Firstnamed Plaintiff Secondnamed Plaintiff v Firstnamed Defendant Secondnamed Defendant

Firstnamed Plaintiff Secondnamed Plaintiff v Firstnamed Defendant Secondnamed Defendant - [2010] VSC 95 - VSC 2010 case summary — Zoe

[52]

"1. In the event of the Sub-Licensee at any time proposing to -

(a) Sell the business carried on at the Licensed Premises ("the business"), or

(b) Being a Company sell its assets or a controlling interest therein, or

(c) Proceed by any other means which directly or indirectly causes the sale of the business ("the proposed sale"), or

(d) Sell transfer assign lease or otherwise part with the possession of the Licensed Premises

the Sub-Licensee shall in addition to observing all rules and regulations regarding such sale in the Articles of Association of the Licensee -

1.1 Submit to the Licensee and the Holding Company a true and complete copy of any bona fide offer (which is capable upon its acceptance of creating a binding contract) made or received (if in writing) or a true and complete statement in writing of all terms and conditions (if not in writing) of the proposed sale assignment lease or other dealing parting with possession of the Licensed Premises including the name and address of the proposed purchaser assignee lessee or other person as aforesaid ('the identified purchaser').

1.2 In the event of the proposed sale -

1.2(a) Offer to sell the business to the Licensee and to the Holding Company or to a Company nominated by the Licensee or the Holding Company which Companies shall have the first right and option to purchase the business for the same price payable in the same manner and at the same time and otherwise in all respects upon the same terms and conditions set out in the offer or statement ('option to purchase'). Either the Licensee or the Holding Company (or if both wish to exercise the option to purchase then the Holding Company alone) or its nominee may exercise the option to purchase by notifying the Sub-Licensee in writing of its election to do so within 28 days of submission of the offer or statement ('the option period');

1.2(b) enter into a contract to effect the proposed sale to the identified purchaser only if that contract is expressed to be subject to the option to purchase for the option period.

1.3 If neither the Licensee nor the Holding Company exercise the right to purchase conferred by this Clause, then after the expiration of the option period the Sub-Licensee may proceed to sell the business but only -

1.3(a) to the identified purchaser and

1.3(b) at the same price and otherwise in all respects upon the same terms and conditions set out in the offer or statement.

...

1.5 If a valid and binding Contract between the Sub-Licensee and the identified Purchaser has not been entered into within 60 days after the submission of the offer or statement pursuant to Clause 1.1 the proposed sale shall be deemed to have lapsed and be at an end and the provisions of Clause 1 of this Agreement shall again apply in their entirety as if no proposed sale had ever existed."

[113]

A Sale of Business Agreement to be entered by the parties to purchase:
- the Business, Plant and Equipment, fixed Assets and Stock and all intellectual property pertaining to the Business at a purchase price of $7.2 million as per Bunnings offer;
- a 35 year lease of the Premises with an initial term of 10 years and subsequent 5 x 5 year term options with a Commencement Rent of $550,000 per annum, annual rent review to an agreed formula with market review every 5 years; and
The parties agree that the purchase of the Business will attract no GST liability as considered sale of a going concern.
An option for the Landlord to upgrade the buildings on the Premises during the first two year period to a value of up to $1.5 million and a further $4.0 million within a three year period following the initial upgrade of $1.5 million. Upgrade of rent applies to an agreed formula.
An option for the Landlord to redevelop the entire Premises to an agreed footprint as either a developer or as the Landlord. Redevelopment rent to be set by an agreed formula.
An option for the Landlord to sell the freehold property to NewCo at any time after the initial 2 year period. The purchase price will be the greater of either $6.0 million or a valuation as agreed between the parties. In addition to the price, upgrade capital costs are to be added less adjustments to an agreed formula.
All employees of the Business will be offered re-employment by NewCo on terms and conditions no less favourable to their present contracts and all entitlements will be transferred to NewCo including Annual Leave, Sick Leave and Long Service Leave;
Vendor agrees to a non-competition clause in Sale of Business Agreement for a period of 5 years from the date of the Agreement in a 200 km radius of the store;
The purchase at all times to be subject to:
- Strict confidentiality of the terms of this bid and all negotiations surrounding it, including any resulting agreements and documentation;
- Approval by the purchasers entities' boards of the purchaser;
- Confirmation of the terms of Bunnings' original offer;
- Approval of finance for the full purchase price by Mitre10/NewCo's financiers;
- Satisfactory outcome of a due diligence review to be performed by Mitre 10/NewCo and/or their advisers of the financial and operational performance and records of the Business which the Vendor will facilitate to the best of its ability;
- Continued operation by the Vendor of the Business in the most effective and efficient manner possible to maintain and develop the most productive customer and staff relationships and to maximise the financial performance of the Business without causing any one-off or non-recurring transactions to adversely impact upon the Business' financial results or the criteria on which the purchase price is calculated;
- Vendor to provide warranties in the Sale of Business Agreement relating to but not limited to compliance with all laws by the Business, compliance with all zoning, use, codes and OH & S requirements and environmental laws at the Premises.

[133]

"The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence. As Williston[54] points out the doctrine is not out of harmony with the general rule that a binding surrender of a right requires a sealed release or consideration; by surrendering one right the elector thereby, gains an advantage not previously enjoyed, the ability to exercise to the full the other, inconsistent right.

In many instances what may pass for an application of the doctrine is in truth but the inevitable consequence of the party's conduct, a consequence that would follow even if no such doctrine existed. Thus in the common case of avoidance of a contract for breach it is not any doctrine of election that prevents the avoiding party subsequently from enforcing the contract but rather the fact that the contract has, by his act of avoidance, ceased to exist; such a situation is revealed by the facts discussed by Lindley J in Evans v Wyatt.[55] On the other hand if he chooses instead to keep the contract on foot and sue for damages rather than rescind for breach of recourse must be had by the other party either to election or, if the facts will support it, to an estoppel if that breach should later be sought to be relied upon so as to avoid the contract. All this is made clear in the judgment of Jordan CJ in O'Connor v SP Bray Ltd.[56] In the present appeals the doctrine of election is directly in question since the issue is not whether following rescission the vendors may enforce the contracts but rather whether acts on their part consistent with the continued existence of the contracts prevent their subsequent purported rescission from being effective.

For the doctrine to operate there must be both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which he possesses: Craine v Colonial Mutual Fire Insurance Co Ltd;[57] United Australia Ltd v Barclays Bank Ltd.[58]

The nature of the knowledge which an elector must possess is a matter upon which the authorities are somewhat at variance. An elector must at least know of the facts which give rise to those legal rights, as between which an election must be made; without that knowledge the doctrine of election will not be available to make irrevocable his choice of one particular right, although in appropriate circumstances an estoppel may still arise which produces that very consequence and this without any such requirement of knowledge no the part of the party who is estopped. The extent of knowledge of relevant facts necessary for the doctrine of election to apply has been described as 'full knowledge of the material facts'.[59] In Elder's Trustee & Executor Co Ltd v Commonwealth Homes & Investment Co Ltd,[60] a knowledge of circumstances such as will provide information from which the decisive fact giving rise to the legal right is 'a clear if not a necessary inference' was held to be sufficient.[61]" (Emphasis added by the defendants)

At a glance

Court

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Before

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Judgment (208 paragraphs)

Parties

Cases Cited (13)