Edensor Nominees Pty Ltd v Anaconda Nickel Ltd [2001] VSC 502 - VSC 2001 case summary — Zoe

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Edensor Nominees Pty Ltd v Anaconda Nickel Ltd [2001] VSC 502

[2001] VSC 502

Supreme Court of Victoria|2001-12-18|Before: Warren J

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At a glance

Source facts

Court

Supreme Court of Victoria

Decision date

2001-12-18

Before

Warren J

Source

Original judgment source is linked above.

Judgment (17 paragraphs)

[1]

For the reasons expressed already, I cannot be satisfied that Anaconda conducted a due diligence after 5 September 2000 and that its determination on 17 November and 1 December 2000 was made after an honest and duly considered assessment of due diligence. Accordingly, the obligations to perform the share sale deed as varied by the variation agreement were not determined by the notice. It follows, therefore, that Anaconda was obliged to proceed with settlement on 5 March 2001 and upon settlement to discharge the loan made to Edensor. The plaintiffs did not seek specific performance, rather, they claimed that Anaconda repudiated the share sale deed and the variation agreement by its conduct on 17 November and 1 December 2000. They accepted the repudiation and sought damages. In so far as it would be necessary to do so and as an alternative to the finding on the promissory estoppel claim, I would find that by its conduct on 17 November and 1 December 2000, Anaconda evinced an intention not to be bound by the terms of the share sale deed and the variation agreement and repudiated those agreements. However, for the reasons stated the plaintiffs have not proved a quantifiable loss.

[2]

The plaintiffs alleged that there were implied terms of good faith of the share sale deed. Until fairly recently Australian courts have demonstrated hesitation in imposing an implied obligation to act in good faith on contracting parties other than those who are subject to fiduciary duties. Indeed, the desirability of imposing a duty of good faith has been a topic of debate for some years. Although the duty to act in good faith has been recognised on some occasions, the majority of judgments in Australian courts have tended to decline to find a general duty to act in good faith in contractual circumstances but there have been occasions where the courts have found an implied duty of good faith and, for that matter, an implied duty to act honestly on the basis of the character of the particular contract.

Parties

Applicant/Plaintiff:

# Edensor Nominees Pty Ltd

Respondent/Defendant:

Anaconda Nickel Ltd \[2001\] VSC 502

Legislation Cited (1)

Practices Act 1974

Cases Cited (20)

The making of the representations and the reliance thereon met the pre-requisites specified in Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387. It is instructive and convenient to re-state the principles expressed by Brennan J therein at 428-9:

Thirdly, Edensor and Gutnick acted in reliance on the assumption or expectation. Edensor and Gutnick agreed to Forrest's requests and as a result accepted the delay in settlement, entered into the variation agreement, entered into a loan for the moneys paid together with the obligation to pay interest thereon, transferred board and management control of Centaur to Anaconda (including the resignation of Gutnick as chairman), effected the termination of the AWI agreement with Centaur and, significantly, ceased to explore alternative arrangements with other parties such as Sherrit, Billiton, Falconbridge, WMC or possibly even BHP. It can be reasonably concluded that without the events on and after 4 September 2000 Gutnick and Edensor would have approached the U.S. bond holders from a different commercial prospective. Furthermore, it is to be observed again that Gutnick trusted Forrest. As a consequence Gutnick and Edensor were placed at a material disadvantage: see Australian Securities Commission v Marlborough Goldmines Limited [1993] HCA 15; (1993) 177 CLR 485, 506-7; Commonwealth v Clark, supra, 377, 380.

However, the existence of the due diligence clause did not mean that a binding contract failed to come into existence. The effect of the due diligence clause was to confer upon Anaconda an ability to terminate the contract in the event that the it did not reach the requisite level of satisfaction on or before the date for completion: Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571. As a consequence, satisfaction of the due diligence clause was a condition of performance: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, Meehan v Jones, supra, 596. Thus, Anaconda was obliged to complete unless it chose to avail itself of the benefit of the due diligence condition. Anaconda was bound to conduct due diligence and form an honest opinion that it was dissatisfied with the assets, trading position and liabilities of Centaur or was dissatisfied as to the effect on the deed on the change of control provisions as set out in clause 4.1(a) of the deed. On the basis of the findings made already due diligence was not a matter of importance to Anaconda. It did not form an honest opinion by 4 September or for that matter by 1 December 2000 that it was dissatisfied with due diligence. The decision of Anaconda not to proceed was founded on matters other than dissatisfaction with due diligence. Anaconda could be excused from its obligations under the share sale deed only if it honestly determined it was dissatisfied with the results of the due diligence. It did not form such a determination at any time.

(1988) 164 CLR 387

(1990) 170 CLR 394

(1991) 1 VR 181

(1994) 2 VR 333

(1993) 177 CLR 485

(1982) 149 CLR 571

(1982) 149 CLR 537

(1979) 144 CLR 597

(1919) 27 CLR 133

(1953) 89 CLR 807

(1986) 160 CLR 1

(1982) 42 ALR 177

(1982) 149 CLR 1913

(1998) 158 ALR 333

(1992) 26 NSWLR 234

(1997) 145 ALR 1

(1998) 44 NSWLR 349