New Image Group Ltd v Dart Industries Inc
[2025] VSC 88
•11 March 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2023 00048
| NEW IMAGE GROUP LIMITED (NZBN 9429035158509) | Plaintiff |
| v | |
| DART INDUSTRIES INC. & ORS (according to the schedule attached) | Defendants |
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JUDGE: | Waller J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 February 2025 |
DATE OF JUDGMENT: | 11 March 2025 |
CASE MAY BE CITED AS: | New Image Group Ltd v Dart Industries Inc |
MEDIUM NEUTRAL CITATION: | [2025] VSC 88 |
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CONTRACT — Contract for purchase of businesses — Share Sale and Purchase Agreement — Working capital adjustment provisions — Post-completion obligations — Dispute resolution process as precondition to payment claim — Whether dispute resolution process fully engaged — Claim unsuccessful.
CONTRACT — Breach of contract — Failure to provide audited accounts by contractual deadline — Non-disclosure of transfer pricing liability — Misrepresentation regarding working capital — Causation of loss not established — Whether opportunity to prevent transfer payment existed — Claims unsuccessful.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | N Dragojlovic | Hall & Wilcox |
| No appearance for the Defendants |
HIS HONOUR:
A. INTRODUCTION
This proceeding arises out of an agreement for the purchase of the ‘Nutrimetics’ business, a multilevel marketing skincare and cosmetics brand. The plaintiff, New Image Group Limited (‘New Image’), purchased the business from the defendants, Dart Industries Inc. (‘Dart Industries’), Tupperware Nederland B.V. (‘Tupperware Nederland’) and Tupperware Products AG (‘TPAG’).
The principal claim is for the sum of NZD1,671,000, representing the difference between what New Image submits was the actual Completion Working Capital[1] and the Minimum Working Capital specified in the Sale Agreement. New Image also advanced alternative claims relating to breaches of warranty, misrepresentation and failure to provide audited accounts in a timely manner.
[1]Capitalised terms are defined in the Sale Agreement referred to in [21] below (‘Sale Agreement’).
The first and second defendants initially defended the proceeding but subsequently ceased to be legally represented and did not appear at trial. The plaintiff’s claim against the third defendant was dismissed by consent prior to the trial.
The central question in this proceeding is whether the first and second defendants are contractually obligated to pay New Image the amount claimed under the working capital adjustment provisions of the Sale Agreement or, alternatively, damages for breach of contract or misrepresentation.
B. THE ABSENCE OF THE DEFENDANTS AT TRIAL
On 10 May 2024, I fixed this proceeding for trial to commence on 10 February 2025 on an estimated duration of 4 days.
On 1 November 2024, I made orders granting leave for Aptum Legal to cease acting for the first and second defendants pursuant to r 20.03(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’).
At the directions hearing on 8 November 2024 there were no appearances for the first and second defendants, nor were any appearances expected.[2] On the plaintiff’s application, I dismissed its claims against the third defendant, with no order as to costs. I further ordered that the trial would commence on 10 February 2025 with a revised estimated duration of one day. I directed Aptum Legal to forthwith serve a copy of that Order and a copy of the transcript of the directions hearing of 8 November 2024 on the first and second defendants.
[2]Transcript of Proceeding (8 November 2024) 1.18–1.33.
On 5 February 2025, my chambers emailed the parties and solicitors, reminding them that outlines of submissions were required to be filed and served by 7 February 2025.
At the trial on 10 February 2025 there were no appearances for the first and second defendants. As they were given reasonable notice of the trial and made no application for an adjournment, I determined that the trial should proceed in their absence.[3]
[3]See Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 49.02(1)(b).
In Re Dysin Investment Partners Pty Ltd,[4] I dealt with a similar situation. In that case I said that ‘[w]here a defendant is absent at trial, the plaintiff must still establish their case by evidence in order to obtain judgment. The plaintiff is then entitled to the relief claimed in the statement of claim.’[5]
[4][2024] VSC 656, [23] (‘Re Dysin’).
[5]See Stone v Smith (1887) 35 Ch D 188, 189 (Kekewich J); Macquarie Bank Ltd v Seagle (2005) 146 FCR 400, 406–7 [24] (Conti J); Electrolux Home Products Pty Ltd v Delap Impex KFT (2015) 110 IPR 164, 169–70 [24] (Farrell J).
In Re Dysin, I set out the established principles regarding the approach of the Court to undefended trials:[6]
[6]Re Dysin [2024] VSC 656, [27]–[28] (citations omitted).
Further, a defendant’s defence must be weighed in light of their failure to lead any evidence at trial. As the High Court of Australia recognised in Australian Securities and Investments Commission v Hellicar,
[d]isputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken into account in determining whether a party has proved its case to the requisite standard.
In G v H, Brennan and McHugh JJ said,
when a court is deciding whether a party on whom rests the burden of proving an issue on the balance of probabilities has discharged that burden, regard must be had to that party’s ability to adduce evidence relevant to the issue and any failure on the part of the other party to adduce available evidence in response.
The plaintiff relied on various admissions made by the first and second defendants, through their lawyers, in their respective defences.[7]
[7]Defence filed by the first and third defendants on 20 October 2023, CB 28–34; Defence filed by the second defendant on 10 April 2024, CB 42–9; Response to the Plaintiff’s Request for Further and Better Particulars filed by the first and third defendants on 10 April 2024, CB 50–1 (collectively, ‘Defences’).
As I said in Re Dysin:[8]
A lawyer has implied authority to make admissions on behalf of their client during litigation, either for the purposes of dispensing with proof at trial, or in certain other respects.
Whether an admission in a defendant’s pleading or other filed documents constitutes an admission pursuant to s 87 of the Evidence Act 2008 (Vic) is a question of fact in the circumstances.
[8]Re Dysin [2024] VSC 656, [25]–[26] (citations omitted).
In the circumstances, I consider that it is appropriate to treat the representations made in the documents filed by the first and second defendants (through their lawyers) as admissions.
C. FACTUAL BACKGROUND
The parties
The plaintiff, New Image, is a company incorporated in New Zealand.[9] New Image is an international business that manufactures health supplements.[10]
[9]Court Book filed by the Plaintiff on 18 October 2024, 7 [1] (‘CB’), Outline of Submissions filed by the Plaintiff on 2 February 2025, 1 [1] (‘Plaintiff’s Outline of Submissions’).
[10]Statement of Facts filed by the Plaintiff on 7 November 2024, 1 [1] (‘Statement of Facts’).
The first defendant, Dart Industries, is a company incorporated in the United States of America.[11]
[11]CB 7 [2].
The second defendant, Tupperware Nederland, is a company incorporated in the Netherlands.[12]
[12]CB 7 [3].
Until 1 July 2022, Dart Industries and Tupperware Nederland were the owners of shares in certain companies which owned and operated (or were otherwise related to) businesses (‘Acquired Companies’) that manufactured and sold beauty and skin care products and services in Australia and New Zealand in connection with the brand known as Nutrimetics.[13]
[13]Statement of Facts, 1 [2].
The Acquired Companies consisted of each of the following entities:[14]
[14]Statement of Claim filed by the Plaintiff on 4 August 2023, 2 [5] (‘Statement of Claim’).
(a) NM Holdings (New Zealand) (NZBN 9429034544143) (‘NM Holdings’), wholly owned by Dart Industries;
(b) Nutri-metics Holdings France SASU (RCS 404 839 243), wholly owned by Tupperware Nederland; and
(c) Nutrimetics France SAS (RCS 393 387 881), wholly owned by Tupperware Nederland and Nutri-metics Holdings France SASU.
The third defendant, TPAG (also known as Tupperware Products SA), is a company incorporated in Switzerland.[15] Until 1 July 2022, TPAG was the owner of certain trademarks in Australia, New Zealand, France and the European Union in connection with the businesses owned and operated by the Acquired Companies and Nutrimetics (‘TPAG Trademarks’).
[15]CB 7 [4].
On or about 1 June 2022, New Image entered into a Share Sale and Purchase Agreement with Dart Industries and Tupperware Nederland (together, the ‘Vendors’) and TPAG for the purchase of the Nutrimetics business by New Image (‘Sale Agreement’).[16]
[16]Statement of Claim, 3 [6].
The Sale Agreement
On 14 April 2022, New Image wrote to Ms Jane Garrard, the Vice President of Tupperware Brands Corporation (‘Tupperware’), the parent company of the Acquired Companies.[17] New Image offered to purchase from Tupperware the worldwide operations of Nutrimetics, including:
[17]CB 152.
(a) Nutrimetics Australia Pty Ltd (‘Nutrimetics Australia’), being a subsidiary of NM Holdings;
(b) Nutrimetics International (New Zealand) Limited (‘Nutrimetics New Zealand’), also a subsidiary of NM Holdings; and
(c) Nutrimetics France SAS (‘Nutrimetics France’) (collectively, ‘Nutrimetics’).
This offer was subsequently accepted by Tupperware.[18]
[18]Statement of Facts, 1 [4].
In May 2022, New Image and Tupperware exchanged draft agreements for the acquisition by New Image of the shares and assets in the Acquired Companies. As part of the drafting process there were negotiations regarding the setting of what was referred to between the parties as a ‘working capital peg’, being the Working Capital Assets less the Current Liabilities of the businesses.[19] The working capital peg was agreed between Tupperware and New Image to be NZD5.7 million.[20] The working capital peg was later referred to in the Sale Agreement as the Minimum Working Capital.[21]
[19]Transcript of Proceeding (10 February 2025) 15.10–16.14.
[20]Statement of Facts, 1 [5]; Transcript of Proceeding (10 February 2025) 15.18–15.21.
[21]CB 102.
On 1 June 2022, the Sale Agreement was signed and executed by:[22]
(a) the Vendors and New Image, whereby the Vendors agreed to sell and New Image agreed to purchase all of the shares in the Acquired Companies;[23] and
(b) TPAG, whereby TPAG agreed to sell and assign, and New Image agreed to take assignment of the TPAG Trademarks.[24]
[22]CB 96.
[23]Plaintiff’s Outline of Submissions, 1–2 [2].
[24]Plaintiff’s Outline of Submissions, 1–2 [2]; CB 138.
The settlement date under the Sale Agreement was specified to be ‘1 July 2022 or such other date agreed by the parties in writing’ (‘Completion Date’). There is no evidence that the parties agreed (in writing or otherwise) to any date other than 1 July 2022.[25]
[25]Statement of Facts, 2 [6]; Plaintiff’s Outline of Submissions, 2 [4]; CB 103.
The purchase price under the Sale Agreement was NZD240,000 (‘Purchase Price’), payable by New Image to the Vendors and TPAG on the Completion Date.[26] The parties agreed that the Sale Agreement is governed by the laws of Victoria.[27]
[26]Plaintiff’s Outline of Submissions, 2 [5]; CB 69, 103.
[27]Plaintiff’s Outline of Submissions, 2 [3]; CB 93.
The Sale Agreement contains the following Post Completion Obligations:[28]
[28]CB 77–9.
9.2Preparation of Completion Statement
The Purchaser shall procure that each Target Company prepares within 20 Business Days after the Completion Date the Completion Statement for the Target Company and its Operating Entity as at the 31 May 2022 being a statement in the form of Part A of Schedule 9 prepared in accordance with the Completion Statement Accounting Principles.
9.3Co-operation
The parties must co-operate with one another to enable preparation, review and finalisation of the Completion Statement.
9.4Review of Completion Statement
Within 20 Business Days after receipt of the Completion Statement under clause 9.2, each of the Vendors and the Purchaser may give a notice to the other (Dispute Notice) that it does not agree with any amount set out in the Completion Statement and must provide details of the reasons why, or grounds on which, it does not agree.
9.5Discussion
If any Dispute Notice is given, the Vendors and the Purchaser must discuss the matters raised in the Dispute Notice and make a genuine effort to negotiate an agreement on each such matter, within 10 Business Days after the Dispute Notice is given.
9.6Referral to Expert
If a matter raised in a Dispute Notice is not agreed within the period referred to in clause 9.5, then either party may by written notice require that all outstanding matters be referred to an Expert for determination.
9.7Appointment of Expert
(a)If a notice is given under clause 9.6, the parties must appoint the Expert to determine the matters in dispute in accordance with this clause 9.7.
(b)The Vendors and the Purchaser must:
(i)sign whatever reasonable terms of engagement the Expert requires; and
(ii)use reasonable endeavours to provide the Expert with any information reasonably required by the Expert.
(c)The Expert acts as an expert and not as an arbitrator and must resolve the matters raised in the Dispute Notice:
(i)having regard to the terms of this document (including the Completion Statement Accounting Principles);
(ii)according to whatever procedures the Expert decides, in the Expert's absolute discretion, but subject to the requirements of procedural fairness; and
(iii)exercising the Expert's own skill, judgment and experience.
(d)The Expert may determine the party to pay costs in its absolute discretion, with the intention being that the party whose position is not accepted by the Expert shall pay the costs, or otherwise with the parties sharing costs in an arrangement reflecting the Expert determination.
9.8Expert's decision
(a)The parties must use their respective reasonable endeavours to ensure that the Expert gives, within 20 Business Days after its appointment, a written decision to the parties.
(b)The Expert must give reasons for the decision.
(c)The Expert's decision is, in the absence of manifest error, final and binding on the parties.
9.9Completion Statement
For the purposes of this document the Completion Statement is:
(a)if no Dispute Notice is issued within the 20 Business Day period referred to in clause 9.4, as prepared and given under clause 9.2; or
(b)if any Dispute Notice is issued under clause 9.4, the Completion Statement incorporating any amendments agreed or determined by the Expert in resolving the matters raised in the Dispute Notice in accordance with clauses 9.4 to 9.8.
9.10Adjustment
Subject to clause 9.11, if the amount of the Completion Working Capital is less than the Minimum Working Capital, the Vendors must pay the Purchaser the amount of that difference within 10 Business Days of the Completion Statements being finalised under clause 9.9. For clarity no payment need be made where the Completion Working Capital is greater than the Minimum Working Capital.
9.11Minimum Adjustment Amount
(a)The Vendors are not obliged to make any payment to the Purchaser under clause 9.10 where the difference in clause 9.10 is less than $200,000.
(b)If the difference in clause 9.10 is greater than $200,000, then the Vendors must pay the whole amount to the Purchaser.
9.12Reduction in Price
Any payment to the Purchaser under clause 9.10 is taken, to the maximum extent permitted by law, to be a reduction of the Purchase Price.
The Sale Agreement also contains the following obligation to provide accounts:
5.4Provision of Accounts
The Vendors must provide to the Purchaser by not later than one month prior to the Completion the Accounts of each Vendor Group Entity as at the Accounts Date.
The Sale Agreement includes the following clause as part of cl 11 which deals with limitations on liability:
11.3Quantum limits
(a)The Vendors are only liable to the Purchaser for any Purchaser Claim if
(i)a written notice is given to the Vendors in accordance with clause 11.8;
(ii)the amount finally adjudicated or agreed as being payable in respect of that Purchaser Claim is $15,000 or more (a Relevant Claim); and
(iii)the amount finally adjudicated or agreed as being payable in respect of the Relevant Claim and all other Purchaser Claims exceeds $75,000,
in which case, subject to this clause 11, the Vendors will be liable for the full amount of the Relevant Claim.
(b)The Parties agree that the total liability of the Vendors or TPAG in aggregate in respect of all Claims for breach by the Vendors or TPAG under this Agreement (including breach of Vendors Warranties or breach of TPAG Warranties) is the Purchase Price.
The Sale Agreement contains the following relevant definitions:[29]
[29]CB 98, 103.
Claim includes a claim, notice, demand, action, proceeding, litigation, investigation or judgment, however arising, whether present or future, ascertained or unascertained, immediate, future or contingent, whether based in contract, tort or statute and whether involving a third party or a party to this Agreement.
…
Completion Statement means the statement setting out the Completion Working Capital of each of the Target Companies and their respective operating Entity prepared in accordance with clause 9.1.
…
Completion Working Capital means the aggregate net value of the Working Capital Assets less Current Liabilities of each of the Target Companies and their respective Operating Entity (converted to NZ dollars at the NZ Exchange Rate) as at 31 May 2022 set out in the Completion Statement.
…
Minimum Working Capital means NZ$5,700,000.
…
Purchaser Claim means any Claim (including a Vendors Warranty Claim and TPAG Warranty Claim) by the Purchaser under or in connection with this Agreement.
The Sale Agreement also includes the following terms regarding warranties and representations made by the Vendors to New Image (‘Vendors Warranties’):[30]
[30]Plaintiff’s Outline of Submissions, 2–3 [6(c)]; Clause 10.1 of, and Schedule 4 to, the Sale Agreement, CB 79, 109; Statement of Claim, 3–4 [7]–[8], CB 15–16; Defences, 2 [7]–[8], CB 29, 43.
10.1Vendors Warranties
(a)Subject to the qualifications and limitations in this clause 10 or unless expressly stated otherwise, each Vendor represents and warrants to the Purchaser that each of the Vendors Warranties is at the date of this Agreement and will be at the Completion Date true and accurate and not misleading in all material respects.
(b)Each Vendors Warranty is to be construed separately and independently from the others and is not limited by reference to any other Vendors Warranty or any other provision of this Agreement.
10.2Vendors’ Indemnity
Subject to any limitations and qualifications in this clause 10 and clause 11, the Vendors indemnify and keep the Purchaser harmless from and against all Liabilities which may be incurred by the Purchaser as a direct result of any breach by the Vendor of any of the Vendors Warranties.
…
11.4Reliance
(a)The Vendors and TPAG acknowledge that the Purchaser has entered into this Agreement in reliance on the Vendors Warranties, TPAG Warranties and the Disclosure Material.
The Vendors Warranties included the representation and warranty by the Vendors to New Image that, at the time of entering into the Sale Agreement, as at the date of the Sale Agreement and on the Completion Date (‘Disclosure Warranties’):[31]
(a) all information disclosed by the Vendors to New Image (‘Relevant Disclosure’) was, when given, true and accurate in all material respects; and
(b) there was no fact or matter which was not disclosed by the Vendors as part of the Relevant Disclosure which renders any information contained within the Relevant Disclosure untrue or misleading in any material respect.
[31]Plaintiff’s Outline of Submissions, 3 [7];
The Vendors agreed to indemnify New Image in relation to any breach of any of the Vendors Warranties.[32]
[32]Plaintiff’s Outline of Submissions, 2–3 [6(c)]; Clause 10.2 of the Sale Agreement, CB 79; Statement of Claim, 6–7 [10(i)], CB 18–19; Defences 2–3 [10.9], CB 29, 43.
In or around late May 2022, Nutrimetics Australia’s auditors identified that in December 2021 Tupperware Products Inc had paid AUD2,382,910.24[33] to Nutrimetics Australia as a ‘Market Development Allowance’ in connection with a transfer pricing agreement.[34] The auditors determined that the payment was made by mistake and that Nutrimetics Australia was required to make a payment equivalent to that amount to Tupperware Products Inc to effectively reverse the payment (‘Transfer Pricing Liability’).
[33]Parts of the Statement of Claim erroneously refer to the Transfer Pricing Liability and the Transfer Payment in NZD instead of AUD. This is a typographical error. Reference to the Transfer Pricing Liability and the Transfer Payment should be approximately AUD2,833,000 or, more precisely, and ultimately consistent with the evidence, AUD2,832,910.24. See also CB 214–16.
[34]Statement of Facts, 2 [7]; Statement of Claim, 7 [13]; CB 161, 235.
On or around 6 June 2022 (after the execution of the Sale Agreement but before the Completion Date), Nutrimetics Australia transferred CHF1,976,092.91 (in Swiss Francs equivalent to AUD2,832,910.24) to Tupperware Products Inc to reverse the transfer pricing payment (‘Transfer Payment’).
On 24 June 2022, the Vendors represented to New Image in an email sent by Ms Jane Garrard, the Vice President of Tupperware Brands Corporation, to Mr Stewart (‘24 June Email’) that the Completion Working Capital (i.e. the aggregate net value of the Working Capital Assets less Current Liabilities of each of the Target Companies and their respective Operating Entity as at 31 May 2022) was NZD6,584,000 (‘Working Capital Representation’).[35]
[35]Plaintiff’s Closing Submissions, 3 [14]; Statement of Facts, 2 [9]; CB 168–9.
On 30 June 2022, New Image received signed audited financial statements for Nutrimetics Australia and Nutrimetics New Zealand as at 31 December 2021. Under the Sale Agreement these were required to be provided on 1 June 2022, being one month prior to Completion.[36]
[36]CB 70, cl 5.4.
In accordance with the terms of the Sale Agreement, on the Completion Date (1 July 2022):[37]
[37]Statement of Facts, 2 [10]; Plaintiff’s Outline of Submissions, 4 [13].
(a) New Image paid the Purchase Price to the Vendors and TPAG;
(b) the Vendors transferred the shares in the Acquired Companies to New Image; and
(c) TPAG assigned its interests in the TPAG Trademarks to New Image.
On 12 July 2022, Mr John Markotis, the CFO of Nutrimetics Australia, Nutrimetics New Zealand and Nutrimetics France (which companies were now owned by New Image), prepared a statement showing that the working capital for each of the Target Companies and their respective Operating Entity as at 30 June 2022 was NZD4,029,000.
On 12 July 2022, Mr Stewart sent an email to Ms Garrard stating that he had received an update of working capital as at 30 June 2022, which amount was very different to the figure as at 31 May 2022 and noting that ‘the big difference is in Australia Cash where it appears that $2.2m was paid out in June to Tupperware’.[38]
[38]CB 217.
On 13 July 2022, in an email from Ms Jane Garrard to Mr Stewart, the Vendors informed New Image that the significant discrepancy between the working capital figures for May 2022 and June 2022 was due to the Transfer Payment.
On 17 July 2022, Mr Stewart sent an email to Ms Garrard stating that the Transfer Payment involved the removal of funds after 31 May 2022 which was not acceptable. He further stated that, pursuant to cl 9.11 of the Sale Agreement, the Vendors were required to pay New Image the difference between the Completion Working Capital and the Minimum Working Capital.
On 18 July 2022, in an email from Ms Garrard to Mr Stewart, the Vendors acknowledged that the Transfer Payment had been made to reverse the erroneous payment of AUD2,832,910.24 made by Tupperware Products Inc to Nutrimetics Australia in 2021. Ms Garrard further stated:
Consequently, the cash in working capital was overstated by this amount when we set the working capital peg … the actual working capital peg should have been set at $3.5M based on historical balances as the balance sheet was overstated by this amount in 2021.[39]
[39]CB 237.
Following this correspondence, New Image demanded that the Vendors pay it an amount representing the difference between NZD5,700,000 (the ‘Minimum Working Capital’) and NZD4,029,000.
When those demands were not met New Image commenced this proceeding.
D. THE PLAINTIFF’S CASE
At trial, the plaintiff principally relied on:
(a) the Sale Agreement;
(b) correspondence passing between the parties;
(c) the evidence of:
(i) Mr Alan Stewart, the Managing Director, a shareholder and Deputy Chairman of New Image; and
(ii) Mr John Markotis, the Chief Financial Officer of Nutrimetics Australia, Nutrimetics New Zealand and Nutrimetics France; and
(d) admissions made by the first and second defendants in their Defences.
Detailed witness outlines (taking the form of witness statements) had been filed for Mr Stewart and Mr Markotis. As the trial was undefended and there was to be no cross examination, I ordered, pursuant to s 49(3)(j) of the Civil Procedure Act 2010, that the witness outlines be treated as their evidence in chief.[40]
[40]Transcript of Proceeding (10 February 2025) 63.01–63.07. Each witness was required to verify that the content of their witness outline was true and represented the evidence they wished to give in the proceeding.
New Image relied specifically on the following admissions made by the first and second defendants in their Defences:
(a) the existence of the Sale Agreement and its relevant terms;[41]
[41]Defences, 2 [6]–[8], [10]; CB 29, 43.
(b) from around December 2021, Nutrimetics Australia owed a liability of approximately AUD2,833,000 in respect of the Transfer Pricing Liability;[42]
[42]Defences, 3, 4 [13.1]; CB 30, 45.
(c) the Transfer Pricing Liability was a liability within the meaning of Liabilities, as defined in the Sale Agreement;[43]
[43]Defences, 4 [13.2]; CB 31, 45.
(d) the Transfer Pricing Liability was owed by Nutrimetics Australia to Tupperware Products Inc;[44]
[44]Defences, 4, 5 [13.3]; CB 31, 46.
(e) the Transfer Pricing Liability was never disclosed by the Vendors to New Image until after the Sale Agreement was entered into;[45]
(f) on or about 6 June 2022, CHF1,976,092.91 (equivalent to AUD2,832,910.24) was paid to Tupperware Products Inc in respect of the Transfer Pricing Liability;[46] and
(g) the 24 June Email constituted the Completion Statement.[47]
[45]Defences, 6, 7 [26.1]; CB 33, 48.
[46]Response to the Plaintiff’s Request for Further and Better Particulars filed by the first and third defendants on 10 April 2024 [1.4]–[1.6]; CB 51.
[47]Defences, 2–3 [9], [11B]; CB 29–30, 43–4.
Adjustment claim
New Image’s principal claim is for the sum of NZD1,671,000 being the difference between the Completion Working Capital and the Minimum Working Capital payable as a debt or by way of damages pursuant to cl 9.10 of the Sale Agreement.
New Image submitted that, having received the Completion Statement in the 24 June Email from the Vendors, it effectively gave a Dispute Notice in satisfaction of cl 9.4 when it raised objections in its emails of 12 and 17 July 2022.[48]
[48]Transcript of Proceeding (10 February 2025) 40.18–40.23.
New Image submitted that it then engaged in discussions with the Vendors (via the emails passing between the parties between 12–18 July 2022) in a genuine effort to negotiate an agreement pursuant to cl 9.5.
New Image acknowledged that, when no agreement was reached concerning the matters raised in its Dispute Notice, neither party sought to refer the matter to an expert for determination pursuant to cl 9.6.[49] However, New Image submitted that the Sale Agreement did not mandate referral to expert determination and it was therefore entitled to pursue its claim under cl 9.10 in this proceeding.
[49]Transcript of Proceeding (13 February 2025) 144.05–144.10.
New Image submitted that the definitions of Completion Working Capital and Completion Statement give rise to ambiguity and a degree of circularity when used in cl 9.10, as the definition of each of them incorporates the definition of the other.[50]
[50]The ambiguity is not assisted by the apparent typographical error in the definition of Completion Statement which appears to erroneously refer to cl 9.1 instead of cl 9.2.
It submitted that the Completion Working Capital referred to in cl 9.10 is not simply the figure contained in the Completion Statement but the actual or true amount representing the aggregate net value of the Working Capital Assets less Current Liabilities of each of the Target Companies and their respective Operating Entity (converted to NZ dollars at the NZ Exchange Rate) as at 31 May 2022.
New Image submitted that the Court should find that:[51]
(a) the amount of the Completion Working Capital for the purpose of cl 9.10 of the Sale Agreement is NZD4,029,000; and
(b) the Vendors are liable to pay to New Image the sum of NZD1,671,000 pursuant to cl 9.10 of the Agreement.
[51]Plaintiff’s Closing Submissions, 6–7 [32].
Other claims
New Image made additional claims which are in fact alternative claims if its primary claim is unsuccessful. It claims to have suffered loss and damage by reason of the Vendors:[52]
[52]Plaintiff’s Outline of Submissions, 14 [49].
(a) breach of cl 5.4 of the Sale Agreement (failure to provide audited accounts);
(b) breach of cl 10.1 of the Sale Agreement (Disclosure Warranties); and
(c) Working Capital Representation.
Breach of contract — failure to provide audited accounts
New Image submitted that the Vendors admitted that they failed to provide to New Image, by no later than one month prior to the Completion Date, the audited accounts of each relevant entity as at 31 December 2021 and that such failure constitutes a breach of cl 5.4 of the Sale Agreement.[53]
[53]Plaintiff’s Outline of Submissions, 2–3 [6], 9–10 [33(d)], 12 [41]; Statement of Claim, 6 [10(f)], 10 [22] CB 18, 22; Defences, 2 [10.6], 5 [22], CB 29, 43, 32, 47; Plaintiff’s Closing Submissions, 7 [33].
New Image submitted that, as a result of the Vendors’ failure to provide audited accounts in accordance with their obligations under the Sale Agreement, New Image was denied any proper opportunity to discover the existence of the Transfer Pricing Liability and the actual or intended making of the Transfer Payment.[54]
[54]Plaintiff’s Closing Submissions, 8 [36].
Breach of contract — Vendors Warranties
New Image submitted that the Vendors admitted that they failed to disclose the existence of the Transfer Pricing Liability at the time the Agreement was entered into and that such failure constitutes a breach of the Disclosure Warranties and cl 10.1 of the Sale Agreement.[55]
[55]Plaintiff’s Outline of Submissions, 10 [33(e)], 13 [44]; Plaintiff’s Closing Submissions, 7 [34]; Statement of Claim, 11 [26], CB 23; Defences 6 [26], CB 33, 48.
New Image submitted that the Vendors are obliged to indemnify New Image (pursuant to cl 10.2 of the Sale Agreement) in respect of any loss and damage suffered by New Image as a direct result of the Vendors’ breach.[56]
[56]Plaintiff’s Outline of Submissions, 13 [45]; Plaintiff’s Closing Submissions, 7 [34].
New Image submitted that, as a consequence of the Vendors failing to disclose the existence of the Transfer Pricing Liability, New Image was not aware (nor had any reason to suspect or otherwise be aware) that the Vendors would procure or allow the Transfer Payment to be made during the period after the Sale Agreement was entered into and before the Completion Date.[57]
[57]Plaintiff’s Outline of Submissions, 5 [18].
New Image further submitted that, as a result of the Vendors’ failure to disclose the Transfer Pricing Liability, in breach of the Vendors Warranties, New Image was denied the opportunity to intervene or otherwise take any step to prevent the payment of AUD2,284,000 that was made by Nutrimetics Australia to Tupperware Products Inc in June 2022. As a direct consequence, New Image has been deprived of the use of AUD2,284,000.[58]
[58]Plaintiff’s Closing Submissions, 8 [37].
Misrepresentation
New Image submitted that the Vendors admitted that on or about 24 June 2022, the Vendors made the Working Capital Representation, stating that the Completion Working Capital was NZD6,584,000.[59] New Image submitted that the Working Capital Representation was false for the reasons it relies on in support of its principal claim.
[59]Plaintiff’s Outline of Submissions, 9–10 [33(b)], 13 [46]; Plaintiff’s Closing Submissions, 7 [35]; Statement of Claim, 4–5 [9], CB 16; Defences, 2 [9] CB 29, 43; CB 168–9.
New Image submitted that, as a result of the Vendors making the Working Capital Representation, New Image was denied the opportunity to intervene or otherwise take any step to prevent the payment of AUD2,284,000 that was made by Nutrimetics Australia to Tupperware Products Inc in June 2022. As a direct consequence, New Image has been deprived of the use of AUD2,284,000.[60]
[60]Plaintiff’s Closing Submissions, 8 [37].
New Image conceded that the effect of cl 11.3 of the Sale Agreement is to limit the liability of the Vendors in aggregate in respect of all of its alternative claims to the sum of NZD240,000.
In the circumstances, New Image submitted that the Court should find that the Vendors:[61]
[61]Plaintiff’s Closing Submissions, 8 [40].
(a) breached their obligations under cl 5.4 of the Sale Agreement;
(b) breached their obligations under cl 10.1 of the Sale Agreement;
(c) are liable to New Image for misrepresentation in respect of the Working Capital Representation; and
(d) are liable to pay damages to New Image in the sum of NZD240,000.
Interest
New Image submitted that it is entitled to interest pursuant to s 60 of the Supreme Court Act 1986, calculated from the date of the writ (11 January 2023) to the date of judgment.[62]
[62]Plaintiff’s Outline of Submissions, 15 [54]; Plaintiff’s Closing Submissions, 9 [41].
E. CONSIDERATION
Adjustment claim
New Image’s principal claim is made pursuant to cl 9.10 of the Sale Agreement. It seeks payment of NZD1,671,000, representing the alleged difference between the actual Completion Working Capital and the Minimum Working Capital.
Clause 9.10 appears in cl 9 which is headed ‘Post Completion Obligations’.
The Sale Agreement establishes a structured process in cls 9.2–9.12 for preparing, reviewing and potentially disputing the Completion Statement. This process is essential to understanding whether New Image’s claim is properly before the Court and whether the prerequisites for payment under cl 9.10 have been satisfied.
Clause 9.2 provides that New Image shall procure that each Target Company prepares within 20 Business Days after the Completion Date the Completion Statement for the Target Company and its Operating Entity as at 31 May 2022.
Although cl 9.2 contemplates the Completion Statement being procured within 20 Business Days after 1 July 2022, New Image submitted that the Completion Statement provided by Ms Garrand in the 24 June Email (setting out the Completion Working Capital as NZD6,584,000) constituted the Completion Statement in respect of 31 May 2022, in satisfaction of cl 9.2 of the Sale Agreement.
New Image’s submission was inconsistent with its pleaded case. In its Reply, New Image alleged that ‘on or about 11 July 2022, [it] received a Completion Statement (as defined in, and as contemplated by clause 9.2 of, the Agreement)’.[63] The Completion Statement received by New Image on 11 July 2022 purported to set out the Working Capital of the Acquired Entities as at 30 June 2022 not as at 31 May 2022 as contemplated by cl 9.2. Despite this inconsistency, New Image relied, in support of its submission, on the first and second defendants’ Defences which pleaded that ‘on 24 June 2022, the Plaintiff received the Completion Statement’.[64] I am content to accept, based on the admissions in the first and second defendants’ pleadings, that the 24 June Email constituted the Completion Statement for the purposes of cl 9.2.
[63]Reply filed by the plaintiff on 21 December 2023, 2 [2(a)]; CB 36.
[64]Defences, 3 [11A]; CB 30, 44.
Where either party does not agree with any amount set out in the Completion Statement, pursuant to cl 9.4, it may give a Dispute Notice to the other party within 20 business days, following which, the parties must discuss and make genuine efforts to negotiate, an agreement within 10 business days of giving the Dispute Notice. Clause 9.6 then relevantly provides that, where agreement cannot be reached, either party may refer outstanding matters to an expert for determination.
I am satisfied that New Image, in sending its emails of 12 and 17 July 2022 gave a Dispute Notice to the Vendors within the meaning of cl 9.4. The Sale Agreement does not prescribe the form of the Dispute Notice, requiring only that it provide details of the reasons why, or grounds on which, a party does not agree with the Completion Statement. The notice must be in writing, legible and in English.[65] It may be sent by email.[66]
[65]CB 92, cl 17.1.
[66]CB 93, cl 17.1(c).
I am also satisfied that New Image engaged in discussions with the Vendors (via the emails passing between the parties between 12–18 July 2022) in a genuine effort to negotiate an agreement pursuant to cl 9.5.
As New Image has acknowledged, when no agreement was reached concerning the matters raised in its Dispute Notice, neither party sought to refer the matter to an expert for determination pursuant to cl 9.6.[67]
[67]Transcript of Proceeding (13 February 2025) 144.05–144.10.
This raises an issue as to whether the Sale Agreement — and in particular cl 9 — contains an exclusive remedy where relief is ultimately sought under cl 9.10. Put another way, can New Image, having issued a Dispute Notice and having failed to reach agreement through negotiation, then elect not to refer the matter to expert determination but instead issue proceedings to have the Court determine what constitutes the Completion Working Capital?
A court will not usually grant specific performance of a contracting party’s obligation to participate in a prescribed dispute resolution process, because it is generally not possible to supervise whether that party has complied with the process.[68] However, a court may effectively enforce a dispute resolution clause by ordering a stay of proceedings until the dispute resolution process has been completed.[69]
[68]Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194, 210 (Giles J); Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236, 244 [26] (‘Aiton’). But see 1144 Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd (2009) 26 VR 551, 561 [39] (Warren CJ, Nettle and Bongiorno JJA).
[69]Aiton (1999) 153 FLR 236, 244 [26]–[27] (Einstein J). For a more comprehensive discussion of when a proceeding should be stayed in light of a dispute resolution clause, see Onslow Salt Pty Ltd v Buurabalayji Thalanyji Aboriginal Corporation [2018] FCAFC 118, [15]–[27] (Besanko, Barker and Colvin JJ); Raskin v Mediterranean Olives Estate Ltd [2017] VSC 94, [44]–[57] (Hargrave J). See also Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] 2 Qd R 563, 568–70 [19]–[24] (Chesterman J).
Where compliance with a dispute resolution process is not expressed as mandatory or as a condition precedent to a party commencing or continuing proceedings, the authorities are less clear.[70]
[70]VDM Construction Pty Ltd v MCC Mining (Western Australia) Pty Ltd (2012) 28 BCL 453, 458 [34]; (Kenneth Martin J); [2011] WASC 269; Halifax Financial Services Ltd v Intuitive Systems Ltd [1999] 1 All ER (Comm) 303, 306–7 (McKinnon J). Cf Aiton (1999) 153 FLR 236, 245 [35] (Einstein J); Hooks Enterprises Pty Ltd v Sonnenberg Pty Ltd [2018] 1 Qd R 116, 123–4 [26] (Daubney J).
In the present case no application to stay the proceeding has been brought by the defendants. Nonetheless, the approach taken in such cases is instructive.
In VDM Construction Pty Ltd v MCC Mining (Western Australia) Pty Ltd,[71] cl 46 of the agreement between the parties provided for a dispute resolution process whereby either party could issue a notice of dispute and, if the dispute was not resolved, ‘either party may refer the dispute to mediation in accordance with The Institute of Arbitrators and Mediators’.[72] Justice Kenneth Martin refused the defendants’ application to stay the proceeding until the parties completed mediation on the basis that referral to mediation was not mandatory. His Honour stated:
My reading of cl 46.2 is that after the parties have conferred but are still in dispute, either party can within 15 days, or within such longer period as the parties agree, decide to refer the matter to a mediation. Either party alone has the right to elect to require the mediation process for the dispute before litigation. But I do not assess the cl 46 mediation requirement as being mandatory for every notified dispute where there has been unfruitful conferral. Clause 46 could have been drawn in more rigid terms, invariably requiring mediation before litigation, but it was not. Here, a mediation process does not become mandatory until one party elects for it and thereby makes it mandatory by that election.[73]
[71](2012) 28 BCL 453; [2011] WASC 269.
[72]Ibid 455 [10].
[73]Ibid 458 [34].
By contrast, in Hooks Enterprises Pty Ltd v Sonnenberg Pty Ltd (‘Hooks Enterprises’),[74] cl 12 of the agreement between the parties provided a procedure for referral of disputes to an independent expert. It stated:
12.2If a party asserts that a dispute exists between the parties arising out of or in connection with this Agreement, the party can give a Notice of Dispute to the other party…
12.3Within seven (7) days of receipt of the Notice of Dispute, the other party must provide a Notice of Response stating its position in relation to the dispute…
12.4Within seven (7) days of receipt of the Notice of Response, the parties must take reasonable steps to resolve the dispute.
12.5Either party may refer the dispute for expert determination pursuant to this clause if the dispute is not resolved in the period referred to in clause 11.4 [sic].[75]
[74][2018] 1 Qd R 116.
[75]Ibid 118 [6]. Justice Daubney noted that cl 12.5’s reference to cl 11.4 is clearly an error and should refer to cl 12.4: at 119 [7].
Justice Daubney found that cl 12 was, as a whole, ‘couched in permissive language’ but, once the process was commenced by either party, the other party was bound to follow through with it.[76] Granting the defendant’s application for a stay of the proceeding, his Honour found that ‘only one party need merely assert that a dispute exists in order to bind the other party to the completion of the dispute resolution process, including expert determination’.[77]
[76]Ibid 121 [18], 124 [32].
[77]Ibid 123 [26].
In the present case the language of cl 9 more closely aligns with the contractual provisions considered by Daubney J in Hooks Enterprises. More significantly, cl 9.10, pursuant to which New Image brings its claim, makes it clear that New Image must fully engage in the dispute resolution process set out in cl 9 in order to make its claim.
Clause 9.10 relevantly provides that ‘if the amount of the Completion Working Capital is less than the Minimum Working Capital, the Vendors must pay the Purchaser the amount of that difference within 10 Business Days of the Completion Statements being finalised under clause 9.9’.
The finalisation of the Completion Statement under cl 9.9 is a necessary precondition to an obligation arising on the part of the Vendors to make a payment pursuant to cl 9.10.
Clause 9.9 provides:
9.9 Completion Statement
For the purposes of this document the Completion Statement is:
(a)if no Dispute Notice is issued within the 20 Business Day period referred to in clause 9.4, as prepared and given under clause 9.2; or
(b)if any Dispute Notice is issued under clause 9.4, the Completion Statement incorporating any amendments agreed or determined by the Expert in resolving the matters raised in the Dispute Notice in accordance with clauses 9.4 to 9.8.
On its face, cl 9.9 appears to deal with two scenarios. First, where no Dispute Notice is given. Secondly, where a Dispute Notice is given and the dispute is resolved by agreement or through expert determination. Clause 9.9 does not appear to deal with a situation where a Dispute Notice is given but the parties fail to resolve the dispute through negotiation and elect not to proceed to expert determination. In that circumstance it cannot be said that the Completion Statement has been finalised under cl 9.9 as required by cl 9.10.
The consequence is that the necessary precondition to an obligation on the part of the Vendors to make a payment to New Image pursuant to cl 9.10 has not been satisfied.
It might be argued that cl 9.9 can apply where a Dispute Notice is given but the parties fail to resolve the dispute through negotiation and elect not to proceed to expert determination. In that circumstance, the Completion Statement will incorporate no amendments agreed or determined by the expert and will remain in the form as prepared and given under cl 9.2.
This somewhat strained construction of cl 9.9 does not, however, assist New Image as the Completion Statement as prepared and given under cl 9.2 records the Completion Working Capital as $6,854,000 which is not less than the Minimum Working Capital.
As a consequence, for these reasons I do not consider that New Image has established its principal claim.
Breach of contract — failure to provide audited accounts
The first and second defendants admit that in breach of cl 5.4 of the Sale Agreement they failed to provide to New Image, by not later than one month prior to the Completion Date, the audited accounts of each relevant entity as at 31 December 2021.[78]
[78]Plaintiff’s Outline of Submissions, 2–3 [6], 9–10 [33(d)], 12 [41]; Statement of Claim, 6 [10(f)], 10 [22] CB 18, 22; Defences, 2 [10.6], 5 [22], CB 29, 43, 32, 47; Plaintiff’s Closing Submissions, 7 [33].
The Sale Agreement required the audited accounts to be provided to New Image by no later than 1 June 2022. In fact they were provided on 30 June 2022.
New Image submitted that this breach caused loss by denying it the opportunity to discover the Transfer Pricing Liability and prevent the Transfer Payment.[79]
[79]Plaintiff’s Closing Submissions, 8 [36].
There are several difficulties with this claim.
First, there was no evidence that the audited accounts themselves revealed the Transfer Pricing Liability or the intended Transfer Payment. New Image only discovered these matters on 12 July 2022 after observing a significant discrepancy in the working capital figures, not through reviewing the audited accounts.
Secondly, even if New Image had learned of these matters earlier through timely provision of the audited accounts, there is no evidence that this knowledge would have materially changed the outcome. New Image has not established that it would have acted differently regarding the completion of the Sale Agreement or that it had any legal basis to prevent the Transfer Payment. On the evidence of Mr Stewart, it was only ‘any opportunity to consider any adjustment to the working capital peg’ that was allegedly lost.[80] Such an opportunity would not have assisted New Image’s case in any event, as a lower working capital peg would have reduced any potential adjustment under clause 9.10.
[80]CB 60 [39].
I am therefore not satisfied that New Image has demonstrated that it suffered any loss as a consequence of receiving the audited accounts on 30 June 2022 rather than on 1 June 2022.
Breach of contract — Vendors Warranties
The first and second defendants admit that they failed to disclose the existence of the Transfer Pricing Liability at the time the Sale Agreement was entered into and that such failure constitutes a breach of the Disclosure Warranties and cl 10.1 of the Sale Agreement.[81]
[81]Plaintiff’s Outline of Submissions, 10 [33(e)], 13 [44]; Plaintiff’s Closing Submissions, 7 [34]; Statement of Claim, 11 [26], CB 23; Defences 6 [26], CB 33, 48.
New Image submitted that, as a consequence of the Vendors failing to disclose the existence of the Transfer Pricing Liability, New Image was not aware (nor had any reason to suspect) that the Vendors would procure or allow the Transfer Payment to be made after the Agreement was entered into and before the Completion Date and was denied the opportunity to intervene or otherwise take any step to prevent the payment of AUD2,284,000 being made by Nutrimetics Australia to Tupperware Products Inc in June 2022. As a direct consequence, New Image claims it has been deprived of the use of AUD2,284,000.[82]
[82]Plaintiff’s Closing Submissions, 8 [37].
The difficulty with this claim is that it was not explained how, nor was there any evidence that, New Image had any legal right or basis to prevent the payment of AUD2,284,000 being made by Nutrimetics Australia to Tupperware Products Inc in June 2022. New Image did not submit that the transfer pricing payment had not been made in error in December 2021. It did not submit that the Transfer Pricing Liability was misconceived. On the contrary, it argued that the Transfer Pricing Liability ought to have been taken into account in calculating the Completion Working Capital.
I am not satisfied that New Image has demonstrated that it suffered any loss as a consequence of the first and second defendants’ failure to disclose the existence of the Transfer Pricing Liability at the time the Sale Agreement was entered into.
Without establishing a legal basis for preventing the Transfer Payment, New Image cannot demonstrate that the breach of warranty caused the alleged loss.
Misrepresentation
New Image’s claim for misrepresentation contained in its closing submissions relied on the first and second defendants’ admission that on or about 24 June 2022, the Vendors made the Working Capital Representation, stating that the Completion Working Capital was NZD6,584,000.[83]
[83]Plaintiff’s Outline of Submissions, 9–10 [33(b)], 13 [46]; Plaintiff’s Closing Submissions, 7 [35]; Statement of Claim, 4–5 [9], CB 16; Defences, 2 [9] CB 29, 43; CB 168–9.
New Image submitted that the Working Capital Representation was false for the reasons it relies on in support of its principal claim.
New Image faces a number of difficulties with this claim.
First, in its statement of claim, New Image does not raise a common law misrepresentation claim in respect of the Working Capital Representation. The claims pleaded under the heading ‘Misrepresentation’ relate to ‘Relevant Disclosures’ made by the Vendors to New Image at the time of entering into the Sale Agreement. The only claim pleaded in respect of the Working Capital Representation is that ‘at all relevant times, the Working Capital Representation was misleading or deceptive, or likely to mislead or deceive, contrary to section 18 of the Australian Consumer Law’.[84]
[84]Statement of Claim, 14 [34].
In its opening written submissions New Image expressly abandoned its claims relating to the Vendors’ alleged breaches of the Australian Consumer Law.[85]
[85]Plaintiff’s Outline of Submissions, 7 [21(b)].
Secondly, even accepting that such a claim was pressed, the loss and damage alleged to have been suffered by New Image is that it has been deprived of the sum of AUD2,284,000 that was paid by Nutrimetics Australia to Tupperware Products Inc in June 2022.[86] This claim suffers from the same defects set out above in respect of the Vendors Warranties.
[86]Plaintiff’s Closing Submissions, 8 [37]. See also, Statement of Claim, 9 [21] which refers to NZD2,833,000.
I am therefore not satisfied that New Image has demonstrated that it suffered any loss as a consequence of the Working Capital Representation.
F. CONCLUSION AND ORDERS
New Image has not succeeded in any of its claims.
In the circumstances an order will be made dismissing the proceeding with no order as to costs.
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SCHEDULE OF PARTIES
S ECI 2023 00048
BETWEEN:
| NEW IMAGE GROUP LIMITED (NZBN 9429035158509) | Plaintiff |
| v | |
| DART INDUSTRIES INC. | First Defendant |
| TUPPERWARE NEDERLAND B.V. | Second Defendant |
| | |
0
11
0