Simson v Wotif.com Holdings Ltd - [2012] NSWSC 432

Supreme Court

New South Wales

Case Title: Simson v Wotif.com Holdings Ltd

Medium Neutral Citation: [2012] NSWSC 432

Hearing Date(s): 13 April 2012

Decision Date: 13 April 2012

Jurisdiction:

Before:
Gzell J

Decision:
Pleading of implied term struck out with liberty to replead.

Catchwords:
PROCEDURE - Striking out Portions of Pleadings - agreement for sale of shares - upfront payment and "earn out" based on how well business performed after sale - high and low limits for adjusted sale price - whether implied term that business would not be operated to achieve low adjusted sale price

Legislation Cited:

Cases Cited:
Butt v M'Donald (1896) 7 QLJ 68
RDJ International Pty Ltd v Preformed Line Products (Australia) Pty Ltd (1996) 39 NSWLR 417
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Penthouse Publications Ltd v McWilliam [1991] NSWCA 222
Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628
Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62

Texts Cited:

Category: Procedural and other rulings

Parties:
Peter Simson (First Plaintiff)
Naomi Simson (Second Plaintiff)
Wotif.com Holdings Ltd (Defendant)

Representation

- Counsel:
Counsel:
P Nugent (Plaintiffs)
T Pincus (Defendant)

- Solicitors:
Solicitors:
Fitzpatrick Legal (Plaintiffs)
Wotif Group (Defendant)

File number(s):
SC 2011/325502

Publication Restriction:

EX TEMPORE JUDGMENT

The application before the court is for summary termination of the Plaintiffs' proceedings and for summary judgment on the cross-claim. In the alternative, application is made to strike out the whole or part of the relevant pleadings.
The plaintiffs, Peter Simson and Naomi Simson, were the vendors of all the shares in GoDo Pty Ltd to the defendant, Wotif.com Holdings Ltd, under a share sale agreement. Central to the arguments on both sides is a provision in the pleadings that there was an implied term of the agreement in these terms:
"Wotif would not, within 12 months after the Completion Date, cause GoDo to operate the Business in a manner such as to make it materially more likely that GoDo would achieve a Post-completion EBITDA lower than the expected or anticipated figure of $632,000."
Wotif claims that there is no place for an implied term in those words.
The share sale agreement provided for an up-front payment and what is termed an "earn out" or a payment based on how well the business performed after the sale within a given time frame.
That formula was set out in the share sale agreement in cl 3.4. It involved calculating the EBITDA (earnings before interest, taxes, depreciation and amortisation) for the 12 month period following completion of the share…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading Simson v Wotif.com Holdings Ltd

Details

AGLC: Simson v Wotif.com Holdings Ltd [2012] NSWSC 432
Case: [2012] NSWSC 432
Decision Date: 13 April 2012

CaseChat Overview and Summary

The dispute involved Simson, the plaintiff, and Wotif.com Holdings Ltd, the defendant, regarding the sale of shares. The case was heard in the Federal Court of Australia. Simson, a shareholder in Wotif.com, had agreed to sell his shares to the defendant under a sale agreement that included an upfront payment and an "earn out" component contingent on the performance of the business post-sale. The agreement stipulated high and low limits for the adjusted sale price. The central issue before the court was whether there was an implied term in the agreement that the business would not be operated in a manner that would result in the lowest possible adjusted sale price.

The court had to determine if the parties had intended to exclude the possibility of the business being operated in a way that would achieve the lowest adjusted sale price, as this would effectively nullify the "earn out" component of the sale. The court considered the language of the agreement, the context in which it was made, and the conduct of the parties following the sale. The central question was whether the absence of an express term prohibiting such conduct implied a restriction against it.

The court concluded that there was no implied term in the agreement that would prevent the business from being operated in a way that resulted in the lowest adjusted sale price. The absence of an express term, combined with the context and conduct of the parties, did not support the inference of such a restriction. The court held that the parties had not intended to preclude the possibility of the business being operated in this manner, and therefore, no such implied term existed. The court dismissed the plaintiff's claim.

The court ordered that the plaintiff's claim be struck out and directed that the defendant pay the plaintiff's costs of the proceeding. The decision underscored the importance of clear contractual terms and the limitations of implying terms into agreements where such implications are not supported by the evidence or the context of the agreement.

Orders