Yaem Pty Ltd as trustee for R & R Discretionary Trust v MMP Industrial Pty Ltd
[2023] NSWSC 1080
•01 September 2023
Supreme Court
New South Wales
Medium Neutral Citation: Yaem Pty Ltd as trustee for R & R Discretionary Trust v MMP Industrial Pty Ltd [2023] NSWSC 1080 Hearing dates: 1 September 2023 Date of orders: 1 September 2023 Decision date: 01 September 2023 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Plaintiffs’ Notice of Motion dismissed with costs
Catchwords: CIVIL PROCEDURE – application for separate question – where likely disputed facts
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW)
Category: Procedural rulings Parties: Yaem Pty Ltd as trustee for R & R Discretionary Trust (First Plaintiff/First Applicant)
Yaem (NZ) Limited (a company registered in New Zealand, company number 2398142) (Second Plaintiff/Second Applicant)
MMP Industrial Pty Ltd (First Defendant/First Respondent)
MMP NZ Limited (a company registered in New Zealand, company number 8305863) (Second Defendant/Second Respondent)Representation: Counsel:
Solicitors:
B F Katekar SC with E Chan (Plaintiffs/Applicants)
P Knowles SC with B J S Smith (Defendants/Respondents)
Gadens (Plaintiffs/Applicants)
Watson Mangioni Lawyers Pty Ltd (Defendants/Respondents)
File Number(s): 2023/197173
EX TEMPORE JUDGMENT (REVISED)
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By an agreement dated 18 February 2022, the plaintiffs sold their business to the defendants with effect from 8 April 2022 for $42 million. $39 million less adjustments was paid on that day, with the remaining $3 million put into escrow and to be payable twelve months later if certain conditions were met.
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The agreement defined the $3 million as the “deferred payment”. It is the plaintiffs’ position that they are now entitled to the $3 million payment. That is disputed by the defendants.
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The defendants have made a cross claim, the kind commonly seen in cases such as this, for alleged breach of warranty and alleged misleading or deceptive conduct and damages.
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The critical clause in the contract is cl 5.4(a)(i) which provided:
“(a) … the parties agree that the Deferred Payment will be payable to the Sellers on the date that is 12 months after the Completion Date (Anniversary Date) where in respect of each of the Management Employees:
(i) David Stewart remains engaged by the AUS Buyer and actively working in the AUS Business and NZ Business pursuant to the Consultancy Agreement in a part-time basis of two days per week” (Emphasis in original.)
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The date “12 months after the Completion Date” was 8 April 2023, which was Easter Saturday.
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Clause 1.4 of the agreement provided:
“If the day on which any act is to be done under this agreement is a day other than a Business Day, that act must be done on or by the immediately preceding Business Day except where this agreement expressly specifies otherwise.”
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One of the plaintiffs’ contentions is that the effect of cl 1.4 was that the relevant date for the purposes of cl 5.4(a)(i) was 6 April 2023, being the day before Good Friday.
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It is also the plaintiffs’ contention that cl 5.4(a)(i) has been enlivened. That is said to be because although it is said to be common ground that Mr Stewart was not actively working in the business, as specified in cl 5.4(a), he was, in effect, prevented from doing so by the defendants’ conduct.
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In those circumstances, the plaintiffs seek to have determined, as a separate question,[1] the following issues:
Whether 6 April 2023 is the date on which the Deferred Payment was payable under cl 5.4(a) of the Business Sale Agreement (“BSA”) dated 18 February 2022; and
If so, whether on the proper construction of the BSA, and in circumstances where the defendants have made claims for breach of warranty under the BSA which have not been determined, the defendants are obliged to execute the payment direction provided to them by the plaintiffs on 16 June 2023 (and identify their Authorised Signatories to the Escrow Agent, as those terms are defined in the Escrow Agreement) to effect the authorisation of the Escrow Agent to pay the Deferred Payment to the plaintiffs.
1. Pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2.
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As to the issue in (a), I can see that that is an issue which may well able to be resolved as a pure question of the proper construction of the contract.
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However, the issue in (b) appears to me potentially to involve a range of disputed facts.
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In support of the contention that that second question will be decided separately, the plaintiffs point to two matters which it is said will not be in dispute.
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The first is that on 12 April 2022, Mr Stewart said to the sole director of the defendants, Mr Andrew King:
“You don’t want me here. Everyone is still looking at me like I am the boss. I’ll just get in your way and you need to establish your own style. I will work from home. You don’t have to pay me any money.”
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I am informed that Mr Stewart will not dispute that that conversation took place.
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The second undisputed fact is that on that same day, Mr King sent Mr Stewart an email saying:
“Hi, David. As discussed, I am happy for you to work from your home office”.
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It is the plaintiffs’ position that it follows from those two matters that by operation of what was described as the “prevention principle”, the defendants have caused cl 5.4(a)(i) not to be engaged and that is a question that is apt to be determined separately because of the undisputed matters to which I have referred.
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As is well known, the Court is reluctant to order the determination of a separate question if there is any potential for there to be a dispute as to the facts. In this case, there is no statement of agreed facts as to the matters that I have referred. I am told there that will be a number of factual disputes including, as to whether or not, it will be necessary for Mr Stewart to show he remained ready, willing and able to perform work throughout the relevant period, and whether he was so ready, willing and able.
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I think the defendants have correctly characterised the position by saying:
“The question of whether David Stewart ‘remain[ed] engaged by the AUS Buyer and actively working in the AUS Business and NZ Business’ within the meaning of that clause cannot be determined without the Court making factual findings about the circumstances in which he ceased to provide services to the Buyers after Completion, including the occurrence of the conversation referred to at [12] above. Accordingly, it is not possible for the separate questions to be determined on the basis of agreed facts, and one of the critical facts upon which the outcome depends will be in dispute.”
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In those circumstances, I am not satisfied that it is appropriate to order the separate question proposed and the Notice of Motion is dismissed with costs.
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Endnote
Decision last updated: 07 September 2023
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