James McCrea as trustee for the J&P Trust and the McRea Family Trust v Threat Protect Group Pty Ltd
[2021] WASC 11
•19 JANUARY 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: JAMES MCCREA as trustee for THE J&P TRUST AND THE MCREA FAMILY TRUST -v- THREAT PROTECT GROUP PTY LTD [2021] WASC 11
CORAM: MASTER SANDERSON
HEARD: 7 DECEMBER 2020
DELIVERED : 19 JANUARY 2021
PUBLISHED : 19 JANUARY 2021
FILE NO/S: CIV 1812 of 2020
BETWEEN: JAMES MCCREA as trustee for THE J&P TRUST AND THE MCREA FAMILY TRUST
PAULEEN MCCREA as trustee for THE J&P TRUST AND THE MCREA FAMILY TRUST
First Plaintiffs
BARRY DAVID PEARCE
Second Plaintiff
JAMES HALL as trustee for THE HALL FAMILY TRUST (ABN 49 542 493 371)
SUSAN HALL as trustee for THE HALL FAMILY TRUST (ABN 49 542 493 371)
Third Plaintiffs
JAMSUE PTY LTD as trustee for THE HALL FAMILY SUPERANNUATION FUND (ABN 63 227 040 651)
Fourth Plaintiff
SANDERS SUPERANNUATION PTY LTD as trustee for THE SANDERS SUPERANNUATION FUND (ABN 40 0716 108 19)
Fifth Plaintiff
DANHARR PTY LTD as trustee for THE DELLA 5 FAMILY TRUST
Sixth Plaintiff
HARRY DELLA CIOPPA as trustee for THE DANHARR PTY LTD EMPLOYEES SUPERFUND (ABN 32 405 125 335)
SHARON DELLA CIOPPA as trustee for THE DANHARR PTY LTD EMPLOYEES SUPERFUND (ABN 32 405 125 335)
Seventh Plaintiffs
AND
THREAT PROTECT GROUP PTY LTD
First Defendant
SWEET NOMINEES PTY LTD as trustee for THE DAVID & ANGELA SWEET FAMILY TRUST
Second Defendant
Catchwords:
Summary judgment - Plaintiff seeks enforcement of share sale agreement - Turns on own facts
Legislation:
Nil
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiffs | : | M J Sims |
| Second Plaintiff | : | M J Sims |
| Third Plaintiffs | : | M J Sims |
| Fourth Plaintiff | : | M J Sims |
| Fifth Plaintiff | : | M J Sims |
| Sixth Plaintiff | : | M J Sims |
| Seventh Plaintiffs | : | M J Sims |
| First Defendant | : | I R Freeman |
| Second Defendant | : | No appearance |
Solicitors:
| First Plaintiffs | : | K&L Gates |
| Second Plaintiff | : | K&L Gates |
| Third Plaintiffs | : | K&L Gates |
| Fourth Plaintiff | : | K&L Gates |
| Fifth Plaintiff | : | K&L Gates |
| Sixth Plaintiff | : | K&L Gates |
| Seventh Plaintiffs | : | K&L Gates |
| First Defendant | : | Lavan |
| Second Defendant | : | Hogan Lovells (Sydney) |
Case(s) referred to in decision(s):
Palaniappan v Westpac Banking Corporation [2016] WASCA 72
MASTER SANDERSON:
This is the plaintiffs' application for summary judgment against the first defendant. Based upon the statement of claim which was indorsed on the writ of summons filed 29 July 2020, the plaintiffs' action can be summarised as follows. In February 2019, the plaintiffs entered into an agreement defined in the pleadings as a 'share sale agreement' to sell all of the issued capital in a company Onwatch Pty Ltd to the first defendant.[1] The terms of the share sale agreement relevant to this dispute are set out in par 11 of the plaintiffs' statement of claim. That paragraph reads as follows:
[1] Writ of Summons – Statement of Claim filed 29 July 2020 [10].
It was a term of the Share Sale Agreement, in effect, that:
(a) each plaintiff and the second defendant agreed to sell to the first defendant, and the first defendant agreed to buy, the Shares (cl 2.1);
(b) the first-named third plaintiff, in his personal capacity, is and was at all material times the Sellers’ Representative (as defined in the Share Sale Agreement) (cl 1.1);
(c) the first defendant would pay the Purchase Price (as defined in paragraph 11(d) below) to the second defendant and the plaintiffs as consideration for the Shares (cl 3.3);
(d) the Purchase Price was the sum of the Deposit, the Completion Payment, the Actual Deferred Payment, any Tax Asset Utilisation Amount, any AIS Premium and the value of the Consideration Shares (as each of those terms is defined in the Share Sale Agreement) (cl 1.1);
(e) the first defendant would pay the Purchase Price, relevantly, as follows:
(i) on Completion (as defined in the Share Sale Agreement), the Completion Payment (cl 3.4.1); and
(ii) in accordance with clause 8 of the Share Sale Agreement, the Actual Deferred Payment (cl 3.4.2),
in immediately available funds by way of electronic funds transfer to the Nominated Trust Account, being an account nominated by K&L Gates Sydney; and
(iii) by procuring on Completion that the Buyer Parent (as defined in the Share Sale Agreement) issue the Consideration Shares (cl 3.4.5);
(f) as to the Actual Deferred Payment:
(i) within 10 business days after the day that was 12 months from the Completion Date (as defined in paragraph 12 below), the first defendant must prepare a draft Deferred Payment Statement (the Draft Deferred Payment Statement) in accordance with Part B of Schedule 3 of the Share Sale Agreement and provide it to the Sellers' Representative for review (cl 8.1);
(ii) within 20 business days of receipt of the Draft Deferred Payment Statement, the Sellers' Representative must give notice to the first defendant stating whether he agreed or disagreed with the Draft Deferred Payment Statement (cl 8.2);
(iii) if the Sellers' Representative gave notice that he disputed any item in the Draft Deferred Payment Statement then:
(A) the first defendant and the Sellers' Representative were to confer and use all reasonable endeavours to resolve the dispute (cl 8.4.1);
(B) the Draft Deferred Payment Statement must be adjusted to reflect the resolution of all disputed items resolved in accordance with the term pleaded at subparagraph (A) above (cl 8.4.3); and
(C) the Draft Deferred Payment Statement as adjusted will constitute the Deferred Payment Statement (cl 8.4.4);
(iv) the amount stated in the Deferred Payment Statement was defined as the Actual Deferred Payment (cl 1.1); and
(v) if the Actual Deferred Payment was less than the Estimated Deferred Payment (defined in the Share Sale Agreement as $1,500,000), the first defendant shall pay an amount equal to the Actual Deferred Payment to the Nominated Trust Account by electronic funds transfer on the date 5 business days after the Deferred Payment Statement is finalised (cl 8.6);
(g) unless otherwise expressly agreed between the parties, all payments of the Purchase Price must be paid without set-off or counterclaim (cl 3.10); and
(h) no party had a right to set off, deduct or withhold any moneys that it may be or become liable to pay under the Share Sale Agreement to another (the 2nd) party against any money that the other (the 2nd) party may owe to it (cl 20.19).
Particulars
The plaintiffs refer to and repeat the particulars sub-joined to paragraph 9 above.
The plaintiffs plead 'completion' under the share sale agreement occurred on 30 April 2020 and that date became the 'completion date'.[2] The plaintiffs and the second defendant then transferred the shares held by each of them to the first defendant.[3] At completion, the first defendant paid the completion payment to the plaintiffs and the second defendant and the buyer parent issued the consideration shares.[4]
[2] Writ of Summons – Statement of Claim filed 29 July 2020 [12].
[3] Writ of Summons – Statement of Claim filed 29 July 2020 [13].
[4] Writ of Summons – Statement of Claim filed 29 July 2020 [14].
On 14 May 2020, the first defendant delivered the draft deferred payment statement to the seller's representative.[5] The actual deferred payment was an amount of $853,200.[6] On 22 May 2020, the seller's representative issued a notice disputing the draft deferred payment statement.[7] On 19 June 2020, the seller's representative gave written notice to the first defendant that the dispute had been resolved and the plaintiffs and the second defendant agreed the draft deferred payment statement.[8] Despite demand the first defendant has not paid to the plaintiffs and the second defendant the $853,200.[9] The plaintiff seeks judgment in that amount.
[5] Writ of Summons – Statement of Claim filed 29 July 2020 [15].
[6] Writ of Summons – Statement of Claim filed 29 July 2020 [16].
[7] Writ of Summons – Statement of Claim filed 29 July 2020 [17].
[8] Writ of Summons – Statement of Claim filed 29 July 2020 [18].
[9] Writ of Summons – Statement of Claim filed 29 July 2020 [20].
The first defendant has filed a defence. (As a rule, an application for summary judgment should be brought before a defence is filed. In this case the defence was filed promptly and the summary judgment application was brought within time. This was not a case where standard practice was not followed by the first defendant's solicitors).
The first defendant raises two issues. First it is said there were material misrepresentations made by the plaintiffs which give rise to a cause of action under the Australian Consumer Law. It is important to note the first defendant does not seek to have the share sale agreement set aside. As counsel for the first defendant said in the course of his submissions, it is now too late to 'unscramble the egg'. Effectively what the first defendant is saying is that the plaintiffs are not entitled to the payment they are presently seeking.
The second argument is, what is defined as the 'completion payment agreement'. The pleading of this side agreement is found in par 15 of the first defendant's defence. I do not need to set it out in detail. Essentially what was pleaded as that there was a separate and distinct agreement standing apart from the share sale agreement pursuant to which the deferred payment was to be made. Counsel for the plaintiffs maintained this plea was untenable.
In the course of his submissions, counsel for the first defendant accepted that was the case. On that basis, the completion payment agreement can be put to one side; it does not form the basis for rejecting the summary judgment application. For the purposes of the summary judgment application – and only for that purpose – counsel for the plaintiffs accepted that the defendants have a cause of action under the Australian Consumer Law. In making that concession, counsel was doing nothing more than accepting the long‑established principle on a summary judgment application the version of facts most favourable to a defendant must be accepted. So for present purposes, it is proper to proceed on the basis that the first defendant has a cause of action under the Australian Consumer Law but that the relief available does not include setting aside the share sale agreement. The first defendant is limited by way of relief to a money claim.
In those circumstances, the plaintiffs rely on cl 3.10 and cl 20.19 of the share sale agreement. The effect of those two clauses is pleaded in pars 11(g) and (h) which I have quoted above. It was the plaintiffs' position these clauses were what is sometimes referred to as 'suspension clauses' or 'pay now argue later' clauses. It is now generally accepted such clauses are effective: See Palaniappan v Westpac Banking Corporation [2016] WASCA 72. On that basis the plaintiffs say they are entitled to judgment. Whatever arguments the first defendant wishes to raise must be raised in separate proceedings and can only be raised once payment has been made.
The plaintiffs' claim is unanswerable. The meaning and intent of the suspension clauses is clear. The first defendant has agreed to make payment, without deduction, and it should do so. When payment has been made then the first defendant can, if it wishes, in separate proceedings, claw back some of what it has paid. But it does not have a defence in this action. Accordingly there should be judgment for the plaintiffs in the amount claimed.
On publication of these reasons, if agreement as to the form of orders cannot be reached, each party should, within seven days, file short written submissions. Subject to any submissions, it would appear the proper order as to costs is that the first defendant pay the plaintiffs' costs of the action, including reserved costs. Such costs to be taxed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
19 JANUARY 2021
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