Gambit Recruiting P/L (as trustee of the Gambit Recruiting Trust) v PeopleBank Australia P/L

[2005] SASC 77

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

GAMBIT RECRUITING P/L (AS TRUSTEE OF THE GAMBIT RECRUITING TRUST) & ANOR v PEOPLEBANK AUSTRALIA P/L & ANOR

Judgment of The Honourable Justice Vanstone

7 March 2005

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT

Appeal from a Master of the Supreme Court dismissing application for immediate relief - whether Master correct in finding triable issue - appeal dismissed.

Supreme Court Rules 1987 rr 7.04, 25.02, 25.03, 97, 106.05; Supreme Court Act 1935 (SA), s 50(2), referred to.
House v The King (1936) 55 CLR 499; Mullett v Gabriel (1989) 52 SASR 330; Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1988) 146 LSJS 150, considered.

GAMBIT RECRUITING P/L (AS TRUSTEE OF THE GAMBIT RECRUITING TRUST) & ANOR v PEOPLEBANK AUSTRALIA P/L & ANOR
[2005] SASC 77

Civil

1. VANSTONE J:     This is an appeal from a decision of a Master of this Court dismissing an application by the plaintiffs pursuant to SCR 25.02 for immediate relief. 

2. The plaintiffs’ proceedings were commenced by way of inter partes summons issued on 26 July 2004 and supported by an affidavit filed in lieu of a Statement of Claim, as permitted by SCR 7.04.  The affidavit was that of the second plaintiff, Phillip Graham Gamble, and was sworn on the same date (“the first Gamble affidavit”).

3. From the first Gamble affidavit can be drawn the substance of the claim.  In essence the plaintiffs allege that Gambit Recruiting Pty Ltd (“Gambit Recruiting”) acted as the trustee for the Gambit Recruiting Trust, which operated an information technology recruiting business from about 1998 until the business was sold to PeopleBank Australia Pty Ltd (“PeopleBank”) in October 2003.  Since 1 October 2003 the Gambit Recruiting business has ceased to operate and all activity of the business has been carried on under the banner of PeopleBank.  Gambit Recruiting is yet to receive the proceeds of sale from PeopleBank and has issued the proceedings to obtain orders to enforce the agreement reached in relation to the sale of the business. 

4. The application before the Master was by way of Notice for Specific Directions issued on the same date as the summons.  The application was said to be brought in circumstances of urgency, which circumstances were set out in a further affidavit of the second plaintiff of 26 July 2004 (“the second Gamble affidavit”).  The matter referred to was the currency of winding up proceedings against Gambit Recruiting taken in this Court by the Australian Taxation Office.

5. The orders sought before the Master were part only of those referred to in the Notice for Specific Directions, being part only of the purchase price said to be payable under the claimed contract.  They were:

   1.A declaration that there is a binding agreement between the plaintiffs and the defendants in the terms of the Agreement executed between the parties and dated 1^st October 2003 and exhibited as “PGG11” to the First Affidavit of Philip Graham Gamble and sworn on the 26^th July 2004 and includes clause 5.6 in the following terms:-

   (i)In consideration of the purchase of the Assets, the Purchaser agrees to issue to the Vendor, B Class Shares in the Purchaser as follows:

   (a)On Completion issue of fully paid B Class Shares equal to 5% of the fully diluted equity in the Purchaser

   and

   [(b)omitted]

   2.That PeopleBank Australia forthwith issue to Gambit Recruiting in accordance with Clause 5.6(a) of the Agreement fully paid B class shares equal to 5% of the fully diluted equity in PeopleBank Australia as at 1^st October 2003.

   Supreme Court Rule 25.03 authorises entry of a judgment for part only of the relief claimed in an action and continuation of the proceedings in respect of outstanding issues.  The basis for the relief claimed was said to be analogous to specific performance, enabling part only of an agreement to be enforced. 

6. An appeal to a single Judge of this Court from a decision of a Master pursuant to s 50(2) Supreme Court Act 1935 and SCR 106.05 is by way of re-hearing:  SCR 97.  Insofar as the Master purported to exercise a discretion, the appellants must demonstrate error of fact or approach:  House v The King (1936) 55 CLR 499; Mullett v Gabriel (1989) 52 SASR 330.

7. In Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1988) 146 LSJS 150, 152, King CJ discussed the requirements for establishing a claim for immediate relief in the nature of summary judgment. He said:

   [Rule 25.02] provides a procedure whereby in circumstances of urgency a judge can decide issues which are capable of speedy resolution without lengthy hearing and give judgment without trial, Wicklow Enterprises Pty Ltd v. Doysal Pty Ltd and the Registrar General 1985 124 L.S.J.S. 225; Lawrence v. Griffiths 1987 140 L.S.J.S. 134. Another purpose of the procedure is to operate as an alternative to an Application for Summary Judgment under Rule 25.01 where the Rule 25.01 endorsement has not been made but where the plaintiff considers that there is no serious issue to be tried, Bellas v. Kipouros 1974 8 S.A.S.R. 418 at 419. This latter purpose is emphasised by the language of the 1987 Rules which express the Rule 25.02 procedure as an alternative to the Rule 25.01 procedure.

8. In the instant case the Master doubted whether there were circumstances of urgency in the relevant sense.  He found that there were “complex questions of law and fact which [could not] be disposed of summarily.”  I read that statement as a finding that one or more triable issues had been made out and that the matter was incapable of speedy resolution.  Like the Master, I do not think that if there is a triable issue here, it could be resolved without a trial in the normal way.  My reasons for that view will become apparent shortly.  Because of that the issue of urgency falls away.  The only matter requiring determination ‑ on an independent review ‑ is whether the Master was correct in finding that the papers disclose a triable issue.

9. The material before the Master was extensive.  The Gamble affidavits (of which there were, ultimately, three) annexed extensive exhibits.  Three affidavits were filed on behalf of the defendants, also containing voluminous factual material.  A number of factual issues remain either unexplored or unresolved.  But, unsurprisingly, there is a good deal of common ground.

10. It is clear that in mid 2003 there were discussions between the second plaintiff and the second defendant as to acquisition by PeopleBank of Gambit Recruiting.  An important part of what Gambit Recruiting had to offer was an expectation of doing substantial and lucrative new business with Bluescope Steel.  Those discussions were progressed on 24 July 2003.  On that occasion the second defendant agreed to make a loan of $200,000 to the second plaintiff (which he said he would take from his retained earnings in PeopleBank) to clear a debt which Mr Gamble asserted he owed to the Australian Taxation Office.  That loan was subsequently made, although it was in a larger amount. 

11. It is also clear that both sides always envisaged that the agreement in principle, or the understanding between the parties, would ultimately be reduced to written documents and executed.  To that end quite extensive work on drafting such documents was done by the defendants’ legal advisers.  The only documents actually executed by the parties were the Agreement for Sale of Assets (although it did not contain the draft clauses as to price) and an Assignment of Lease in respect of Gambit Recruiting’s premises.  The first mentioned document was dated 1 October 2003, although it was not executed until February 2004.  There is a dispute between the second plaintiff and defendant as to the reason why that Agreement was executed in the way that it was.  The second defendant asserts that it was executed only because the agent for the landlord of the plaintiffs’ business premises required to sight it prior to assigning the lease of those premises to the defendants.  However the plaintiffs claim that, irrespective, it was an acknowledgment of all the terms within it, and that the clauses dealing with price were omitted only for reasons of confidentiality. 

12. There is no dispute between the parties that on 1 October 2003 PeopleBank took over the premises and business of Gambit Recruiting and from that time folded it into its own business.  A number of steps were taken to facilitate that takeover, including the assignment of the lease, termination of employees, novation of labour hire agreements, transfer of various accounts, notification of various contractors and media releases announcing the takeover.  The plaintiffs assert that these things amounted to acting upon the draft deed and that these events establish a binding contract between the parties, notwithstanding that the draft deed in its entirety was never executed.

13. For their part, the defendants claim that the reason that the unexpurgated draft agreement was never signed was that the terms of any agreement were never finalised and the agreement never perfected.  They assert that the timing of the takeover of the business was not of their choosing.  Rather, it was done as a result of the second plaintiff’s request, he having pressed for it on account of Gambit Recruiting being a loss-making business and he being unable to further support it.  The defendants assert that at the time of the takeover, not only was it still necessary to finalise the terms of the Agreement for Sale of Assets, but both parties always understood that since the consideration to be paid by the first defendant included shares in the company, a shareholders agreement was required.  It is not disputed by the defendants that the negotiations having failed, they will ultimately have to pay a fair price for the business; rather the defendants say that there was never a commitment by both parties to a complete set of terms for the acquisition.

14. Further, the defendants raise the issue of misrepresentation in relation to statements made by Mr Gamble with respect to foreshadowed work from Bluescope Steel.  Counsel for the defendant argues that irrespective of whether a court finds that there was a contract between the parties, the issue of misrepresentation should be determined before any orders such as those sought, could appropriately be made.  It was put, and I accept, that if the defendants make good their claim of misleading and deceptive conduct, they may be in the position of having an equitable set-off against any monies they are otherwise liable to pay to the plaintiffs.

15. It was further argued for the defendants that the fact that monies in excess of $200,000 were advanced by way of loan by the second defendant to the second plaintiff is a matter that tells against the grant of this application.  I was told that legal proceedings have been issued in New South Wales to recover that loan, but it was put to me that, at least arguably, that loan having arisen out of the transaction under consideration, it could give rise to a set-off defence.  For his part, Mr Frayne for the plaintiffs, argues that since proceedings are on foot interstate, it is inappropriate for me to have regard to that issue.  But I do not consider I am in a position to accept that submission, without more.

16. In my view at least three triable issues have been established by the defendants.  First there is the issue of whether an agreement for sale of the business, covering the terms of purchase, was ever struck;  second there is the issue of misrepresentation and then there is the matter of the loan.  I consider that the Master’s decision was correct and that it is not appropriate to make the orders sought. 

17. Accordingly, the appeal is dismissed.