WISSINK v Global Scaffold Sales Pty Ltd - [2013] WASC 111

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WISSINK -v- GLOBAL SCAFFOLD SALES PTY LTD [2013] WASC 111

CORAM: MASTER SANDERSON

HEARD: 19 MARCH 2013

DELIVERED : 19 MARCH 2013

PUBLISHED : 4 APRIL 2013

FILE NO/S: COR 171 of 2012

BETWEEN: BRADLEY WISSINK
First Plaintiff
WISSINK HOLDINGS PTY LTD (ACN 156 502 840)
Second Plaintiff
AND
GLOBAL SCAFFOLD SALES PTY LTD (ACN 120 237 318)
First Defendant
ROBERT WISSINK
Second Defendant
CHRISTINE WISSINK
Third Defendant

Catchwords:

Practice and procedure - Consequential order necessary for giving effect to compromise - Turns on own facts

Legislation:

Nil

Result:

Orders made

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr C S Williams
Second Plaintiff            :     Mr C S Williams
First Defendant             :     No appearance
Second Defendant         :     Mr K A Dundo
Third Defendant           :     Mr K A Dundo

Solicitors:

First Plaintiff                :     Solomon Brothers
Second Plaintiff            :     Solomon Brothers
First Defendant             :     No appearance
Second Defendant         :     HopgoodGanim
Third Defendant           :     HopgoodGanim

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

Nil

MASTER SANDERSON: Four issues have arisen in this matter and it is appropriate to deal with them now, because there is some urgency. The parties need to know where they stand to make their necessary arrangements. The background to the matter is that proceedings were issued which sought to have the second and third defendants buy out the plaintiffs' interests in the first defendant. It was the case that there were alternative remedies sought, but first and foremost, the aim was to have an order made for purchase of shares.
On 4 December 2012, an order was made by me which was effectively a consent order. Problems have arisen with respect to order 5 of that order. In February, I made a determination as to the proper interpretation of the order and I determined that the wording at the end of order 5 entitled the plaintiffs to look at the first defendant's books, records and documents and not just those books, records and documents which were supplied to the expert.
It is true that order 5 is conditioned by the words 'subject to any Court order'. So on one view, it would be possible to amend the order in any way, shape or form, but I think that the proper course is to attempt to give effect to that order consistent with that is actually in the order itself. In my view, the plaintiffs' present position in relation to that order is to be preferred; that is to say, they should have effectively undiminished access to the books and records and documents of the plaintiffs.
That means that the documents which are presently in the server, and there appear to be five categories of documents to which the plaintiffs seek access and access has been denied, should be available to them. There is a confidentiality regime in place and that, insofar as it is ever possible to protect confidentiality, is to the benefit of the defendants. It has to also be said that the plaintiffs have, up until mid‑2012, been involved with the management of the company. They must have, of their own knowledge, fairly detailed understanding of the business enterprise of the first defendant.
The overriding consideration in cases such as this in my view is transparency. A party who is selling its shares is entitled, I think, to have full access to the books and records, with a view to ensuring that all relevant information is known. At times that can seem draconian, particularly when, as has been pointed out by counsel for the defendants, it would seem that some of the material could not possibly be relevant to the determination as to the proper price. But the fact remains that a party who is selling its shares is entitled to feel satisfied that everything that is relevant, or even related to the determination of a purchase price, has been put before the independent expert. So I am satisfied that the plaintiffs should have access to the full sweep of books of records.
However, I am not satisfied that the plaintiffs' minute of proposed orders and the proposed amendment to order 5 should be adopted. It seems to me that it cuts both ways. The order, I think, is wide and clear. I do not think that it is appropriate to amend the order now in such a way that it is materially different from that which was agreed between the parties. If the defendants were of the view to protect their position, they wished to have the order amended as proposed by the plaintiffs, then that can be done. Otherwise, it seems to me that the defendants should provide unrestricted access to the first defendant's books and records and that that should be done within the context of the present existing order 5.
If particular issues arise, I suppose they will have to be referred back to me for determination. I am not entirely sure that amending order 5 in the way proposed by the plaintiffs would solve that problem, in any event. So while I would accept that the plaintiff's interpretation of order 5 of the orders is correct, I am not prepared to amend those orders in terms of the order 5 that is proposed in the minutes advanced by the plaintiffs.
The second question has to do with the terms upon which payment of the eventual purchase price is to be made. The order that was settled on 4 December does deal with that to an extent; $200,000 was to be paid effectively forthwith and that has been done. Payments of $25,000 were to be paid into the defendants' solicitor's trust account on a monthly basis and that was to be done from the beginning of 2013. I am advised that two payments of $25,000 each have been made. A third one will be due on 30 March.
Although it is not entirely clear when the final determination might be made by the expert, it would seem to me that it is unlikely to be before the middle of June; in fact, experience suggests that is an optimistic time frame, but for the purposes of this decision, I am prepared to accept that as the likely payment date. Given that any payment of the purchase price would be made some time after that final determination, it is reasonable to assume that there would have been paid into the defendants' trust account six instalments of $25,000, meaning that as at 30 June, there should be in that account $150,000.
That would mean that the plaintiffs would have available to them as at 30 June an amount of $350,000. What the defendants propose is that subsequent to the determination, within seven days of the determination, they should pay a further $100,000. That would mean that at or around the end of June, the plaintiffs would have either have received or would be entitled to receive an amount of $450,000. At present the valuation on the plaintiffs' shares, the preliminary determination, is something in the region of $520,000 ‑ $530,000. So it is clear that as at the date of determination, if the defendants' proposals were adopted, there would be a relatively modest amount of money outstanding.
What the defendants propose is that thereafter, the outstanding balance should be paid off in monthly instalments of $15,000, with interest at the rate of 6%. If instalments were not paid, then the rate of interest would increase to 8%. On the other hand, the plaintiffs' preferred option, understandably, is to have the full amount of the assessed purchase price, the determined value, paid within seven days of the date of the determination. If there is to be a staggered payment regime, then the plaintiff seeks the provision by the second and third defendants of security over their real property.
I should note, because it is important, the order of 4 December anticipated the provision by the defendants of security over the first defendant's business to secure the payment of the plaintiffs' entitlement. The order also anticipated the giving of personal guarantees by the second and third defendants in relation to the purchase price. While, as I understand it, the security has not yet been provided, it seems arrangements are well in hand and it is a matter of settling to the satisfaction of the parties or, failing that, on the order of the court, the form of security.
It should be noted, and I have taken this into account, that one of the great enemies of any small business is a cash flow deficiency. It is clear that the first defendant relies on an overdraft to effectively maintain its business. That overdraft fluctuates, as one might expect, and doubtless that is because of the need to pay suppliers and some lag time in being paid for its product.
I am reluctant to make any orders which impose upon the first defendant strictures on its cash flow position. I am also of the view that to require mortgages, securities over the real estate of the second and third defendants, given the amount likely to be outstanding as at the date when payment becomes due, would be too onerous.
What I have determined is that I should make an order that is broadly consistent with the order proposed by the defendants in their minute of orders. Order 1 anticipates the payment of $100,000 within seven days of the date of the determination and the balance of monthly instalments of $15,000. I think the monthly instalments should be $25,000. That would seem to me to ensure that payment will be made in a relatively short space of time.
The plaintiffs are accommodated by both the security over the assets and undertakings of the first defendant and by the personal guarantees given by the second and third defendants. That seems to me to be in the circumstances a reasonable position. Anything further I think would be too on onerous and unnecessary.
The third issue is the question of costs, always a difficult matter when effectively, the case has been settled. There is a vast amount of material in this matter and it runs backwards and forwards. In the end, I have determined that the proper order is that there should be no order as to costs. I accept that in large measure, the plaintiffs succeeded in their application to have the defendants buy their shares. That was settled by agreement and I accept that in the ordinary course, costs follow the event.
That provides a strong argument for the plaintiffs to succeed on the question of costs. But the fact remains an offer was made by the defendants to purchase the plaintiffs' shares at or around $600,000. That would appear to be, on present estimates, a good deal more than the independent expert thinks the shares are worth. I would not necessarily equate that with a Calderbank offer.
I also accept that when that offer was made, the business was on the market for a good deal more than is reflected in the offer of $600,000. But as I have noted earlier in these reasons, the plaintiffs had a fairly good understanding of the nature of this business, how it ran and what it was worth. That cannot be put to one side. The fact is the offer was made and the present determination suggests an entitlement less than the offer. I have weighed that against the fact that on one view, the plaintiffs have been successful in their action. Having weighed it all in the balance, I have determined that the proper course is to make the order that there be no orders as to costs.
Finally, there is the question of the undertaking by the second and third defendants not to withdraw more than $10,000 per week from the first defendant. I am not quite sure, after hearing argument, why it is that that is said, that that undertaking ought be released. It seems to me that it is part of the matrix that provides the plaintiffs with some security and ensures that the payment to which they are entitled will be made. I cannot presently see any reason why there ought be a release of that undertaking. It will of course fall away when and if the full amount of the purchase price has been paid, but for the present, it is my view that the undertaking ought be maintained and it ought be maintained until there is a final payment of the determination. So I would dismiss the application to release the undertaking.