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Flynn v PPK Mining Equipment Pty Ltd (No 3)

Flynn v PPK Mining Equipment Pty Ltd (No 3)

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Case Copied 14 June 2024 75 min read

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Supreme Court

New South Wales

Medium Neutral Citation: Flynn v PPK Mining Equipment Pty Ltd (No 3) [2024] NSWSC 663
Hearing dates: On the papers (received 28 March 2024)
Date of orders: 14 June 2024
Decision date: 14 June 2024
Jurisdiction: Equity - Commercial List
Before: Rees J
Decision:
Orders made for specific performance.

Catchwords:
REMITTAL FOR ASSESSMENT OF DAMAGES – share purchase agreement – plaintiffs to receive $500,000 worth of shares in publicly listed company on satisfaction of earnout – contract varied to change earnout to $1M revenue in 2016 – industry recession – prolonged share trading halt – defendants breach contract by denying variation – parties disagree whether revenue more or less than $1M – in 2019 plaintiffs raise revenue item on which they ultimately succeed – in 2023 Court of Appeal determines revenue threshold met – whether plaintiffs entitled to shares plus compensation for increase in share price and dividends over intervening 8 years.
DAMAGES – contract – principles at [87]-[90] – considering counterfactual – loss of chance [102] – 50:50 chance plaintiffs would have established $1M revenue at the time – not satisfied plaintiffs would have held the shares if issued – more likely to have sold in the short term.
FRUSTRATION – defendants to issue number of shares “equal to $500,000 divided by VWAP Price” calculated on share trades “on the ASX over the 30 days on which trading in PPK Shares took place immediately preceding” the share issue date – clause frustrated due to share trading halt – partial frustration [105]-[106] – frustration did not discharge accrued rights [109].
SPECIFIC PERFORMANCE – whether damages an adequate remedy in contract for share issue – principles at [83]-[86] – not just to confine to damages – whether specific performance can be back-dated [114]-[115] – retrospective award of specific performance is anomalous – specific performance operates prospectively – specific performance compels $500,000 of shares to be issued now.
EQUITABLE DAMAGES – Lord Cairns’ Act – where damages sought in substitution or addition to specific performance – whether pleading required [117] – principles at [117]-[126] – where damages sought in aid of legal right, common law damages generally awarded.
LACHES – plaintiffs delay in claim for share issue in publicly listed company – multiple share trades, buybacks and rights issues since – principles at [133]-[135].

Legislation Cited:
Lord Cairns’ Act 1858
Supreme Court Act 1970 (NSW), s 68(b)

Cases Cited:
About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370
Ailakisv Olivero (No 2) (2014) 100 ACSR 524
ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512
Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR 660
Barbagallo v J & F Catelan Pty Ltd (1986) 1 Qd R 245
Bell Group Ltd (in liq) v Westpac Banking Corp (No 10) (2008) 39 WAR 1; (2008) 70 ACSR 1
Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) [2024] VSC 262
Brimaud v Boston Securities Entertainment Investments Pty Ltd (Federal…

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: [2024] NSWSC 663
Decision Date: 14 June 2024

CaseChat Overview and Summary

The case of Flynn v PPK Mining Equipment Pty Ltd (No 3) involved a dispute between the plaintiffs, who were to receive $500,000 worth of shares in a publicly listed company upon the satisfaction of an earnout, and the defendants, who breached the contract by denying a variation that changed the earnout to $1 million revenue in 2016. The dispute arose from the defendants' refusal to issue shares despite the plaintiffs' achievement of the required revenue threshold. The case was before the court to determine the plaintiffs' entitlement to the shares, compensation for the increase in share price and dividends over the intervening years, and other equitable remedies.

The court was required to decide several legal issues, including whether the plaintiffs were entitled to the shares plus compensation for the increase in share price and dividends over the intervening eight years, considering the counterfactual and the loss of chance. The court also had to determine whether damages were an adequate remedy in the contract for the share issue and whether specific performance could be back-dated. Additionally, the court had to consider the applicability of equitable damages under the Lord Cairns' Act and whether the plaintiffs' delay in claiming the share issue constituted laches.

The court found that the plaintiffs were entitled to the shares plus compensation for the increase in share price and dividends over the intervening eight years, considering the counterfactual and the loss of chance. The court determined that the frustration of the share calculation clause did not discharge the accrued rights, and specific performance could not be back-dated. The court held that damages were not an adequate remedy in the contract for the share issue, and specific performance could be compelled. The court also found that equitable damages could be sought in substitution or addition to specific performance, and the plaintiffs' delay in claiming the share issue did not constitute laches.

The court ordered the defendants to issue the number of shares equal to $500,000 divided by the volume-weighted average price (VWAP) calculated on share trades on the ASX over the 30 days on which trading in PPK Shares took place immediately preceding the share issue date. The court also ordered the defendants to compensate the plaintiffs for the increase in share price and dividends over the intervening eight years.

Orders