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[2001] WASC 44
plaintiff. The Court ordered that the defendant specifically perform and pay to the plaintiff the sum of $400,000 within seven days; liberty to apply; costs to be heard (para 9).
Iambic (vendor) sued Northwind (purchaser) for specific performance to compel payment of $400,000 due under a contract for 1,000,000 shares in a private company. The court held that specific performance was appropriate because the shares were not readily saleable and damages would be inadequate. The defendant's claims of hardship (inability to pay) and futility were rejected; the court observed that mere financial difficulty or a preference to await a share-swap does not ordinarily defeat specific performance, and the plaintiff could pursue winding up or other remedies if payment was not obtained. The court ordered the defendant to pay $400,000 within seven days, granted liberty to apply for future relief (including application for damages in lieu if recovery proved impossible), and reserved costs.
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Iambic Pty Ltd (the vendor) and Northwind Holdings Pty Ltd (the purchaser) entered an agreement for the sale of shares in Noizenet Pty Ltd in two tranches. The first tranche (500,000 shares for $250,000) was completed. The second tranche was for 1,000,000 shares for $500,000, payable $100,000 by 1 September 2000 and $400,000 by 16 October 2000. Northwind paid the first instalment of $100,000 but did not pay the remaining $400,000 (para 2).
Iambic applied for summary judgment seeking specific performance to compel Northwind to pay the outstanding $400,000. Northwind resisted, relying principally on two equitable discretionary defences to specific performance: hardship and futility. The factual foundation for Northwind's position was the affidavit of Mr William David Millar (a director), asserting that the company had only $844 in the bank, held 1,500,000 unencumbered Noizenet shares as its only asset, and that there was a proposed corporate reorganisation/float (a share swap into a public company, Noize Ltd) that Northwind wished to await because it might secure a better value for its shares (paras 4–5).
Master Bredmeyer heard the application in chambers. He concluded that specific performance ordering payment of the outstanding $400,000 should be granted. He rejected the hardship and futility defences for the reasons that follow below, but granted liberty to apply so that the plaintiff could later seek damages in substitution if recovery proved impossible; costs were reserved (paras 3, 6–9).
Core equitable principle: the court applied the established equitable rule that specific performance is available where damages are an inadequate remedy, and that this principle applies equally to vendors seeking payment where the purchaser's outstanding obligation is to pay money. Master Bredmeyer quoted Meagher, Gummow and Lehane: "if for a purchaser damages are not an adequate remedy, his vendor equally is entitled to specific performance although his only entitlement is to receive a payment of money" (para 3). The court also cited Turner v Bladin for that proposition (para 3).
Application to facts: the 1,000,000 shares were in a private company and not readily saleable. Where the subject matter is a private company shareholding, its illiquidity can make damages an inadequate remedy because the vendor cannot readily obtain equivalent shares or realise the shares on the open market. That fact reinforced the availability of specific performance for payment of the balance.
Hardship defence rejected: the defendant's pleaded "hardship" was essentially its inability to pay and a desire to await a proposed share swap/float so as to obtain a better outcome for its shareholding. The court observed that mere financial difficulty in finding the purchase money "would almost never constitute the defence of hardship" (para 6), and the defendant's preference to await a potentially better transaction did not fall within accepted categories of hardship (examples include exposure to criminal prosecution, forfeiture, or being forced to become the owner of an unacceptable business). The court referenced Pasedina (Holdings) Pty Ltd v Khouri on this point (para 6).
Futility defence rejected (with reservation): the defendant argued that granting the decree would be futile because the company lacked funds. The court accepted that the company might currently lack the cash, but that was not an absolute bar to specific performance. The vendor could try other remedies to obtain recovery, including winding up the company so a liquidator could sell assets and examine potential claims against directors or third parties. Given those possible paths, the court allowed the vendor to pursue specific performance now and kept open the option of later applying for damages in lieu if recovery proved impossible (para 7).
Entire contract / partial payment issue: the plaintiff had received $100,000 but had not transferred 200,000 shares (one-fifth) of the 1,000,000. The plaintiff argued the contract was entire and that transfer of the shares occurred only on receipt of the whole $500,000. The Master considered ordering partial performance by directing the plaintiff to transfer 200,000 shares to reflect the instalment paid, but declined because of the practical consequence that, if the plaintiff later successfully sought damages in lieu and the damages were less than $100,000, the court could order the difference refunded. To accommodate both sides, the court ordered payment of $400,000, granted liberty to apply for future relief and reserved costs rather than ordering partial transfer (para 8).
Practical accommodation: by granting liberty to apply, the court preserved the plaintiff's present claim to specific performance while leaving open the avenue to seek damages if the vendor cannot ultimately realise the amount owed by enforcing the order (para 7). That balancing reflects equitable flexibility.
Before this decision: the principles were already settled that specific performance is an equitable remedy available where damages are inadequate, and that in the context of private company shares this often arises because of illiquidity. Authorities such as Turner v Bladin and the treatise Meagher, Gummow and Lehane were treated as establishing that vendors are entitled to specific performance to receive money where the purchaser's obligation is to pay and damages are inadequate (para 3).
This decision: Master Bredmeyer applied those established principles to order specific performance of payment of money by the purchaser. The decision reiterates that mere inability to pay is not ordinarily adequate to defeat specific performance, emphasising that "hardship" in the legal sense is a narrow category. It also clarifies that allegations of futility do not necessarily prevent a grant of specific performance where a vendor has alternative remedies (eg winding up) and where the court can provide procedural flexibility by granting liberty to apply for relief later (paras 6–8).
After this decision: the case is an application of settled doctrine to a common factual pattern: sale of private company shares with instalment payments and a default. It reinforces the readiness of an Australian court to order payment in such circumstances, while also demonstrating tactical equitable devices (liberty to apply) to preserve fairness where ultimate realisation may be uncertain.
Quotation of Meagher, Gummow and Lehane: "One thing is quite clear: if for a purchaser damages are not an adequate remedy, his vendor equally is entitled to specific performance..." (para 3).
"Mere financial difficulty in the purchaser finding the purchase money would almost never constitute the defence of hardship" (para 6).
"The defendant says it would be futile... I consider the plaintiff should be allowed to try and recover the money... the plaintiff can then apply to the court for damages instead of specific performance. I will give liberty to apply that door open." (para 7).
"The plaintiff was paid $100,000... yet it has not transferred... 200,000 shares... it has its cake and is eating it." (para 8).
This judgment is directly relevant when:
Pattern-specific takeaways:
The judgment itself does not catalogue later treatments; it applies established principles and uses procedural devices to balance competing equities. Because Master Bredmeyer relied on settled authority and a well-known treatise, the decision is best understood as a clear application rather than a novel legal development. Practitioners should view it as persuasive guidance that where private company shares are involved and damages are inadequate, a vendor can obtain specific performance for payment, and that the court will only refuse on hardship grounds in exceptional cases.
For subsequent courts considering similar facts, the main signals from this judgment are:
Degree of evidential proof required for a hardship defence: The judgment asserts the principle that mere financial difficulty will "almost never" be sufficient (para 6) but does not lay out precision about what threshold of evidence would establish hardship (for example, the extent of impecuniosity or connected consequences that would be required). Practitioners must still navigate absent precise metrics.
Timing and content of a liberty-to-apply order: The decision granted liberty to apply to permit later substitution of damages and other relief (paras 7–8). There remains discretion as to when and on what evidence an application to substitute damages (or to be relieved from a decree) will succeed; this will depend on subsequent factual development and be addressed case-by-case.
Interplay with insolvency/strategic defences: The court suggested winding up and liquidator remedies as means the vendor might employ (para 7). The extent to which insolvency steps will be effective, and the interplay of insolvency law with equitable orders for specific performance, may produce complex litigation requiring careful procedural planning.
Partial payment and equitable accounting: The court chose not to require partial transfer reflecting the instalment paid (para 8). In other circumstances a court could order an accounting or declare constructive trusts; the precise lines where the court will require partial transfer or other interim measures remain fact-specific.
Conclusion: Iambic v Northwind is a concise application of orthodox equitable principles in the context of private company shares. It confirms that vendors can obtain specific performance for payment when shares are illiquid, that hardship and futility defences require more than mere financial inability or tactical delay, and that the court can craft procedural safeguards (liberty to apply) to address uncertainty about ultimate recovery.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : IAMBIC PTY LTD -v- NORTHWIND HOLDINGS PTY LTD [2001] WASC 44
Equity - Specific performance of a contract for the sale of shares - Specific performance sought by vendor for the payment of a sum of money
Beswick v Beswick [1967] UKHL 2; [1967] 2 All ER 1197
Ready Construction Pty Ltd v Jenno & Anor (1984) Q ConvR 54-142
1 MASTER BREDMEYER: This is an application by the plaintiff for summary judgment seeking specific performance of an agreement. The agreement is for the sale and purchase of shares. The plaintiff is the vendor and the defendant, the purchaser.
2 The agreement for the sale of shares was in two parts. The first part was for the sale of 500,000 shares in Noizenet Pty Ltd ("Noizenet") for $250,000, payable on 1 March 2000. That money was paid and those shares were transferred. I am only concerned with the second part of that agreement which, as varied, was that the plaintiff sell to the defendant 1,000,000 shares in Noizenet for $500,000, payable by an instalment of $100,000 by 1 September 2000 and $400,000 by 16 October 2000. The defendant paid the instalment of $100,000. The plaintiff seeks an order that the defendant specifically perform and carry into execution its obligations under the deed and the variation by the payment to the plaintiff of the sum of $400,000 within seven days.
3 Specific performance is an equitable remedy whereby a party to a contract is directed to perform his obligations thereunder according to its terms. It presupposes an executory contract, as distinct from an executed one, where something remains to be done, such as a contract of sale for the sale of land which requires a transfer to be executed to give effect to the contract. Or, a contract of sale of a chattel which requires the chattel to be delivered to the purchaser to give effect to the contract. It is not so common for specific performance to be sought to recover a sum of money. However, the court can order the specific performance of payment of a sum of money. Meagher Gummow and Lehane: Equity Doctrines and Remedies, 3rd ed, par 2091, states:
"One thing is quite clear: if for a purchaser damages are not an adequate remedy, his vendor equally is entitled to specific performance although his only entitlement is to receive a payment of money, and the purchaser's only outstanding obligation is to pay it."
Turner v Bladin (1951) 81 CLR 463 at 473 is cited for that proposition. That proposition applies to the facts of this case. The shares, the subject of the sale, are in a private company and I imagine are not readily saleable. That being so, the purchaser of those shares under an agreement could call upon the vendor for specific performance of the agreement. On the statement of law just cited, that means equally that the vendor of those shares seeking to be paid for them, can get specific performance.
4 Specific performance can be opposed on any one of a number of discretionary grounds which are set out in ch 20 of Meagher Gummow and Lehane. In this case the defendant relies on the grounds of hardship and futility. The hardship ground refers to hardship to the defendant and the defendant's argument on that is based on matters set out in the affidavit of Mr William David Millar of 1 February 2000. In that, he states that his company does not have the financial capacity to pay the $400,000. It has $844 in the bank. Its only unencumbered asset is a parcel of approximately 1,500,000 shares in Noizenet. The company is indebted to his wife and him in the sum of $225,000 loaned by them to the company. The company does not trade. It could only become able to complete the purchase of the parcel of shares if it is able to sell the shares which it currently holds in Noizenet. On 19 January 2001 the annual general meeting of Noizenet was held. The proposed sale of Noizenet was not voted on at that annual general meeting. The proposal was that Noizenet sell its assets to an unlisted public company, now known to be Noize Ltd, in consideration for a transfer by the shareholders of Noizenet of their respective shares to Noize Ltd and the issue by Noize Ltd of shares in that company to those shareholders on a one-to-one basis. That proposal was not put to the annual general meeting. It was stood over to an extraordinary general meeting to be convened after the determination of this present application. Mr Millar says that, although the plaintiff does not seek an order for damages in lieu of specific performance, he wishes to deny that the plaintiff has, or will, suffer any loss or damage by reason of the defendant's liability to complete the purchase of the parcel of 1,000,000 shares.
5 The defendant is saying that it does not have the cash to pay the $400,000. Its only asset is the parcel of 1,500,000 shares in Noizenet. It would prefer not to sell them at the present time. If the proposal is approved to swap those shares on a one-to-one basis for shares in a new company, Noizenet Ltd, which of course will be floated, it will get more for the shares.
6 Mere financial difficulty in the purchaser finding the purchase money would almost never constitute the defence of hardship to a claim for specific performance: Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460. But the defence of hardship in the present case is not simply advanced on the ground of financial difficulty. It is put, as stated above, because the defendant would like to see its shares in Noizenet swapped for shares in the public company prior to any sale of its shares to pay this debt. I do not consider that this reason comes within the category of hardship, as stated in the cases. Examples of hardship are given in Meagher Gummow and Lehane at 507 - 508. For example, it would not be proper to give specific performance where it would expose the defendant to the risk of prosecution for breach of local government legislation, or where the decree would cause the defendant to incur a forfeiture. The court would also refuse to force a purchaser to become the reluctant owner of a brothel. Holland J in Pasedina, above, discussed hardship in the context of some of the cases. In one case specific performance was refused on the ground of financial hardship because the plaintiff had imposed a hard and unconscionable bargain upon the defendant from the beginning. There is no evidence of that in this case.
7 The defendant says it would be futile to grant this decree because the company does not have the money to pay the debt. That latter statement may, or may not, be true. I consider the plaintiff should be allowed to try and recover the money from the company. In order to do that it may need to apply to wind up the company. The liquidator will sell the assets and explore the possibility of suing the directors, or someone else, to claw back any assets which may have been given away or improperly spent. All that maybe futile. But if it is, the plaintiff can then apply to the court for damages instead of specific performance. I will give liberty to apply to leave that door open.
8 The liberty to apply order could also benefit the defendant. I am concerned that the plaintiff is at present in a very favoured position. The plaintiff was paid $100,000, one fifth of the purchase price for the 1,000,000 shares, yet it has not transferred one fifth of the shares (ie, 200,000 shares) to the purchaser. In relation to that parcel of shares, it has its cake and is eating it. It has the purchase money but has not transferred the shares. The plaintiff argues that it is an entire contract, and that it is only obliged to transfer the shares when the total sum of $500,000 is received. That is true as a matter of construction. I contemplated granting a decree of specific performance but making it conditional on the plaintiff transferring 200,000 shares to the defendant to give substance to its claim that it is ready, will and able to perform its obligations. However, I have decided not to do so, because, if the plaintiff later applies for assessment of damages, that $100,000 could be retained by the plaintiff pending the assessment of damages. If the plaintiff is unable to recover the $400,000 from the defendant, then under the liberty to apply order, I propose that the defendant could apply and ask the court to be relieved from the decree of specific performance and have the court assess damages on behalf of the plaintiff. If those damages were less than $100,000, the difference would be refunded to the defendant.
9 I propose to order that the defendant specifically perform and carry into execution the obligations under the deed and the variation by the payment to the plaintiff for the sum of $400,000 within seven days. There will be liberty to apply. I will hear the parties on costs.
Iambic Pty Ltd
Northwind Holdings Pty Ltd [2001] WASC 44
(1951) 81 CLR 463
The Court ordered that the defendant specifically perform and pay to the plaintiff the sum of $400,000 within seven days; liberty to apply; costs to be heard (para 9).