AAV Australia Pty Limited v Regency Media Pty Limited

PARTIES: AAV Australia Pty Limited (Plaintiff) Regency Media Pty Limited (Defendant)

COUNSEL: A G Bell SC with C N Bova R Newlinds SC with P Silver

1 The plaintiff was the owner of all of the shares in the issued share capital of AAV Duplication Services Pty Limited ("AAVD").

2 From around 1 July 2003 AAVD and the defendant were parties to an unincorporated joint venture known as the "AAV Regency Joint Venture" (the "Joint Venture"). The business of the Joint Venture concerned the duplication and manufacture of audio and audio-visual home entertainment products. It was operated through AAV Regency Management Pty Limited (the "Manager") and AAV Regency Pty Limited (the "Sales Agent"). Shares in both the Manager and the Sales Agent were held by AAVD and the defendant.

3 By deed dated 27 February 2006 the plaintiff agreed to sell to the defendant all of the plaintiff's shares in the issued capital of AAVD (the "Share Sale Agreement"). The Share Sale Agreement is located at T 122 of the parties' tender bundle, exhibit A.

4 The object of the Share Sale Agreement was to end the Joint Venture. The Share Sale Agreement set out the purchase price that the defendant was to pay the plaintiff for its shares in AAVD and the mechanics to achieve the sale.

5 Completion was to take place on 30 June 2006: Clause 5.1 of the Share Sale Agreement.

6 Between 27 February 2006 and completion, 51% of all cash or "cash equivalent on hand or held in a financial institution" was to be distributed to the plaintiff in accordance with Clause 3.3(b) of the Share Sale Agreement as follows: "Each of the parties acknowledge and agree that, between the date of this Deed and Completion, the Manager and the Sales Agent will (and the Joint Venture Companies will cause the Manager and the Sales Agent to) distribute (in accordance with the Joint Venture Agreements and past practices) 51% of all cash or cash equivalent on hand or held in a financial institution to AAVD (and in any event prior to Completion distribute 51% of all cash or cash equivalent on hand or held in a financial institution to AAVD) and AAVD will distribute to the Vendor (whether by way of loan repayment or dividend) all cash or cash equivalent on hand or held in a financial institution on or before Completion."

7 If any trade debts had not been paid by the date of completion and to the extent that working capital was higher than average as a result, the Share Sale Agreement provided for the amount of the purchase price payable by the defendant for the plaintiff's shares in AAVD to be adjusted. "Purchase Price" was defined in Clause 1.1 as: " 'Purchase Price' means the aggregate amount of:

8 "Completion Payment" was defined in Clause 1.1 to mean "$22 million".

9 As things transpired, there was no "Final Adjustment Payment" made. This was defined in Clause 1.1 to mean "$3 million".

10 "WC Adjustment Payment" was defined in Clause 1.1 as: " 'WC Adjustment Payment' means either:

(a) subject to (b), 51% of the amount (if any) by which the Working Capital Amount at Completion exceeds the WC Average Amount, confirmed or adjusted by the Auditors under clause 6.2 or as determined by the Independent Accountant under clause 6.4; or

(b) where clause 6.5 applies, the amount (if any) calculated in accordance with that clause.

11 The commercial objective of the WC Adjustment Payment was to ensure that the Joint Venture continued to be properly managed between settlement and completion. In the absence of the WC Adjustment Payment the Manager and the Sales Agent could reduce the amount payable to the plaintiff pursuant to Clause 3.3(b) by ensuring that the cash at bank figure remained low and the trade debtors figure remained high, at least until after completion. The inclusion of the WC Adjustment Payment provision in the Share Sale Agreement meant that if the cash at bank figure was low the plaintiff would most likely receive an adjustment payment.

12 "Working Capital Amount" was defined in Clause 1.1 as: 'Working Capital Amount" means:

(a) subject to (b), the positive sum (if any) of the following in respect of the AAV Regency joint venture: (i) the aggregate of trade debtors, (net of doubtful debts) inventory, prepayments and non cash and non cash equivalent deposits; less

(ii) the aggregate of trade creditors, accruals, employee leave provisions, but excluding any liabilities (interest bearing or otherwise) relating to property, plant and equipment,

excluding any debts owing by the Manager or the Sales Agent to a Joint Venturer and excluding provisions for or accruals in respect of Royalties; or

(b) where clause 6.5 applies, the working capital amount at Completion determined in accordance with that clause.

13 "Working Capital Average Amount" was defined in Clause 1.1 as: " 'WC Average Amount' means the monthly average Working Capital Amount during the 12 month period immediately preceding the Completion Date, confirmed or adjusted by the Auditors under clause 6.2 or as determined by the Independent Accountant under clause 6.4."

14 In the lead up to settlement the parties noted a gap created by the fact that Completion Accounts (as defined) were to be prepared as at close of business on the day of completion whereas the distribution required under clause 3.3(b) only continued until completion. Completion was defined as the event of completion of the Share Sale Agreement and the sale and purchase of the plaintiff's shares. This event was to occur on the Completion Date of 30 June 2006, but no time on that date was specified.

15 On 22 June 2006 the solicitors for the defendant sent an email to the solicitors for the plaintiff in which they said (A 190): "At what point in time on 30 June 2006 is your client expecting our client to determine the amounts held in financial institutions? Obviously if this amount is to be paid at completion, the relevant time would need to be some time before completion."

16 Discussions ensued, with the result that, on 30 June 2006, by letter from AAV Limited addressed to Regency Recordings Pty Ltd, which was executed as a deed by the plaintiff and the defendant (the "Letter Agreement"), the plaintiff and the defendant agreed as follows: "We refer to clause 3.3(b) of the Share Sale Deed and the obligations of the Sales Agent, the Manager and the Joint Venture Companies (each as defined in the Share Sale Deed) to distribute to AAVD between the date of the Share Sale Deed and Completion (as defined in the Share Sale Deed) (In accordance with the Joint Venture Agreements (as defined in the Share Sale Deed) and past practices) and in any event prior to Completion fifty one per cent (51%) of all cash or cash equivalent on hand or held in a financial institution (the "Distribution").

As the Completion Accounts (as defined in the Share Sale Deed) are to reflect the financial position as at close of business on the day of Completion, we have agreed that the amount of the Distribution will be calculated as being the aggregate amount of cash or cash equivalent held on hand by the Sales Agent or the Manager as at 5.00pm on the day of Completion together with the aggregate credit balances (without offset or deduction against any accounts in debit) as stated in the bank statements of the Sales Agent's and the Manager's financial institutions as at 5.00pm on the day of Completion ("Bank Statements"), notwithstanding that Completion may have occurred earlier that day.

You undertake to us to procure that the Sales Agent and the Manager print the Bank Statements at 5.00pm on the day of Completion (and provide copies of the same to us) and that they make payment of the Distribution (calculated in the manner set out above) to us directly in immediately available cleared funds within 2 Business Days (as defined in the Share Sale Deed) of the day of Completion in accordance with the payment directions issued to each of the Sales Agent and the Manager in our favour by AAVD and dated with today's date.

You further undertake that you will not (and will procure that the Sales Agent and the Manager do not) between the time at which Completion occurs and 5.00pm on the day of Completion, reduce the amount of cash or cash equivalent on hand or held in a financial institution by or on behalf of either of the Sales Agent and the Manager.

Except as set out above, nothing in this letter in any way changes or amends the provisions of the Share Sale Deed. This letter is without prejudice to any rights or remedies that AAV Australia Pty Ltd (CAN 080 533 955) may have under the Share Sale Deed.

Please execute the attached copy of this letter as a deed and return to us to signify your acceptance of and agreement to the terms of this letter and that you undertake and confirm to us in the terms set out above."

17 By letters of direction prior to completion, AAVD Limited directed the Manager and Sales Agent to pay the Distribution to the plaintiff (A 276 & 277).

18 On 30 June 2006 completion of the Share Sale Agreement occurred and the defendant procured the Sales Agent and the Manager to distribute to the plaintiff the amounts of $707,022.77, $1685 and USD $1959.60.

19 It is the plaintiff's case that the defendant failed to procure the Sales Agent and the Manager to distribute the whole of the Distribution to the plaintiff. The plaintiff claims that the payments it received in total were less than 51% of all cash or cash equivalent on hand or held in a financial institution by the Sales Agent and the Manager as at 5pm on 30 June 2006 together with the aggregate credit balances as stated in the bank statements of the Sales Agent and Manager as at 5pm on the day of Completion. In paragraph 16 of the Statement of Claim filed on 20 June 2007 the amount claimed as the shortfall in this regard was "at least $571,643.14".

20 Prior to making the payments to the plaintiff on 30 June 2006 steps were taken by the Sales Agent to obtain bank statement documentation from its banker, National Australia Bank Limited ("NAB").

21 On 27 June 2006 at 4.18pm Karen Keen of the Sales Agent sent the following email to Todd Martin of the NAB (A 227): "Hello Todd,

As per our telephone conversation earlier this afternoon, we require bank statements or documents for all 4 accounts clearly showing bank balances at 5.00pm on the 30th June, must be received by Tim Morrissey email: tmorrissey@aavregency.com.au or fax number 03 9587 2384 by 5.10pm same day.

Please confirm that this request had been actioned.

Karen Keen. Accounts Department AAV Regency Pty Ltd"

22 Mr Martin replied at 10.29am on 29 June 2006 (A 226): "Karen,

I will attend to the requirement on Friday, however I should note that I'll provide a transaction listing detailing what has been passed throught (sic) the account from when the last statement was issued, until the COB on Friday. Any transactions that are effectively in the system, like unpresented cheques or over the counter bank deposits, may not show up on our transaction listing. If there are none of these type transactions, all should be in order.

We have also confirmed with our International area that they will be able to provide the same information on the USD accounts.

Trust that this is OK, and we will fax statements to you on Friday.

Todd Martin Associate Director, Melbourne Major Client Group National Australia Bank"

23 Next, at 5.26pm on 30 June 2006 Mr Martin sent a 14 page facsimile transmission to Ms Keen/Mr Morrisey (A 293ff). The first page contained Mr Martin's handwriting as follows: "Karen,

Please note the first 3 pages relate to USD A/C's. There have been no transactions on these accounts up to 5pm today.

24 The first three documents attached to Mr Martin's fax (A 294, 295 and 296) were each headed "CUSTOMER OVERSEAS CURRENT ACCOUNTS", under which heading followed "INTERIM STATEMENT AS AT 29/6/06". Document A 294 related to the Sales Agent and documents A 295 and 296 related to the Manager. Each of the three pages recorded a print out time of 10.30.31am on 30/6/06.

25 The remaining 10 pages (A 297-306 inclusive) related to the accounts of the Manager and the Sales Agent. They were each headed "Transaction Listing". The first date of transactions listed for the Manager was "06/05/06" and the last date of transactions listed was "30/6/06". The relevant entry for that date was "TRANSFER 2501.80". There was otherwise no record of a credit entry or debit entry to the account on that date. As at that date the account showed a balance of "3,304.04CR".

26 In the case of the Sales Agent the first date of transactions listed was "05/05/06" and the last date of transactions listed was "29/06/06". There was no record of any entry on the Sales Agent's account for 30 June 2006. The balance of the account shown at 29/06/06 was "1,386,319.14".

27 At the bottom of each of A 297-306 the following statement was made by NAB: "IMPORTANT:

. This Provisional list is NOT A STATEMENT of account.

. It may include transactions which appear on previous statements.

. It may NOT include all transactions processed since last statement was issued.

. With the exception of cheque serial numbers, the details shown in the particulars column may be an abbreviation.

. Inclusion of a debit does not always indicate payment by the Bank."

28 At 6pm on 30 June 2006 Mr Morrissey sent portions of the NAB fax to Mr Krug of the plaintiff informing him that as "the statements received from NAB" were not very clear he would send Mr Morrissey an email from the NAB confirming the balances (A 307).

29 At 5.53pm on 30 June 2006 Mr Morrissey had forwarded to Mr Krug an email he and Ms Keen had received from Mr Martin at the NAB which stated (A 312): "AAV Regency Management Pty Ltd

Regards Todd Martin Associate Director, Melbourne Major Client Group National Australia Bank"

30 Based on the balances referred to above, the Manager and Sales Agent made the following distributions to the plaintiff on 30 June 2006 and 3 July 2006: (a) The Sales Agent transferred $707,022.77 to the plaintiff, calculated as 51% of $1,386,319.14.

(b) The Manager transferred $1,685.06 calculated as 51% of $3,304.04.

(c) The Manager transferred USD 1959.60 calculated as 51% of USD 3842.37.

31 The above calculations did not take into account the amounts listed as having been credited to the accounts of the Manager and Sales Agent on 30 June 2006 as appear from the documents at A 343, A 345, A 347 and A 349 each headed "National Online Statement Report". The amounts included an "interbank credit" relating to Sony Pictures Home Entertainment Pty Limited ("Sony") of $1,079,593.01 (the "Sony Payment"). The plaintiff contends that all the amounts in the National Online Statement Reports should have been included in the calculations of the amounts making up the Distribution. In this respect, the Online Statement Reports were only produced to the plaintiff after preliminary discovery occurred.

32 The Share Sale Agreement provided for the Joint Venture accounts to be prepared after completion and for these accounts to be audited. The defendant provided such accounts to Ernst & Young who audited them. In their report (A 320ff), Ernst & Young found that no WC Adjustment was necessary.

33 The AAVD balance sheet as at close of business on 30 June 2006 is at A 320. The column headed "Total AAVD excl AAVR" represents the financial position of AAVD excluding its 51% share in the Joint Venture. The column headed "AAVR" represents AAVD's 51% share in the Joint Venture. The balance sheet shows as at 30 June 2006 that AAVD was entitled to "Cash and Intercompany Accounts" of $570,817.27. The plaintiff says that this amount should have been included in the Distribution.

34 Ernst & Young's report contained the consolidated balance sheet for the Joint Venture as at 30 June 2006. It disclosed the following: (a) $845.70 as "Cash on hand";

35 It is clear from the documents that the Sony Payment was not included in the "Trade Debtors'" amount but was included in the "Cash at Bank". This is because the invoices which made up the Sony Payment amount are all recorded as having been paid as at 30 June 2006. If some or all of those invoices had not been recorded as having been paid they would had to have been recorded as Trade Debtors and included in the calculation of the WC Adjustment payment. Had that occurred, the defendant conceded that the plaintiff would have received an additional amount of $300,000 (round figures), but not the amount claimed.

36 In April and May 2006 it was the practice between the Sales Agent and Sony for the Sales Agent to issue tax invoices to Sony nearly every day and then the Sales Agent would send Sony a statement on the last day of the month setting out the invoices paid and those outstanding. In April 2006 the Sales Agent issued 69 invoices between 3 April and 30 April. These were all paid on 31 May 2006, the due date for payment.

37 In May 2006 the Sales Agent issued 81 invoices to Sony between 3 May and 31 May 2006. The invoices totalled $1,079,593.01 (the amount of the Sony Payment) and were due for payment on 30 June 2006. Thus, the Sales Agent expected Sony's payment on 30 June 2006.

38 On 26 June 2006 Sony produced the document headed "Payment settlement list for payment run 26.06.2006/51221" (A 385 ff). This document set out the Sales Agent's invoices totalling $1,079,593.01 as well as the total amount for the "payment run" of $2,816,681.45.

39 On 26 June 2006 the Sales Agent received Sony's "Remittance Advice" (A 209-211) by email. The email set out the 81 invoices which made up the Sony Payment. It recorded the "Amount Paid" as AUD 1,079,593.01 and the "Effective Date" as 30.6.06. Within its internal system Sony created a payment instruction (A 389) for the amount to be paid from its Westpac account to the NAB account of the Sales Agent.

40 Westpac received Sony's payment instructions in computer readable form and processed it at 12.09pm on 30 June 2006 (A 423).

41 At 1.13pm on 30 June 2006 the NAB received details of the transaction from Westpac. In this regard, at this point, it is convenient to turn to the evidence of Professor Roger Clarke.

42 Professor Roger Clarke has considerable expertise with regard to payment systems, in particular, the general practice of banks when dealing with bank to bank payments. Professor Clarke's two reports were in evidence as exhibit E and exhibit F respectively. Professor Clarke also gave oral evidence.

43 Professor Clarke said this in paragraph 7.3 of exhibit F when he replaced the original paragraph 5.16 in exhibit E: "5.16 NAB received a transaction in the relevant amount, for credit to (the Sales Agent), at 1.13pm on 30 June 2006. I infer that from the information provided in Annex O, and in particular the following:

• the document is headed 'DIRECT ENTRY SYSTEM - FILE EXCHANGE EDIT LISTING', which indicates that it reports on payments data received, as described in general terms in paras. 4.4-4.5 and 4.11-4.12 of my first Report;

• '083-091 557833798', which is the same as the payee bank account date provided on pp. 1 and 13 of Annex F;

• '1079593.01', which is the same amount as that of the payment in question;

• AAV REGENCY (AUST TO USE ONLY)'. This is the same as the payee's name on p.17 of Annex F (the documents provided by Sony), including the same lack of a closing parenthesis;

This date is therefore the same as that noted in para. 5.8 of my first Report."

44 Professor Clarke said it was not meaningful to infer a specific time at which the credit of $1,079,593.01 reached the Sales Agent's account at the NAB. This was because of the way inter-bank transactions are conducted in Australia. Professor Clarke's evidence about this was as follows.

45 Professor Clarke's evidence was that after receiving the payer's payment instruction, the payer's bank executes it. This involves transferring to the payee's bank: (a) funds equivalent to the amount in the payment instruction;

(b) details of the transaction, in particular, the payee's payee account identifier.

46 Generally inter-bank transactions are conducted by means of an intermediary banker with which both banks have an account. In Australia such inter-bank payments are made through entries against accounts each bank holds with the Reserve Bank of Australia ("RBA"). These are called Exchange Settlement ("ES") accounts.

47 For very large transactions it is normal to execute the instruction promptly and individually. In this context "very large" means tens of millions of dollars rather than transactions of only up to seven figure sums.

48 Because there is a large volume of payment transactions ranging from amounts of $50 to $5,000,000, it is more efficient for each bank to combine all of the instructions of this kind that they receive during a business day and issue a single instruction to the RBA to transfer a total amount from the paying bank to each of the receiving banks. This is referred to as "deferred net settlement". It is "net" in the sense of being a single bulk or summary transaction for each bank, rather than a large number of detailed transactions. It is "deferred" in that it does not occur progressively during a business day, but just once at the end of each business day.

49 This effects the transfer of the funds to the payee's bank. In order for the funds to be credited to the payee's account with that bank, the date in the payment instruction also has to be transferred to the payee's bank. This is achieved by what is generically referred to as a clearing scheme.

50 After the payee's bank has received both: (a) the funds (by means of net settlement through the ES account with the RBA) and

(b) the payment instruction (by means of the relevant APCA clearing system, in the case of direct entry transactions, BECS);

the payee's bank effects the final instruction by crediting the "amount" to the "payee-account identifier".

51 Banks generally effect the creditor payee accounts in one or more batches each "business day", that is, each calendar day on which the bank is open for business. The batch processing may be undertaken both during the "working day", that is, between 9am and 5pm weekdays (except public holidays) and overnight after the end of the working day during which the direct entry payment instructions were received.

52 All banking works on "daily rests". That is to say, banks do not regard funds as arriving in an account at a particular time within a business day, but only on a particular business day. Consistently with that approach, interest accrues per business day, not per hour.

53 Accordingly, all processing is regarded as having occurred "as at close of business" on a particular business day. It is not relevant whether the processing actually takes place during working hours, or at some time overnight (although it does need to have been completed prior to the beginning of the following working day).

54 Professor Clarke further explained that a customer could not reliably know what transactions had been reflected in the processing for a particular business day until the commencement of the following working day. That was based on a long-standing practical arrangement which allows banks to have from approximately 8.30pm in the evening until 8.30am the following morning to complete the previous day's processing.

55 Professor Clarke also said that payees may have more timely access to information by means of online displays of data equivalent to a "bank statement" and perhaps also to data relating to each transaction that is processed against their account. Generally, the transactions displayed are recorded up to the preceding business day.

56 In relation to the Sony Payment Transaction, Professor Clarke said in cross-examination that by 5pm Westpac had not made the deferred net settlement payment to the RBA. Most likely, this happened some time after 5pm on 30 June 2006. He also said the RBA had not credited the NAB account with the Sony Payment by 5pm on 30 June 2006 and that the NAB had not allocated any amount to the Sales Agent's account with the NAB. In terms of processing, as best as Professor Clarke could say, that was something which happened electronically sometime between the evening of 30 June 2006 and 8.45am on 3 July 2006 when the NAB bank statement was printed showing the Sony Payment. Nevertheless, Professor Clarke's evidence (exhibit E, para 4.16 and para 5.18) was that the NAB treated the credit as being in the account as at close of business on 30 June 2006. I accept Professor Clarke's evidence.

57 The defendant submits that because the plaintiff has not proved that payment of the amount owed by Sony in the sum of $1,079,593.01 occurred prior to 8.45am on 3 July 2006 there is no basis to suggest that the Sony Payment should ever have appeared as a credit in the Sales Agent's account at 5 o'clock on 30 June 2006. Therefore, the plaintiff's case fails.

58 In order to determine the plaintiff's claim it is necessary to consider the proper construction of the Letter Agreement having regard to the Share Sale Agreement and the Joint Venture Agreement.

59 The plaintiff submitted that in the Letter Agreement, the words "the aggregate credit balances … as stated in the bank statements of the Sales Agent's and the Manager's financial institutions as at 5pm on the day of Completion" meant the sum of the credit balances stated in the bank statements of the Sales Agent's and Manager's financial institutions as at the close of business on 30 June 2006 and that close of business necessarily meant the time after which nothing further relevant would occur. The submission should be accepted because it is consistent with the parties objective purpose of filling in the gap between the actual time of completion and close of business. This construction is supported by the introductory words to the second paragraph of the Letter Agreement which set out the rationale for the 5pm cut off being that the "Completion Accounts … are to reflect the financial position at close of business on the day of Completion". In other words, through the bank statements printing mechanism in the Letter Agreement, the parties were to achieve their commercial objective of there being no further credit balances after close of business on 30 June 2006. In accepting the plaintiff's submission, the Court has rejected the defendant's contention that the parties countenanced the possibility that invoices issued prior to Completion but paid between 5pm and close of business on 30 June 2006 could "fall through the crack" so to speak.

60 In accepting the plaintiff's submission the Court has endeavoured to do so objectively in accordance with what has been laid down by the High Court in cases such as Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 and Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165. The Court has also considered the surrounding circumstances known to the parties at the time of the Letter Agreement: Ryledar Pty Limited v Euphoric Pty Limited (2007) NSW CA at [264] - [265] per Campbell, JA. In particular, I have taken into account the following (thereby rejecting the defendant's objection to the tender of A 214 and A 229 which have been admitted on the basis that they are evidence that the parties were using the expressions "close of business" and "as at 5pm" interchangebly): (i) Clause 14.1(e) of the Share Sale Agreement (A 160) which provides:

Each communication … under or in connection with this Deed: …… (e) is taken to be received by the addressee …… ……

but if the communication is taken to be received on a day that is not a working day or after 5.00pm, it is taken to be received at 9.00am on the next working day ("working day" meaning a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally, in the place to which the communication is posted, sent or delivered); and

(ii) Clause 20.5(b) of the Operating Deed (A 49) which provides

(a) If: (i) the time for doing any act or thing required to be done; or

expires on a day other than a Business Day, the time for doing that act or thing or the expiration of that notice period is extended until the following Business Day.

(b) If any act or thing required to be done is done after 5pm on the specified day, it is taken to have been done on the following Business Day.

(iii) The following extract from the file note (A 212) of Ms O'Connell, a solicitor acting for the purchaser, relating to a conversation with Messrs Rein and Izzard, solicitors for the vendor at 2.38pm on 26 June 2006: "cash - completion as at COB on 30 June 06 sweep at bank at a time - say 12 noon undertaking at settlement to extent any cash in b/a 12 ½ COB - pay when pay final adjustment."

(iv) The following extract from Mr Izzard's file note (A 213) of the same conversation: "… proposed that payment be made by a cash sweep as at e.g. 12 midday and that undertaking be given by (Sales Agent) etc to pay all $ received between time of payment + close of business."

(v) An extract from another file note (A 214) of Ms O'Connell on 27/6/06 when she spoke to Mr Rein: "Bank statements to be printed at specific time, say 12 noon and (Sales Agent) to give undertaking to pay cash held b/n 12 @ COB on Friday."

An extract from Ms O'Connell's file note (A 229) on 27/6/06 when she spoke to Mr Rein: "Tony's concern is about cheques that have been received but not cleared at 5pm - their opinion that these are "cash equivalent", they shouldn't be penalised by bank procedures."

61 In reaching the above conclusion I have considered the defendant's submission that if what the parties intended was a reference to bank statements obtained sometime after 5.00pm on 30 June 2006, that would leave no work for the undertaking in the second last paragraph of the Letter Agreement to work. I reject the submission because it follows from the Court's construction of the Letter Agreement that "as at 5pm on the date of Completion" and "5pm on the day of Completion" mean "as at close of business …" in each case. This being so, the undertaking is not meaningless because it operates as an undertaking not to reduce cash balances between the time at which Completion occurred and close of business. Consistently with that construction, there was then an obligation to pay the distribution within two business days of the day of Completion, that is, by close of business on 4 July 2006.

62 Next, the plaintiff submits that the National Online Statement Report (A 343) generated at 8.45am on 3 July 2006 was a bank statement "as at 5.00pm on the day of Completion" because it was a bank statement printed at the commencement of the next working day following 30 June 2006 which recorded all the transactions which had occurred in the Sales Agent's account as at close of business on 30 June 2006.

63 In considering this issue, it is necessary to determine whether the Interim Statements and Transaction Listing Documents (A293-306) or Mr Martin's email (A 312) were themselves "bank statements as at 5.00pm on the day of Completion".

64 The defendant accepts Professor Clarke's evidence that banks do not issue official bank statements for a particular time on a particular day, such as 5pm on 30 June 2006. Nevertheless, it submits, relying on Professor Clarke, that banks regularly provide customers with transaction summaries; displays of data equivalent to a "bank statement" and details of debit and credit balances. Adopting this approach the defendant submits that the Transaction Listing Summaries were clearly bank statements within the meaning of the Letter Agreement. The defendant also relies on the handwriting in Mr Martin's facsimile at A 293: "… There have been no transactions on these accounts up to 5pm today."

Although the plaintiff objects to the admission of the handwriting into evidence on the basis of s 135 & s 136 of the Evidence Act, the Court does not uphold the objection. The document is plainly a business record which ought be admitted unconditionally. However, the words referred to can only be a reference to the US dollar account documentation since the last entry on A 300 is for 30 June 2006.

65 In my opinion, the documents attached to Mr Martin's facsimile transmission of 30 June 2006 were not bank statements as required by the Letter Agreement. As already noted, the Transaction Listing document was described as a "Provisional list" which was "NOT A STATEMENT" of account and the document made it clear that it might not comprehensively record all transactions, a fact which Mr Martin had already notified Ms Keen about in his email at A 226. Moreover, each Transaction Listing document bears no statement as to the time it was printed and there is no evidence these documents were printed as at close of business or even at 5pm on 30 June 2006.

66 In relation to the US dollar accounts of the Manager and Sales Agent at A 294-296, as already noted, these documents were printed at 10.30am and 10.31am respectively and so they too cannot have been printed as at close of business or even at 5pm on 30 June 2006.

67 As a fallback, the defendant submits that Mr Martin's email at A 312 is a "bank statement" within the meaning of the Letter Agreement because it was a statement by a person with "appropriate authority" of the NAB stating the balances of the four accounts as at 5.00pm on 30 June 2006. The Court rejects the submission because, first, on any view of it, the email contains incorrect information, namely, the balance in USD account AAVREUSD01. Counsel for the defendant conceded Mr Martin's email was incorrect in this respect. Secondly it is not a document to be found amongst "the bank statements of the Sales Agent's financial institution" as required under the Letter Agreement. At the very least such documents should record entries to an account which result in a balance. Mr Martin's email does not do this.

68 On the other hand, the National Online Statement Report at A 343 generated at 8.45am on 3 July 2006 starts on 30 June 2006 and ends at 30 June 2006. It was a bank statement printed at the commencement of the working day following 30 June 2006. It clearly records the credit balance on the Sales Agent account at the NAB as at the close of business on 30 June 2006. The Court is therefore satisfied that this is a bank statement "as at 5pm on the day of Completion" within the meaning of those words in the Letter Agreement as found earlier in this Judgment. By reason of the fact that the Statement at A 343 records the Sony Payment, it follows that Sony was no longer a debtor of the Sales Agent as at close of business on 30 June 2006.

69 The defendant submitted that the National Online Statement Report at A343 could not be a bank statement within the meaning of the Letter Agreement because it included the amount paid to the plaintiff. In my opinion, the fact that the payment is so recorded simply does not have that effect. Nor does it operate to deprive the plaintiff of the inclusion of the amount of $707,022.77 in the calculation of its damages. The Letter Agreement did not require the defendant to make a payment on the date of Completion. Accordingly, as a matter of commonsense, any interim payment of the kind made by the defendant on that date cannot be taken to have qualified the defendant's obligation to pay 51% of the credit balance in the account prior to such payment.

70 It follows that the National Online Statement Reports at A 345, A 347 and A 349 are also bank statements "as at 5pm on the day of Completion". It therefore follows, with reference to the aggregate credit balances as stated in all these bank statements, that the defendant is in breach of the Share Sale Agreement by failing to procure the Sales Agent to pay the plaintiff the full amount of the Distribution. The plaintiff is therefore entitled to recover damages as follows:

National Online Sales Report AUD USD A 343 2,494,444.87 A 345 269.36 A 347 5,488.13 A 349 5,738.32 TOTAL 2,499,933.00 6,007.68 51% 1,274,965.83 3,063.92 Less Distribution paid 707,022.07 Less Distribution (admitted) 1,685.06 Less Distribution (admitted) 1,959.60 $566,258.70 $1,104.32

71 Both parties have proceeded on the basis that, if the plaintiff were to succeed, there should be one judgment in AUD currency. The Court therefore stands this matter over for mention on Thursday 26 June 2008 at 9.30am to enable the parties to do the calculations in the meantime, including interest on the damages awarded. Costs should follow the event on the ordinary basis but if either party wishes to make a different submission I will make directions concerning the filing of short written submissions.

72 Finally, it should be noted that it has not been necessary, given the Court's findings, to consider the plaintiff's alternative submissions.

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