Nati v Bunt

Case [2013] FCAFC 60

FEDERAL COURT OF AUSTRALIA

Nati v Bunt [2013] FCAFC 60

Citation: Nati v Bunt [2013] FCAFC 60
Appeal from: Bunt v Nati [2012] FCA 1089
Parties: ROBERT NATI and YING JIA (JASON) DAI v GREGORY JOHN BUNT
File number: NSD 1690 of 2012
Judges: MANSFIELD, GILMOUR & FOSTER JJ
Date of judgment: 7 June 2013
Legislation: Corporations Act 2001 (Cth) s 1274B(2)
Cases cited: Australian Securities and Investment Commission v Hellicar (2012) 286 ALR 501
Date of hearing: 29 April 2013
Place: Canberra via video-link to Sydney (Heard in Sydney)
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 50
Counsel for the 1st and 2nd Appellants: Mr M Gracie with Ms S Haddad
Solicitor for the 1st and 2nd Appellants: Zhang Shijing Lawyers
Counsel for the Respondent: Mr M Condon SC
Solicitor for the Respondent: Price & Company

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1690 of 2012
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

ROBERT NATI
First Appellant

YING JIA (JASON) DAI
Second Appellant
AND:

GREGORY JOHN BUNT
Respondent

JUDGES:

MANSFIELD, GILMOUR & FOSTER JJ

DATE OF ORDER:

7 JUNE 2013

WHERE MADE:

CANBERRA VIA VIDEO-LINK TO SYDNEY

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The appellants jointly and severally pay the respondent’s costs of the appeal.

3.The amount of $20,000 paid into Court by the appellants as security for costs be paid together with any accretions to the respondent in part satisfaction of the respondent’s costs. 

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1690 of 2012
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

ROBERT NATI
First Appellant

YING JIA (JASON) DAI
Second Appellant
AND:

GREGORY JOHN BUNT
Respondent

JUDGES:

MANSFIELD, GILMOUR & FOSTER JJ

DATE:

7 JUNE 2013

PLACE:

CANBERRA VIA VIDEO-LINK TO SYDNEY (HEARD IN SYDNEY)

REASONS FOR JUDGMENT

  1. The appellants, Robert Nati and Ying Jia Dai, appeal from a judgment of this Court delivered on 6 September 2012 as a result of which each appellant, severally, was subsequently ordered to pay Gregory Bunt, the respondent, $573,809.02, being a total of $1,147,618.04.  The primary judge had found that there was a total failure of consideration in relation to a contract made in early August 2004 between the appellants and the respondent.  It is the challenge to this finding which is central to the appeal.

  2. Under the contract, in consideration of the respondent paying the purchase price of $750,000, each of the appellants were to sell and transfer to the respondent shares equivalent to 20% of the shares registered in their names and beneficially owned by them in the issued share capital of Rowa Australia Pty Limited (Rowa), giving the respondent a total of 20% of Rowa’s issued shares.  The judgment sum, in each case, comprised $375,000 being half the total purchase price for the shares together with an…

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AGLC
Nati v Bunt [2013] FCAFC 60
Case
[2013] FCAFC 60
Decision Date

CaseChat Overview and Summary

Nati v Bunt involved a dispute over the performance of a contract for the sale of shares in Rowa. The appellants, who owned shares in Rowa, agreed to sell 20% of the shares to the respondent. The respondent paid the purchase price in instalments but did not receive the shares. The primary judge found that the contract had been frustrated due to a tax liability that would have been incurred if the shares were transferred directly, and that the appellants had not attempted to restructure Rowa's share capital as an alternative method of performance. The respondent sought the return of the money paid, claiming total failure of consideration.

The court had to determine whether the contract was frustrated due to the tax liability, and whether the appellants had made a good faith attempt to restructure Rowa's share capital as an alternative method of performance. The primary judge concluded that the contract was frustrated and that the appellants had not made a good faith attempt to restructure the share capital. The court also had to consider whether the respondent was entitled to the return of the money paid, together with interest, as money had and received.

The court held that the contract had been frustrated due to the tax liability, and that the appellants had not made a good faith attempt to restructure Rowa's share capital as an alternative method of performance. The court also held that the respondent was entitled to the return of the money paid, together with interest, as money had and received. The court dismissed the appeal and ordered the appellants to pay the respondent's costs of the appeal, including $20,000 paid into court as security for costs.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellants jointly and severally pay the respondent’s costs of the appeal.

3. The amount of $20,000 paid into Court by the appellants as security for costs be paid together with any accretions to the respondent in part satisfaction of the respondent’s costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The terms of the contract were varied in June 2005 which, in effect, would have enabled the appellants to meet their obligations by causing Rowa to issue to the respondent by the allotment of 20% of its share capital. As there were only 2 issued shares in Rowa, one of which was held by each appellant, such an implementation of the contract would necessarily have involved a restructuring of Rowa’s share capital. The primary judge, significantly, found that no such restructure or allotment of shares had occurred and that documents lodged with ASIC in 2008, which purported to evidence that they had occurred in 2004, were fraudulent.Background The contract came into existence in the following way. Following prior negotiations and shortly after 2 August 2004, Mr Nati sent to Mr Bunt a draft share transfer agreement. The parties named in the draft agreement were the appellants, the respondent and Rowa. The draft recited relevantly, that the appellants owned shares in Rowa and wished to sell shares to Mr Bunt and that he agreed to buy shares in Rowa. The pivotal provision of the draft agreement provided that the appellants agreed to sell to the respondent, and he agreed to purchase, 20 per cent of the shares in Rowa registered in the name of the appellants for a purchase price of $750,000. Shortly after 2 August 2004, the first appellant and the respondent met at the Willoughby Hotel. The first appellant, relevantly, confirmed that he and the second appellant were happy to proceed to transfer their shares to the respondent. It was common ground that at all times the first appellant acted as the agent of the second appellant in relation to these negotiations. The first appellant said there would be a share transfer. At the end of the meeting, the two of them shook hands and agreed that a deal was in place. Thereafter, the respondent made payments between 11 August 2004 and 6 September 2004, with a part-repayment to him on 19 November 2004, the net effect of which was that the respondent paid the appellants $750,000 in three instalments as the price for a 20% shareholding. The respondent, at the direction of the first appellant, paid this sum directly from his bank into a bank account in the name of Rowa. However, no shares were transferred by the appellants to the respondent. A meeting was held on 10 June 2005, attended by the appellants, the respondent and a Ms Low who did accounting work for Rowa. At this meeting Ms Low informed the appellants that the transfer of a 20% shareholding from them to the respondent would, relevantly, attract a substantial capital gains tax liability for each of them. The respondent indicated at the meeting that he did not mind whether he received his 20% shareholding from each of the appellants or by means of a direct allotment by Rowa by way of the implementation of the contract made in August 2004. The primary judge at [47] held that if there had been an allotment of shares at some time before the proceedings were instituted by the respondent, there may well have been a good basis for the conclusion that there was not a total failure of consideration. His Honour, however, concluded that there had been no such allotment, that the consideration had totally failed and that the respondent was entitled to the return of the monies he had paid as money had and received together with interest.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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