the minds of Apex's major customers was recognised by Duffield right from the beginning of the negotiations. See, for example, the reference to this topic in Tonks' letter to Phillips of 29 November 2000. Phillips was quite forthcoming about this aspect. At the conclusion of his evidence, I asked Phillips why, if, as he said, his sales team could have approached Apex's customers and obtained their business, Duffield agreed to buy about a million dollars worth of stock, some of which it did not really want. Phillips answered that "by buying this inventory it was an easier way into – a stronger way into getting that business." He agreed that with the inventory, Duffield also got Apex's willingness to facilitate introductions to the customers so that Duffield could replace Apex and that that willingness was "of value" to Duffield. Thus, it seems to me that Duffield knew that it was obtaining more than simply the stock. The question was – what, if anything, was Duffield prepared to pay for this valuable extra? Or perhaps more precisely, what price could Duffield negotiate Apex down to for the stock, the ancillary equipment and the goodwill? Duffield managed to obtain the auxiliary equipment for nothing by Phillips’ forceful negotiating, but I do not consider that it also obtained the goodwill for nothing.
This rejection of the defendant's submission that the contract between the parties was finalised by Apex's conduct in response to the letter of 16 February 2001 is vital, because Mr Peters submitted that, the contract having been made, it was impermissible to look at the post-contractual conduct to see whether it gave rise to an obligation to pay a premium.[2] However, if as I have found, the contract had not been finalised in February 2001, it is both permissible and necessary to consider the further developments.
[2]FAI Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 at 350 per Brooking J
The next critical event is the sending of the stock list to Duffield late on 4 March 2001. McLean's role is probably irrelevant because it was submitted by the defendant that he did not have the authority to reach agreement on the final amount to be paid. But if this is correct, then it only makes Tonks' role more significant. I cannot accept Tonks' evidence that he did not know, and did not try to find out, on 5 March 2001, what the final figure was. His professed lack of interest in the outcome of the stock-take seems to me quite extraordinary. More importantly, I accept the evidence of Hawkins that he told Tonks on 5 March 2001 that the 25% premium had been charged on top of the stock value. Tonks' failure to immediately raise this matter with Landgren or Lenz is quite inconsistent, in my opinion, with a belief that Apex had agreed with Duffield that no premium would be charged. Rather, it indicates an acceptance by Tonks that the premium would have to be paid.
Then, on 9 March 2001, Tonks received the invoice. Even if he did not know before then that the premium had been added on, he knew on that date and still he did not make any attempt to contact Apex and reject the charging of the premium. It was not until after he received Phillips' email of 11 March 2001, that Tonks attempted to contact Landgren.
The wording of Phillips' email itself, whilst not decisive, also suggests to me that Phillips knew that the question of the payment of a premium was still unresolved. If there really had been an agreement that the premium was not to be added on, then I consider that the tone would have been much firmer. Tonks' explanation was that, in his email, Phillips:
"was attempting to be a little bit conciliatory, taking into the view that so far everything has gone reasonably well and we were in possession of the stock and we had told them we'd go ahead, particularly in light of us being awarded the Kestrel contract, so I think we wanted to be conciliatory towards them."
Mr Peters sought to explain away Phillips' lack of anger at the charging of the premium by describing it as his "charming English way". I do not consider these explanations to be sufficient. If Landgren had reneged on his agreement, it was not simply a question of payment of the premium seeming “excessive”. Landgren was not sticking to his word, and I would have thought that, if the circumstances were as Phillips and Tonks maintain, then payment of the premium was out of the question, as far as they were concerned.
Moreover, the suggestion by Tonks that Duffield was in a difficult position as a result of Apex's conduct because Duffield had taken possession of, and used some of, the stock and secured the contract with Kestrel was, in my opinion, unconvincing. If Apex was not sticking to the agreement, then Duffield was quite entitled to walk away. By this stage, it had the Kestrel contract. It could simply have paid for the stock it had used and left the remainder at Apex's warehouse in Mackay. That step would surely have brought Apex to its senses if, as Duffield now alleges, it was not keeping to its previously agreed bargain.
Mr Schlicht sought to rely on the defendant taking possession of the stock after it had become aware of the inclusion of the 25% premium on the stock list as evidence of the concluding of the agreement. However, this submission was dependent on Tonks' evidence that Duffield "probably" took possession of the stock on 5 or 6 March 2001, whereas there was other evidence which suggested that Duffield actually took possession of the stock earlier. In any event, even if Tonks were correct, the evidence is not so precise that it would allow me to be satisfied that Tonks became aware on 5 March 2001 of the inclusion of the premium before Duffield took possession of the stock.
The conversation which resulted in the sending of the amended invoice is the next critical event. Although I consider that Landgren was mistaken in saying that there were two conversations with Tonks at this time, I accept Landgren's evidence that Tonks asked for the invoice to be changed so that it did not refer to the stock list. I cannot accept that Tonks asked for the 25% premium to be removed and the amount of the invoice to be reduced accordingly. If he had done so, I consider that Tonks would have reacted quite strongly to the amended invoice still showing the higher amount. I find Tonks' evidence that he thought it pointless calling Landgren again quite unconvincing.
Later conduct by Tonks strengthens my belief that Tonks agreed to pay the higher amount so long as it was not shown on the invoice. First, the payment by Duffield on 19 March 2001 of one third of the higher amount is also inconsistent with Tonks and Landgren having agreed that the final figure was to be reduced. One thing that had been agreed between the parties was that Duffield would pay by three equal instalments, and paying more than one third of the final figure was quite inconsistent with any such agreement, whatever amount appeared on the amended invoice. Tonks could not explain why the payments were made in this way. I also note that Tonks did say that he decided to pay "the first two as we had agreed", thereby suggesting that Duffield had agreed to pay $1,544,158.85 by three equal monthly instalments, which is exactly what Apex says was agreed.
Further, Tonks' email to Phillips of 26 March 2001 is, in my opinion, also supportive of Landgren's evidence about his conversation with Tonks ten or so days earlier. Tonks correctly stated in the report that "the new invoice does not show the premium". This is consistent with Landgren's evidence. It is completely inconsistent with Tonks' evidence that it had been agreed to reduce the amount of the final figure by removing the premium. Not surprisingly, Tonks could not give any explanation for what, on his evidence, was a misleading statement in his report to his superior, other than saying that it was a mistake.
Finally, in my opinion, Tonks' letter of 21 May 2001 does not support Duffield's contention that the charging of the 25% premium was contrary to the agreement between the parties, reiterated as recently as 15 March 2001. The letter seems more concerned, in my opinion, to detail complaints about how matters have turned out for Duffield, rather than to insist that payment of the 25% premium had never been agreed, and to use all of these issues as a means of persuading Apex to reduce the amount of the final instalment.
I, therefore, conclude that in the conversation on 16 March 2001, Tonks did agree with Landgren that Duffield would pay Apex the amount of $1,544,158.85 by three equal instalments, the first of which was to be paid on 21 March 2001 and monthly thereafter, and that they also agreed that the invoice would be changed so that it did not refer to the stock list, because it showed that a 25% premium had been included in the calculation of the amount of $1,544,158.85. That is, the contract between the parties was not finalised until that conversation between Tonks and Landgren on 16 March 2001 when they finally agreed on the price to be paid.
Conclusion
For the above reasons, I have concluded that there should be judgment for the plaintiff in the sum of $308,831.77 together with interest and costs. I shall hear from the parties as to the appropriate orders.
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