In the matter of My Wholesale Pharmacy Pty Ltd

Catchwords: CONTRACTS – breach of contract – where First Plaintiff and First Defendant entered into an asset sale agreement – where First Defendant failed to pay the purchase price – where First Defendant asserted that the parties had entered into a deed of variation releasing it from the obligation to pay the purchase price – where issues raised regarding provenance and authenticity of the deed of variation – whether the deed of variation was of any force and effect

Legislation Cited: Corporations Act 2001 (Cth) s 198G

Cases Cited: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Ling v Pang [2023] NSWCA 112
Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066

Category: Principal judgment

Parties: My Wholesale Pharmacy Pty Ltd (First Plaintiff)
Graeme Robert Beattie (Second Plaintiff)
Gains Retail Group Pty Ltd (First Defendant)
Assad Atef Karem (Second Defendant)
Feras Karem (Third Defendant)

Representation: Counsel:
T J Dixon (Plaintiffs)
Solicitors:
Maksisi Lawyers (Plaintiffs)

File Number(s): 2024/412680

Publication restriction: Nil

EX TEMPORE JUDGMENT – REVISED 2 October 2025

1. By Originating Process filed on 6 November 2024, the First Plaintiff, My Wholesale Pharmacy Pty Ltd (MWP), and the Second Plaintiff, Mr Graeme Robert Beattie, as the Deed Administrator of MWP, seek damages against the First Defendant, Gains Retail Group Pty Ltd, for breach of contract. In particular, the Plaintiffs seek the amount of the purchase price which was claimed to be payable by Gains to MWP pursuant to the terms of an asset sale agreement.

2. The Defendants did not appear at the hearing, or file any evidence or submissions in opposition to the relief sought. The Defendants were aware of the hearing date. On 11 August 2025, they were represented in Court by their then solicitor when the matter was set down for hearing on 30 September 2025. On 11 September 2025, the Second Defendant appeared at the return date of the Plaintiffs’ discovery application, and indicated that the Defendants intended to bring an application to adjourn the hearing. No such application has been brought.

Factual background

3. MWP and Gains operated a pharmaceutical services business. MWP, which was previously named Pharmacy 4 Less Pty Ltd, provided services to retail pharmacies including branding, promotional, advertising, warehousing, transport and logistics services and acted as an intermediary in the supply chain between suppliers and end users (who were franchisees of “Pharmacy 4 Less” pharmacies).

4. The Second Defendant, Mr Assad Karem, is the sole director of MWP.

5. The Third Defendant, Mr Feras Karem (who is Mr Assad Karem’s brother), is the sole director of Gains. He was also, in the period from 3 July 2007 to 30 April 2021, a director of MWP.

6. On 27 July 2020, MWP entered into an agreement with DXC Eclipse Pty Limited for the purchase by MWP of an enterprise resource planning software system to be built by DXC (the DXC software system) and for ongoing administration and management of that system. This agreement provided for total fees of $1,725,651 (excl GST) to be paid by MWP for the DXC software system and for DXC’s services.

7. The Second Plaintiff gave evidence that, following the execution of this agreement, DXC built and delivered the software system to MWP, and MWP paid to DXC the contract price in a number of tranches between 2020 and 2022 as consideration for DXC building and delivering the software system.

8. On 30 September 2022, MWP and Gains entered into a Deed of Asset Purchase. The Plaintiffs pleaded, and the Defendants admitted, that the Deed of Asset Purchase included the following terms:

9. the assets being sold by MWP and purchased by Gains comprised the DXC software system;

10. the DXC software system was being sold on an “as is” basis with all faults and defects whether patent, known or detectable by Gains or not (clause 5.1);

11. MWP did not warrant that the DXC software system was fit for purpose (clause 5.2.3);

12. the purchase price of the DXC software system was $1,359,563.13; and

13. the purchase price was payable by Gains to MWP on the settlement date, being 30 September 2023.

14. On 1 October 2022, MWP issued an invoice to Gains for $1,359,563.13. (The Plaintiffs acknowledged in submissions that, although the invoice was issued on that date, the due date for payment of this amount was, in accordance with the Deed of Asset Purchase, 30 September 2023.)

15. No amount has been paid by Gains to MWP in respect of the purchase price under the Deed of Asset Purchase.

16. On 1 March 2023, MWP entered voluntary administration, and the Second Plaintiff was appointed as its administrator. At that time, the records of MWP stated that it was owed the amount of $1,359,563.13 by Gains. For example:

17. the Aged Receivables Summary for MWP, which was provided by the Second Defendant to the Plaintiffs’ solicitor on 9 March 2023, recorded a sum of $1,359,563.13 as owing from Gains to MWP; and

18. an Unpaid Invoices Report for MWP that was generated through MYOB on 14 March 2023 recorded that the sum of $1,359,563.13 was owing in respect of an invoice issued to Gains before January 2023.

19. On 5 April 2023, the second meeting of creditors of MWP was held and a resolution was passed for MWP to enter into a proposed deed of company arrangement (DOCA) and for the Second Plaintiff to be appointed as Deed Administrator. The executed form of the DOCA was lodged with the Australian Securities and Investments Commission on 1 May 2023.

20. On 16 August 2023, the Defendants’ solicitors first provided to the Deed Administrator a document headed “Variation of Deed of Asset Purchase” (the Purported Deed of Variation). This document was dated “21 October 2022” and was executed by Mr Assad Karem as director of MWP and by Mr Feras Karem as director of Gains. The Purported Deed of Variation contained the following terms:

“1. Clause 5 of the Deed of Asset Purchase dated 30 September 2022 (‘As Is’ clause) is deleted from the date of this document.

2. On 1 October 2022 [MWP] sent a tax invoice for $1,359,563.13 relating to the Deed of Asset Purchase dated 30 September 2022.

3. The Deed of Asset Purchase was based on the Asset being a completed and finished product.

4. The Asset is not a finished product and not fit for purpose, and [Gains] is entitled to make claims against [MWP] for its misrepresentations and warranties relating to the Asset and breaches [of] the Deed of Asset Purchase made on 30 September 2022.”

5. Subject [to] clause 6 and 7 of this document, [Gains] will from the date of this document be responsible for funding and finalising the Asset to an operative condition which is estimated to cost at least 2.5 million to 5 million and [MWP] will not need to contribute any further capital to finalise the Asset.

6. [MWP] will not pursue [Gains] for any amounts or claims under the Deed of Asset Purchase dated 30 September 2022.

7. [Gains] does not need to pay the purchase price under the Deed of Asset Purchase.

8. [Gains] will send [MWP] an updated tax invoice and or credit reflecting the new agreed amount of the Asset.

9. Settlement of the Deed of Asset Purchase dated 30 September 2022 will occur on 30 September 2023.”

14. In short, this document, which was dated only three weeks after the Deed of Asset Purchase (and which implicitly acknowledges that the DXC software system has been received by Gains) purports to release Gains from any obligation to pay the purchase price for that asset to MWP.

15. On 6 November 2024, the Plaintiffs commenced this proceeding, seeking, inter alia, a declaration that the Purported Deed of Variation “is of no force and effect” and damages for breach of the Deed of Asset Purchase.

16. By their Points of Defence filed on 23 January 2025, the Defendants pleaded that:

17. in around October 2022, Gains and MWP entered into an oral agreement (as a result of conversations between Mr Assad Karem and Mr Feras Karem) that, in circumstances where the DXC software system “had provided no benefit to Gains having regard to the additional amount that had to be paid to have the [DXC software] system completed”, “Gains would forego any actionable claims it had against MWP and MWP would waive Gains’ obligation to reimburse MWP for the ERP Costs [defined as the amount of $1,359,563.13]”; and

18. “MWP and Gains executed [the Purported Deed of Variation] on 21 October 2022 to give effect to this agreement and remove Gains’ obligation to reimburse MWP for the ERP Costs”.

The Purported Deed of Variation

17. The key issue which arises for determination is whether the Purported Deed of Variation is, as contended by the Defendants, a binding agreement which was executed by MWP and Gains on 21 October 2022 and which had the effect of releasing Gains from any obligation to pay MWP the purchase price for the software system under the Deed of Asset Purchase which had been entered into three weeks earlier.

18. For the reasons given below, I accept the Plaintiffs’ submission that the Defendants’ contentions in respect of the Purported Deed of Variation have not been established.

19. First, the Defendants did not file any affidavit evidence concerning the provenance of the Purported Deed of Variation, or the circumstances in which and time at which that document was executed, or tender any documents concerning those issues.

20. As noted above, the Points of Defence pleaded that the Purported Deed of Variation was executed on 21 October 2022 in order to give effect to an oral agreement between MWP and Gains which was formed as a result of “conversations” between the Second Defendant and the Third Defendant around that time. In the absence of any evidence from the Second and Third Defendants, those allegations cannot be established.

21. The Defendants were given ample opportunity to put on such evidence. On 20 March 2025, the Defendants were served with the Plaintiffs’ evidence. On 31 March 2025, the Court ordered that the Defendants file and serve their evidence in response by 30 May 2025. On 11 August 2025, the Court extended the time for service of the Defendants’ evidence to 5 September 2025. On 11 September 2025, the Defendants foreshadowed an application for a further extension of time to file their evidence. No such application has been brought.

22. The Defendants were uniquely placed to give evidence regarding the circumstances in which the agreement recorded in the Purported Deed of Variation was made, and regarding the provenance and authenticity of that document. Their failure to call such evidence serves to indicate, as the most natural inference, that the Defendants feared to lead such evidence, and this fear is some evidence that such material “would have exposed facts unfavourable to the [Defendants]”: see Ling v Pang [2023] NSWCA 112 at [27] per Kirk JA (Leeming and Mitchelmore JJA agreeing), quoting Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8; at 320-321 per Windeyer J.

23. Secondly, the Defendants failed to discover any documents in response to orders of the Court requiring discovery of:

24. all communications referring to the Purported Deed of Variation (including all communications referring to the creation of, or entry into that document);

25. all hard copies and electronic versions of the Purported Deed of Variation; and

26. all communications attaching a copy or version of the Purported Deed of Variation.

27. The Plaintiffs’ solicitor deposed, in an affidavit sworn on 9 September 2025 in support of the application for discovery (which was also read at the substantive hearing), that this material was sought because the Administrator was of the view “that the [Purported Deed of Variation] is a late invention and wishes to test, by way of discovery, its provenance and authenticity”. The Defendants were therefore put squarely on notice, by this discovery application, that the Plaintiffs were putting those matters in issue.

28. The Defendants must have some documents in their possession falling within the scope of the discovery orders. In particular, they plainly have at least one copy, whether in hard or electronic form, of the Purported Deed of Variation, since this document was provided by their solicitors to the Plaintiffs’ solicitor on 16 August 2023.

29. A failure by a party to comply with discovery orders can provide a basis for striking out the party’s claim or defence (or part thereof): Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066 at [26] (Jagot J). In the present case, no such application has been made. In any case, there is, for reasons given above, no evidence to establish the matters pleaded in the Points of Defence regarding the circumstances in which the Purported Deed of Variation was created and executed.

30. Thirdly, the Purported Deed of Variation was not produced by MWP or the Second Defendant in March 2023, when the Administrator called for the books and records associated with the Deed of Asset Purchase. In particular, by an email addressed to Mr Assad Karem on 16 March 2023, a member of the Administrator’s staff referred to the sale of the “ERP” software to Gains, prior to the Administrator’s appointment, and made the following request (emphasis in original):

“Can you please urgently provide the following information / documentation in relation to the sale:

A copy of the Sale Contract (along with any associated schedules);

Any supplementary documentation relating to the sale (such as transfer documents, Deeds etc.);

Details of payments / consideration received; and

Any other information which may assist.”

28. In response to this request, Ms Caroline Van, who was in-house counsel at Gains, provided various documents, which did not include the Purported Deed of Variation. There was no explanation on the evidence as to why, if the Purported Deed of Variation was in existence at that time, it was not provided to the Administrator in response to the above request to Mr Assad Karem for all documentation (including “Deeds”) relating to the sale of the DXC software system to Gains.

29. Fourthly, there was no apparent commercial rationale for MWP to enter into the Purported Deed of Variation, which would have had the effect of releasing Gains, on 21 October 2022, from any liability to pay the purchase price for the DXC software system, in circumstances where MWP had, only three weeks earlier, entered the Deed of Asset Purchase and issued an invoice for the amount of the purchase price.

30. Clauses 3 and 4 of the Purported Deed of Variation appear to be intended to provide a rationale for the execution of the document, stating, in short, that Gains did not receive “a complete and finished product”, and that Gains was therefore “entitled to make claims against the Vendor [MWP] for its misrepresentations and warranties relating to the Asset and breaches [of] the Deed of Asset Purchase”.

31. However, there is no evidence to establish that there were any issues with the DXC software system as at the date of the Purported Deed of Variation. There are, for example, no communications showing that any complaints were made by Gains to MWP about the DXC software system, including that the system was not fit for purpose or was incomplete, let alone that MWP accepted the validity of such claims (particularly in circumstances where the Deed of Asset Purchase included clauses that the DXC software system was being sold on an “as is” basis and that MWP was not making any warranty as to fitness for purpose). Further, MWP had been using the DXC software system for around two years at the time that it was sold to Gains. For a significant part of that period, Mr Feras Karem had been a director of MWP, and was therefore likely to be aware whether or not there was any issue with the DXC software system. There is no evidence of any complaint being made from MWP to DXC during that period regarding the DXC software system, including any complaint that the system was not fit for purpose or was incomplete.

32. Fifthly, the Purported Deed of Variation was first provided to the Administrator on 16 August 2023. On that date, it was attached to a letter from the Defendants’ then solicitors, which was sent in response to a letter sent by the Administrators’ solicitors regarding the amount owing by Gains under the Deed of Asset Purchase.

33. The Administrator gave evidence that there had been, from the time of his appointment up until 16 August 2023, no reference to the existence of the Purported Deed of Variation in any of the various discussions and communications between his staff and representatives of MWP (including the Second Defendant).

34. The circumstances in which the Purported Deed of Variation was first provided by the Defendants to the Administrator, coupled with the lack of any reference to the Purported Deed of Variation in the records of MWP that were previously provided to the Administrator or in any previous dealings between the Administrator and representatives of MWP (including the Second Defendant), support an inference that this document was created around the time that it was provided to the Administrator, and was backdated, in order to provide a basis for denying any liability in respect of the purchase price owing from Gains to MWP pursuant to the Deed of Asset Purchase.

35. It is not necessary to make any finding to this effect. The Plaintiffs acknowledged in oral address that they had not pleaded any allegation that the Purported Deed of Variation was fabricated by the Defendants, or any other allegation in the nature of fraud in relation to that document.

36. For present purposes, it is sufficient to note that the matters described above give rise to significant doubts regarding the provenance and authenticity of the Purported Deed of Variation and, in particular, give rise to a substantial possibility that the Purported Deed of Variation may have been entered into on a date later than the date which it bears. In circumstances where there is substantial doubt about those matters, and where there is no evidence or discovery by the Defendants concerning the creation or execution of that document, I am not satisfied that the Purported Deed of Variation:

37. was signed by the Second Defendant on behalf of MWP prior to the appointment of a voluntary administrator to that entity; and

38. therefore, was signed prior to the time when the Second Defendant’s powers as a director of MWP were suspended: Corporations Act 2001 (Cth) s 198G(1).

Conclusion and Orders

37. For the reasons given above, the basis pleaded by the Defendants for disputing MWP’s entitlement to the purchase price specified in the Deed of Asset Purchase is not established.

38. Accordingly, MWP is entitled to judgment against Gains in the sum of $1,359,563.13.

39. I am satisfied that, even though the Plaintiffs have established their claims only against Gains, it is appropriate that all three of the Defendants be ordered to pay the Plaintiffs’ costs. There was a single Points of Defence filed by the Defendants, which was verified by each of Mr Assad Karem and Mr Feras Karem. As outlined above, the basis on which the Defendants disputed MWP’s entitlement to the purchase price payable under the Deed of Asset Purchase was that MWP and Gains had entered into the Purported Deed of Variation which had released Gains from any obligation to pay that amount. The claims made by the Plaintiffs against the Second and Third Defendants arose only in the event that the Defendants established the authenticity of the Purported Deed of Variation. In circumstances where the authenticity of that document has not been established, costs should follow the event, and the Defendants should pay the Plaintiffs’ costs of the proceeding.

40. At the conclusion of the hearing, I delivered these reasons for judgment. The Plaintiffs then made an application for costs to be awarded against the Defendants on an indemnity basis.

41. In support of this application, the Plaintiffs referred to the following correspondence.

42. On 21 September 2023, the Plaintiffs’ solicitor wrote to the Defendants’ solicitors, in response to their letter of 16 August 2023 which had attached the Purported Deed of Variation. The Plaintiffs’ solicitor raised various issues regarding the provenance and authenticity of that document, and demanded that Gains pay the purchase price due under the Deed of Asset Purchase by 2 October 2023 (noting that the due date of 30 September 2023 was a Saturday). The Plaintiffs’ solicitor enclosed a draft Originating Process and draft Points of Claim, which were substantially in the form of the documents that were subsequently filed in this proceeding (and which, relevantly, sought a declaration that the Purported Deed of Variation was of no force and effect, and sought damages for the failure to pay the purchase price under the Deed of Asset Purchase). This letter concluded by stating that:

“In the event that proceedings are filed, our client will seek to rely upon this, and previous, correspondence in relation to the question of costs, including costs on an indemnity basis”.

2. On 12 October 2023, following the Defendants’ failure to comply with the demand for payment of the purchase price that was due under the Deed of Asset Purchase, the Plaintiffs’ solicitor wrote a further letter, confirming that the Plaintiffs would be commencing legal proceedings without further notice, and would “rely upon this, and previous correspondence in relation to the question of costs, including costs on an indemnity basis”.

3. On 8 February 2024, the Plaintiffs’ solicitor sent a letter to the Defendants’ solicitor, marked “Without Prejudice Save as to Costs”, which referred to the letter of 21 September 2023 (see subparagraph (1) above) and the draft Originating Process and Points of Claim, and offered to settle the dispute in relation to the purchase price due under the Deed of Asset Purchase on the basis that the Defendants pay the amount of $800,000. The offer was expressed to be made “pursuant to the principles set out in Calderbank v Calderbank”. The Plaintiffs’ solicitor again stated that the Plaintiffs intended to rely on this, and previous, correspondence “in relation to the question of costs, including costs on an indemnity basis”.

4. On 17 October 2024, the Plaintiffs made a further offer to the Defendants to settle the dispute regarding the purchase price due under the Deed of Asset Purchase for an amount of $700,000. This offer was also expressed to be made “in accordance with the principles established [in] Calderbank v Calderbank”, and the offer letter contained similar statements to those set out in subparagraph (3) above.

5. Although the Calderbank offers were made at a time before the proceeding was commenced, and therefore before any evidence had been filed, there was, at the time of those offers, no doubt regarding the claim being made by the Plaintiffs or the basis on which it was advanced. The Plaintiffs’ claim was, as set out in the draft Originating Process and the draft Points of Claim, a claim for payment of a fixed amount due under an asset sale agreement. The main substantive issue raised by the Defendants in response to that claim was that Gains had been, by the Purported Deed of Variation, released from any obligation to pay that amount. The Defendants, rather than the Plaintiffs, were the persons who knew the circumstances in which that document had been signed. No material filed by the Plaintiffs could affect the Defendants’ assessment of the strength of their defence. Having regard to those matters, I am satisfied that the Defendants’ rejection of the offers made by the Plaintiffs, which represented a substantial compromise of the amount due under the Deed of Asset Purchase, was unreasonable.

6. In addition, the following matters support the Plaintiffs’ application for costs to be awarded on an indemnity basis:

7. first, I have determined that there are strong reasons to doubt the provenance and authenticity of the Purported Deed of Variation, and therefore I am not satisfied that there was any genuine basis for the Defendants to dispute MWP’s entitlement to the sum due under the Deed of Asset Purchase; and

8. secondly, there has been delinquency in the Defendants’ conduct of the proceeding and, in particular, the Defendants have failed, without explanation, to comply with discovery orders.

9. For those reasons, I am satisfied that costs should be awarded against the Defendants on an indemnity basis.

10. Accordingly, I make the following orders:

11. There be judgment for the Plaintiffs.

12. The First Defendant pay damages to the First Plaintiff in the amount of $1,359,563.13.

13. The Defendants pay the Plaintiffs’ costs of the proceedings, including the costs of the Plaintiffs’ interlocutory process filed 9 September 2025, on an indemnity basis.

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