SARRACIN Pty Ltd v Taaffe - [2001] WADC 279

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: SARRACIN PTY LTD -v- TAAFFE & ANOR [2001] WADC 279

CORAM: O'BRIEN DCJ

HEARD: 28 NOVEMBER 2001

DELIVERED : 10 DECEMBER 2001

FILE NO/S: CIV 2993 of 2000

BETWEEN: SARRACIN PTY LTD (ACN 062 756 352)
Plaintiff
AND
DENNIS TAAFFE
CELLY-ANN TAAFFE
Defendants

Catchwords:

Appeal against Deputy Registrar's decision - Dismissing plaintiff's application for summary judgment - Turns on own facts

Legislation:

Nil

Result:

Appeal dismissed

Representation:

Counsel:

Plaintiff: Mr C F McLeod
Defendants: In person

Solicitors:

Plaintiff: Deacons Lawyers
Defendants: Not applicable

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Blomley v Ryan (1956) 99 CLR 362
Clay v Karlson (1997) 17 WAR 493
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447
Davidson v Neild (1890) 6 WN (NSW) 163
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Garcia v National Australia Bank Limited [1998] HCA 48
Gillon& Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Louth v Diprose (1992) 175 CLR 621
Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) L 252
Phillips Fox (a firm) v Westgold Resources NL and Ors [2000] WASCA 85
Re Terrey & White's Contract (1886) 32 Ch D 14
Theseus Exploration NL v Foyster (1972) 126 CLR 507
Webster v Lampard (1993) 177 CLR 598

O'BRIEN DCJ: This matter involves an appeal from a decision of the Deputy Registrar dismissing the plaintiff's application for summary judgment.
The legal principles applicable to applications for summary judgment are well settled. They are summarised in the defendants' outline of submission filed on 27 June 2001. I adopt and do not propose to repeat them. Suffice to say that where there is a triable issue whether because of a factual dispute or a legal point which cannot be determined without ventilation and testing of all relevant evidence, there should not be an order for summary judgment.
The plaintiff's claim for summary judgment is for a decree that the defendants specifically perform part of their obligations under an agreement between the defendants and the plaintiff. The nature of the agreement and the circumstances surrounding it are as follows.
On or before 21 August 1998, the defendants carried on business trading as Work Force Management ("the business"). The second defendant ("Mrs Taaffe") was the director and secretary of a company called Human Resource Solutions (WA) Pty Ltd ("the company").
It is claimed by the plaintiff, and not disputed by the defendants, that on or about 11 August 1998, the parties entered into an agreement in relation to the purchase of the business and shares in the company by the plaintiff ("the agreement"). The plaintiff claims that the agreement was partly oral and partly in writing. The oral component of the agreement constituted discussions between Mr Adrian Taylor, the sole director of the plaintiff, and the defendants during early August 1998. The substance of those discussions was summarised in writing in a document entitled "Heads of Agreement – Independent Arrangement". This document was undated and unsigned but transmitted by Mrs Taaffe to the plaintiff on or about 11 August 1998 ("independent arrangement"). The written component of the agreement was contained in a document titled "Heads of Agreement" dated 21 August 1998 between the plaintiff, the defendants, the company and one Thomas Anthony Fahey.
The relevant terms of the Heads of Agreement are as follows:
1.The plaintiff would purchase all of the issued share capital in the company for $70,000 by way of:
(a)$50,000 to be paid on 21 August 1998 (cl 2.1(1)(a)).
(b)$20,000 by way of 12 equal consecutive calendar monthly instalments unless otherwise agreed (cl 2.1(1)(b)) ("purchase price").
2.Mrs Taaffe would provide her services as a consultant to the plaintiff for 25 hours per week for a five year period commencing on 21 August 1998 (cl 3.1).
3.Except during the period of 12 months following 21 August 1998, the plaintiff was to pay Mrs Taaffe a specified percentage of fees raised by the company in respect of her services (cl 3.3).
4.The plaintiff would pay the first defendant ("Mr Taaffe") 45 per cent of fees raised by the company or one half of the indexed maximum (as defined in cl 1.1(12) of the agreement) whichever was the lesser in respect of his services (cl 3.4).
5.In consideration of a put option fee paid by the plaintiff to the defendants, Mr and Mrs Taaffe agree to purchase Work Force Management assets ("assets") (as defined in cl 1.1(20) of the Heads of Agreement) and the issued shares of the company from the plaintiff ("put option") on the terms set out in the put contract, provided that the purchase price for the put contract (as defined in cl 1.1(15)) and being in the form of Annexure B to the Heads of Agreement) ("put contract") was for the amount calculated in accordance with item 8 to the schedule to the Heads of Agreement ("item 8") (cl 9.2).
6.The put option was exercisable before 30 November 2003 by delivery to the defendants of copies of the put contract signed by the plaintiff (cl 10.1).
7.Within 14 days after the exercise of the put option, the defendants were obliged to sign one of the copies of the put contract already signed by the plaintiff and to return it to the plaintiff at the address shown in the put contract (cl 11.3).
The relevant terms of the independent arrangement were that the parties agreed to vary the payment of the purchase price as follows:
(i)The balance of the purchase price ($20,000) payable by the plaintiff pursuant to cl 2.1(1)(b) would be made by way of payment to Mrs Taaffe of 45 per cent of fees raised by her on behalf of the company during the first 12 months of the consultancy arrangements; and
(ii)If Mrs Taaffe raised more than $20,000 in fees during the first 12 months any additional fees would be allocated to Mr Taaffe for taxation purposes.
The plaintiff further claims that in accordance with the independent arrangement the defendants jointly issued invoices to the value of $63,366 for 45 per cent of fees rendered pursuant to the consultancy arrangement relevant to the business during the period 21 August 1998 and 20 August 1999, which amount was paid by the plaintiff despite the terms of cl 3.3 of the Heads of Agreement.
The plaintiff's amended statement of claim makes a claim for overpayments to the defendants by way of mistake. That component of the plaintiff's claim has been abandoned.
As to the put option, the plaintiff claims that pursuant to the Heads of Agreement, the put option was an irrevocable offer by the defendants to purchase the assets pursuant to the put contract. Further, the put contract came into effect on the exercise of the put option. The date of the put contract was the date of the exercise of the put option. The plaintiff claims, and it is not disputed by the defendants, that on or about 17 August 2000, the plaintiff exercised the put option by delivering to the defendants copies of the put contract signed by it in the form of Annexure B of the Heads of Agreement for the amount of $50,000 and the put contract came into effect on or about the same date.
The plaintiff claims that in breach of the Heads of Agreement the defendants failed to sign one of the copies of the put contract already signed by the plaintiff and return it to the plaintiff at its address shown in the put contract within 14 days of the exercise of the put option and despite demand having been made the defendants have refused to remedy the breach of the agreement. The defendants do not dispute this.
Pursuant to the put contract, various steps were to be taken to ensure the transfer of the assets in the business to the defendants and therefore payment of the put price.
In its application for summary judgment, the plaintiff seeks an order requiring the defendants to specifically perform:
1.The terms of cl 11.3 of the Heads of Agreement between the parties by signing one of the copies of the put contract already signed by the plaintiff and returning it to the plaintiff within three days of the date of the order;
2.Their obligations under the put contract by preparing and submitting to the plaintiff within 10 days of the date of the order all assignments, applications and other documents required to be signed and handed over pursuant to cl 5.3 of the put contract;
3.Their obligations under cl 5.4 of the put contract by paying to the plaintiff the sum of $50,000 by bank cheque within 21 days of the date of this order; and
4.Perform such other acts as may be necessary to enable completion under the put contract to take place.
By affidavit sworn on behalf of the plaintiff on 15 November 2001, Mr Taylor deposed that the plaintiff would, in lieu of specific performance, consent to an order for damages being made. The plaintiff's counsel submitted that the amount of damages would be $50,000. The amended statement of claim does not specifically plead damages as a head of relief (see O 21 r 1).
However, it would seem that the plaintiff is not so much concerned with disposing of the assets as in securing payment of the $50,000.
The put contract purchase price is specified on a sliding scale dependent on when the put option is exercised (item 8). The relevant date is 30 November 2000 and the relevant price is $50,000. (The purchase price is also specified in identical terms in cl 5.1 of the put contract). The price reduces to $20,000 if the put option is exercised on or before 30 November 2003 (the latest date when pursuant to the Heads of Agreement, it could be exercised).
By affidavit sworn on 13 December 2000, Mr Taylor deposed that the defendants granted the plaintiff a put option; the relevant put option fee was paid; the put option contract was exercised by letter to the defendants dated 17 August 2000; and the defendants have failed to comply with that request. The defendants contest none of those issues.
In opposition to the plaintiff's application for summary judgment, Mrs Taaffe has sworn affidavits on 27 June 2001 and 26 November 2001. The latter affidavit, in my view, contains no information which would permit this court to determine that there is an arguable defence to the plaintiff's claim. Mrs Taaffe deposes to an outstanding claim before the Industrial Magistrates Court for leave entitlements; a claim for superannuation entitlements through the Australian Tax Office; and reimbursement from the plaintiff of business expenses incurred with regard to work carried out on behalf of the plaintiff. She also deposes to an outstanding invoice which she claims relates in part to services provided in lieu of the repayment of the amount of $5,000 advanced by the plaintiff for the purchase and upgrade of business equipment as specified in the Minutes of company meetings. However, there is no detailed evidence to support these claims.
The affidavit sworn by Mrs Taaffe on 27 June 2001 contains much inadmissible evidence which it is unnecessary for me to detail. In essence, the defences raised by the defendants are outlined in par 47 of Mrs Taaffe's affidavit. These are summarised as follows:
1.The plaintiff has engaged in unconscionable conduct which renders the transaction liable to be set aside. (The defendants' counsel specifically abandoned this component of the defence at the hearing of the application for summary judgment before the Deputy Registrar);
2.The plaintiff failed to advise the defendants to obtain independent legal or accounting advice prior to the execution of the Heads of Agreement;
3.False misleading and deceptive conduct on the part of the plaintiff contrary to s 10 and s 11 of the Fair Trading Act 1989 (WA) and or s 52 of the Trade Practices Act 1974 (Cth) based on their belief that Taylor, acting on behalf of the plaintiff, profoundly misrepresented to them the plaintiff's position and intentions and took advantage of their limited commercial experience especially in light of his position of trust with them and their unequal bargaining position.
4.A counterclaim would lie for unliquidated damages based on the unpaid invoices annexed to the affidavit as well as unliquidated damages for false, misleading and deceptive conduct and/or unconscionable conduct contrary to the above-mentioned statutes.
The Deputy Registrar's reasons for dismissing the application for summary judgment include that in his view, there were competing claims between the parties and he found it "very difficult to isolate a claim arising from the exercise of the put option from the balance of the competing matters". However, the plaintiff submits, and I agree, that the Deputy Registrar had no proper basis on which to find that there were arguable "counterclaims" by the defendants.
Further, the Deputy Registrar considered that the true purchase price of the business was $50,000, not $70,000. Accordingly, on the Deputy Registrar's reasoning, the amounts reflected in item 8 outlining the put contract purchase prices should be reduced by $20,000.
In submissions in support of the appeal, the appellant's counsel refers to a document entitled "Heads of Agreement" (exhibit CAT1 to Mrs Taaffe's affidavit sworn on 27 June 2001), a document drafted by Mrs Taaffe to reflect the negotiations of the parties. Under the heading "Payment Terms" the purchase price is described as "a deposit of $50,000 to be paid with a further $20,000 to be paid in agreed instalments over a period of 12 months". It is submitted that this clearly reflects the negotiations which took place between the parties as understood by at least Mrs Taaffe. Further, the Heads of Agreement signed on 21 August 1998 by all the parties, refer to the purchase price as being in the sum of $70,000 to be paid by deposit of $50,000 and thereafter $20,000 by way of 12 equal consecutive calendar monthly instalments unless otherwise agreed (cl 2.1(a)). Accordingly, on the evidence before the Deputy Registrar which was unchanged before me is to the effect that the purchase price was $70,000.
I return to the affidavit evidence relating to the defendants outlined defence to the action by the plaintiff.
I know of no authority to the effect that there would be a defence to the plaintiff's claim for specific performance resulting from a failure by the plaintiff, its servants and/or agents, to advise the defendants to obtain independent legal and accounting advice prior to the execution of the Heads of Agreement.
The alleged counterclaims in relation to "unpaid invoices" reflected in exhibit CAT4 to Mrs Taaffe's affidavit sworn 27 June 2001 are unsupported by any details as to the basis for the amounts specified in the invoices. In fact, I note that the invoice is dated 1 August 2000 and refers to consultancy services between August and December 1999 and an adjustment for discounted services May, June and July 1999 and services provided by ROI Marketing (about whom there is no information provided).
In her affidavit sworn on 27 June 2001, Mrs Taaffe deposes in effect that there was more to the contract than is pleaded by the plaintiff. She deposes to the background to the preparation of the Heads of Agreement. She deposes that the $20,000 "balance" was inserted so that she would not have to pay personal income tax, in, I infer, the first year of the contract.
Mrs Taaffe also deposes that, pursuant to the oral negotiations, a draft agreement (annexed as "CAT1" to the affidavit) reflected a purchase price of $50,000 and a put option which "allowed Taylor to "put" the business back to us at a future date at a reduced rate, based on actual outgoings paid by [the defendants] and other relevant factors". However, as mentioned above, that document on its face makes no reference to the purchase price being $50,000. Nor does the draft document refer to a put option. Mrs Taaffe does, however, refer to the document as being two pages long and there is only one page annexed to the affidavit. It may be that it was inadvertently omitted.
In any event, Mrs Taaffe deposes in pars 28 and 29 in her affidavit sworn on 27 June 2001 as follows:
"28.My husband and I had agreed to a put option in principle pursuant to the original heads of agreement ("CAT1"), this was to based on a calculation to the purchase for the purchase price of $50,000.00 less monies paid via the 10% retention of earnings at any point in time including other considerations to negotiated, most notably the running costs of the business during the life of the agreement. The Heads of Agreement and the put option schedule reflected the starting point of $70,000.00 rather than $50,000.00. Both Macknay and Taylor advised that the put option needed to reflect the purchase price stated in the agreement which had been inflated by $20,000.00 for taxation purposes.
When I raised concerns with Taylor as to the nature of the put option, which we frankly did not understand, he represented to us that the arrangement was and should be reciprocal. It was discussed and agreed between the parties that an equitable outcome would be reached should either party want early termination and a formula would be reached based on earnings generated for the Plaintiff, expenses and entitlements. It was not until this matter became the subject of litigation that my husband and I realised that we had not been afforded any such termination formula. I was specifically concerned by the inclusion of the inflated value of the put option and accompanying schedule which appeared to allow [the plaintiff] to sell the company back to us at any time for an amount in excess of the purchase price. As hitherto stated, Taylor reassured me that this eventuality would never arise and that the document was not intended to be operational; but rather, reflected a level of formality which Taylor required to satisfy the Business Migration Criteria. We trusted Taylor and acted in reliance upon those reassurances.
29.Both Macknay and Taylor advised that an element of trust was required by both parties in so far as I would not claim the additional $20,000.00 from the purchase price and that Taylor would reduce the put option exercise price by a corresponding amount. No further payment of $20,000.00 was ever paid to us by Sarracin."
Although not expressed in particularly precise terms, it would seem that the defendants allege that there were other orally expressed terms of the agreement, which were not reflected in the Heads of Agreement. In essence, these seemed to be that the purchase price was to be $50,000; that the clauses relating to the additional $20,000 were inserted for taxation purposes; and that it was agreed that the defendants would not claim the extra $20,000 and if the put option was exercised, it would be reduced by "a corresponding amount".
Thus, what the defendants seem to be claiming is that specific performance is not appropriate in the terms claimed by the plaintiff because the put option purchase price should be $30,000 not $50,000.
Further, it would seem that the defendants also raise the issue of misrepresentation on the part of the plaintiff through either or both Mr Taylor as its sole director and Mr Macknay, the plaintiff's accountant. The alleged misrepresentation is that the purchase price was $50,000 and that the $20,000 was inserted as for taxation purposes only and that stated value of the put option in the Heads of Agreement would be reduced by $20,000.
There is clearly a dispute between the parties as to the precise terms of the agreement entered into in August 1998. It is not possible to resolve those differences at this stage of the proceedings. Further, the defendants claim that they entered into the agreement on the basis of misrepresentations made by the plaintiff through Mr Taylor and/or is servants or agents. Again, this is a matter, which cannot be resolved at this stage.

I need not consider the issue of unconscionable conduct. This is not because the defendant's counsel abandoned the argument before the Deputy Registrar. This is an appeal de novo and that argument may be resurrected. However, I doubt whether there is sufficient material before me to establish a prima facie defence to a claim for specific performance on this ground.
For reasons I have expressed about the dispute as to the terms of the contract and the defendant's claim of misrepresentations, which cannot be resolved, in my view, without the full testing of evidence at trial, I would not decree specific performance by way of summary judgment. A further reason is that it would appear that the plaintiff considers that it would have an adequate remedy at law by way of damages and for that reason a decree for specific performance is not appropriate. It would not be appropriate in my view, in the absence of a particular pleading claiming damages to order damages by way of summary judgment.
I would dismiss the appeal.