JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SDS CORPORATION LTD -v- PASDONNAY PTY LTD & ANOR [2004] WASC 26
CORAM: ROBERTS-SMITH J
HEARD: 4-6, 10-11 NOVEMBER 2003 & 17 FEBRUARY 2004
DELIVERED : 27 FEBRUARY 2004
FILE NO/S: CIV 2435 of 2002
BETWEEN: SDS CORPORATION LTD (ABN 73 007 980 645)
Plaintiff
AND
PASDONNAY PTY LTD (ABN 86 009 131 622)
First DefendantIAN GRAEME REAR
Second Defendant
Catchwords:
Contract - Agreement to purchase business - Proposed merger of corporations manufacturing and supplying equipment and providing services to mining, oil and gas and construction industries - Specific performance - Whether plaintiff ready, willing and able to perform - Whether discretionary reasons for refusal of specific performance
Contract - Implied terms - Rectification - Whether payment of $1 million by purchaser required to be made by date certain if completion had not then occurred and assets not transferred
Trade Practices - Misleading or deceptive conduct - Failure to disclose - Test of reasonable expectation that relevant facts would be disclosed - Details of purchaser's financial position with its own banks and generally - Published reports and accounts - Whether further disclosure required
Contract - General contractual principles - Repudiation - Termination - Frustration - Whether contract incapable of performance - Obligation to comply with due diligence inquiry - Whether defendants in breach
Legislation:
Australian Securities & Investments Commission Act 2001 (Cth), s 12DA
Result:
Plaintiff's claim upheld
Specific performance ordered
Category: A
Representation:
Counsel:
Plaintiff: Mr M L Abbott QC & Mr D M Stone
First Defendant : Mr D H Solomon
Second Defendant : Mr D H Solomon
Solicitors:
Plaintiff: Williams & Hughes
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143
Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410
Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526
Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Concut Pty Ltd v Worrell (2000) 176 ALR 693
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Eskin, Erenli & Balkaya v Trewin, unreported; SCt of Vic; 8307/91; 15 June 1995
Foran v Wight (1989) 168 CLR 385
Franich v Swannell (1993) 10 WAR 459
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Frontier Petroleum NL v Anzoil NL, unreported; SCt of WA; Library No 970286; 4 June 1997
G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23
J C Williamson Ltd v Lukey (1931) 45 CLR 282
Mehmet v Benson (1965) 113 CLR 295
National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC…
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- Case
- [2004] WASC 26
- Decision Date
CaseChat Overview and Summary
The court was tasked with determining whether SDS was ready, willing, and able to perform the terms of the agreement, and if there were any discretionary reasons to refuse specific performance. It also had to consider whether there were implied terms in the contract, particularly regarding the payment of $1 million if completion had not occurred and assets not transferred. The court examined the defendants' argument that SDS had failed to disclose certain financial information, assessing the test of reasonable expectation for disclosure. Furthermore, the court assessed whether the contract could be considered repudiated, terminated, or frustrated, and whether the defendants were in breach of their obligations.
The court found that SDS had raised sufficient funds to satisfy its obligations under the agreement, and that the defendants had not demonstrated any discretionary reasons to refuse specific performance. The court held that there were no implied terms regarding the payment of $1 million if completion had not occurred and assets not transferred. Regarding the disclosure of financial information, the court found that the defendants had not shown that further disclosure was required. The court also determined that the contract had not been repudiated, terminated, or frustrated, and that the defendants were in breach of their obligations.
The court ordered specific performance of the agreement, with SDS required to complete the business sale to Pasdonnay Pty Ltd. The defendants were also ordered to pay costs associated with the litigation. The court emphasised the importance of fulfilling contractual obligations and the consequences of failing to do so.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
I shall not set out the details of the action nor the evidence. They are set out in my judgment delivered 27 February 2004 (SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26). These reasons should be read with that. In his affidavit Mr Benson deposes that SDS sought to lead evidence of capital raising it had undertaken. He considers that the capital which SDS had raised is relevant to the question of SDS's ability to perform its obligations pursuant to the Business Assets Sale Agreement ("the Agreement") which it entered into with the defendants. He deposes that the prospect of capital raising and placement was first raised in a meeting on 19 November 2003 with the representatives of Bell Potter Securities in Adelaide. In December 2003 SDS secured commitments from investors to contribute the sum of $16.5 million by way of the issue of 30,000,000 fully paid ordinary shares in SDS at an issue price of 55 cents. The commitments from the investors were expressed to be subject to SDS obtaining shareholder approval for the capital raising at an extra‑ordinary general meeting of SDS which was scheduled for 23 January 2004. The resolution for placement of the new shares to the investors was passed at that meeting. An announcement to that effect was subsequently made to the ASX on 27 January 2004. According to Benson, on 28 January 2004 SDS received $16,046,250 representing the proceeds of the issue of 13,000,000 fully paid ordinary shares in SDS less costs associated with the capital raising. On 28 January 2004, SDS issued 30,000,000 full paid ordinary shares. He deposes that the sum of $1,500,000 has been set aside and is held on deposit by SDS as part of a larger sum that SDS has held on deposit. With it SDS is able to satisfy its obligations under the Agreement in the event the court makes an order for specific performance. Benson further deposes that SDS seeks to lead evidence in relation to the movement in its share price on the ASX since judgment was reserved on 11 November 2003. He attaches a schedule disclosing SDS's share price for the period 11 November 2003 to 4 February 2004, and states that SDS's then current share price was 69 cents. Finally, he deposes to his belief that SDS's share price is relevant to the question whether the defendants are likely to suffer loss as a consequence of reliance on the alleged representations pleaded in the defence and in particular whether the discretion to grant relief has been enlivened. The purpose of Ms Del Fuoco's and Mr Bellamy's affidavits was simply to annex copies of correspondence between the solicitors for the parties, as to the plaintiff's intention to seek an order re‑opening the trial, the evidence sought to be led and the reasons for the defendants' opposition to that. However, it is from that correspondence that the evidentiary issues sought to be raised by the plaintiff and the defendants' response to them, may be discerned. For the plaintiff it is said that SDS has recently raised $16.5 million by way of share issue and that is relevant to its ability to settle pursuant to the Agreement. Further, it is said the then current (February 2004) share price is 75 cents and it has been at similar levels for three months or so. That is relevant to the question whether the respondents suffered or are likely to suffer any loss as a consequence of the representations pleaded in the defence and in particular whether the relief sought should be granted.