CB Australia Ltd v Shepherd

Completion of share sale

1. Prior to the sale to CB, Mr Shepherd was the owner of all of the issued shares in SGS. He was also the sole director of SGS and SGS's executives reported to him. His wife, Lisa Ann Shepherd, was employed by SGS and was responsible for administration, including accounting, invoicing, creditor and employee payments. SGS operated out of offices at Penrith. Mr and Mrs Shepherd had their home at Millthorpe in the Central West of New South Wales, several hours' drive away.
2. The contract in question was recorded in a written agreement styled "Share Sale Agreement" between Mr Shepherd (defined as the "Vendor") and CB (defined as the "Purchaser"). SGS, which was referred to as "the Company", was not a party. Mr Shepherd's shares in SGS were defined as the "Shares".
3. The consideration for the purchase was split into three components. First, there was the amount of $3,291,500 defined as the "Completion Payment". Second, there was the amount of $2,700,000 defined as the "Shepherd Amount". Third, there was the amount of $475,000 defined as the "Purchaser Fees".
4. Clauses 2 and 3 provided: 2. Purchase and Sale of Shares (a) The Vendor agrees to sell the Shares to the Purchaser for the Purchase Price. (b) The Purchaser agrees to buy the Shares from the Vendor for the Purchase Price. … (e) In consideration of the Purchaser purchasing the Shares, subject to Completion, the Vendor agrees to pay the Purchaser's costs in relation to the transactions contemplated by this agreement in an amount equal to the Purchaser Fees on Completion. 3. Purchase Price 3.1 Purchase Price The purchase price payable for the Shares is the aggregate of the Completion Payment, the Shepherd Amount and the Purchaser Fees, as adjusted pursuant to clause 3.2. 3.2 Adjustments to Purchase Price The Purchase Price will be subject to the adjustments made pursuant to clause 15. 3.3 Payment of Purchase Price The Purchase Price must be paid as follows: (a) on Completion, the Purchaser must pay the Completion Payment to the Vendor in accordance with clause 7.1; (b) Pay the Shepherd Amount to the Vendor in accordance with clause 7.1; (c) Pay the Purchaser Fees to the Vendor in accordance with clause 7.1.
5. The Agreement contained, before cl 4.2, a number of sub-paragraphs apparently intended to represent warranties by Mr Shepherd as Vendor (the heading and chapeau to the clause, which would presumably have been numbered 4.1, is missing but for convenience I will refer to the sub-paragraphs as sub-clauses of cl 4.1). Sub-paragraphs (e) and (f) provided: (e) The Company intends to lend and advance to the Purchaser at Completion the Purchaser Loan [defined as "the loan made by the Company to the Purchaser in an amount equal to the Shepherd Amount pursuant to clause 6.2(b)(viii)"], on substantially the same terms as the Shepherd Loan; and (f) Upon payment of the Shepherd Amount by the Vendor to the Company on Completion, the Company intends to, and the Vendor intends to use his rights as sole director and shareholder of the Company to cause the Company, to release the Vendor from all liability in respect of the Shepherd Loan.
6. Clauses 6 and 7 relevantly provided: 6. Completion 6.1 Time and Place Completion must take place on the Completion Date [defined as "the date of this agreement"] as soon as practicable after this agreement is executed (subject to satisfaction or waiver of the Conditions) at the office of Rothsay Chartered Accountants, [address] or such other time or place (a) requested by the Purchaser's financier or (b) that the Vendor and the Purchaser may agree, on the Completion Date [sic]. 6.2 Actions at Completion On Completion, the Vendor must: (a) give to the Purchaser: [thirteen specified items, including executed share transfers, share certificates, SGS's corporate records, possession of its plant and equipment, and, numbered (xii), the Vendor's Draft Completion Balance Sheet] (b) ensure that a meeting of the board of directors of the Company is held at which: … (ii) the transfer of the Shares are approved for registration subject only to the payment of stamp duty; and (iii) to record the resignation of each director, secretary and public officer of the Company whose resignation effective from Completion is to be delivered under clause 6.2(a)(vii). … (viii) the Company lends and advances to the Purchaser a loan in an amount equal to the Shepherd Amount and otherwise on substantially the same terms as the Shepherd loan. (c) Upon receipt by the Company of the Shepherd Amount from the Vendor, the Company releases the Vendor from all liability in respect to the Shepherd Loan. 6.3 At Completion (a) At Completion each action a party takes is deemed to be simultaneous with each other action. (b) At Completion a delivery or payment is not taken as made until all deliveries and payments are made. 6.4 Purchaser must pay If the Vendor complies with Clause 6, then the Purchaser must comply with clause 7. 7. Payment of the Purchase Price 7.1 Payment At Completion the Purchaser must: (a) Pay the Completion Payment to the Vendor; (b) Pay the Shepherd Amount to the Vendor, and for this purpose the Vendor irrevocably and unconditionally directs the Purchaser to pay such amount to the Company in full satisfaction of the Shepherd Loan; and (c) Pay the Purchaser Fees to the Vendor, and for this purpose the Vendor irrevocably and unconditionally directs the Purchaser to pay such amount in satisfaction of the Purchaser's costs in relation to the transactions contemplated by this agreement. 7.2 Payment by Immediately Available Funds The Purchaser must make payment required under clause 7.1(a) in Immediately Available Funds as directed by the Vendor, or by other means of payment as agreed by the Vendor.
7. It will be observed that, of the three sums of money which made up the Purchase Price, only the Completion Payment was to be retained by Mr Shepherd. The Shepherd Amount was part of a round-robin: it was to be used to repay a loan which SGS had made to Mr Shepherd (defined as the "Shepherd Loan"): cl 7.1(b); and in turn, SGS was to lend the same amount back to CB: cl 4.1(e), cl 6.2(b)(viii). The Purchaser Fees amount was to be applied by Mr Shepherd to costs incurred by CB as Purchaser in entering into the transaction (in accordance with an obligation undertaken by Mr Shepherd under cl 2(e)): cl 7.1(c).
8. The front page of the Agreement bears the typewritten date 8 April 2016 but the spaces in the body of the Agreement for the entry of the date were left blank. Apparently, it had been contemplated that the Agreement would be executed, and the relevant payments made, on 8 April at the office of Mr Shepherd's accountants, Rothsay Chartered Accountants, in the Sydney CBD (see cl 6.1). On 8 April, Mr and Mrs Shepherd travelled from Millthorpe to Rothsay's office for this purpose. But further negotiations ensued with CB, and then CB's financier was unable to make the necessary funds available. The Agreement and the other instruments required were signed on the day and held in escrow.
9. On 12 April, the necessary funds became available from CB's financier. Mr Shepherd was not in Sydney. Mr Shepherd's accountants delivered to CB most of the documents and other things listed in cl 6.2(a) including minutes of the meeting of SGS referred to in cl 6.2(b). In return, they received a cheque for the Completion Payment ($3,291,500) which was credited to Mr Shepherd's bank account on the same day. The transfer of the shares from Mr Shepherd to CB was registered in the books of SGS and CB assumed control of SGS and the business conducted by it.

Alleged breaches of Agreement

1. Counsel for Mr Shepherd submitted that five requirements of the Agreement with respect to Completion had not been complied with. First, the Shepherd Amount was not paid: cl 7.1(b). Second, the plaintiff did not deliver a deed of release releasing Mr Shepherd from liability in connection with the Shepherd Loan: cl 4.1(f), 6.2(c). Third, CB failed to enter into a loan agreement with SGS in substantially the same terms as Mr Shepherd's loan agreement: cl 4.1(e), 6.2(b)(viii). Fourth, the Purchaser Fees amount was not paid: cl 7.1(c). Fifth, Mr Shepherd did not hand over his Draft Completion Balance Sheet: cl 6.2(a)(xii).
2. As to counsel's first submission, it is true that CB did not tender payment of the Shepherd Amount to Mr Shepherd's representatives on 12 April. But I am not persuaded that this was a breach of the Agreement. As I read cl 7.1(b), it provides for the payment to be made from CB directly to SGS by direction of Mr Shepherd. The payment by CB to Mr Shepherd (and from Mr Shepherd to SGS) was notional but nonetheless effective. In any event, it would appear to be of no practical significance as the benefit of the Shepherd Amount was not to be retained by Mr Shepherd.
3. On 13 April, Mr Shepherd forwarded to SGS a draft deed of release prepared by his solicitors. The deed of release was ultimately executed by SGS on 1 July and delivered to Mr Shepherd on 18 July. It provided for SGS to acknowledge receipt of $2,700,000 (being the sum of the Shepherd Amount) and to release Mr Shepherd from his obligations under the Shepherd Loan.
4. Counsel's second submission presupposes that the Agreement required the delivery of a deed of release for the Shepherd Loan on Completion. I do not think this is correct. SGS was not a party to the Agreement and the Agreement could not directly oblige SGS to grant a release to Mr Shepherd. All that cl 4.1(f) did (assuming it to be a warranty by Mr Shepherd) was to record his intention to exercise his control over SGS before Completion to effect a release. The meaning of cl 6.2(c) is at first sight more troublesome. Read as a sub-clause of cl 6.2, it makes no grammatical sense. I think it must be read instead as a further sub-clause of 6.2(b); such a reading makes grammatical sense and is consistent with the relationship between cl 4.1(e) and cl 6.2(b)(viii). So read, cl 6.2(c) required Mr Shepherd to cause SGS to pass a resolution releasing him from liability under the Shepherd Loan upon receipt of the Shepherd Amount at Completion. A release could have been effected by deed of release but that was not contractually necessary; all that was required was a resolution.
5. There was nothing to stop Mr Shepherd from causing SGS to pass such a resolution but, in point of fact, he did not do so. On my reading of cl 6.2(c), this was a breach, but it was a breach by Mr Shepherd, not CB. In any event, it would appear to have no practical consequence as the deed of release requested by Mr Shepherd was ultimately executed by SGS.
6. Counsel for Mr Shepherd suggested that Mr Shepherd may be at some risk of having the deed of release set aside by the liquidator of SGS. This idea was not developed and it is hard to see how it could be sustained, in view of the fact that SGS has executed an acknowledgement that it received the Shepherd Amount. It is even harder to see how Mr Shepherd could complain when he accepted the deed of release as executed by SGS and it had been prepared by his own legal advisers.
7. As to counsel's third submission, among the resolutions which Mr Shepherd caused SGS to pass was a resolution to the effect that SGS intended to lend an amount equivalent to the Shepherd Amount to CB. But after CB took control of SGS, the transaction proceeded differently. A loan agreement (dated 8 April but apparently prepared after that date) provided for SGS to lend CB the sum of $6.56 million, $3.86 million more than the Shepherd Amount. The loan was also made on the basis that recourse against CB was limited to the value of its shares in SGS. The loan was subsequently amended to increase the amount by $4.475 million. It is, therefore, clear that SGS did not proceed in accordance with what was contemplated in the Agreement. But I do not think that that involved any breach of the Agreement. The relevant provisions, cl 4.1(e) and 6.2(b)(viii), did not cast any obligation on CB. All that was required for compliance with those clauses was that Mr Shepherd cause SGS to pass a resolution in the requisite terms, and he did so. Subsequent action by SGS which was not consistent with the resolution may or may not expose officers of SGS, or CB, to claims at the suit of SGS's liquidator. But those actions were not, on the evidence before me, Mr Shepherd's responsibility and he could not have any liability for them. Nor did they give rise to any contractual liability from CB to Mr Shepherd under the Agreement.
8. Counsel's fourth submission, which relates to the Purchaser Fees, raises the same issues as counsel's first submission concerning the payment of the Shepherd Amount. For the reasons I have already given, the failure to make payment of the amount of the Purchaser Fees to Mr Shepherd's representatives on 12 April was not a breach of the Agreement and there is no reason to doubt that there was a notional, but effective, payment of that amount to Mr Shepherd, coupled with a payment back to CB discharging Mr Shepherd's obligations under cl 2(e) of the Agreement. In any event, the benefit of the Purchaser Fees was not to be retained by Mr Shepherd.
9. Counsel's fifth submission is correct to the extent that the Draft Completion Balance Sheet was not handed over on 12 April (or afterwards) and that this was a breach of cl 6.2(a) of the Agreement. But this was Mr Shepherd's own breach. CB contended that the obligation was waived. Counsel for Mr Shepherd disputed this, pointing to a provision in the Agreement requiring any waiver to be in writing. But even if this is correct, it only means that CB retained the right to require Mr Shepherd to provide his Draft Completion Balance Sheet. Mr Shepherd's breach could not confer any additional rights upon him.
10. Unsurprisingly, counsel for Mr Shepherd did not contend that these alleged breaches, individually or collectively, amounted to a repudiation of the Agreement which would have allowed Mr Shepherd to terminate it (or that he did terminate it). Rather, counsel argued that they meant that "Completion" had not occurred for the purposes of the Agreement, and that Mr Shepherd's obligations, to the extent that they depended on Completion, had not arisen. In effect, according to counsel's submission, the Agreement continued to apply and to bind the parties, and all payments made under the Agreement stood, but CB was unable to obtain an adjustment to the purchase price.
11. In my opinion, the language of the Agreement is clear. The Agreement defined "Completion" as meaning "settlement of the sale and purchase of the Shares under clause 6". It was the settlement of the sale and purchase "of the Shares" which was the critical thing. On 12 April, Mr Shepherd's representatives accepted the Completion Payment and provided in return the documents required for the transfer of the shares to be effected. Neither party disputes that CB became the owner of the shares on 12 April. In my opinion, the requirements of the definition were satisfied and Completion occurred on 12 April. I have rejected counsel's submissions of breach (except by Mr Shepherd in relation to the Draft Completion Balance Sheet). But even if I were wrong in my view and the other breaches alleged by counsel were sustained, that would not affect my conclusion that Completion occurred in accordance with the Agreement on 12 April. It would only mean that Mr Shepherd had the right to sue for breach.
12. I think that my conclusion is supported by considerations of commercial common sense which would be relevant in the event of any ambiguity in the Agreement. The result contended for by Mr Shepherd is that by reason of breaches of the Agreement, CB lost the ability to obtain an adjustment of the purchase price, no matter how justified such an adjustment was in fact. Yet it was also bound to continue with the Agreement and could not withdraw. This would be a highly capricious outcome, which, in my opinion, the Court would not reach unless it was clear from the terms of the Agreement that the parties had specifically intended such an outcome.

Response to CB's Completion Balance Sheet

1. The adjustment to the purchase price was dealt with in cl 15. Clause 15.1 provided for the preparation and delivery of the Draft Completion Balance Sheet. Clauses 15.2 to 15.4 relevantly provided: 15.2 Preparation and delivery of Completion Balance Sheet The Purchaser must prepare and deliver to the Vendor no later than 70 Business Days after Completion a draft of a statement of financial position of the Company, being those current assets identified in Schedule 5 less those liabilities (whether current or non-current) identified in Schedule 5 as at 11:59pm Sydney time on the Financial Adjustment Date (the "Completion Balance Sheet") in the form and including the items properly specified in the Draft Completion Balance Sheet and prepared in accordance with: (a) the specific principles and policies set out in Schedule 5; (b) to the extent that the treatment of any item is not dealt with in the principles and policies referred to in clause 15.2(a), the Accounting Standards in force at Completion. For the avoidance of doubt, the Completion Balance Sheet must be prepared without taking into account any event caused after the Financial Adjustment Date, and a draft statement of financial performance should be prepared to the extent necessary to calculate any line item of the Completion Balance Sheet. If the Purchaser has not provided to the Vendor the Completion Balance Sheet complying with this clause 15.2 within 70 Business Days after Completion, then the Draft Completion Balance Sheet will constitute the Completion Balance Sheet for the purposes of this Agreement. 15.3 Assistance from Vendor The Vendor must from the Completion Date until the Completion Balance Sheet has been finalised in accordance with this clause 15 provide all assistance reasonably required to enable: (a) the Purchaser to comply with the provisions of clause 15.2; and (b) the Purchaser Accountants to review the Draft Completion Balance Sheet. 15.4 Vendor's response to Completion Balance Sheet (a) The Vendor must within 14 Business Days after the date on which he receives the Completion Balance Sheet give notice to the Purchaser either: (i) stating that the Vendor agrees with the Completion Balance Sheet; or (ii) stating that the Vendor does not agree with the Completion Balance Sheet and specifying: (A) each item in the Completion Balance Sheet that it disputes; (B) the grounds on which it disputes each such item; and (C) the proposed adjustment to each item which it disputes. (b) The Purchaser must on the provision of the Completion Balance Sheet provide all assistance reasonably required to enable: (i) the Vendor to comply with the provisions of this clause 15.4; and (ii) the Vendor's accountant to review all records of the Company so that the Vendor may comply with this clause 15.4. (c) If the Vendor gives notice under clause 15.4(a)(i) that it agrees with the Completion Balance Sheet or if at the conclusion of the 14 Business Day period referred to in this clause 15.4 the Vendor has not provided to the Purchaser a notice complying with clause 15.4(a)(ii) then the Completion Balance Sheet will constitute the final Completion Balance Sheet for the purposes of this agreement, and will be referred to as the "Final Completion Balance Sheet".
2. Clauses 15.5 and 15.6 went on to provide for the resolution of any dispute arising from the Vendor's response. The dispute resolution procedure involved determination by independent expert accountants. Clause 15.7 provided: 15.7 Adjustment to the Purchase Price (a) The amount equal to those current assets identified in Schedule 5 less those liabilities (whether current or non-current) identified in Schedule 5 as stated on the Final Completion Balance Sheet will be referred to as the "Adjustment Amount", (b) If the Adjustment Amount is a positive figure, the Adjustment Amount will be an amount owing by the Purchaser to the Vendor, payable by the Purchaser to the Vendor in Immediately Available Funds within five (5) Business Days of the date on which the Final Completion Balance Sheet is agreed or determined, as applicable. (c) If the Adjustment Amount is a negative figure, the Adjustment Amount will be an amount owing by the Vendor to the Purchaser, payable by the Vendor to the Purchaser in Immediately Available Funds within five Business Days of the date on which the Final Completion Balance Sheet is agreed or determined, as applicable.
3. As mentioned, Mr Shepherd had been the sole director of SGS. An instrument of resignation was one of the documents handed over on 12 April. Stuart James Anderson was appointed as a director in Mr Shepherd's place, and thereafter the executives of SGS reported to him. Mr Anderson had previously worked as a consultant to CB.
4. Steven Liebeskind is an executive of CB who had principal responsibility for its investment in SGS. He was also responsible for dealing with Mr Shepherd under the Share Sale Agreement. Mr Liebeskind was not himself an executive of SGS, but appears to have worked closely with Mr Anderson and SGS's other executives.
5. Mr Shepherd swore affidavits for the purpose of the proceedings in which he described the events surrounding the service of CB's Completion Balance Sheet, and his subsequent dealings with Mr Liebeskind and Mr Anderson, and was cross-examined. Mrs Shepherd was involved in some of these dealings and also swore an affidavit. She was not cross-examined.
6. In response, Mr Liebeskind swore a number of affidavits, and was cross-examined. Mr Anderson swore an affidavit for CB but it did not address the events in which he was involved. Mr Shepherd's affidavit evidence on the subject was not challenged in cross-examination. The result is that Mr Shepherd's version of his conversations with Mr Anderson was not contradicted, and thus he was not asked about those conversations in his oral evidence.
7. One of the major projects of SGS at the time of the sale was the completion of construction works pursuant to a contract with a company called Shiyan Gledswood Hills Pty Ltd ("Shiyan Gledswood"), which was a subsidiary of a property development group known as "Cabe". The contract between SGS and Shiyan Gledswood provided for instalment claims and payments. The practice of the parties had been to consult prior to each instalment date and agree on the amount to be paid; an invoice would then be issued by SGS to Shiyan Gledswood in the agreed amount. As at 31 March, invoices for instalment payment claims dated 31 January ($125,946.54), 5 March ($339,251.80) and 31 March ($232,374.31) had been issued but had not been paid. These amounts were the subject of the assignment from SGS to LS Bell. Following the handover, two further instalment payment claims, dated 29 April ($228,887.82) and 31 May ($225,588.48), were made. Disputes were raised by Cabe. Cabe contended that some of the works done were defective; that some works were additional works not authorised by the contract; that some of the contractual work had not been done; and that Shiyan Gledswood was entitled to liquidated damages. These disputes related to work done both before and after 31 March.
8. For the purposes of the adjustment to the purchase price under the Share Sale Agreement, CB was working on the basis that "Completion" for the purposes of the Agreement had occurred on 12 April, which after allowing for 70 business days would require CB's Completion Balance Sheet to be provided by 21 July. On Thursday 14 July, Mr Liebeskind emailed Mr Shepherd as follows: Hope this emails finds you well. We have to give you our calculation of the closing balance sheet and the contract says we are to send it to the Post office at Millthorpe - but for simplicity are you willing to have us send it to you by email? Hope this is acceptable.
9. Mr Shepherd was on holiday interstate when the email was sent and did not reply immediately. He returned home to Millthorpe on the evening of Monday 18 July. The following day, Tuesday 19 July, at 12.05 pm, he sent the following email in response to Mr Liebeskind's email of 14 July: Email is ok thankyou
10. Meanwhile, not having had a response to his email, on Friday 15 July Mr Liebeskind had sent a letter by registered mail to Mr Shepherd. The letter stated: Share Sale Agreement - purchase price finalisation As you know, the Share Sale Agreement was released from escrow on 11 April 2016 [it is agreed this is a mistake and should have been a reference to 12 April] and Completion occurred on that date. The clauses dealing with finalisation of some of the balance sheet matters between the parties and our assessment of them are attached. We appreciate that some of the amounts relating to Gledswood may require detailed discussion and because the Share Sale Agreement (SSA) requires us to identify liabilities in accordance with Schedule 5 of the SSA and accounting standards, the liability amounts may be higher than you consider will be the amounts ultimately resolved with or relating to Gledswood - we look forward to working with you to resolve Gledswood for lesser amounts. Could you please liaise with the undersigned in relation to all these matters as I have been co-ordinating the relevant information.
11. Attached to the letter were two pages referring to clauses of the Share Sale Agreement. The first page was headed "Adjustment Amount to Purchase Price clauses" and extracted cl 3.1 and 3.2 (relating to the purchase price and adjustments to purchase price: see [10] above), cl 15.2 (dealing with preparation and delivery of the completion balance sheet: see [28] above) and cl 15.7 (dealing with adjustment to the purchase price: see [29] above). The second page was a copy of Schedule 5 to the Agreement as referred to in cl 15.2 and 15.7.
12. CB's Completion Balance Sheet then followed as an appendix. The total adjustment claimed of $856,291 was made up of 8 separate claims. The sum of $379,781 was claimed on account of the Shiyan Gledswood project and the sum of $374,816 was claimed on account of employee entitlements. The other claims were smaller, but they included the sum of $72,401 for uncompleted work on another project known as "UPG Fyfe Road", $12,547 for supply invoices which were said not to have been paid and $7,185 for unpaid income tax.
13. There followed supporting material for the employee entitlements and Shiyan Gledswood claims. The supporting material for the Shiyan Gledswood claim in turn broke down the claim into seven items. There was a brief narrative for each item and a further page of additional details covering three of the items.
14. At 10.42 pm on Tuesday 19 July, Mr Liebeskind responded to Mr Shepherd's email acknowledgement with an email attaching a copy of his letter of 15 July and its attachments. He said: Thank you for your email confirming you will accept correspondence by email. I had also sent a copy by registered mail dispatched on Friday. I know there are some items here you will need to explore with me and I am happy to meet with you or discuss over the phone in due course. A key aspect will be resolving the Gledswood numbers which are very much up in the air at the moment.
15. According to Mr Shepherd, following the receipt of this email he telephoned Mr Anderson and they had a conversation in words to the following effect: Shepherd: I have received some documents from Steve Liebeskind today and he suggests we meet to discuss Cabe. I need you to send me the information about the Cabe contract as I don't have any of it. Anderson: Let me know when you can attend a meeting.
16. On the following day, 20 July, Mr Shepherd collected the hard copy of Mr Liebeskind's letter of 15 July from the Millthorpe Post Office. His evidence was that on the next day, Thursday 21 July, he had a conversation with Mr Anderson in words to the following effect: Shepherd: How did you go about setting up a meeting regarding Cabe this Friday? Anderson: I will let you know but I haven't heard yet. Shepherd: I have been going through the documents that CB Australia has sent me. I don't agree with most of the stuff in it. I think it is rubbish. Anderson: I don't know much about that. Shepherd: There are also a number of items I just don't understand. Anderson: It looks like we are going to have to get together with Cabe to sort out those issues. Shepherd: Well is the meeting on for Friday or is it not? Anderson: I don't know. I will have to get back to you.
17. According to Mr Shepherd, later that day he and Mr Anderson had a further conversation which included words to the following effect: Shepherd: Stuart I have been looking through the documents. I have told you before I don't agree with a lot of the claims Cabe makes. A lot of I just don't understand. I need you to get me some documents. I thought the job would have been finished ages ago. What does it say in the contract about completion? Anderson: I am not on top of all of these issues. I will get a hold Steve and get him to contact you. Shepherd: Look Stuart a lot of these I just do not understand. I need some documents to help me work out what it is all about. I need copy of the contract with Cabe and I need a break down of the bill of quantities so that I can understand what SGS claimed when I was there and what it has claimed since then. Anderson: I know Steve has been working on it. I will give him the message that you want the documents.
18. At 5.35 pm that evening, Mr Liebeskind sent the following email to Mr Shepherd: I truly appreciate your help/support on Gledswood. We responded to Scott Diamond's request for information [Mr Diamond was the relevant executive of Cabe] yesterday (same day it came in). I would like to think this may be the last outstanding matter, but I will believe it when I see it. Anyway I will be calling these guys tomorrow and if no satisfactory response I will be going to Brad Weston. [Mr Weston was the chief executive of Cabe] Thanks for the offer to come down tomorrow but I prefer to deal with Cabe in the first instance tomorrow. Then if there is no satisfaction it may be better if we meet up next week with view to get you up to speed and then visit Cabe. We just spoke now and I will send Norms [Norm Gibson was an estimator at SGS] response to Scott D email of yesterday. I will get some spreadsheets to you in the morning that show the disconnects on the project. Thanks for your support.
19. Five minutes later, Mr Liebeskind forwarded to Mr Shepherd and Mr Anderson an email chain of communications between Mr Gibson and Mr Diamond. The following day at 12.54 pm Mr Liebeskind forwarded a further email from Mr Alan Edwards (the responsible project manager of SGS) containing Mr Edwards' views of the resolution of the claims.
20. According to Mr Shepherd, he heard nothing further from Mr Liebeskind or Mr Anderson of any substance. On 12 August, he telephoned Mr Anderson leaving a message but received no response. On 14 September, he left another message for Mr Anderson. Over the next few days, there were a number of missed calls between them. According to Mr Shepherd, on about 23 September, he had a telephone conversation with Mr Anderson in words to the following effect: Shepherd: Can we meet regarding Cabe? I still have not received the information that I have been asking to be given to me regarding Cabe. When am I going to get those documents Anderson: Yes. I'll try to set up a meeting. Let me know when you are free.
21. Mr Shepherd said that on about 26 September he then had a further telephone conversation with Mr Anderson to the following effect: Shepherd: Stuart, I have been trying to talk to you for some time to set up a meeting to discuss the issues with Cabe. I would like to have a meeting so that we can go through the Cabe Gledswood Hills issues so that we can settle the completion balance sheet. I will be away for the balance of this week and part of next week. Could we have a meeting after that maybe a date late next week? I am happy to come to Richmond. Anderson: Ok, I will try and sort something out with Steve and let you know. Shepherd: Stuart this has been going on for far too long. I have been through the material that Steve has sent me and I disagree with a lot of it. There is a lot of it I simply just don't understand. I spoke to you a long time ago about getting the documents. You told me Steve would forward the documents to me. I still don't have them. When am I going to get them? Anderson: I will get onto Steve about that.
22. Eventually, on Thursday 13 October, a meeting took place at the SGS offices in Penrith between Mr Liebeskind, John Purcell (a contracting consultant retained by SGS), Mr Shepherd and Mrs Shepherd to discuss the Shiyan Gledswood contract. The meeting was convened by Mr Liebeskind. By email to Mr Shepherd, Mr Liebeskind said: Happy to meet Thursday at 10am … It is possible we could get into some disagreement down the track on this so we should make the meeting without prejudice - that way we can share information openly - are you happy with this? If so please confirm before Thursday.
23. According to Mr Shepherd, the meeting began with an exchange to the following effect: Liebeskind: Thanks for coming to the meeting. As I told you when I invited you to the meeting, this is a without prejudice meeting. Shepherd: I am not sure what the meeting is really about if someone from Cabe not hear [sic] and I am not really sure what without prejudice means anyway. Liebeskind: Col, thanks for your support regarding our dealings with Cabe. This is John Purcell. He is a contracts administrator. He has done works on major projects with John Holland. He has got extensive experience in contracts administration. We want to finalise the Cabe issues so we can then finalise the balance sheet. If we can get the Cabe issues sorted out then the rest should fall into place. We have had John look at the contract with Cabe to bring some clarity as to where we stand with that contract. I will now hand it over to John to talk about it further.
24. The meeting then continued and the Shiyan Gledswood contract was discussed. Counsel for CB objected to evidence of what happened at the meeting on the grounds that the discussions which took place at the meeting were protected by "without prejudice" privilege: Evidence Act 1995 (NSW), s 131. I overruled this objection at the hearing and indicated that in my judgment I would give my reasons for doing so, which now follow.
25. Section 131(1) provides: 131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
26. As the text of the section makes clear, the privilege does not apply to everything that happens at a meeting even if the meeting is conducted on a "without prejudice" basis. The privilege protects only communications in relation to attempts to settle proceedings.
27. SGS may well have been in dispute with Shiyan Gledswood at the time of the meeting, but neither SGS nor Shiyan Gledswood was represented in these proceedings and it was not submitted that the evidence was inadmissible on the basis that the meeting was "without prejudice" as between SGS and Shiyan Gledswood. Rather, counsel for CB contended that the relevant dispute was one between CB and Mr Shepherd as to the value of the adjustment to be made to the balance sheet on account of the issues raised by Shiyan Gledswood under the Share Sale Agreement.
28. In my opinion, the evidence does not establish that as at the date of the meeting there was a "dispute" between CB and Mr Shepherd in the relevant sense. It is true that CB had served its Completion Balance Sheet and that Mr Shepherd had expressed some disagreement with it (or at least a failure to understand it). But Mr Shepherd had not served his own version of the balance sheet and, accordingly, the dispute resolution mechanism under the Agreement had not even come into play. In my opinion, the word "dispute" requires something more formal than a merely preliminary expression of disagreement.
29. If I am wrong in this view, I consider that the communications at the meeting were not communications "in connection with an attempt to negotiate a settlement of the dispute". Usually, an attempt to negotiate a settlement will involve the formulation of a proposal by one side for how the dispute should be resolved. Of course, the phrase "in connection with" does not mean that the privilege is limited to a conversation in which a proposal of such a type is formulated and put to the other party to the dispute. It would include preliminary internal discussions about how the proposal ought to be formulated, for instance. But, in the present case, no proposal was put to Mr Shepherd. Rather, the meeting focused on SGS's rights as against Shiyan Gledswood. This is reinforced by evidence from Mrs Shepherd, who said that at one point the following exchange took place: John Purcell: At the end of the day Colin, you didn't follow the contract and you don't have a leg to stand on. Colin Shepherd: Well I don't agree. I don't understand that because all of our progress claims firstly had to be and were approved by Scott Diamond. We then had to issue a tax invoice and they paid on the tax invoice. Steve you have been paid our progress claim 5. Steve Liebeskind: Col that is a different matter, just put that to one side aside for the moment. We are just dealing with the Cabe contract. We have to get the Cabe issues sorted before we can settle with you.
30. It is, of course, true that it was expressly mentioned at the beginning of the meeting that it should be "without prejudice". But s 131(1) applies where, objectively analysed, the element of the statutory requirement is satisfied. The use of the phrase "without prejudice" may be relevant to the objective characterisation of the communication, but it is not determinative: JD Heydon, Cross on Evidence (10th ed, 2015, LexisNexis Butterworths) at 943.
31. My interpretation of the circumstances is that all Mr Liebeskind was seeking to achieve by using the phrase was that the content of the discussions should remain confidential from Shiyan Gledswood. In a sense, his use of the term "without prejudice" was a misnomer. There was no objective agreement that the meeting was to be without prejudice to the position as between CB and Mr Shepherd.
32. It was for these reasons that I overruled the objection by counsel for CB to the admissibility of the evidence in question.
33. The 13 October meeting focused principally on the disputed claims by Shiyan Gledswood against SGS. There was also some reference to the claim concerning the Fyfe Road project. Mr Shepherd was very dismissive about the claims against SGS. He professed himself quite unable to understand what the issues were about payment. He was asked what he would need in order to understand those issues. He said for Shiyan Gledswood he needed a copy of the signed contract including all attachments, a copy of the bill of quantities, a copy of the work as executed plans prepared by SGS, all of the claims issued to Shiyan Gledswood under the contract and attachments, and the extension of time register together with all of the variations. He said he would also need to examine the site diaries and "job folders". None of this material was at the meeting. According to Mrs Shepherd, Mr Liebeskind agreed to provide Mr Shepherd with those documents and to do "the same for Fyfe Road".
34. According to Mr Shepherd, there was no further communication from CB or SGS before these proceedings were commenced. On 21 October, Mr Shepherd visited SGS's offices at Penrith for other reasons and asked Mr Anderson whether there had been "any progress on the Cabe matter" and Mr Anderson suggested that he visit Mr Shepherd in the week beginning Monday 31 October. No such visit took place. It was not until 17 November, after the proceedings had been commenced, that Mr Shepherd received an email from CB providing a link to a dropbox which contained a copy of the contract between Shiyan Gledswood and SGS. According to Mr Shepherd, the contract was unsigned and the annexures were not included nor were the other documents requested by him. He subsequently received a hard copy of the dropbox documents.

Estoppel

1. The Agreement provided that Mr Shepherd's response was due 14 business days after service of CB's Completion Balance Sheet. Mr Shepherd received an electronic copy of the Balance Sheet at 10.42 pm on 19 July, and collected the hard copy from the Post Office on Wednesday 20 July. Assuming the relevant date for receipt should be 20 July (since the electronic version was received after business hours), Mr Shepherd's response was due by 9 August. However, counsel for Mr Shepherd contended that an estoppel arose which prevented CB from relying on the time limits prescribed in the Agreement.
2. The references to the negotiations with Shiyan Gledswood did introduce an element of uncertainty into the communications which took place before and after CB's Completion Balance Sheet of 15 July was served on 19/20 July. Mr Liebeskind's letter of 15 July (see [37] above) referred to the need for "detailed discussion" concerning some of the amounts relating to Shiyan Gledswood and spoke of working with Mr Shepherd to resolve Cabe's claims for lesser amounts. His email of 19 July (see [41] above) referred to "the numbers" being "very much up in the air". His email of 21 July (see [45] above) referred to the possibility of meeting the following week and a further visit to Cabe in which Mr Shepherd might participate. For his part, Mr Shepherd told Mr Anderson that he needed information about the Shiyan Gledswood contract and Mr Anderson agreed to pass these requests on (see [44] above). But CB never expressly promised that the contractual time limit under the Agreement would be suspended, and, indeed, Mr Shepherd never expressly asked for any such suspension. The question is whether CB's conduct gave rise to such a promise by implication.
3. In my opinion, the conduct of CB falls short of establishing any such representation. I think there are four points of particular significance.
4. The first is that counsel for Mr Shepherd made no submission that the references to negotiation and uncertainty in the surrounding correspondence deprived CB's balance sheet of 15 July of its status as CB's Completion Balance Sheet for the purposes of the Agreement. This is understandable. CB never sought an extension of its 70 day time limit from Mr Shepherd. It is clear from the terms of the 15 July letter that CB was seeking to comply with the provisions relating to adjustment of the purchase price. This naturally would focus a reasonable recipient's attention on those provisions and on the 14 business day time limit for the response.
5. The second point is that to be effective, any estoppel must have come into force by the time Mr Shepherd's response was due under the Agreement. Accordingly, the relevant conduct of the parties is limited to the period up to 9 August, unless an estoppel is established within that period.
6. The third point is that Mr Shepherd chose to use Mr Anderson rather than Mr Liebeskind as his point of contact. It may be accepted that Mr Anderson indicated that he would pass on Mr Shepherd's requests for information. However, he also said, according to Mr Shepherd's account of an earlier conversation, that he did not know much about the contractual situation (see [43] above). Ultimately, he was not an executive of CB and it was Mr Liebeskind as the relevant executive of CB with whom Mr Shepherd was dealing on contractual issues. In fact, Mr Shepherd initiated no direct contact with Mr Liebeskind at all.
7. The fourth point is that it is necessary to bear in mind what the contractual issue between CB and Mr Shepherd was, so far as the Shiyan Gledswood dispute was concerned. SGS's balance sheet as at 31 March contained, as a receivable, the amounts which had been invoiced to Shiyan Gledswood, but had not been paid, as at that date. CB was, through the adjustment sought in its Completion Balance Sheet, proposing a provision against that receivable to reflect the fact that it had not been, and might not be, collected in full from Shiyan Gledswood. The question was, having regard to generally applicable accounting standards, what provision (if any) was appropriate.
8. Mr Shepherd was not necessarily bound to accept that any provision was necessary. It might have been open to him to contend that the dispute had arisen subsequently and that, as between himself and CB, there should be no adjustment at all. But even if Mr Shepherd accepted that a provision was appropriate, the quantum of that provision was not necessarily determined by the eventual outcome of the dispute between SGS and Shiyan Gledswood. Had the dispute between SGS and Shiyan Gledswood been resolved at a particular figure before the time came for CB to present its Completion Balance Sheet, CB might have proposed that agreed figure as the provision and Mr Shepherd might have agreed to it. But he would have been under no obligation to do so. It would have been open to him to contend that accounting principles applied as at 31 March 2016 called for some lesser figure. In any event, at all relevant times, there had been no agreement between SGS and Shiyan Gledswood and the terms of the Agreement clearly did not permit some sort of waiting period until there was (something which CB implicitly accepted by serving its Completion Balance Sheet when it did).
9. It might have been understandable for some confusion to have persisted up to, and shortly after, the date of the proposed meeting with Cabe on 22 July. But once Mr Shepherd was not invited to participate in that meeting, and no further meeting eventuated during the following week as Mr Liebeskind had foreshadowed (see [45] above), it was not reasonable, in my opinion, for Mr Shepherd simply to do nothing. As the party with the contractual time running against him, in my view the onus lay upon him to clarify the position. All he seems to have done is attempt to make telephone contact with Mr Anderson on 12 August, which was after the expiry of the contractual timetable in any event.
10. In my opinion, the effect of the parties' conduct was that the situation was left uncertain. But for an estoppel to arise, the representation must be clear (Legione v Hateley (1983) 152 CLR 406 at 435-437) and there was no clear representation by CB that it would not be relying upon the contractual timetable. Mr Shepherd may in his own mind have thought that the adjustment issue had been shelved, but, in my opinion, that was not a correct objective interpretation of what CB had said.
11. If I am wrong in this view, then the effect of any estoppel could not have been to discharge the obligation on Mr Shepherd to respond to CB's Completion Balance Sheet. At best, an estoppel would have suspended the timetable. Further discussions took place at the meeting on 13 October and there was a request for documents which was responded to on 17 November, inadequately according to Mr Shepherd. But Mr Shepherd has never actually responded to CB's Completion Balance Sheet. In the end, it seems that the only effect of an estoppel, if established, would be to extend the period of time over which CB was obliged to provide relevant assistance to Mr Shepherd. I now deal with this issue.

Obligation to provide assistance

1. Counsel for Mr Shepherd contended that there had been a breach by CB of its obligation under cl 15.4(b) to provide "all assistance reasonably required" to enable Mr Shepherd to comply with his obligation to agree (or otherwise) with CB's Completion Balance Sheet.
2. On any view, CB's obligation to provide assistance can only have subsisted up until the time came for Mr Shepherd to lodge his response to CB's Completion Balance Sheet. As explained at [62] above, the contractual time limit for Mr Shepherd to do this was 9 August 2016. Only conduct of the parties up to that date is, therefore, relevant (unless, contrary to my view, the date was extended by estoppel).
3. It must be remembered that the obligation to provide assistance was not an obligation to provide information generally; it was an obligation to provide assistance for a particular purpose. That purpose was to enable Mr Shepherd to comply with his obligation under cl 15.4, namely, to agree with CB's Completion Balance Sheet or to disagree (specifying the extent and nature of his disagreement).
4. It will be recalled that CB's Completion Balance Sheet sought an adjustment of $856,291, of which $379,781 was attributable to the Shiyan Gledswood receivable. Counsel for Mr Shepherd did not suggest that there had been any failure to provide assistance so far as the other elements of the adjustment were concerned (a request for information was made concerning the $72,401 for Fyfe Road, but not until 13 October: see [60] above). So far as the proposed Shiyan Gledswood provision was concerned, CB had broken it down into seven separate items and provided detailed supporting material for three of those. For instance, item 1 was a claim for $20,501 for "Roads 2 & 4 Pavement/concrete error". The supporting material stated: Background: SGS carried out work on site that included clearing, digging, drainage and laying pipes. After these tasks the pipes were covered and prepared for compacting and sealing. This work was completed pre 31 March. However, this work was incorrectly prepared in that the depth was greater than the specified depth plus the surface area for the next treatment was also great [sic] than specified (larger sq meterage). The end result was that an extra 31% of bitumen and asphalt was required at a cost of $20,501 to rectify the work. Contract reference Estimated cost Mark up at 15% Contract Val Item 14.4 Construction pavement 29,180 4,360 33,540 Item 16.1(a) Asphaltic concrete 29,589 4,461 34,050 Total 58,769 8,821 67,590 Cost All Pavement 77,070 Difference 18,301 Extra Labour for the work done 2,200 20,501

1. No written request for information was made by Mr Shepherd following receipt of CB's Completion Balance Sheet. In the period up to 22 July, Mr Shepherd did make a number of requests orally to Mr Anderson, which Mr Anderson undertook to pass on to Mr Liebeskind. These requests were made in very general terms. Mr Shepherd asked for "the information about the Cabe contract" (see [42] above). Later he asked for a "copy of the contract with Cabe" and a "break down of the bill of quantities" (see [44] above).
2. The purpose for which Mr Shepherd made his requests to Mr Anderson is unclear. None of the requests were expressly stated to be for the purpose of complying with Mr Shepherd's obligations under cl 15.4 of the Agreement. Indeed, there is no evidence that Mr Shepherd ever asked himself what information he needed to comply. Mr Shepherd told Mr Anderson he needed the bill of quantities information so that he could "understand what SGS claimed when I was there and what it has claimed since then". But the adjustment issues which arose under the Agreement as between Mr Shepherd and CB were confined to provisions as at 31 March 2016. Any disputes between SGS and Shiyan Gledswood about subsequent invoices were contractually irrelevant. It seems that Mr Shepherd may have been seen by the parties as acting in a consultant-type role so as to assist SGS (and through it, CB) in the resolution of all of the disputes raised by Cabe, whether relating to issues before or after 31 March. The uncertainty as to Mr Shepherd's position was exacerbated by his practice of dealing with Mr Anderson of SGS rather than Mr Liebeskind of CB.
3. The position is further complicated by the fact that on 22 July Mr Liebeskind did provide some information to Mr Shepherd by forwarding to him the communications between Cabe and SGS and the internal memorandum of Mr Edwards referred to at [46] above. The emails provided by Mr Liebeskind may not have dealt exhaustively with all of the disputes raised by Shiyan Gledswood. But they did provide some information. It is not clear what specifically Mr Shepherd lacked thereafter to be able to deal with the individual items which made up CB's proposed provisions. There was no further request for information after that date until October.
4. Clause 15.4(b) was a provision which obliged one party to the Agreement to help the other and, in my view, it must be construed on the assumption that the parties were working co-operatively together. It might not be necessary in all circumstances for Mr Shepherd to tell CB in terms why he wanted particular information; the circumstances might be such as to make it obvious. But I do think that before any assistance was "reasonably required" Mr Shepherd needed to ask for it, and he needed to do so in such a way as to make clear the particular purpose for which the information sought was required. How else otherwise was CB to judge the scope of the "assistance" it was required to provide?
5. To the extent that any of Mr Shepherd's previous general requests remained outstanding after Mr Liebeskind had provided the emails to Mr Shepherd on 22 July, I do not think that they were clear or specific enough to trigger CB's obligation to provide assistance. In my opinion, CB was not in breach of its obligations under cl 15.4(b) on the date on which Mr Shepherd was required to provide his response to its Completion Balance Sheet, namely 9 August 2016.
6. If I am wrong in my view concerning the alleged estoppel, it becomes necessary to consider whether there was any relevant failure by CB to provide "assistance reasonably required" after 9 August. I have set out at [60] above what happened at the meeting of 13 October in this regard. Admittedly, Mr Shepherd did nominate more categories of documents which he required: a full copy of the contract including annexures, extension of time registers, "job folders" etc. But the categories were not expressly linked to particular components of CB's Completion Balance Sheet and it remained unclear the extent to which they were for the broader purpose of Mr Shepherd having material available to him in his informal consultant role assisting SGS in its disputes with Shiyan Gledswood. There is no evidence that even at this point Mr Shepherd had set out to comply with cl 15.4 or turned his mind to what specific information was required in order to do so. The requests for documents remained extremely broad. Depending on the issue, it is possible that "job folders", or other records could be relevant to the resolution of one or other of the disputes itemised in the supporting material to CB's Completion Balance Sheet. But there is no evidence as to why or how they have any specific relevance. In my view, even if CB was still under an obligation as at October and November to provide assistance to enable Mr Shepherd to comply with his obligations under cl 15.4, breach of that obligation is not established.
7. If I am wrong in this view, it becomes necessary to consider what impact a breach of cl 15.4(b) would have on CB's ability to recover the adjustment which it seeks pursuant to its Completion Balance Sheet.
8. To the extent that CB may have breached its obligations, Mr Shepherd retains his right to sue for damages. It was not suggested that any breach was repudiatory or had resulted in Mr Shepherd terminating the Agreement. The contention was that failure to comply with CB's obligation rendered CB unable to take advantage of the entitlement it would otherwise have to proceed to recover the adjustment in accordance with its Completion Balance Sheet. The Agreement does not say this expressly and Mr Shepherd's contention thus depends upon implication.
9. In my view, the implication for which counsel for Mr Shepherd contends should not be made. It would produce capricious commercial results. The slightest failure to comply with the obligation to provide reasonable assistance would invalidate any entitlement to any adjustment at all. This is illustrated by the facts of the present case. The provisions sought for the Shiyan Gledswood receivable represents somewhat less than half of the total value of the adjustment sought by CB. So far as the evidence goes, the balance has never been questioned (except to the extent, arguably, that reference was made to the Fyfe Road project on 13 October). The unchallenged items include $374,816 in employee entitlements which would, on the face of it, represent a complete windfall for Mr Shepherd if his counsel's construction is correct. It must also be remembered that the reasonableness or otherwise of the assistance provided would be a contestable issue which might depend upon a detailed factual analysis and on questions of degree and judgment. In my view, it would be even more unbusiness like if a subsequent determination that on balance there had been a breach of the obligation had the effect of depriving CB of obtaining any adjustment whatever. In my opinion, the Court would only reach that conclusion if the language was intractably clear.
10. Accordingly, I reject Mr Shepherd's defences to CB's claim for an adjustment.

Payments by SGS to LS Bell

1. Clause 4.2 of the Share Sale Agreement contained some covenants by CB which operated on and from the date of completion. Sub-clause (c) provided: If after Completion payment of the whole or part of an Assigned Book Debt is received by the Company, the Purchaser must within seven (7) days of receipt of that payment by the Company give notice of that payment to the Vendor and cause the Company to pay the amount received to LS Bell Holdings Pty Limited ACN 155 421 462 as trustee for the Shepherd Family Trust.
2. As a result of concessions made by both parties, it is common ground that SGS failed to account for two payments received by it after completion which were referable to the Shiyan Gledswood contract and had been assigned to LS Bell. Those were amounts of $339,251.80 received on 1 June 2016 and $101,112.18 which was part of a larger payment received on 3 August 2016.
3. It followed, and counsel for CB accepted, that cl 4.2(c) was engaged. However, counsel for CB argued that no relief was available to Mr Shepherd. Counsel pointed out (correctly) that LS Bell was not a party to the Agreement or entitled to sue on it.
4. Counsel for Mr Shepherd relied upon the dicta of Barwick CJ and Windeyer J in Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460. Barwick J said (at 478): I would myself, with great respect, agree with the conclusion that where A promises B for a consideration supplied by B to pay C then B may obtain specific performance of A's promise, at least where the nature of the consideration given would have allowed the debtor to have obtained specific performance.
5. Windeyer J said (at 503): It seems to me that contracts to pay money or transfer property to a third person are always, or at all events very often, contracts for breach of which damages would be an inadequate remedy - all the more so if it be right (I do not think it is) that damages recoverable by the promisee are only nominal. Nominal or substantial, the question seems to be the same, for when specific relief is given in lieu of damages it is because the remedy, damages, cannot satisfy the demands of justice.
6. Counsel for CB contended that the present situation was distinguishable from that under consideration in Coulls. CB did not covenant to pay the relevant amounts to LS Bell, but only covenanted to cause SGS to do so. It was not a case of A promising to pay C but of A promising to cause C to pay D. In my opinion, this makes no difference. Both Barwick CJ and Windeyer J thought that A could be ordered specifically to perform its covenant simply because of the contractual obligation to B. The reasoning did not depend upon the covenant in question being a covenant to pay a sum of money. Windeyer J said (at 503): Complete and perfect justice to a promisee may well require that a promisor perform his promise to pay money or transfer property to a third party. I see no reason why specific performance should not be had in such cases - but of course not where the promise was to render some personal service. There is no reason today for limiting by particular categories, rather than by general principle, the cases in which orders for specific performance will be made. The days are long past when the common law courts looked with jealousy upon what they thought was a usurpation by the Chancery Court of their jurisdiction.
7. In the present case, I have difficulty in seeing what substantial damage Mr Shepherd suffered. Windeyer J instanced a situation where payment is made to C to put C in funds to repay a debt to A. There was no suggestion of any comparable relationship between Mr Shepherd and LS Bell; LS Bell is the trustee of a discretionary trust and the economic benefit of the payment could flow to somebody else in Mr Shepherd's family. In my view, there is no obstacle in principle to an order for specific performance.
8. Counsel for CB pointed to the fact that the covenant was only to cause SGS to pay and submitted that, SGS being in liquidation, and apparently having an excess of liabilities over assets, it could not now make the payment required. However, in my opinion, the substance of the covenant is still capable of specific performance. The covenant was not an obligation to request payment, or even to use best endeavours towards payment. It was a covenant to cause an event (the payment from SGS to LS Bell) to take place. The covenant was absolute and unqualified. Failure to ensure that the payment is made, whether that is the result of supervening insolvency or even illegality, is no answer to a claim for breach. If Mr Shepherd's claim had been made before the liquidation of SGS but SGS lacked funds to make the payment, the obligation would extend to CB putting SGS in funds to enable the payment to take place. It may be that, despite SGS's liquidation, that can still be done. Perhaps CB could make a payment to SGS on trust for payment to LS Bell. But if for some reason that is not practicable, I see no reason why CB should not now be ordered to make the payment directly to LS Bell, in discharge of SGS's liability.

Payment of Shepherd Amount and Purchaser Fees

1. Mr Shepherd also sought mandatory injunctions against CB requiring CB to pay to him the Shepherd Amount and the amount of the Purchaser Fees, on terms that he undertook to make equivalent payments to SGS (in the case of the Shepherd Amount) and CB (in the case of the Purchaser Fees).
2. For the reasons given at [16]-[24] above, I do not consider that there has been any relevant breach of the Agreement by CB to justify the grant of relief. This aspect of Mr Shepherd's cross-claim fails.

Conclusion and orders

1. For these reasons, I have concluded that: (1) CB's claim against Mr Shepherd for adjustment to the purchase price in accordance with CB's Completion Balance Sheet of 15 July 2016 succeeds and there should be judgment in the sum of $856,291.00 accordingly; (2) Mr Shepherd is entitled to orders in the nature of specific performance requiring CB to perform its obligation to cause SGS to pay to LS Bell the sum of $440,363.98 on account of money received by SGS from Shiyan Gledswood after Completion; (3) Mr Shepherd's claim for orders in the nature of mandatory injunctions requiring payment of the Shepherd Amount and the Purchaser Fees fails.
2. I will hear from the parties as to the precise form of orders, calculations of interest, and costs, to the extent that they cannot be agreed.
3. The orders of the Court are:
4. Direct that, within 14 days of the commencement of the 2018 Law Term, the plaintiff bring in Short Minutes of Order to give effect to this judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 December 2017