Iambic Pty Ltd v Northwind Holdings Pty Ltd
[2001] WASC 44
IAMBIC PTY LTD -v- NORTHWIND HOLDINGS PTY LTD [2001] WASC 44
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 44 | |
| Case No: | CIV:2633/2000 | 14 FEBRUARY 2001 | |
| Coram: | MASTER BREDMEYER | 21/02/01 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| PDF Version |
| Parties: | IAMBIC PTY LTD NORTHWIND HOLDINGS PTY LTD (ACN 008 464 037) |
Catchwords: | Equity Specific performance of a contract for the sale of shares Specific performance sought by vendor for the payment of a sum of money |
Legislation: | Nil |
Case References: | Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460 Turner v Bladin (1951) 81 CLR 463 Beswick v Beswick [1967] 2 All ER 1197 Ready Construction Pty Ltd v Jenno & Anor (1984) Q ConvR 54-142 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NORTHWIND HOLDINGS PTY LTD (ACN 008 464 037)
Defendant
Catchwords:
Equity - Specific performance of a contract for the sale of shares - Specific performance sought by vendor for the payment of a sum of money
Legislation:
Nil
Result:
Application allowed
(Page 2)
Representation:
Counsel:
Plaintiff : Mr C F McLeod
Defendant : Mr J D Steedman
Solicitors:
Plaintiff : Deacons Lawyers
Defendant : Karp Steedman Ross-Adjie
Case(s) referred to in judgment(s):
Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460
Turner v Bladin (1951) 81 CLR 463
Case(s) also cited:
Beswick v Beswick [1967] 2 All ER 1197
Ready Construction Pty Ltd v Jenno & Anor (1984) Q ConvR 54-142
(Page 3)
1 MASTER BREDMEYER: This is an application by the plaintiff for summary judgment seeking specific performance of an agreement. The agreement is for the sale and purchase of shares. The plaintiff is the vendor and the defendant, the purchaser.
2 The agreement for the sale of shares was in two parts. The first part was for the sale of 500,000 shares in Noizenet Pty Ltd ("Noizenet") for $250,000, payable on 1 March 2000. That money was paid and those shares were transferred. I am only concerned with the second part of that agreement which, as varied, was that the plaintiff sell to the defendant 1,000,000 shares in Noizenet for $500,000, payable by an instalment of $100,000 by 1 September 2000 and $400,000 by 16 October 2000. The defendant paid the instalment of $100,000. The plaintiff seeks an order that the defendant specifically perform and carry into execution its obligations under the deed and the variation by the payment to the plaintiff of the sum of $400,000 within seven days.
3 Specific performance is an equitable remedy whereby a party to a contract is directed to perform his obligations thereunder according to its terms. It presupposes an executory contract, as distinct from an executed one, where something remains to be done, such as a contract of sale for the sale of land which requires a transfer to be executed to give effect to the contract. Or, a contract of sale of a chattel which requires the chattel to be delivered to the purchaser to give effect to the contract. It is not so common for specific performance to be sought to recover a sum of money. However, the court can order the specific performance of payment of a sum of money. Meagher Gummow and Lehane: Equity Doctrines and Remedies, 3rd ed, par 2091, states:
"One thing is quite clear: if for a purchaser damages are not an adequate remedy, his vendor equally is entitled to specific performance although his only entitlement is to receive a payment of money, and the purchaser's only outstanding obligation is to pay it."
- Turner v Bladin (1951) 81 CLR 463 at 473 is cited for that proposition. That proposition applies to the facts of this case. The shares, the subject of the sale, are in a private company and I imagine are not readily saleable. That being so, the purchaser of those shares under an agreement could call upon the vendor for specific performance of the agreement. On the statement of law just cited, that means equally that the vendor of those shares seeking to be paid for them, can get specific performance.
(Page 4)
4 Specific performance can be opposed on any one of a number of discretionary grounds which are set out in ch 20 of Meagher Gummow and Lehane. In this case the defendant relies on the grounds of hardship and futility. The hardship ground refers to hardship to the defendant and the defendant's argument on that is based on matters set out in the affidavit of Mr William David Millar of 1 February 2000. In that, he states that his company does not have the financial capacity to pay the $400,000. It has $844 in the bank. Its only unencumbered asset is a parcel of approximately 1,500,000 shares in Noizenet. The company is indebted to his wife and him in the sum of $225,000 loaned by them to the company. The company does not trade. It could only become able to complete the purchase of the parcel of shares if it is able to sell the shares which it currently holds in Noizenet. On 19 January 2001 the annual general meeting of Noizenet was held. The proposed sale of Noizenet was not voted on at that annual general meeting. The proposal was that Noizenet sell its assets to an unlisted public company, now known to be Noize Ltd, in consideration for a transfer by the shareholders of Noizenet of their respective shares to Noize Ltd and the issue by Noize Ltd of shares in that company to those shareholders on a one-to-one basis. That proposal was not put to the annual general meeting. It was stood over to an extraordinary general meeting to be convened after the determination of this present application. Mr Millar says that, although the plaintiff does not seek an order for damages in lieu of specific performance, he wishes to deny that the plaintiff has, or will, suffer any loss or damage by reason of the defendant's liability to complete the purchase of the parcel of 1,000,000 shares.
5 The defendant is saying that it does not have the cash to pay the $400,000. Its only asset is the parcel of 1,500,000 shares in Noizenet. It would prefer not to sell them at the present time. If the proposal is approved to swap those shares on a one-to-one basis for shares in a new company, Noizenet Ltd, which of course will be floated, it will get more for the shares.
6 Mere financial difficulty in the purchaser finding the purchase money would almost never constitute the defence of hardship to a claim for specific performance: Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460. But the defence of hardship in the present case is not simply advanced on the ground of financial difficulty. It is put, as stated above, because the defendant would like to see its shares in Noizenet swapped for shares in the public company prior to any sale of its shares to pay this debt. I do not consider that this reason comes within the category of hardship, as stated in the cases. Examples of hardship are given in
(Page 5)
- Meagher Gummow and Lehane at 507 - 508. For example, it would not be proper to give specific performance where it would expose the defendant to the risk of prosecution for breach of local government legislation, or where the decree would cause the defendant to incur a forfeiture. The court would also refuse to force a purchaser to become the reluctant owner of a brothel. Holland J in Pasedina, above, discussed hardship in the context of some of the cases. In one case specific performance was refused on the ground of financial hardship because the plaintiff had imposed a hard and unconscionable bargain upon the defendant from the beginning. There is no evidence of that in this case.
7 The defendant says it would be futile to grant this decree because the company does not have the money to pay the debt. That latter statement may, or may not, be true. I consider the plaintiff should be allowed to try and recover the money from the company. In order to do that it may need to apply to wind up the company. The liquidator will sell the assets and explore the possibility of suing the directors, or someone else, to claw back any assets which may have been given away or improperly spent. All that maybe futile. But if it is, the plaintiff can then apply to the court for damages instead of specific performance. I will give liberty to apply to leave that door open.
8 The liberty to apply order could also benefit the defendant. I am concerned that the plaintiff is at present in a very favoured position. The plaintiff was paid $100,000, one fifth of the purchase price for the 1,000,000 shares, yet it has not transferred one fifth of the shares (ie, 200,000 shares) to the purchaser. In relation to that parcel of shares, it has its cake and is eating it. It has the purchase money but has not transferred the shares. The plaintiff argues that it is an entire contract, and that it is only obliged to transfer the shares when the total sum of $500,000 is received. That is true as a matter of construction. I contemplated granting a decree of specific performance but making it conditional on the plaintiff transferring 200,000 shares to the defendant to give substance to its claim that it is ready, will and able to perform its obligations. However, I have decided not to do so, because, if the plaintiff later applies for assessment of damages, that $100,000 could be retained by the plaintiff pending the assessment of damages. If the plaintiff is unable to recover the $400,000 from the defendant, then under the liberty to apply order, I propose that the defendant could apply and ask the court to be relieved from the decree of specific performance and have the court assess damages on behalf of the plaintiff. If those damages were less than $100,000, the difference would be refunded to the defendant.
(Page 6)
9 I propose to order that the defendant specifically perform and carry into execution the obligations under the deed and the variation by the payment to the plaintiff for the sum of $400,000 within seven days. There will be liberty to apply. I will hear the parties on costs.
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