Rae v Beddison Corporation Pty Ltd - [2009] NSWSC 27

CITATION: Rae v Beddison Corporation Pty Ltd [2009] NSWSC 27

HEARING DATE(S): 2, 3 and 4 February 2009

JUDGMENT DATE :
10 February 2009

JUDGMENT OF: Harrison J

DECISION: The parties are directed to bring in short minutes of order reflecting these reasons for judgment.

CATCHWORDS: CONTRACT – sale of shares in recruitment company – provision in agreement for payment of purchase price by two instalments – calculation of second instalment tied to company profit in the twelve months post-sale – whether purchaser entitled to reduce the second instalment by excluding items of income and including expenses – adjustment of contract price in accordance with terms of agreement

CATEGORY: Principal judgment

PARTIES: Wendy Florence Rae (Plaintiff)
Beddison Corporation Pty Ltd (Defendant)

FILE NUMBER(S): SC 15074 of 2007

COUNSEL: F P Carnovale (Plaintiff)
M J Slattery QC with D R Meltz (Defendant)

SOLICITORS: Brown Wright Stein Lawyers (Plaintiff)
Gadens Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HARRISON J

10 February 2009

15074 of 2007 Wendy Florence Rae v Beddison Corporation Pty Ltd
JUDGMENT

1 HIS HONOUR: From 28 May 1993 to 19 December 2005 Wendy Rae & Associates Pty Ltd ("the company") carried on a recruitment agency business specialising in the supply of both temporary and permanent workers and staff for clients. On 19 December 2005 the plaintiff, who was the owner of the whole of the issued capital in the company, sold all of her shares in it to the defendant ("Beddison Corporation") in accordance with a Deed for Sale of Shares ("the agreement") bearing that date. The purchase price under the agreement was $975,000, subject to the possibility of an adjustment downwards depending on the company's financial results for the 12 months following the date of the agreement. In circumstances and for reasons that are both uncontroversial and irrelevant, it was subsequently agreed that the relevant 12 month period for the purposes of these calculations should expire on 30 November 2006 rather than on 19 December 2006.

2 The purchase price was payable to the plaintiff in two instalments. The first instalment of $217,000 was referred to in the agreement as the Purchase Price Initial Amount. It was due and payable on the date of the agreement and was paid on that day. The second instalment, referred to in the agreement as the Purchase Price Deferred Amount, was payable on 19 January 2007. Provided that the company achieved a target profit (as defined in the agreement) of at least $275,636 over the following 12 months, the second instalment was to be $758,000 and was calculated at the rate of 2.75 times the target profit of $275,636. However, in the event that the company failed to achieve the target profit by the end of the 12 month period, the second instalment would be adjusted downward at the rate of 2.75 times the amount of the profit shortfall.

3 In these circumstances the precise manner in which the company's profit was to be calculated…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWSC 27
Decision Date: 10 February 2009

CaseChat Overview and Summary

The case of Rae v Beddison Corporation Pty Ltd involved a dispute between the parties regarding the sale of shares in a recruitment company. The purchaser, Rae, had agreed to pay the purchase price in two instalments. The second instalment was to be calculated based on the company's profit in the twelve months following the sale. The primary issue before the court was whether Rae was entitled to reduce the second instalment by excluding certain items of income and including certain expenses. This issue hinged on the interpretation of the terms of the agreement and whether such adjustments were permissible.

The court had to determine the precise meaning of the contract terms, specifically focusing on the provision that tied the second instalment to the company's profit. It was necessary to ascertain whether the terms allowed for any modifications to the calculation of the profit, as proposed by Rae. The court examined the language of the agreement and the intentions of the parties as expressed within it. The dispute centred on whether the contract permitted such adjustments to the second instalment, as Rae argued, or if it strictly adhered to the profit figure without any alterations, as Beddison Corporation contended.

In its decision, the court found that the contract did not permit Rae to unilaterally adjust the calculation of the second instalment. The agreement clearly tied the payment to the company's profit, without any provision for the exclusion of income or inclusion of expenses. The court held that any changes to the profit figure would amount to a material alteration of the contract, which was not allowed under the terms. Consequently, Rae was not entitled to reduce the second instalment as proposed. The court's interpretation was based on a strict adherence to the contractual terms and the principle that parties cannot unilaterally change the agreed-upon terms without mutual consent.

The court ordered that Rae was to pay the second instalment as calculated according to the original terms of the agreement. The decision reinforced the importance of clear contractual terms and the need for parties to adhere to the agreed conditions. The outcome underscored the principle that, in the absence of specific provisions allowing for adjustments, parties cannot unilaterally modify the terms of the agreement.

Orders