SDS Corporation Ltd v Pasdonnay Pty Ltd
[2003] WASC 147
SDS CORPORATION LTD -v- PASDONNAY PTY LTD & ANOR [2003] WASC 147
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 147 | |
| Case No: | CIV:2435/2002 | 22 JULY & 5 AUGUST 2003 | |
| Coram: | HASLUCK J | 8/08/03 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Defendants' application to dissolve injunction dismissed Defendants' application for disallowance of amended claim dismissed Plaintiff's application for disallowance of amended defence dismissed | ||
| B | |||
| PDF Version |
| Parties: | SDS CORPORATION LTD (ABN 73 007 980 645) PASDONNAY PTY LTD (ABN 86 009 131 622) IAN GRAEME REAR |
Catchwords: | Injunction Application to dissolve or vary interlocutory injunction Business Asset Sale Agreement Whether new facts or circumstances Turns on own facts Injunction maintained Pleadings Leave to amend sought at late stage Rectification plea Implied term plea Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 |
Case References: | Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Christmas Island Resort Pty Ltd v Casinos Australia International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 October 1996 Club Cape Schanck Resort Co Ltd v Cape Country Club (2001) 3 VR 526 Foran v Wight (1989) 168 CLR 385 Mahoney v Lindsay (1980) 33 ALR 601 Mehmet v Benson (1965) 113 CLR 295 Robert Molesworth Hobill Cole as Liquidator of Ivas Holdings Pty Ltd (In Liq) & Anor v Michael Bosiljevac, Paul Lester & Lourdes Investments Pty Ltd, unreported; Fed C of A; 22 March 1996 SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2002] WASC 276 State of Queensland v JL Holdings Pty Ltd (1996) 189 CLR 146 Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323 Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425 Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365 Archer v Channel Seven Perth Pty Ltd [2001] WASC 195 Australian Broadcasting Commission v Australiasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 All ER 737 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 Barak Pty Ltd v WTH Pty Ltd [2003] NSWSC 15 Bowes v Chaleyer (1923) 32 CLR 159 BP Chemicals ANZ Pty Ltd v Manildra Starches Pty Ltd, [1997]; unreported; Fed Ct of A; 5 November 1997 Breen v Williams (Medical Records Access Case) (1996) 186 CLR 71 Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 Bruness Pty Ltd v Automasters Australia Pty Ltd [2000] WASCA 157 Bullock v Federated Furnishing Trades Society of Australia (No 1) (1985) 5 FCR 464 Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216 Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599 Castlemaine Tooheys Ltd v Carlton & United Breweries (1987) 10 NSWLR 468 CFA Group v Mars Trading [2001] NSWSC 112 Chanel Ltd v F W Woolworth & Co Ltd & Ors [1981] 1 All ER 745 Chappell v Times Newspapers Ltd [1975] 2 All ER 233 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Concut Pty Ltd v Worrell (2000) 176 ALR 693 Craddock Brothers Ltd v Hunt [1922] Ch 809 Darter Pty Ltd v Malloy [1993] 2 Qd R 615 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Duke v Royalstar Pty Ltd [2001] WASCA 273 Fercometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788 Firmin v Gray & Co Pty Ltd [1985] 1 Qd R 160 Frontier Petroleum NL v Anzoil NL, unreported; SCt of WA; Library No 970286; 4 June 1997 Gordon v MacGregor (1909) 8 CLR 316 Hadid v Lenfest Communications Inc (1996) 70 FCR 403 Hensley v Reschke (1914) 18 CLR 452 Hewett v Court (1983) 149 CLR 639 Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 Hubbard v Vosper [1972] 2 QB 84 Hungry Jack's v Burger King [1999] NSWSC 1029 ICP Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 Inglis v John Buttery & Co (1878) 3 App Cas 552 Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] CLC 1243 Jindra v Tech-Rentals Pty Ltd [2000] VSC 122 Kershaw v Forster Pastoral Pty Ltd (1985) 3 BPR 9515 Lacey v Hayden (2000) 10 BPR 18,199 Lamshed v Lamshed (1963) 109 CLR 440 Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265 Lee Kong Nelder Nominees Pty Ltd v John Holland Construction & Engineering Pty Ltd, FCt SCt of WA; Library No 980282; 27 May 1998 Lief Investments Pty Ltd v Conagra International Fertiliser Company [1998] NSWSC 481 Lyford & Glenisia Investments Pty Ltd v Commonwealth Bank of Australia (1995) 130 ALR 267 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 185 ALR 152 Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60¬853 Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 McPhee v Zarb [2002] QCA 530 Newcombe v Newcombe (1934) 34 SR (NSW) 446 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 Pearson v Arcadia Stores, Guyra Ltd (No 1) (1935) 53 CLR 571 Penrith District Rugby League Football Club Ltd v Fittler & Sing, unreported; SCt of NSW; 30 January 1996 Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 44 NSWLR 186 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 Pukallus v Cameron (1982) 180 CLR 447 R v Wallis; Ex Parte HV MacKay Massey Harris Pty Ltd (1949) 78 CLR 529 Re Butlin's Settlement Trusts [1976] Ch 251 Ridout v Fowler [1904] 1 Ch 658 Rocket Records Pty Ltd v White [2001] VSC 368 Rose v Watson (1864) 10 HL Cas 672 Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 186 ALR 289 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Stickney v Keeble [1915] AC 386 Tankexpress A/s v Compagnie Financiere Belge des Petroles SA (The Petrofina) [1949] AC 76 Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd [2000] FCA 1524 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 Upper Hunter District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 Whitbread & Co Ltd v Watt [1901] 1 Ch 911 Whitbread & Co Ltd v Watt [1902] 1 Ch 835 Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 Woods v Sheriff of Queensland (1895) 6 QLJ 163 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PASDONNAY PTY LTD (ABN 86 009 131 622)
First Defendant
IAN GRAEME REAR
Second Defendant
Catchwords:
Injunction - Application to dissolve or vary interlocutory injunction - Business Asset Sale Agreement - Whether new facts or circumstances - Turns on own facts - Injunction maintained
Pleadings - Leave to amend sought at late stage - Rectification plea - Implied term plea - Turns on own facts
Legislation:
Rules of the Supreme Court 1971
(Page 2)
Result:
Defendants' application to dissolve injunction dismissed
Defendants' application for disallowance of amended claim dismissed
Plaintiff's application for disallowance of amended defence dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Abbott QC & Mr D M Stone
First Defendant : Mr J C Giles
Second Defendant : Mr J C Giles
Solicitors:
Plaintiff : Williams & Hughes
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Christmas Island Resort Pty Ltd v Casinos Australia International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 October 1996
Club Cape Schanck Resort Co Ltd v Cape Country Club (2001) 3 VR 526
Foran v Wight (1989) 168 CLR 385
Mahoney v Lindsay (1980) 33 ALR 601
Mehmet v Benson (1965) 113 CLR 295
Robert Molesworth Hobill Cole as Liquidator of Ivas Holdings Pty Ltd (In Liq) & Anor v Michael Bosiljevac, Paul Lester & Lourdes Investments Pty Ltd, unreported; Fed C of A; 22 March 1996
SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2002] WASC 276
State of Queensland v JL Holdings Pty Ltd (1996) 189 CLR 146
(Page 3)
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
Case(s) also cited:
Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425
Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365
Archer v Channel Seven Perth Pty Ltd [2001] WASC 195
Australian Broadcasting Commission v Australiasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 All ER 737
Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435
Barak Pty Ltd v WTH Pty Ltd [2003] NSWSC 15
Bowes v Chaleyer (1923) 32 CLR 159
BP Chemicals ANZ Pty Ltd v Manildra Starches Pty Ltd, [1997]; unreported; Fed Ct of A; 5 November 1997
Breen v Williams (Medical Records Access Case) (1996) 186 CLR 71
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432
Bruness Pty Ltd v Automasters Australia Pty Ltd [2000] WASCA 157
Bullock v Federated Furnishing Trades Society of Australia (No 1) (1985) 5 FCR 464
Bush v National Australia Bank Ltd (1992) 35 NSWLR 390
Buyquick.com Ltd v Foxgold Pty Ltd [2000] WASC 216
Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410
Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599
Castlemaine Tooheys Ltd v Carlton & United Breweries (1987) 10 NSWLR 468
CFA Group v Mars Trading [2001] NSWSC 112
Chanel Ltd v F W Woolworth & Co Ltd & Ors [1981] 1 All ER 745
Chappell v Times Newspapers Ltd [1975] 2 All ER 233
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Concut Pty Ltd v Worrell (2000) 176 ALR 693
Craddock Brothers Ltd v Hunt [1922] Ch 809
Darter Pty Ltd v Malloy [1993] 2 Qd R 615
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Duke v Royalstar Pty Ltd [2001] WASCA 273
(Page 4)
Fercometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788
Firmin v Gray & Co Pty Ltd [1985] 1 Qd R 160
Frontier Petroleum NL v Anzoil NL, unreported; SCt of WA; Library No 970286; 4 June 1997
Gordon v MacGregor (1909) 8 CLR 316
Hadid v Lenfest Communications Inc (1996) 70 FCR 403
Hensley v Reschke (1914) 18 CLR 452
Hewett v Court (1983) 149 CLR 639
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503
Hubbard v Vosper [1972] 2 QB 84
Hungry Jack's v Burger King [1999] NSWSC 1029
ICP Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640
Inglis v John Buttery & Co (1878) 3 App Cas 552
Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] CLC 1243
Jindra v Tech-Rentals Pty Ltd [2000] VSC 122
Kershaw v Forster Pastoral Pty Ltd (1985) 3 BPR 9515
Lacey v Hayden (2000) 10 BPR 18,199
Lamshed v Lamshed (1963) 109 CLR 440
Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265
Lee Kong Nelder Nominees Pty Ltd v John Holland Construction & Engineering Pty Ltd, FCt SCt of WA; Library No 980282; 27 May 1998
Lief Investments Pty Ltd v Conagra International Fertiliser Company [1998] NSWSC 481
Lyford & Glenisia Investments Pty Ltd v Commonwealth Bank of Australia (1995) 130 ALR 267
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 185 ALR 152
Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60¬853
Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507
McPhee v Zarb [2002] QCA 530
Newcombe v Newcombe (1934) 34 SR (NSW) 446
Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444
Pearson v Arcadia Stores, Guyra Ltd (No 1) (1935) 53 CLR 571
Penrith District Rugby League Football Club Ltd v Fittler & Sing, unreported; SCt of NSW; 30 January 1996
Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 44 NSWLR 186
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235
Pukallus v Cameron (1982) 180 CLR 447
R v Wallis; Ex Parte HV MacKay Massey Harris Pty Ltd (1949) 78 CLR 529
(Page 5)
Re Butlin's Settlement Trusts [1976] Ch 251
Ridout v Fowler [1904] 1 Ch 658
Rocket Records Pty Ltd v White [2001] VSC 368
Rose v Watson (1864) 10 HL Cas 672
Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 186 ALR 289
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Stickney v Keeble [1915] AC 386
Tankexpress A/s v Compagnie Financiere Belge des Petroles SA (The Petrofina) [1949] AC 76
Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd [2000] FCA 1524
Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326
Upper Hunter District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429
Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354
Whitbread & Co Ltd v Watt [1901] 1 Ch 911
Whitbread & Co Ltd v Watt [1902] 1 Ch 835
Wily v St George Partnership Banking Ltd (1999) 84 FCR 423
Woods v Sheriff of Queensland (1895) 6 QLJ 163
(Page 6)
1 HASLUCK J: The defendants in these proceedings, Pasdonnay Pty Ltd and Ian Rear, have applied to dissolve or vary certain interlocutory injunctions granted on 22 November 2002 in favour of the plaintiff, SDS Corporation Ltd. The circumstances underlying the grant of the relevant injunctions are described in the reasons for judgment of Barker J in SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2002] WASC 276. I will draw upon those reasons for judgment in describing the nature of the dispute between the parties.
2 In seeking to dissolve or vary the restraining orders previously made the defendants rely principally upon the affidavits of the second defendant, Ian Graeme Rear and Ian Kenneth Bellamy sworn 10 June 2003. The plaintiff relies upon the affidavits previously filed and upon the further affidavits of Jamie Restas sworn 23 June 2003, Kevin Vincent Benson sworn 24 June 2003, and those of Alison Stacy Kingston sworn 24 June and 21 July 2003.
3 These affidavits related also to certain other applications that were heard in conjunction with the principal application, that is to say, applications by the defendants dated 18 June and 16 July 2003 respectively for disallowance of amendments to the statement of claim, an application by the plaintiff dated 20 June 2003 for disallowance of amendments to the statement of defence and an application by the plaintiff for discharge of certain confidentiality undertakings dated 16 July 2003. The last matter was not pursued at the hearing and I will therefore say no more about it.
Background
4 By an undated Agreement entered into in July 2002, Pasdonnay agreed to sell to SDS the business assets of the hammer and bit manufacture business carried on by Pasdonnay in Western Australia under the business name of "International Drill Quip", or IDQ. The parties agreed also that Pasdonnay would be released from and SDS would assume certain liabilities on the terms and conditions contained in the Agreement.
5 The parties estimated that the purchase price would be the sum of $5 million. However, more exactly, the effect of various provisions in the Agreement was that the purchase price would be the total value of the net assets of the business. It is apparent from the terms of the Agreement that due diligence investigations were to be undertaken and pre-completion accounts were to be prepared.
(Page 7)
6 Clause 4 of the Agreement concerned conditions precedent. Completion was to be subject to and conditional on the results of the due diligence investigations to be undertaken by or on behalf of SDS (4.1.1); the Pasdonnay financier, HSBC, consenting to the sale and the proposed assumption of liabilities (4.1.3); the Commonwealth Bank as the SDS financier consenting to the sale and the assumption of liabilities (4.1.4) and the pre-completion accounts and related certificate being prepared in the prescribed manner (4.1.5). By cl 4.2.2 SDS was obliged to use its best endeavours to procure the satisfaction of the clause concerning the consent of the Commonwealth Bank. By cl 4.2.3 Pasdonnay was obliged to use its best endeavours to satisfy the condition in cl 4.1.3 concerning the consent of HSBC.
7 Importantly, for present purposes, cl 4.10.2 provided that in the event that the condition in cl 4.1.3 concerning the consent of HSBC had not been satisfied or waived by 30 September 2002 or such other date as the parties may agree in writing, then the Agreement could be terminated by SDS. Clause 4.11 provided that the condition in cl 4.1.3 could only be waived by Pasdonnay in writing.
8 The Sale Agreement contained lengthy provisions concerning completion with provision also being made for post-completion adjustments having regard to certain valuations, stocktakes and accounts that had to be completed. By cl 1.1.19 the "Completion Date" was said to be the date that is 10 business days after the satisfaction of the conditions precedent listed in cl 4.1 or such other date agreed by the parties.
9 Clause 11 provided that SDS as purchaser was to pay "the balance of the purchase price" in the manner set out in that clause, namely, $1 million was to be paid to Pasdonnay on 30 October 2002 or the date that is three months after the completion date or on certain other dates referrable to the outcome of pending litigation which ever was the earlier date.
10 I digress briefly to say, as a matter relevant to the applications concerning recent amendments to the pleadings, especially the plaintiff's proposed rectification plea, that one finds in the Restas and Benson affidavits a lengthy description of the negotiations preceding the Agreement. In essence, the parties contemplated that SDS would pay Pasdonnay the value of the net assets of the business by a payment of $1 million in cash and the remainder in SDS shares. However, as litigation with a third party had to be settled, and as due diligence inquiries had to be completed, there was arguably a degree of ambiguity
(Page 8)
- as to when exactly the cash component of the purchase price was to be paid.
The dispute
11 In the months that followed the making of the Agreement, a dispute developed between the parties as to compliance with the terms of the Agreement. SDS alleged that the conduct of Pasdonnay in refusing to comply with SDS' request for further information to enable the completion of the due diligence investigations led to the non-satisfaction of the condition precedent concerning that matter. This led to the commencement of legal proceedings by SDS and an application for mandatory and prohibitory injunctions.
12 It is apparent from the reasons for judgment of Barker J at par 21 that Pasdonnay sought to answer the SDS applications for relief by saying three things, namely, first, that it had acted reasonably in regard to the due diligence issue, second, that the Agreement came to an end on 22 October 2002 by reason of HSBC refusing its consent to the assumption of the assumed liabilities by SDS pursuant to cl 4.1.3 of the Agreement and, third, that the Agreement came to an end on 8 November 2002 because the consent of the Commonwealth Bank as the SDS financier had not been obtained.
13 After a careful appraisal of the evidence before him and the matters in issue, Barker J was persuaded that a mandatory interlocutory injunction should be granted which would have the effect of requiring Pasdonnay to perform certain acts bearing upon the supply of information and the due diligence facet of the Agreement. I note in passing that this aspect of the contractual relationship was not a matter in contention before me and there is therefore no need for me to dwell upon the issue.
14 I noted in earlier discussion that the Pasdonnay position was that the Agreement came to an end on 22 October 2002 because, HSBC had refused its consent to the transaction or, alternatively, the Agreement came to an end on 8 November 2002 when Pasdonnay purported to give notice of termination.
15 Justice Barker was not persuaded to this point of view. He concluded that there was a serious issue to be tried as to whether SDS could obtain equitable relief upon the basis that the Agreement remained in force.
(Page 9)
16 In the course of his judgment Barker J said this at par 58:
"As to the defendants' argument that the agreement has already come to an end by reason of non-fulfilment of condition precedent cl 4.1.3, I accept the submissions of counsel for SDS that termination of the agreement on this basis is provided for expressly by cl 4.10.2 of the agreement. That clause provides, so far as it is relevant, that in the event that the condition in cl 4.1.3 has not been satisfied or waived by 30 September 2002, or such other date as the parties may agree in writing, then the agreement may be terminated by SDS giving the other parties notice of such termination. In other words, the condition and the provision for its termination are for the benefit of SDS, not the defendants. Accordingly, I consider there is a strong triable issue from the point of view of SDS that the agreement has not come to an end by reason of the non-fulfilment of cl 4.1.3 of the agreement."
17 Put shortly, Barker J was of the view that SDS was entitled to terminate the Agreement if the HSBC consent was not obtained, but in circumstances where SDS had not taken any step to set aside the Agreement, then, prima facie, the Agreement remained in force.
18 I note in passing that in dealing with the issues arising under cl 4.1.3, that is to say, the condition precedent concerning the consent of HSBC, there was evidence before Barker J that the consent had not been obtained. There was a letter dated 26 September 2002 from HSBC to Pasdonnay stating that HSBC would not be prepared to provide finance to a third party to allow the sale to proceed and it was the preference of HSBC to be repaid at settlement of any sale. Further, there was a letter from HSBC to Pasdonnay dated 22 October 2002 which referred to the earlier letter and added "HSBC will not consent to the assumption of the Assumed Liabilities by SDS in accordance with the business sale asset agreement between Pasdonnay and SDS as our preference is to exit the industry."
Terms of the prohibitory injunction
19 Clause 5 of the Sale Agreement deals with the manner in which Pasdonnay could operate the business between the date of the Agreement and completion. In particular, cl 5.1.3 sets out various restrictions in relation to the way in which the business was to be carried on without the prior written consent of SDS but upon the basis that such consent was not to be unreasonably withheld. It is apparent from the reasons for judgment
(Page 10)
- that the terms of the prohibitory injunction were related to these provisions as a means of maintaining the status quo pending the trial of the action.
20 The terms of the prohibitory injunction obtained by SDS on 22 November 2002 were as follows:
"1. The First and Second Defendants and each of them are restrained and an injunction is hereby granted restraining them until trial or further order whether by themselves, their servants their agents or otherwise from conducting their business or businesses (conducted under the trade name "Drill Quip") other than in the ordinary course of business.
2. Without prejudice to the generality of order 1 the First and Second Defendants are restrained from (without the consent of the Plaintiff (which shall not unreasonably be withheld):-
2.1 disposing or attempting to dispose of any of the assets the subject of the Business Asset Sale Agreement made between the Plaintiff and the Defendants in July 2002 (the Agreement) other than in the ordinary course of business;
2.2 creating an Encumbrance (as defined in the Agreement) over any asset or real property of the Drill Quip business and or any asset the subject of the Agreement;
2.3 engaging any new employees whose annual remuneration exceeds $50,000 or amending the terms of employment of or terminating the employment of the employees listed in Schedule 3 of the Agreement;
2.4 commencing, defending or compromising any litigation or claim concerning an amount of in excess of $50,000;
2.5 entering into any Material Contract (as defined in the Agreement) or varying, amending or terminating or agreeing to vary, amend or
(Page 11)
- terminate any Material Contract other than in the ordinary course of business; or
- 2.6 entering into or agreeing or offering to enter into any contract or agreement that will operate or continue to operate after the completion of the transaction contemplated by the Agreement other than on arms length terms."
21 Further orders were also made restraining the second defendant from dealing with certain patents. The first and second defendants were at liberty to apply on 24 hours notice to the plaintiff to dissolve or vary the injunction. Orders were also made that SDS was to apply for the action to be entered in the expedited list.
22 The action was subsequently entered in the expedited list. In due course a trial date was obtained for a hearing to commence in early August. It seems that, in the event, the trial date had to be vacated having regard to certain circumstances that became the subject of the confidentiality orders mentioned earlier. I will say no more about the circumstances in question. However, I understand that the matter has been relisted for hearing on 4 November 2003.
The application to dissolve or vary
23 It is against this background that the defendants have applied for orders that the mandatory and the prohibitory interlocutory injunctions made on 22 November 2002 be dissolved. The issue concerning the mandatory injunction appears to have fallen away and that part of the application was not pressed before me. The matter in contention concerned essentially the orders comprising the prohibitory interlocutory injunction.
24 There was little dispute between the parties as to the legal principles bearing upon an application of this kind.
25 In Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Gibbs CJ, Aickin, Wilson and Brennan JJ observed at 178 that a court must remain in control of its interlocutory orders and therefore has power to make further orders. Their Honours said that a further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render enforcement of the existing order unjust.
(Page 12)
26 It emerges, then, that an application for dissolution is not an occasion merely to revisit the original grant of interlocutory relief. It remains necessary to consider whether since that grant the circumstances have changed or new facts have been discovered, sufficient to show that the situation in respect of the grant of interlocutory relief is materially different from that which applied when the order was originally made: Christmas Island Resort Pty Ltd v Casinos Australia International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 October 1996.
27 It is apparent from the decided cases that however wide be the discretion to dissolve or vary an interlocutory injunction, it does not extend to an application which in substance seeks to relitigate the merits of the order granting the injunction. If the complaint in substance is that the injunction should not have been granted at all, or should have been granted on different terms, the only appropriate remedy in such a case is an application for leave to appeal: Robert Molesworth Hobill Cole as Liquidator of Ivas Holdings Pty Ltd (In Liq) & Anor v Michael Bosiljevac, Paul Lester & Lourdes Investments Pty Ltd, unreported; Fed C of A; 22 March 1996.
28 Counsel for Pasdonnay relied upon two matters in seeking to assert that there had been a change in the facts and circumstances since the grant of the injunctive orders. The first matter concerned the HSBC consent provision (cl 4.1.3). The second matter concerned an alleged failure by SDS to pay $1 million on 30 October 2002, being the "balance of the purchase price" allegedly payable on or before that date pursuant to cl 11.1 of the Agreement.
29 As to the first matter, counsel for Pasdonnay contended that it was now clear that the Agreement had come to an end because the consent of HSBC to the Agreement was not forthcoming prior to 30 September 2002 in the manner allowed for by cl 4.1.3 of the Sale Agreement. Accordingly, there was no real prospect that SDS could obtain specific performance of the Agreement. This meant that it would be unjust to allow the existing prohibitory injunction to remain in force.
30 Counsel for Pasdonnay submitted further than an equitable right which requires to be protected must be identified before a party becomes and remains entitled to injunctive relief: Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199. If specific performance could not be obtained by SDS then there was no right to be protected. Counsel for Pasdonnay relied also upon affidavit evidence to
(Page 13)
- the effect that the balance of convenience weighed against continuance of the injunction in that the restrictions were interfering with the ability of Pasdonnay to obtain new equipment, find alternative premises and recruit senior staff.
31 In my view, these submissions are not sufficient for the injunction to be dissolved. It is clear from the reasons for judgment of Barker J that he took account of evidence and arguments bearing upon the HSBC issue. He concluded that there was a serious issue to be tried in that the contract would only come to an end if SDS exercised its right to terminate; as it had not done so, there was a basis for contending that the contract remained on foot. That being so, there was a prospect that SDS could obtain specific performance.
32 To my mind, counsel for Pasdonnay did not identify any new fact or changed circumstance concerning this aspect of the matter which would bring the application within the principles mentioned earlier concerning the dissolution of an injunction. In essence, the position remains the same as that addressed by Barker J. HSBC has refused consent but SDS has not exercised its right to terminate the contract. There is a serious issue to be tried as to whether the Agreement remains in force. I note in passing that by par 16(ii) of the statement of defence the defendants plead that on 22 October 2002 HSBC advised that it would not consent. This underlines the position portrayed by the letters mentioned in earlier discussion that the HSBC refusal of consent was known to the parties, and taken account of by Barker J, at the time the prohibitory injunction was granted.
33 Further, and in any event, I am not satisfied that continuance of the injunction is unjust. There is affidavit evidence before me on the SDS side that no approach has been made to SDS to obtain its consent to the management proposals that Pasdonnay has in mind.
34 The second matter relied upon by counsel for Pasdonnay concerns the cl 11.1 payment. It will be useful to say a little more about this issue, and about the respective positions of the parties, because this aspect of the dispute bears directly upon the pleading issues.
35 It appears to be common ground that Pasdonnay did not press for payment of $1 million on or before 30 October 2002 and did not complain of an alleged default by SDS in that regard before Barker J. Many months later, on 20 May 2003, after Pasdonnay had changed solicitors, the defendants contended that SDS was in breach of the Agreement having
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- regard to an alleged failure or refusal to make the cl 11.1 payment, and sought immediate payment of the amount in question (notwithstanding Pasdonnay's previously adopted stance that the Agreement was at an end for various reasons including non-fulfilment of the condition precedent concerning the HSBC consent). In letters passing between the solicitors for the parties, Pasdonnay foreshadowed the line of argument it relied on at the hearing before me, namely, that a party such as SDS that was in material breach of a contract could not obtain specific performance with the result that the injunction should be dissolved.
36 It was against this background that Pasdonnay filed and served its re-amended further re-amended defence dated 4 June 2003 in which it introduced a new plea in par 19 that the Agreement was subject to an implied term whereby the defendants were at liberty to terminate the Agreement for non-fulfilment of the HSBC consent provision if SDS did not exercise its right to terminate within a reasonable time. The defendants pleaded also, in a new par 20, that SDS was in breach of the Agreement because it had failed to pay $1 million due to be paid by Pasdonnay on 30 October 2002 under cl 11.1 of the Agreement. It was said further that by reason of this breach and because SDS was not ready, willing and able to complete the Agreement, SDS was not entitled to specific performance. The defendants said further, in a new par 21, that SDS had repudiated the Agreement by evincing an intention not to perform in the manner prescribed by the Agreement.
37 SDS felt obliged to respond to the new issue by filing initially a further re-amended statement of claim dated 13 June 2003 and then an amended re-amended statement of claim dated 16 July 2003. I will treat the latter as the operative point of reference.
38 SDS set out in a new par 16 of the statement of claim a summary of the Pasdonnay position concerning the cl 11.1 payment. SDS then pleaded in par 17 that the common intention of the parties prior to execution of the Agreement was that Pasdonnay's obligation to transfer its assets and SDS' obligation to pay the price were interdependent obligations and, further, in the premises, SDS' obligation to pay $1 million under cl 11.1 would not arise unless completion first occurred.
39 Further, SDS pleaded in a new par 18 that as a consequence of error by the parties and their solicitors SDS' obligation to pay $1 million under cl 11.1 was not expressed to be conditional upon completion having first occurred. SDS pleaded in a new par 19 that Pasdonnay had failed and refused to perform its obligations under the Agreement and claimed to
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- have terminated the same. This plea is supported by particulars of the conduct said to constitute the failure or refusal to perform. The prayer for relief reflected a newly introduced claim for rectification.
40 Put shortly, then, by its new pleading, and in argument, SDS contends that, first, upon the proper interpretation of cl 11.1 it is not in default because $1 million was only to be paid in the event of completion as indicated by a description of the payment as a "balance" of the purchase price; second, and in the alternative, the Agreement should be rectified in order to reflect the common intention of the parties in that regard; third, the intimation by Pasdonnay prior to 30 October 2002, and thereafter, that it regarded the Agreement as being at an end relieved SDS of the need to make the payment.
41 As to the last matter, counsel for SDS placed reliance upon the following observations of Brennan J in Foran v Wight (1989) 168 CLR 385 at 417:
"The obligation of a vendor to deliver a conveyance and the obligation of a purchaser to pay the price on completion are mutually dependent and concurrent obligations in the absence of any contrary stipulation; each obligation is to be performed in exchange for the other: Palmer v Lark. Where the respective obligations of parties to a contract are mutually dependent and concurrent, the primary rule is that neither party who fails to perform his obligation when the time for performance arrives can rescind for the other party's failure at that time to perform his obligation. Each party's obligation is conditional on performance by the other; neither can complain of non-performance by the other when the condition governing the other's obligation goes unfulfilled. But if one party intimates to the other that it is useless for the other to fulfil his obligation and the other acts on the intimation, the party to whom the intimation is given is dispensed from a nugatory tender of performance."
42 I note in passing that in various cases prior to Foran v Wight (supra), the High Court appears to have accepted that in cases of this kind, where the vendor has intimated that it will be useless to tender performance, the purchaser could obtain a "moulded" decree of specific performance that permitted the purchaser, within a reasonable time to be fixed by the Court, or by notice, to furnish the balance of the purchase price in return for a transfer of the relevant asset: Mehmet v Benson
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- (1965) 113 CLR 295; Mahoney v Lindsay (1980) 33 ALR 601; Bahr v Nicolay (No 2) (1988) 164 CLR 604.
43 Let me now return to the Pasdonnay application to discharge or vary the injunction. As I indicated in earlier discussion, the Pasdonnay position in regard to the cl 11.1 payment (as it was in regard to the HBSC consent provision) is that SDS has no real prospect of obtaining specific performance of the Agreement with the result that the injunction should be discharged because it is now clear that the injunction is not protecting an identifiable and enforceable right.
44 I am not persuaded to this point of view. To my mind, there is a serious issue to be tried in respect of each of the three lines of argument being relied upon by SDS. As a matter of interpretation, the phrase "balance of the purchase price" suggests that the cl 11.1 payment is not to be made until completion. The course of the negotiations is described in the Restas and Benson affidavits and arguably provides a basis for the rectification plea. Reasoning of the kind reflected in Foran v Wight (supra) and related cases may be sufficient to afford to the purchaser SDS relief in equity.
45 Further, it is desirable that the evidence bearing upon these issues be dealt with not by having regard to affidavits but at the trial of the action.
46 I am conscious also that at the hearing before Barker J in November 2002, no submission was made by counsel for the defendants that the sum of $1 million allegedly payable by SDS to Pasdonnay under cl 11.1 of the Agreement had not been paid, when due, on 30 October 2002. In other words, counsel did not contend at the previous hearing that the Agreement should be treated as being at an end as a consequence of the alleged default.
47 It was open to the defendants to advance this line of argument concerning the cl 11.1 payment at the previous hearing but they failed to do so. It cannot be said that any new fact has been discovered or altered circumstance identified which brings the case within the principles concerning dissolution of an injunction. It is quite apparent from the decided cases that it is not sufficient for a party simply to propose a new line of argument as that would amount to an attempt to relitigate the matters previously in issue. The appropriate avenue of relief in such circumstances is by way of appeal. It seems that no appeal was instituted in the present case.
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48 Further, and in any event, for the reasons I have given previously, I am by no means satisfied that the line of argument relied on by the defendants is compelling. To my mind, having regard to the alleged shortcomings of Pasdonnay in regard to its pre-completion obligations, there is a serious issue to be tried as to whether, in these circumstances, SDS, as purchaser, can be characterised as being in default in regard to payment of the said sum of $1 million. It will be a matter to be resolved at the trial of the action. However, for the time being, I am not prepared to assume that the Agreement was brought to an end as alleged by the defendants with the result that SDS has no real prospect of obtaining specific performance.
49 It follows from these reasons that I do not consider that the existing prohibitory injunction should be dissolved or varied. The injunction is necessary to preserve the status quo until the trial of the action. The terms of the injunction make provision for the business to be carried on pending trial.
The defendants' applications for disallowance
50 I noted in earlier discussion that the action has been entered in the expedited list. The parties have amended their pleadings on various occasions. However, in the manner allowed for by the rules applicable to the expedited list, each party in the present case has made application for disallowance of recent amendments to the pleadings. The applications are directed to amendments made at a late stage.
51 It will be useful to look briefly at the legal principles bearing upon a situation of this kind.
52 The grant or refusal of leave to amend is a matter of discretion but the exercise of that discretion must take into account the case management principles reflected in the Rules of the Supreme Court: Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323. However, the Court is generally concerned to ensure that when a civil action is tried the parties to the dispute are allowed an opportunity to bring forward all matters in controversy between them.
53 This approach is reflected in the State of Queensland v JL Holdings Pty Ltd (1996) 189 CLR 146 in which the High Court held that while case management principles were a relevant consideration, they could not be used to prevent a party from litigating an issue which was fairly arguable. It follows that a party should generally be permitted to raise an arguable
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- plea, even if the amendments were sought at a late stage, provided any prejudice to other parties could be compensated by costs.
54 The defendants challenge the pleading dated 13 June 2003 and the later version of the plaintiff's statement of claim being the document dated 16 July 2003 described as Amended Further Re-Amended Statement of Claim (the "amended claim"). In particular, the defendants submit that the plaintiff should not be allowed to introduce a plea of rectification in the manner reflected in par 18 of the amended claim.
55 The plea in par 18 of the amended claim is to the effect that as a consequence of error by the parties and their solicitors, SDS' obligation to pay $1 million under cl 11.1 was not expressed to be conditional upon completion having first occurred. It is apparent from the prayer for relief that the proposed rectification is that cl 11.1 of the Agreement be amended so that it is introduced or preceded by the words "In the event completion occurs…" so that the relevant provision would then read as follows:
"The purchaser shall pay the balance of the purchase price as follows:
11.1 In the event Completion occurs $1 million will be paid to Pasdonnay on…"
56 Rectification depends upon a want of correspondence between the form of the document (that is, in the words actually used) and the common intention of the parties at the time when the document is executed: Club Cape Schanck Resort Co Ltd v Cape Country Club (2001) 3 VR 526. However, there is a basis for contending that rectification is available where there was a mistake as to the effect of the words. See discussion in Meagher, Gummow & Lehane's Equity (4th ed) at par 26-070.
57 I will not traverse in their entirety the arguments and evidentiary materials bearing upon this issue. It will be apparent from earlier discussion that the Agreement reflects a rather unusual and complicated set of arrangements between the parties in which price and settlement were very much dependent on the making of inquiries and the finalisation of details. The negotiations were obviously affected by the concerns of each party in regard to such matters.
58 Whilst the principle is perfectly clear that the jurisdiction of the Court to construe a document in such a way as to eliminate apparent
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- errors or infelicities of expression is distinct from the Court's jurisdiction to rectify a document it is not necessarily clear in a case of complexity which is the appropriate jurisdiction to invoke. It therefore seems to me that, in the present case, with a view to ensuring that all matters in controversy between the parties are disposed of, the rectification plea and related issues should be brought before the Court, Thus, I consider that the amendment in par 18 contended for by the plaintiff should be allowed.
59 It follows from earlier discussion that, in my view, the SDS position reflected in each of the new paragraphs of the amended claim is tenable with the result that the application for disallowance must be dismissed.
The plaintiff's application for disallowance
60 The plaintiff's chamber summons dated 20 June 2003 is directed to the defendants' reamended further reamended defence filed on 4 June 2003 (the "amended defence") SDS contends that the amended defence at par 20.1, 20.2.5, 20.4.3 and 21 should be disallowed.
61 These paragraphs are principally concerned with the defendants' contention that SDS has at all times since October 2002 been in material breach of the Sale Agreement because it has failed to pay $1 million said to be due to the first defendant on 30 October 2002 under cl 11.1 of the Agreement.
62 As I have indicated, this reflects a new line of argument. However, the plea appears to be tenable, for cl 11.1 refers expressly to 30 October 2002.
63 Again, with a view to allowing all matters in controversy to be litigated, I consider that this amendment should be allowed. It will be a matter for the trial Judge as to what is the proper interpretation of the Agreement.
Summary
64 The defendants' application to discharge or vary the injunction dated 22 November 2002 will be dismissed. The plaintiff's application for disallowance will be dismissed. The defendants' application for disallowance will be dismissed.
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