Hadouken Pty Ltd v D Comm Infrastructure Pty Ltd
[2024] WASC 330
•9 SEPTEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HADOUKEN PTY LTD -v- D COMM INFRASTRUCTURE PTY LTD [2024] WASC 330
CORAM: WHITBY J
HEARD: 29 AUGUST 2024
DELIVERED : 9 SEPTEMBER 2024
FILE NO/S: CIV 1294 of 2024
BETWEEN: HADOUKEN PTY LTD
Plaintiff
AND
D COMM INFRASTRUCTURE PTY LTD
Defendant
Catchwords:
Practice and procedure - Summary judgment - Order 14 of the Rules of the Supreme Court 1971 (WA) - Claim for damages pursuant to a share sale agreement - Whether arguable defence - Misleading and deceptive conduct - Valid termination of contract - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application dismissed
Defendant granted unconditional leave to defend proceeding
Category: B
Representation:
Counsel:
| Plaintiff | : | C Williams |
| Defendant | : | C Thorpe |
Solicitors:
| Plaintiff | : | Solomon Brothers |
| Defendant | : | Williams & Hughes |
Case(s) referred to in decision(s):
Agar v Hyde (2000) 201 CLR 552
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24 ; (1982) 149 CLR 337
Edenham Pty Ltd v Meares [2016] WASC 301
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Gerovich v Gerovich [2018] WASC 153
Lashansky v Legal Practice Board of Western Australia [No 3] [2013] WASCA 260
Lopez v Pilmer [2014] WASC 220
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Westpac Banking Corporation v Anderson [2017] WASC 106
WHITBY J:
Summary
In November 2022, the plaintiff and the defendant entered into a share sale agreement (SSA) pursuant to which the plaintiff agreed to sell, and the defendant agreed to buy, the shares in Collie Energy Hub Pty Ltd (CEH) for $800,000.
The defendant purported to terminate the SSA on the basis that the plaintiff had engaged in misleading and deceptive conduct and/or that conditions precedent to the SSA had not been satisfied.
The plaintiff commenced this action against the defendant claiming that the defendant had repudiated the SSA and seeking damages in the amount of $800,000. The plaintiff has applied for summary judgment against the defendant on the basis that the defendant has no arguable defence to the action.
The defendant opposes the application for summary judgment on the basis that it has an arguable defence. For the reasons that follow, I am satisfied that the defendant has an arguable defence and that the plaintiff's application for summary judgment should be dismissed. The defendant should be granted unconditional leave to defend the action.
Application and evidence
By chambers summons dated 2 May 2024, the plaintiff applied for summary judgment against the defendant pursuant to O 14 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) (application).
The plaintiff relies upon the affidavit of Ben Lee Tan sworn on 1 May 2024 (Tan Affidavit) in support of the application.
The defendant opposes the application and relies upon the affidavit of Brett Endersby sworn on 7 June 2024 (Endersby Affidavit). I determined that the following paragraphs of the Endersby Affidavit be struck out: [12] (other than the first two sentences); subparagraphs of [28]; [29]; [37.2]; first sentence of [41]; first sentence of [44]; [50]; [51]; [54] and [64]. The defendant also relies upon the affidavit of Louis Lut-Yiu Lee sworn on 12 July 2024 (Lee Affidavit).
Before outlining the relevant legal principles, identifying the issues and making my determination, I will deal with the preliminary issue of the grant of leave for the application to be made out of time.
Leave to make the application out of time
The plaintiff must make any application for summary judgment within 21 days after the defendant has entered an appearance or such later time by leave of the court.[1]
[1] Order 14 r 1 (1) of the RSC.
The defendant entered an appearance on 28 March 2024. The application was required to be filed by 18 April 2024 - it was in fact filed two weeks later on 2 May 2024. Therefore, the plaintiff requires leave to make the application for summary judgment out of time. The onus is on the plaintiff to justify any delay in making the application.
In deciding whether the delay was justified, the court will have regard to the merits of the application, the history of the proceedings, the conduct of the parties and the consequences for the parties if an extension of time is granted or refused.[2]
[2] Lashansky v Legal Practice Board of Western Australia[No 3] [2013] WASCA 260.
In my view, the following matters justify the plaintiff's delay in making the application:
(1)the defendant did not file a defence by the due date, being 15 April 2024, or at all;
(2)by letter dated 16 April 2024, the solicitors for the plaintiff wrote to the solicitors for the defendant foreshadowing an application for summary judgment on the basis that the defendant had not articulated an arguable defence;[3]
(3)by letter dated 23 April 2024, the solicitors for the defendant wrote to the solicitors for the plaintiff outlining the factual disputes which, in their view, meant that summary judgment was not appropriate;[4]
(4)the application was filed only eight days later; and
(5)the defendant has not adduced any evidence as to prejudice having been suffered because of the plaintiff's delay in making the application.
[3] Tan Affidavit; Annexure BLT-14.
[4] Tan Affidavit; Annexure BLT-15.
In my view, the objects of case management espoused in O 1 r 4B of the RSC are best achieved by the plaintiff having time to consider the response from the defendant outlining its defence before it filed the application. The delay in making the application after receiving that response was minimal and justifiable. It would be counterproductive to the efficient use of court resources and the just determination of litigation to insist upon strict compliance with the time limit for making the application in this case. I, therefore, grant leave to the plaintiff to file the application out of time.
Summary judgment - legal principles
Order 14 r 1(1) of the RSC provides that where a statement of claim has been served on a defendant and the defendant has entered an appearance, the plaintiff may, on the ground that the defendant has no defence to a claim included in the writ, or to a particular part of such claim, or has no defence to such a claim or part except as to the amount of any damages claimed, apply to the court for judgment against that defendant.
Order 14 r 2(1) provides that the application for summary judgment must be supported by an affidavit verifying the facts upon which the claim is based and stating that, in the deponent's belief, there is no defence to the claim.
Order 14 r 3(1) of the RSC provides that on the hearing of a summary judgment application, unless the court dismisses the application, or the defendant satisfies the court with respect to the claim, or the part of the claim to which the application relates, that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part, the court may give such judgment for the plaintiff against the defendant on that claim or part thereof as may be just, having regard to the nature of the remedy or relief claimed.
The legal principles governing the power to order summary judgment are well established. Summary judgment should be exercised with great care and will not be exercised unless it is clear that there is no real question to be tried.[5]
[5] Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 [99].
Summary judgment must only be granted where the court has a high degree of certainty of the outcome of the proceedings if they went to a trial.[6] If the determination of an application for summary judgment depends upon contested questions of fact, the court should not dispose of the action summarily. However, where the issues raised depend upon questions of law, the court may answer those questions in deciding whether summary judgment should be granted.[7]
[6] Agar v Hyde (2000) 201 CLR 552 [57].
[7] Edenham Pty Ltd v Meares [2016] WASC 301 [17].
Once the plaintiff has established a prima facie right to judgment, the evidentiary onus shifts to the defendant to satisfy the court why judgment should not be given. The defendant does not have to show a defence on the balance of probabilities, only to show cause as to why there is an arguable defence.[8] However, the overall legal burden of persuasion that summary judgment is appropriate, that is that there is no serious question to be tried, remains on the plaintiff.[9]
[8] Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27; Westpac Banking Corporation v Anderson [2017] WASC 106.
[9] Lopez v Pilmer [2014] WASC 220 [9].
In order for the defendant to show cause as to why there is an arguable defence, the defendant is usually required to file an affidavit which contains sufficient particulars to enable the defence case to be properly understood.[10]
[10] Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109.
Summary judgment should not be granted when the facts are in dispute. If there is a conflict of evidence on the affidavits, the court should approach the application for summary judgment on the assumption that the facts set out in the affidavits relied upon by the party resisting the application will be ultimately accepted at trial.[11]
[11] Gerovich v Gerovich [2018] WASC 153 [32].
Issues to be determined
In an application for summary judgment, the court must answer the following questions:
(1)has the plaintiff established a prima facie right to judgment?; and if so
(2)has the defendant shown cause as to why it has an arguable defence?
It is only if the plaintiff has established a prima facie right to judgment and the defendant has not shown cause as to why it has an arguable defence, that summary judgment will be granted.
Has the plaintiff established a prima facie right to judgment?
By its statement of claim, the plaintiff pleads:
(1)on 11 November 2022, the plaintiff and the defendant entered into the SSA pursuant to which the plaintiff agreed to sell, and the defendant agreed to purchase, all of the shares in CEH for $800,000;
(2)clause 2.1 of the SSA provided that the plaintiff and defendant were only obliged to settle the sale of the CEH shares if the following conditions precedent were satisfied:
(a)by 23 December 2022, there was no notification by the defendant to the plaintiff indicating that the defendant was not satisfied with the results of the defendant's legal, financial and technical due diligence on CEH and the business of CEH as at 11 November 2022 (Business);[12] and
[12] cl 2.1(a).
(b)no event or circumstances which had, or would have, a material adverse effect on the business, assets, operations, future financial performance or value of the Business or CEH (Material Adverse Change) had occurred in respect of CEH.[13]
[13] cl 2.1(b) (MAC Condition).
(3)by 23 December 2022, the plaintiff and Mr Tan must immediately arrange for representatives of the defendant to be introduced to the owner of the property at 323 Patstone Road, Collie (Property) and the defendant has the right to seek to negotiate with the owner the potential purchase of the Property on terms acceptable to the defendant until 22 January 2023;
(4)settlement of the sale and purchase of the CEH shares was to take place five business days immediately following the date on which the last of the conditions were satisfied or waived;[14]
[14] cl 6.1.
(5)on 22 December 2022, the defendant gave notice of its satisfaction with its legal, financial and technical due diligence on CEH and the Business;
(6)the defendant, did not by 23 December 2022, give any notification to the plaintiff that the defendant was not satisfied with the results of its legal, financial and technical due diligence on CEH and the Business;
(7)on 23 December 2023, the plaintiff and Mr Tan introduced the defendant to the owner of the Property;
(8)on 19 May 2023, an entity related to the defendant, D Comm Energy and Industrial Hub Pty Ltd, settled on the purchase of the Property from the owner;
(9)settlement of the purchase of the CEH shares was due to occur by 4 January 2023;
(10)on 20 January 2023, the defendant asserted that:
(a)there had been a Material Adverse Change in the Business and CEH;
(b)the MAC Condition had not been satisfied; and
(c)the defendant terminated the SSA on the basis of non-satisfaction of the MAC Condition.
(11)despite demand, the defendant failed to settle on the sale of the CEH shares and pay the amount of $800,000 to the plaintiff;
(12)the defendant's purported termination of the SSA was a repudiation of the SSA;
(13)on 31 January 2024, the plaintiff accepted the defendant's repudiation; and
(14)the plaintiff has suffered loss and damage in the amount of $800,000.
The plaintiff seeks relief in the form of damages, interest and costs.
The defendant submits that the plaintiff has failed to demonstrate it has a prima facie case and the application fails at the first hurdle. The defendant says that, at the time that the plaintiff purported to terminate the SSA, the plaintiff was not ready, willing and able to perform the SSA and therefore, the termination was not valid. The defendant advances the following reasons for this proposition:
(1)on 19 January 2024, Western Power terminated two central contracts with CEH that formed part of its solar farm rights because CEH had failed to comply with a finance condition precedent in those contracts;[15]
(2)as a result of losing its solar farm rights, the plaintiff and CEH were in fundamental breach of the SSA in that CEH was incapable of transferring a significant portion of its solar farm rights at settlement; and
(3)at the time that the plaintiff purported to accept the repudiation of the SSA and thereby terminate the SSA, the plaintiff was not ready, willing and able to perform the SSA and therefore the purported termination was invalid.
[15] Tan Affidavit; Annexure BLT-23 and BLT-24.
The issue with the defendant's reasoning is that it does not refer to any provision in the SSA which obliges CEH to transfer its 'solar farm rights' to the defendant. Clause 6 of the SSA requires the plaintiff to do all things necessary to transfer title to the shares in CEH to the defendant. Clause 5.1 provides that the plaintiff must procure that CEH's Business be conducted in the 'Ordinary Course for the period commencing on the Execution Date and expiring on the earlier of the termination of [the SSA] and the Settlement Date'.[16] The 'Settlement Date' is defined in the SSA as:
[T]he date that is five (5) Business Days immediately following the date on which the last of the Conditions have been satisfied or waived in accordance with this Agreement or such other date as the [defendant] and [the plaintiff] may agree in writing.
[16] Tan Affidavit; Annexure BLT-3, cl 5.1, page 23.
The 'Settlement Date', on the ordinary and plain meaning of these words, is the date upon which settlement is required to occur, not the date on which settlement actually occurs. As a result, the obligation in cl 5.1 of the SSA was arguably not an obligation that extended to the date upon which the plaintiff purportedly terminated the SSA.
Therefore, I do not consider that there is merit in the defendant's contention that the plaintiff was not ready, willing and able to perform the SSA at the time that it purportedly terminated the contract.
The plaintiff has satisfied the formal requirements of O 14 r 2(1). Mr Tan, by his affidavit filed on behalf of the plaintiff, verifies that the facts upon which the plaintiff's claim is based are true and correct and that in his belief the defendant has no defence to the action.[17] The plaintiff has established a prima facie case.
[17] Tan Affidavit [31].
I now turn to consider whether the defendant has shown cause as to why it has an arguable defence.
Has the defendant shown cause as to why it has an arguable defence?
In its outline of written submissions the defendant advanced four defences, being misleading and deceptive conduct, valid termination of the SSA by the defendant, rectification of the SSA and abandonment of the SSA. At the hearing, counsel for the defendant focussed on the first two of these defences. I will do the same.
Misleading and deceptive conduct
The first arguable defence advanced by the defendant is that the plaintiff engaged in misleading and deceptive conduct giving rise to relief pursuant to s 237 and/or 243 of the Australian Consumer Law. The defendant submits that Mr Tan, on behalf of the plaintiff made the following representations which induced it to enter into the SSA:
(1)the 'all in' cost of the CEH shares and the Property (CEH Project) was approximately $2.4 million, being $1.6 million for the Property and $800,000 for the CEH shares;
(2)CEH had a legitimate interest in the Property and that the defendant could not deal with the owner of the Property until the SSA was concluded; and
(3)the plaintiff, by Mr Tan, would be a reliable conduit of information from the owner of the Property and of material assistance in facilitating the defendant's acquisition of the Property.
The defendant submits that each of these representations was misleading and deceptive because:
(1)Mr Tan had no reasonable grounds to represent that the 'all in' cost of the CEH Project was $2.4 million when the Property ultimately sold for $2.2 million and as a result the value of the CEH shares was no more than $200,000;
(2)CEH had no interest in the Property and therefore, there was no legitimate basis for prohibiting the defendant from dealing with the owner of the Property; and
(3)CEH conveyed no information in respect of the Property to the defendant until 22 December 2022, when Mr Tan verbally informed Mr Endersby that the Property was under contract of sale to a third party.
The defendant says that it relied on those representations to its detriment in the following ways:
(1)it relied on the representation as to the total cost of the CEH Project to satisfy itself that the value of the CEH shares, as provided for in the SSA, was reasonable;
(2)it agreed to not dealing with the owner of the Property directly in reliance on the representation that CEH had a legitimate interest in the Property and that Mr Tan would be a reliable conduit of information from the owner of the Property; and
(3)in not dealing with the owner of the Property directly, the defendant was unable to test the value of the Property and therefore, the value of the CEH shares.
The defendant relies upon the following evidence of Mr Endersby in support of the misleading and deceptive conduct defence:
(1)on each of 19 September 2022 and 29 September 2022, Mr Tan said to Mr Endersby words to the effect that the Property 'should be approximately $1.6 million or less';[18]
[18] Endersby Affidavit [9] and [16] respectively.
(2)on 20 September 2022, Mr Tan provided the defendant access to the plaintiff's document in a data room which stated:[19]
[19] Endersby Affidavit; Annexure BE-4, page 28.
The whole of the parcel may be purchased for approximately $1.6m. This land has been approved in the Collie Strategic Plan to be zoned Industrial and requires only a rezoning process (circa 12 months) to occur. The solar farm is already approved as is and is not affected by this process.
The land sufficient for the solar farm (south of the east-west pipeline) may also be leased on a long term lease for approximately $50,000 per annum (with CPI).
Either option is available and can be a CP to any transaction.
(3)on 30 September 2022, Mr Endersby and Mr Tan discussed a proposed term sheet which Mr Endersby had sent the day before to Mr Tan. During this conversation, Mr Tan said words to the effect:[20]
(a)the owner of the Property would not grant the defendant a call option over the Property as the owner wanted to sell the Property;
(b)the owner had indicated to Mr Tan that if he received an offer on the Property that was acceptable to him, he would give CEH the opportunity to match that offer before accepting it;
(c)Mr Tan said that the owner would not put that first right of refusal in writing but the owner had assured Mr Tan that is what would happen;
(d)Mr Tan was said he did not want Mr Endersby speaking to the owner of the Property until the due diligence process had been completed; and
(e)in response to a statement from Mr Endersby, in effect, that the defendant needs to have a mechanism in the SSA to protect it if it could not reach terms with the owner for the purchase of the Property, Mr Tan said OK.
(4)the term sheets and the SSA all contained a stipulation in some form to the effect that the defendant would not contact the owner of the Property until the completion of the due diligence process;[21] and
(5)on 29 September 2022, Mr Tan said to Mr Endersby words to the effect that Mr Tan had a good relationship with the owner of the Property and that this would help the defendant secure the Property.[22]
[20] Endersby Affidavit [19] - [21].
[21] Endersby Affidavit; Annexure BE-6, page 41; Annexure BE-7, page 48; Annexure BE-9, page 61.
[22] Endersby Affidavit [16].
The plaintiff submits that, even if Mr Endersby's evidence was ultimately accepted at trial, there is no evidence that establishes that any misleading and deceptive conduct induced the defendant to enter into the SSA. That is for the following reasons:
(1)on Mr Endersby's evidence Mr Tan said that the Property 'should' be able to be secured for $1.6 million - this is not a definitive statement that the Property could be purchased for $1.6 million;
(2)the evidence of Mr Endersby establishes that the defendant did not rely upon any assurance given by Mr Tan that the Property could be purchased for $1.6 million - the third and final drafts of the terms sheet acknowledge that the plaintiff cannot provide certainty as to the acquisition of the Property;[23] and
(3)the evidence of Mr Endersby establishes that the defendant did not rely upon any representation by Mr Tan that he had a relationship with the owner of the Property, as the representation was not sufficiently certain.
[23] Endersby Affidavit; Annexure BE-7 and Annexure BE-9 respectively.
In order for the defendant to show cause that it has an arguable defence based on misleading or deceptive conduct, the defendant must adduce evidence in support of its contention that it suffered loss or damage 'because' of misleading or deceptive conduct.[24] Therefore, the defendant must show that it is arguable that it entered into the SSA 'because of' the alleged misleading or deceptive conduct of the plaintiff.
[24] ss 236 and 237 of the Australian Consumer Law.
I turn first to consider the defence based on the alleged representations as to the value of the Property. I find that, taking Mr Endersby's evidence at its highest, any contention that the defendant entered into the SSA because of a representation that the Property could be purchased for $1.6 million or less is untenable. The relevant evidence is as follows:
(1)on 29 September 2022, Mr Endersby sent Mr Tan a proposed non-binding indicative terms sheet. This terms sheet contained the following condition precedent:[25]
[25] Endersby Affidavit; Annexure BE-5, Item 4(a), pages 33 - 34.
(a)CEH negotiating a Call Option Deed over the [Property] on terms acceptable to [the defendant] including but not limited to;
(i)a Purchase Price not exceeding $1,500,000.
(ii)Call Option Fee of not more than $10,000 payable within 7 days of execution of the Call Option Deed.
(iii)Call Option Period not less than 180 days.
(iv)Settlement being 45 days upon exercise of Option.
(v)The Call Option to contain a clause allowing the rights of the Call Option to be able to be Assigned.
(2)on 1 October 2022, Mr Endersby provided a further draft of the terms sheet to Mr Tan.[26] Item 4(b) of that terms sheet provided:[27]
The Parties acknowledge that the CEH cannot provide certainty as to the acquisition of the Land. The owner of the land is currently wanting to sell so is not prepared to grant a Call Option at this stage. The owner has indicated that should they get an offer on The Land that is acceptable to them they will give CEH the opportunity to match that offer before accepting the original offer.
The Parties acknowledge that this arrangement cannot be placed in writing and hence may not be enforceable on the owner of the land.
…
(3)a provision to the same effect was retained in a subsequent draft of the terms sheet[28] and in the final executed version of the terms sheet;[29]
(4)the final executed terms sheet also provided for a condition precedent (item 4(c)), without reference to the value of the Property, that upon providing notice that the due diligence has been satisfied, the defendant would have a further 30 days to negotiate with the owner of the Property a successful purchase or leasing contract over the Property and that CEH agreed to assist with this transaction;[30] and
(5)the SSA did not contain any condition precedent that the defendant effect a purchase of the Property at all, let alone a purchase for a price of $1.6 million or less.
[26] Endersby Affidavit; Annexure BE-6, pages 39 - 44.
[27] Endersby Affidavit; Annexure BE-6, page 41.
[28] Endersby Affidavit; Annexure BE-7.
[29] Endersby Affidavit; Annexure BE-9, Item 5, page 62.
[30] Enderby Affidavit; Annexure BE-9, pages 61 and 62.
The only evidence in support of a continued understanding by the defendant that the Property could be purchased for a price of $1.6 million or less is Mr Endersby's evidence that:[31]
…the understanding I had, based on Mr Tan's representations about the nature of his relationship with the owner of the [Property], that the Defendant could still possibly acquire the [Property] for approximately $1.6 million.
[31] Endersby Affidavit [37.1].
Even accepting, for the purposes of the application, that Mr Endersby, on behalf of the defendant, had this understanding, such evidence only establishes that the defendant thought that there was a possibility of acquiring the Property for $1.6 million - which leaves open the alternative that the defendant understood that it was possible that it would not be able to purchase the Property for $1.6 million.
The fact that the indicative terms sheet contained a condition precedent providing for a call option to purchase the Property for a price not exceeding $1.5 million and that this condition precedent was removed from any of the later terms sheets and the SSA, excludes any possibility that the defendant continued to understand that it would be able to purchase the Property for an amount that was guaranteed to be $1.6 million or less. Absent that understanding, any contention that the defendant entered into the SSA because of a representation that the Property could be purchased for $1.6 million or less is, in my view, doomed to fail.
I turn now to consider the defence based on the representation that the plaintiff, by Mr Tan, would be a reliable conduit of information from the owner of the Property and of material assistance in facilitating the defendant's acquisition of the Property.
Mr Endersby deposes that, after reading a document entitled 'Collie Energy Hub September 2022' provided by him to Mr Tan, his understanding of the proposed project was, inter alia, that Mr Tan had a special relationship with the owner of the Property that would materially assist the defendant in acquiring it. In my view, this evidence is incapable of establishing an arguable defence. It is simply evidence of Mr Endersby's subjective understanding. There is no evidence adduced by the defendant which can establish a representation that is sufficiently certain or that the defendant relied upon such a representation in entering into the SSA.
I therefore, find that the defendant has failed to show cause as to why it has an arguable defence based on misleading and deceptive conduct.
Valid termination of the SSA by the defendant
The defendant submits that cl 2.4(c) of the SSA, when read in conjunction with cl 2.1(c) of the SSA, provides that the defendant's acquisition of the Property on acceptable terms to the defendant is a condition precedent to the settlement of the SSA.
Clause 2.4(c) of the SSA provides:
the Purchaser shall have the right to seek to negotiate with the Landowner the potential purchase of the land the subject of the Lease on terms acceptable to the Purchaser during the End Date Extension Period.
(emphasis added)
I note that cl 2.4(c) refers to 'the land the subject of the Lease'. As there is no land which is the subject of a lease, I infer that the reference must have intended to be a reference to the Property. The defendant submits that the effect of this clause is that the defendant had until 22 January 2023 (referred to in the SSA as the End Date Extension Period)[32] to purchase the Property on terms acceptable to the defendant. The defendant submits that the owner's terms were unacceptable because the price of the Property was too high and as a result, the plaintiff validly terminated the SSA.
[32] Tan Affidavit; Annexure BLT-3, page 21.
The defendant relies upon the following evidence in support of its proffered construction of cl 2.4(c) of the SSA:
(1)on 3 October 2022 by email[33] in response to inter alia, Endersby saying:
We don't want to be unconditional on buying your shares unless we know we can secure the land…
(2) Tan responded:
I think this makes sense. Pls draft and I think I'm happy to proceed on that basis.
[33] Endersby Affidavit; Annexure BE-8.
The defendant also submits that its inability to purchase the Property for $1.6 million constituted a 'Material Adverse Change' which permitted it to terminate the SSA pursuant to cl 2.1(b). The defendant says the material adverse change is this - given that the 'all in cost' of the CEH Project of $2.4 million was satisfactory for the defendant's return on capital, if the price of the Property was greater than $1.6 million, then the price of the CEH shares was less than $800,000.
The defendant says that the SSA is ambiguous and uncertain in a number of material respects and therefore, extrinsic material and an examination of surrounding circumstances will be necessary to interpret the SSA. The defendant says that this ambiguity and uncertainty necessitates a trial of the action.
The plaintiff says that cl 2.4 of the SSA only provides that the defendant has the 'right to seek to negotiate' with the owner of the Property in relation to the purchase of the Property. The plaintiff says that, on its proper construction, the SSA does not contain a condition precedent that the defendant must acquire the Property on acceptable terms to the defendant.
Further, the plaintiff says that a 'Material Adverse Change' must relate to the ‘Business’ of CEH. The defendant submits that, even if the court were to accept the defendant's contention that the value of the Property was required to be less than $1.6 million, the price for which the defendant could purchase the Property is not a matter that had any effect on the Business of CEH and therefore, falls outside the scope of a 'material adverse change' for the purpose of cl 2.1(b) of the SSA.
In my view, the defendant has shown cause that it has an arguable defence on the basis that it validly terminated the SSA pursuant to cl 2.1(b) and or cl 2.4. That is for the following reasons.
Firstly, the SSA contains a number of inconsistencies, undefined terms and definitions that appear to be non-sensical. The defendant and the plaintiff offer alternate constructions in respect of those inconsistencies. By way of example:
(1)'Material Adverse Change' is defined as 'as event or circumstance which has, or will have, a material adverse effect on the business, assets, operations, future financial performance or value of the Business or the Group' (emphasis added).[34] 'Business' is defined as 'the business carried on by the Company as at the Execution Date'. 'Group' however, is not defined in the SSA. The defendant says that 'Group' may have intended to be a reference to 'Purchaser Group' - a term which is defined in the SSA as 'the Purchaser and each of its Affiliates (including the Company immediately following Settlement) or any of them, as the case requires'.[35]On the other hand, the plaintiff submits that the word Group does not add anything to the definition of 'Material Adverse Change' and the material adverse change required is clearly one to the Business of CEH as evident from the words of cl 2.1(b) of the SSA; and
(2)clause 2.1(a) is expressed in terms of the absence of notification in relation to due diligence, whereas cl 2.4 refers to cl 2.1(a) in terms of there being a positive confirmation in writing of the due diligence. Although nothing turned on this for the purposes of the application, it is another example of the inherent inconsistencies in the SSA capable of alternate constructions; and
(3)clause 2.4 refers to the 'land the subject of the Lease' - the Property is not 'land the subject of a Lease'.
[34] SSA cl 1.1.
[35] SSA cl 1.1.
What is evident from these inconsistencies and uncertainties is that the task of construing the SSA is not a straight-forward one. The question of whether the defendant was entitled to terminate the SSA pursuant to cl 2.1(b) and/or cl 2.4 is a matter to be determined upon the proper construction of the SSA as a whole and may give rise to an ambiguity upon which extrinsic evidence would be admissible.[36] In my view, the proper construction of these clauses, given their ambiguity, is not capable of being determined on a summary judgment application.
[36] Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24 ; (1982) 149 CLR 337, 348.
I find that the defendant's contention that it validly terminated the SSA gives rise to an arguable defence and must be determined at trial.
Conclusion
The defendant has shown cause as to why it has an arguable defence that it validly terminated the SSA. The plaintiff's application for summary judgment is dismissed and the defendant is granted unconditional leave to defend the proceedings.
For the sake of clarity, even though I have found that the defendant did not show cause that it had an arguable defence on the basis of misleading and deceptive conduct, that was a finding made on the basis of the evidence currently before the court. My findings are made only for the purposes of this application and are not binding upon either party at the trial. The defendant has unconditional leave to defend and is not precluded from raising any defence based on my findings made in these reasons.
The parties are requested to confer in relation to the final orders and costs and file a memorandum of proposed consent orders. If the parties do not consent to orders within seven (7) day, each party is to file a minute of proposed orders.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to the Hon Justice Whitby
9 SEPTEMBER 2024
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