Re George Raymond Pty Ltd; Gilbertson v Salter
[2000] VSC 531
•19 December 2000
| SUPREME COURT OF VICTORIA COMMERCIAL AND EQUITY DIVISION | Not Restricted |
No. 7831 of 1998
IN THE MATTER of the Corporations Law of Victoria
- and –
IN THE MATTER of GEORGE RAYMOND PTY LTD
(ACN 004 545 546)
| JOY SALTER & OTHERS (According to the Schedule) | Applicants |
| v | |
| GEORGE GILBERTSON & OTHERS (According to the Schedule) | Respondents |
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No. 7074 of 2000
| GEORGE ROBERT GILBERTSON & OTHERS (According to the Schedule) | Plaintiffs |
| v | |
| JOY SALTER & OTHERS (According to the Schedule) | Defendants |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 December 2000 | |
DATE OF JUDGMENT: | 19 December 2000 | |
CASE MAY BE CITED AS: | Re George Raymond Pty Ltd; Gilbertson v Salter | |
MEDIA NEUTRAL CITATION: | [2000] VSC 531 | |
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Companies – sale and purchase of shares – whether a buy-back scheme a sale and purchase of shares – company’s disclosure statement – sufficiency – steps reasonably necessary to give effect to sale of shares – whether seller entitled to vote against buy-back – specific performance of sale agreement – whether sellers ready and willing.
Corporations Law Part 2 J.1 Div.2
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants/ Defendants | Mr P. W. Almond QC | Fitzpatrick Teale |
| For the Respondents/ Plaintiffs | Mr F.X. Costigan QC with Mr J.D. Loewenstein | Rigby Cooke |
HIS HONOUR:
On 19 November 1999 I published my reasons in an oppression proceeding brought pursuant to s. 246AA of the Corporations Law. The proceeding concerned certain conduct in the management of George Raymond Pty Ltd (“GRPL”) which I found to be oppressive of the minority shareholders. These shareholders, who were the applicants in the oppression proceeding (No. 7831 of 1998) and are the defendants in proceeding No. 7074 of 2000 (“the specific performance proceeding”), are Joy Margaret Salter, Raymond Cameron Salter, Paul James Salter and Robert Cameron Salter. I shall refer to them collectively as “the Salters”. In the oppression proceeding the Salters sought orders that their shares in GRPL be purchased by George Robert Gilbertson, the firstnamed respondent in the oppression proceeding and the firstnamed plaintiff in the specific performance proceeding, or by the other shareholders in GRPL. I concluded that this was a desirable course and the matter was stood over for final orders and to work out the details of purchase.
The parties of the oppression proceeding were the Salters as applicants and the remaining 16 shareholders in GRPL whom I shall refer to collectively as “the Gilbertsons” as respondents. They comprised; Mr George Gilbertson, Margaret Grace Gilbertson, Susan Ruth Yeend, Christine Margaret Bliss, Glenview Investments Pty Ltd, Raymond John Gilbertson, Andrea Joan Ashford, Christopher James Gilbertson, Samantha Joy Gilbertson, Robert Edward John Gilbertson, Paul Langdon Gilbertson, Beverley Elaine Gilbertson, Karen Lee-Anne Gordon, Heather Ruth Conolan, Deborah Gay Gilbertson and Bradley Paul Gilbertson.
These parties engaged in negotiations following my judgment and, on 14 April 2000, they signed terms of settlement under which the Salters agreed to sell their shareholding in GRPL for $3.65M. By cl. 9 of the terms, the parties agreed to execute a formal deed of release embodying the terms of settlement and this was done on 21 June 2000. The present application and proceeding concerns the meaning and effect of this deed of release, which was dated 14 April 2000. The parties to the deed are the Salters and the Gilbertsons. It recites that the Salters together hold 25.26% of the issued shares in GRPL and the desire of the parties to settle the oppression proceeding and all claims between them. The deed contains the following provisions, which are relevant for my present purposes.
“1.The respondents agree to purchase and the applicants agree to sell the shares to the respondents and/or their nominees for the sum of $3,650,000.00 payable in the following instalments (“the instalments”):
30 June 2000
$50,000.00
30 September 2000
$125,000.00
31 December 2000
$425,000.00
30 June 2001
$425,000.00
30 June 2002
$425,000.00
31 December 2002
$525,000.00
30 June 2003
$625,000.00
31 December 2003
$675,000.00
30 June 2004
$375,000.00
$3,650,000.00
2.The instalments shall be paid by bank cheque to the applicants Ray and Joy Salter or direct credit or transfer to their bank account with the ANZ Banking Group BSB 013 497 account no 007096834. Such payment shall be sufficient discharge of the respondents’ obligation to pay the applicants.
3.Within 7 days from the day hereof the respondents, by their solicitors, shall:
(a)notify the applicants’ solicitors in writing which of the respondents or their nominee is to be the purchaser or purchasers of the shares and the number of shares to be transferred to them;
(b)deposit the certificates for the shares that each of them holds in the company (“the respondents shares”) with the applicants’ solicitors, Messrs Fitzpatrick Teale, to be held by that firm as security for payment of the purchase price and any interest payable thereon to the applicants as herein provided. If requested by the applicants and at the applicants’ expense, the respondents shall execute a charge over the respondents’ shares to provide further security for the payment of each of the instalments. The applicants will be entitled to exercise all their rights in relation to the respondents shares if they become entitled by virtue of the respondents’ default in making any of the instalments and to enter judgment in default for any part of the sum of $3,650,000.00 unpaid together with interest and costs as herein provided.
4.Within 14 days of the date hereof the applicants, by their solicitors, shall:
(a)deliver signed transfers of the shares to the respondents solicitors;
(b)deliver a resignation as director of the company signed by the applicant Joy Salter;
(c)subject to performance by the respondents of their obligations in paragraph 3 hereof the applicants shall file and serve a notice of discontinuance of the proceeding and file consent orders that the proceeding be struck out with a right of reinstatement with no order as to costs.
5.If any of the instalments or part thereof is not paid within seven days after the due date, interest will be paid on the unpaid amount computed daily and payable monthly in arrears (on the first day of each calendar month) from the due date until it is paid in full at the rate offered by the Bank of Melbourne on 90 day bank bills plus 2.5% on the day the relevant unpaid instalment fell due for payment. Interest on any unpaid instalment will abate from the date of the payment.
6.If any of the instalments is not paid in full within 30 days after the due date together with interest as herein provided the applicants shall be entitled to reinstate the proceeding and to enter judgment against the respondents for such part of the sum of $3,650,000.00 as shall remain unpaid together with interest and the costs of and incidental to the reinstatement of the proceeding and the application for and entry of judgment but for no other relief.”
By cl. 8, a certain property at Tylden is to be offered for sale by GRPL and the Salters are to be paid 25.26% of the gross proceeds of sale after payment of expenses, such payment to be made in addition to the $3.65M payable under cl. 1. There is also a co‑operation clause, cl. 9, in these terms:
“Each of the parties will at his, her or its own cost execute all documents and do all things that any other party may reasonably require to enable and authorise the respondents and/or their nominees to purchase the shares and otherwise to give the full effect to the provisions of this Deed.”
Finally, the deed contains releases in wide terms.
On 19 April 2000 the solicitors for the Gilbertsons wrote to the solicitors for the Salters advising them that the Gilbertsons nominated GRPL as the purchaser of the shares. They advised that a meeting of the members of GRPL would, in due course, be convened to approve the purchase of the shares and their subsequent cancellation. This appears to be a reference to a s. 257D meeting and to the cancellation of the shares under s. 257H (3), although these are not mentioned in the letter. The letter also required the Salters, in accordance with cl. 4 of the deed, to deliver signed undated transfers of the shares with an authority to insert the date after the approval of members has been obtained.
Mrs Salter on 27 April 2000, resigned as a director of GRPL as required by cl. 4(b) of the deed. On 28 April 2000 the Salters caused to be delivered to the solicitors for the Gilbertsons signed undated transfers in favour of GRPL as required by cl. 4(a). In each of the transfers the consideration was expressed to be a sum of money, with the total sums aggregating $3.65M. On the same day the oppression proceeding was by consent dismissed with a right of reinstatement as required by cl. 4(c).
On 1 June 2000 the directors of GRPL resolved that the company would accept nomination as the purchaser of the shares.
On 21 June 2000 GRPL sent to all of its members a circulating resolution in accordance with s. 249A that they unanimously agree to the buy-back of the Salter shares. This was accompanied by a copy of the deed and a statement of information to members as required by s. 257D(2) and a fresh set of transfers with the request that the documentation be signed and returned by 27 June. The second set of transfers described the consideration as the appropriate share of the $3.65M and of the 25.26% of the proceeds of the sale of the Tylden land. Mr Robert Salter on behalf of the Salters responded by letter dated 27 June, which was not received until 29 June. This letter was sent, not to the solicitors for the Gilbertsons, but to Mr George Gilbertson direct. Mr Robert Salter asserted that this was first time the Salters had heard of the buy-back proposal. He protested that the requirement of a response by 27 June was unreasonable and that he would seek advice and reply as soon as possible.
It will be recalled that, by cl. 1 of the deed, the first instalment of $50,000 was payable on 30 June 2000. On this day the solicitors for the Gilbertsons wrote to the solicitors for the Salters. This letter included a request that a time for payment of the instalment be appointed by noon that day, saying that, if this was not done, there would be a tender at the home of Mr Raymond Salter and Mrs Joy Salter. By a letter faxed at 12.04pm on that day the solicitors for the Salters responded that they were seeking instructions. There followed a flurry of correspondence and an attempted tender at 4pm. There was, however, no one at home at the Salters’ house.
On 3 July 2000 the solicitors for the Salters wrote confirming that the transfers might be dated 27 April 2000 and stating that they had instructions to accept payment of the $50,000. About the same time, the solicitors for the Salters sent, also by fax, a three page letter in which they asserted that the terms of the deed permit the nomination of a purchaser other than the Gilbertsons, but not GRPL itself under a buy-back scheme. They pointed out that, under s. 257D, the terms of the buy-back must be approved by the members before the agreement is entered into. No approval had been obtained before the terms of settlement were agreed upon on 14 April 2000 or before the deed was executed on 21 June 2000. They said that the Salters had complied with their obligations under the deed by providing signed transfers on 28 April and that the deed imposed upon them, no further obligation “to do anything more and certainly no obligation upon them to agree to, or sign fresh transfers to facilitate, any proposed selective buy-back as you suggest in your letter 30 June 2000”. They observed that the proposed buy-back would have significant adverse taxation consequences for the Salters and that, on its face, the proposal was a further example of oppression of them as minority shareholders in GRPL. It may be noted at this point that the authorisation given to date the transfers 27 April 2000, a date prior to any members’ approval, would have the consequence that the buy-back would contravene s. 257D.
Payment of the first instalment of $50,000 was ultimately made on 4 July 2000 by solicitor’s letter challenging these assertions and reserving the rights of the Gilbertsons.
On 13 July 2000 a notice was given to members of a general meeting of GRPL to be held on 9 August 2000. The notice informed members that a resolution was to be put to the meeting approving the buy-back. By letter faxed on 14 July 2000 the solicitors for the Salters restated their position and advised that the Salters would not vote in favour of the resolution. I note in passing that, having regard to s. 257D(1)(a) they were not permitted to vote in favour of the resolution in any event. Further correspondence followed. At the meeting of members of 9 August 2000 the Salters voted against the resolution, the Gilbertsons voting in favour. Since those in favour represented less than 75% of the votes the special resolution approving the buy-back was lost.
Further correspondence followed throughout August and September 2000 in which the respected parties maintained their position. The second instalment of the purchase price, namely $125,000 was payable on 30 September 2000. On 22 September the solicitors for the Gilbertsons advised that GRPL was ready and willing to make this payment but were unable to do so because of the breach by the Salters of their obligations under the deed. They proposed mediation. The solicitors for the Salters on 28 September declined this last proposal and warned that, if payment was not made in accordance with the deed, their clients would enforce their rights under the deed. By letter of 28 September the solicitors for the Gilbertsons warned that their clients would commence proceedings for specific performance. They proposed that the second instalment be placed in an interest bearing deposit in the joint names of the parties pending resolution of the dispute.
On 29 September 2000 Mr George Gilbertson provided the sum of $125,000 to the solicitors for the Gilbertsons and it was placed by them on trust in an interest bearing deposit. They advised the solicitors for the Salters that it would be paid to the Salters, in effect upon receipt of an assurance that the necessary approval of members of the buy-back will be given. By letter dated 29 September 2000 the solicitors for the Salters, nonetheless, indicated that their clients would vote against the resolution.
I should add that, amongst the material before me, there is a affidavit of Mr Paul Salter setting out an analysis of the taxation implications of the buy-back as compared with a sale to a third party of the Salters’ shares. As a result of this analysis he concludes that the buy-back would be seriously disadvantageous to the financial interests of the Salters. His analysis was challenged on behalf of the Gilbertsons, but it is not necessary for me to resolve this dispute: it is sufficient that I note that this appears to represent the motive behind the position adopted by the parties.
Against this background, the Gilbertsons, on 5 October 2000 commenced the specific performance proceeding. On 16 November 2000 the Salters, in accordance with cl. 6 of the deed, applied to reinstate the oppression proceeding and seek judgment in the sum of $3.6M plus interest on the basis that the second instalment was not paid within 30 days after the due date, so that the balance became due and payable.
In the specific performance proceeding, the Gilbertsons by summons filed on 14 November 2000 sought orders for mediation and directions for trial. The application was listed before me as a judge who had some familiarity with the disputes between the parties. And so, on 20 November the application for reinstatement and judgment in the oppression proceeding and the summons for directions in the specific performance proceeding were mentioned before me. Notwithstanding the objections of the Salters, I directed that the dispute between the parties return to mediation. I directed that, in the event that the mediation be unsuccessful, the two proceedings be tried at the same time and that the evidence in one be evidence in the other and, by consent, that the trial of the specific performance proceeding be heard on affidavit. The trial was fixed for hearing before me on 8 December. The affidavit material before the court at trial comprised affidavits of George Robert Gilbertson sworn 14 November 2000 and 28 November 2000 respectively, Graham Leslie Candy sworn 6 December 2000, David John Fitzpatrick sworn 16 November 2000 and 7 December 2000 respectively, Mr Paul Salter sworn 29 November 2000, Mr Raymond Salter, Mrs Salter and Mr Robert Salter all sworn 6 December 2000.
Sale and Purchase
Clause 1 of the deed speaks of a sale and a purchase of the shares. The first question is whether the share buy-back falls within these terms. By way of preliminary observation I note that the deed is a formal document entered into following lengthy negotiations between two groups of parties who possess abundant commercial expertise and legal and accounting assistance. The deed itself was drawn by legal practitioners as a vehicle to produce a commercial result.
I am, of course, not concerned with the question whether the parties themselves intended or even had in mind the possibility that the Gilbertsons might nominate GRPL as purchaser under a buy-back scheme. The question is whether the terms of the document themselves, properly construed, cover such a transaction.
It was submitted on behalf of the Salters that the words “purchase” and “sell” in cl. 1 and “transfer” in cl. 3 and cl. 4(a) are not capable of referring to a buy-back. It was put that sale connotes a conveyance or transfer of property[1] and that a share buy-back was not a transfer[2]. Accordingly, GRPL is incapable of being the nominee of the Gilbertsons for the purposes of the deed.
[1] Kirkness v John Hudson & Co Ltd [1955] AC 696 at 727, per Lord Reid
[2] Coles Myer Ltd v Commissioner of State Revenue [1998] 4 VR 728
To this, counsel for the Gilbertsons made a number of responses. First, they said that the Salters had accepted the nomination and were apparently prepared to implement the share buy-back until 29 June 2000, the eve of the date for payment of the first instalment or, perhaps, four days later on 3 July 2000. It was said that, even so, their motive for this change in attitude, namely the adverse taxation consequences, was not a relevant consideration. Accordingly, it was said that the Salters asserted reasons for their non-performance of their obligation should be rejected. To my mind, the primary consideration does not turn on the motivation of the Salters or upon the genuineness of their asserted reasons for refusing to implement the buy-back. It is a question of construction of the deed.
It is necessary, in the midst of these allegations and counter-allegations, to bear in mind the precise terms of the operative part of the deed:
“The [Gilbertsons] agree to purchase and the [Salters] agree to sell the shares to the [Gilbertsons] and/or their nominees….”
The Gilbertsons have sought to implement this agreement with a selective buy-back under Part 2J of the Law which deals with share capital reductions and share buy-backs. Division 2, dealing with buy-backs, is built around s. 257A which provides: “A company may buy-back its own shares” upon certain conditions. “Buy-back” is defined in s. 9 as meaning “ the acquisition by the company of shares in itself”. The essential feature of such a scheme, at least insofar as it is a selective buy-back scheme, is that it is consensual; the company agrees to buy-back its own shares[3]. It is an agreement in the true sense although it has certain unique statutory limitations: it may not be disclaimed by a liquidator of the company,[4] and consequences: all rights attaching to the shares are suspended once the agreement for buy-back is made and they remain suspended until the agreement is terminated[5] or, presumably, until the transfer is registered at which time the shares are cancelled[6]. It is constituted by an offer and acceptance[7]. The parties to the agreement thus formed are the shareholder in question and the company itself. The terms of the buy-back agreement are not specified in the Law but it would seem that the shareholder agrees to transfer the shares[8] to the company and the company agrees to pay for them, for it incurs a debt in the amount agreed to be paid for the shares[9]. As a consequence of the transaction the company acquires the shares in itself[10] by transfer[11]. There was a suggestion in the argument that a transfer is not a necessary step in the buy-back process. I think this is not correct. The registration of a transfer triggers the cancellation of the shares. Since the Law imposes no time within which this registration must take place, cancellation may not occur for some time. In the meantime, the company may not deal in the shares[12] and all rights attaching to them remain suspended[13].
[3] Section 9
[4] Section 568(1AA)
[5] Section 257H
[6] Section 257H(3)
[7] Section 257G
[8] Section 257H(3)
[9] See s. 254Y(c) and s. 588G(1A) item 3. As to proof of this debt in the winding up of the company, see s. 553AA
[10] Section 259A. And see the definition of buy-back and buy-back agreement in s. 9
[11] Section 257H(3)
[12] Section 257H(2)
[13] Section 257H(1)
I was reminded that, throughout the Law, the shareholder involved in a selective buy-back is referred to as the seller[14]. The transaction itself is defined in terms of the acquisition of the shares by the company and, as such, it was, until very recently, subject to the unacceptable circumstances regime of s. 733[15]. Furthermore, the acquisition by the company of the shares is completed by the registration of the transfer from the seller to the company[16] although the shares are cancelled immediately after registration[17]. In ordinary parlance, it was said, such a transaction, or at least the contractual components of it, bear all the hallmarks of purchase and sale.
[14] For example s. 563AA
[15] Section 257J, item 3. Repealed as from 13 March 2000 by Act No. 156 of 1999 Schedule 3 Part 9 Item 325
[16] Section 257H
[17] Section 257H(3)
Nonetheless, counsel for the Salters contended that this was not, as a matter of law, the correct characterisation of the buy-back procedure. They relied for this upon the analysis of the majority of the Court of Appeal in Coles Myer Ltd v Commissioner of State Revenue[18]. The issue in that case was whether the implementation of a selective buy-back scheme attracted stamp duty as a transfer of marketable securities within the meaning of the Stamps Act 1958. In concluding that it did not, Ormiston JA, in a closely reasoned judgment with which the President concurred, subjected the buy-back regime established under Part 2.4 Division 4B of the Law as in force in 1994 to a detailed analysis. This Division was replaced in 1995[19] by a new Division 4B and this, in turn, has been replaced in 1998 with the current Part 2J.1 Division 2[20]. It is difficult to analyse and compare the changes introduced by these amending statutes but it is apparent that many of the statutory provisions referred to in the Coles Myer case are in different terms, or even absent, in the current legislation. The current statutory regime seems to be a simpler one than that before the Court of Appeal on that occasion but the philosophy underlying it seems to be unchanged. Ormiston JA in that case identified the precise question before the court as being whether the legal effect of a buy-back of the shares was that the company as transferee acquired as a result of the transfer “substantially the same right or interest in the subject matter as did the transferor before the transfer took place”[21]. His Honour concluded that it did not because the shares in the course of the transaction suffered a suspension of all appurtenant rights upon the making of the agreement[22] followed by the extinguishment of those rights upon cancellation of the shares after registration of the transfer[23]. The modern equivalent[24] does not in terms refer to the extinguishment but this may not be significant. What is important is that his Honour was concerned with characterising the transaction as a transfer in terms of the revenue legislation.
[18] [1998] 4 VR 728
[19] Act No. 115 of 1995
[20] Act No. 61 of 1998
[21] [1998] 4 VR at 740
[22] Section 206PA
[23] Section 206PC(1)
[24] Section 257H(3)
My task is rather different. Two groups of commercial parties have used the language of sale and purchase in their document. The reference to “transfer” in cl. 3(a) and cl. 4(a) of the deed is to a document of that name or the process which may be required rather than to the legal concept having that label. To my mind their chosen terminology refers to an exchange of a thing for money or an agreement to do this. The thing in this case is the shares which the company acquires by the buy-back. The money is the agreed price. The nature of the transaction mentioned in cl. 1 is not so much a transfer but a sale and purchase. As the Court of Appeal explained in the Coles Myer case, the concept of a transfer focuses upon the nature of a thing received by the transferee. A sale and purchase, on the other hand, is concerned with an agreement under which a thing passes from the seller to the buyer for consideration. The fact that the buyer is unable to enjoy the thing in the same way or to the same extent as the seller is beside the point. The important feature of the transaction is that the title to the thing passes from the seller to the buyer for an agreed price.
I conclude that the nomination of GRPL as a buyer under a share buy-back scheme falls within the terms of cl. 1 and that the Salters are obliged to accept the nomination.
The Co-operation Clause
Next, it was submitted that the deed does not provide for the proposed capital reduction. In terms, this is correct because capital reduction is not mentioned in the document. Part 2J.1 Division 2, as I have mentioned, establishes the procedure which must be followed to implement a buy-back. This involves the selling shareholders taking certain steps as well as the company. These steps are, in this case, that all the selling shareholders not vote against the s. 257D(1) resolution approving the terms of the buy-back, their acceptance of the company’s offer to purchase to be made pursuant to s. 257G, and their execution of the share transfers to the company so that they may be registered as is contemplated in s. 257H(3). Leaving to one side the transfers which are referred to specifically in cl. 4(a), the deed does not in terms require the Salters to take these steps. Clause 9, however, requires them to do all things reasonably required to give full effect to the deed.
It was argued that the Salters as shareholders had rights and obligations, at least until the share suspension takes effect. These obligations might require them to exercise their voting rights adversely to the buy-back if, for example, it was thought that the transaction would materially prejudice the company’s ability to pay its debts[25]. It was inconsistent with the safeguards built into the scheme of Part 2J.1, it was submitted, that the Salters as shareholders might be contractually bound to ignore their duties as members and abstain from opposing such a buy-back. Whether this be so, it is certainly not the case here.
[25] Section 257A(a)
Next, it was said that the requirement of the Gilbertsons that the Salters not vote against the proposal was not a reasonable requirement in terms of cl. 9 because of the adverse financial impact of the buy-back on the Salters. There is no substance in this contention. The parties must, all of them, be taken to have reflected upon the financial implications of the terms of settlement before they agreed to them in April 2000 and again in June 2000 when the deed was executed without complaint. The fact that a party to a contract may not have adequately foreseen disadvantages which may accrue to that party cannot ordinarily provide a basis for rescinding the contract or, as is the present position of the Salters, a basis for insisting upon the performance of the contract only in the manner which suits them. The provision in cl. 9 that the requirement be reasonable means no more than that the thing required to be done must be a reasonably necessary step in the process of giving effect to the agreement. It is a feature of the present dispute that each of the groups of parties insists that the deed remains on foot and each seeks in their own way to enforce it against the other.
In summary, I conclude that, under the terms of the deed, the Salters are obliged not to vote against the resolution to approve the terms of the proposed agreement for the buy-back, provided these terms are in accordance with the terms of the deed; they are obliged to accept the offer to be made by GRPL following and in accordance with this approval; and, generally, they are obliged to give effect to the agreement contained in the deed. The position they have adopted on 3 July 2000 and thereafter constitutes a breach of these obligations.
The Disclosure Statement
Next, it was put on behalf of the Salters that the information in the company’s disclosure statement required by s. 257D(2) to be provided to members was deficient in four respects.
First, it is said that it contained an incorrect statement that the consideration for the buy-back includes 25.26% of the proceeds of the sale of the Tylden land. In two respects at least this contention must fail. First, it is by no means certain that this information is erroneous. The deed must be read as a whole setting out a single transaction. Part of this transaction is the sale and purchase of the shares for $3.65M; another part is the sale of the Tylden land and the distribution of the proceeds, all in accordance with cl. 8. Indeed, Mr George Gilbertson points out in his affidavit sworn on 28 November 2000 that it was an appreciation of this fact which caused the Gilbertsons to submit the second set of transfers in June. Second, if it is in fact erroneous, all parties were well aware of the true position. A copy of the deed which had been executed by all of the members of GRPL was attached to the disclosure statement. In any event, if the misstatement amounts to a failure to follow the procedures laid down in Division 2 contrary to s. 257A(b) with the consequence that the transaction becomes or may become an unlawful acquisition by GRPL of its own shares contrary to s. 259A, this does not affect the validity of the acquisition[26].
[26] Section 259F
Second, it is said that the directors have not formed a view as to whether the agreed price for the shares is in excess of their market price. This is necessary in order that all shareholders be treated fairly. In the context of this case this is a remarkable submission. The Law does not require that the directors form or express any such opinion. Section 257D(2) obliges the company to provide “a statement setting out all information known to the company that is material to the decision how to vote on the resolution”. No further guidelines as to the information required are specified. The decision in question is one which, in this case, is not a decision which would be a difficult one for the members, particularly those who were permitted by s. 257D1(a) to vote in favour of it. In any event, this is a proprietary limited company held within the Gilbertson family. The market value of such shares will always be a matter of uncertainty. Perhaps the surest yardstick to it is the apparently arms length agreement entered into by all shareholders in April.
Third, it is said that the statements as to the taxation affects of the buy-back are misleading. I do not enter upon the debate as to the taxation impact of the transaction. Different views have been put to me. Again, all of the parties are well supported by competent accounting advice. At the time of the August general meeting all members were aware of the rival contentions. Furthermore, given the obligation imposed on them by the deed, the significance of the taxation implications of the buy-back diminishes or entirely disappears.
Fourth, there is no indication of the value of the Tylden land in the information provided. Having regard to terms of cl. 8, I doubt that it was necessary to provide this information.
With respect to all of these complaints about the information, s. 257D(2) relieves the company of an obligation to make disclosure of matters where this would be unreasonable because it has previously disclosed them. When the August general meeting was held all members were aware of the matters now complained of and had, doubtless, taken up their positions. There is no requirement of law or of common sense that would oblige the company to provide further or different information to enable the members to cast an informed vote on the buy-back resolution.
The Gilbertsons’ Breach
Finally, it is said that specific performance should be refused because the Gilbertsons themselves are in breach of the deed for non-payment of the second instalment. Counsel for the Gilbertsons argued that their clients were not in breach. It is, of course, common ground that the second instalment was not paid on the due date and that it remains unpaid. Counsel submitted that this non-payment was entirely attributable to the breaches by the Salters of their obligations under the deed. This submission must fail both as a matter of fact and as a matter of law. Under cl. 1 of the deed the party obliged to make the payments is not spelt out. It must, however, be the Gilbertsons, for they are the parties who agreed to purchase the shares. As a matter of contract, it is they and not the nominee purchaser who has the contractual obligation to make the payment and they were not relieved of this obligation by the nomination[27]. The breaches of contract by the Salters may have prevented GRPL from lawfully making payments; it did not prevent the Gilbertsons from doing so. It is evident that they had the money available and could have made the payment had they been minded to do so. As a matter of law, the obligation of the Gilbertsons under the deed to make any or indeed all of the payments was not expressed to be dependent upon the performance by the Salters of their obligations. What appears to have been contemplated is that the transfer of shares would take place within a relatively short timeframe, within 14 days of the date of the deed, 14 April 2000, or soon thereafter. The first of the instalments is not due for another two months and the remainder over four years. In the meantime, the Salters, as unpaid sellers of the shares, are protected by the security given under cl. 3(b).
[27] Tonelli v Komirra Pty Ltd [1972] VR 737
It may well have been open to the Gilbertsons to have terminated the deed by accepting the breaches or anticipatory breaches by the Salters as a repudiation of the contract contained in the deed, but they have not done so. In these circumstances, the Gilbertsons, having elected to keep the contract on foot, are themselves bound to perform it. Counsel on their behalf submitted that, in these circumstances, it was open to them to suspend performance so long as the party in default persists in its refusal to perform. I was referred in support of that proposition to the old case of Braithwaite v Foreign Hardwood Company[28] and to the discussion of this case in Chitty[29]. To my mind, the law is not in accordance with that submission. Putting aside the case which may exist where the performance of the innocent party is contractually dependent upon performance by the party in default and that where the seller under a sale of goods contract may withhold delivery where it appears that the defaulting purchaser is insolvent, the law offers the innocent party no third choice. It must elect between two courses of action when faced with a breach by the other party: it may determine the contract by accepting the breach as a repudiation or it may elect to affirm the contract. In the latter event it must abide the burden as well as the benefit of the contract. The law confers no general right of suspension of performance[30]. It follows, then, that the Gilbertsons, too, were on 30 September 2000 in breach of the contract and that this breach persisted for 30 days.
[28] [1905] 2 KB 543
[29] 26th Ed. at para 1707
[30] Canterbury Pipe Lines Ltd v Christchurch Drainage Board [1979] 2 NZLR 347; Bowes v Chaleyer (1923) 32 CLR 159 at 169, per Knox CJ; Fercometal SARL v Mediterranean Shipping Co SA; The Simona [1989] AC 788; Foran v Wight (1989) 168 CLR 385 at 407, per Mason CJ
The Salters then say that the Gilbertsons are liable to pay interest pursuant to cl. 5. So much cannot be gainsaid. Further, they seek judgment for the unpaid balance of the price and interest and costs pursuant to cl. 6. As to this, I entertain no doubt that such judgment should be denied them. Clause 6 does not make the unpaid balance of the price due and payable upon 30 days default; it confers an entitlement to seek judgment. Inasmuch as the Salters have applied for judgment their entitlement to do so is not a common law action for debt but a claim in the nature of specific performance. The court will not order accelerated payment of the price of the shares to a party which persists in its wrongful refusal to deliver them.
Specific Performance
The Gilbertsons seek an order that the Salters specifically perform their obligations under the deed. I have concluded that they are in breach of its terms. They resist specific performance on a number of grounds, many of which I have already dealt with. In the circumstances of this case, there is no reason which would render it inappropriate that the Salters be directed not to vote against the buy-back resolution. It has not been suggested that the buy-back proposal contravenes the letter or the intent of Part 2J.1 of the Law. There is nothing in the criticisms of the disclosure statement which leads me to the conclusion that any of the shareholders of GRPL is not in possession of all of the facts which might bear upon their decision to vote at a meeting upon the resolution to approve the terms of the buy-back agreement.
The fact, as I have found, that the Gilbertsons are themselves in breach of their obligation to make a second payment does not disentitle them from the equitable relief they seek. A party in breach will be denied this relief where it fails to show that it was and is ready and willing to perform its obligations under the contract which it seeks to enforce.[31] In this case, the evidence shows that the Gilbertsons were and are in a position to perform and that they are willing to perform their obligations under cl. 1.
[31] Foran v Wight (1989) 168 CLR 385
In conclusion, I will make an order for specific performance of the deed which the Gilbertsons seek. I shall leave it to counsel to bring in minutes of the orders which should be made to give effect to these conclusions. I would expect that they would address the following matters.
Proceeding No. 7831 of 1998
1.The application of the applicants’ filed on 16 November 2000 seeking judgment be refused.
2.The applicants pay the costs of the application including reserved costs.
Proceeding No. 7074 of 2000
1.The plaintiffs must pay the sum outstanding together with interest at that sum at the rate provided for in cl. 5 of the contract from 30 September 2000 until the date of payment.
2.The defendants will be restrained from voting at a properly constituted meeting of members under s. 257D against a resolution that the terms of the proposed buy-back agreement be approved.
3.If such a special resolution be passed the defendants shall accept GRPL’s buy-back offer and do all things reasonably required of them including the execution of transfers in proper form to give effect to the buy-back agreement constituted by such offer and acceptance.
4.The defendants pay the costs of the proceeding including reserved costs.
5.Liberty to apply should be reserved to enable the parties to work out further details of this order that may be required. If it be necessary during the vacation, an application pursuant to this liberty reserved may be made to the judge in the Practice Court.
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SCHEDULE
Proceeding No: 7074 of 2000
George Robert Gilbertson
Firstnamed Plaintiff
Margaret Grace Gilbertson
Secondnamed Plaintiff
Susan Ruth Yeend
Thirdnamed Plaintiff
Christine Margaret Bliss
Fourthnamed Plaintiff
Glenview Investments Pty Ltd
Fifthnamed Plaintiff
Raymond John Gilbertson
Sixthnamed Plaintiff
Andrea Joan Ashford
Seventhnamed Plaintiff
Christopher James Gilbertson
Eighthnamed Plaintiff
Samantha Joy Gilbertson
Ninthnamed Plaintiff
Robert Edward John Gilbertson
Tenthnamed Plaintiff
Paul Landgon Gilbertson
Eleventhnamed Plaintiff
Beverley Elaine Gilbertson
Twelfthnamed Plaintiff
Karen Lee-Anne Gordon
Thirteenthnamed Plaintiff
Heather Ruth Conolan
Fourteenthnamed Plaintiff
Deborah Gaye Gilbertson
Fifteenthnamed Plaintiff
Bradley Paul Gilbertson
Sixteenthnamed Plaintiff
Joy Salter
Firstnamed Defendant
Raymond Salter
Secondnamed Defendant
Robert Salter
Thirdnamed Defendant
Paul Salter
Fourthnamed Defendant
SCHEDULE
Proceeding No: 7831 of 1998
Joy Salter
Firstnamed Applicant
Raymond Salter
Secondnamed Applicant
Robert Salter
Thirdnamed Applicant
Paul Salter
Fourthnamed Applicant
George Gilbertson
Firstnamed Respondent
Margaret Gilbertson
Secondnamed Respondent
Susan Yeend
Thirdnamed Respondent
Christine Bliss
Fourthnamed Respondent
Glenview Investments Pty Ltd
Fifthnamed Respondent
Raymond Gilbertson
Sixthnamed Respondent
Andrea Ashford
Seventhnamed Respondent
Christopher Gilbertson
Eighthnamed Respondent
Samantha Gilbertson
Ninthnamed Respondent
Robert Gilbertson
Tenthnamed Respondent
Paul Gilbertson
Eleventhnamed Respondent
Beverley Gilbertson
Twelfthnamed Respondent
Karen Gordon
Thirteenthnamed Respondent
Heather Conolan
Fourteenthnamed Respondent
Deborah Gilbertson
Fifteenthnamed Respondent
Bradley Gilbertson
Sixteenthnamed Respondent
2
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