M L W Technology Pty Ltd & Anor v May [2005] VSCA 29

M L W Technology Pty Ltd & Anor v May [2005] VSCA 29 - VSCA 2005 case summary — Zoe

[26]

"2.1 Exclusive Licensee for the Product 2.1.1 Subject to clause 5, MLW (the plaintiff) irrevocably appoints IMT (Info-Motion) as its exclusive licensee to manufacture, market, distribute, sell and provide technical support for the Product in the Territory and IMT agrees to act in that capacity, subject to the provisions of this Agreement. ... 2.2 Exclusive Licence for the Software Interface 2.2.1 Subject to clause 5, MLW appoints IMT as its exclusive licensee to manufacture, market, distribute, sell and provide technical support for the Software Interface in the Territory and IMT agrees to act in that capacity, subject to the provisions of this Agreement. ... 3 CONSIDERATION AND GUARANTEE 3.l In consideration for MLW granting the licences referred to in clauses 2.1.1 and 2.2.1 to IMT, IMT and the Guarantors shall procure that on the Commencement Date the ADVC (Advanced Communications Florida) shares are issued to MLW or its nominee. 3.2 MLW acknowledges that the shares referred to in clause 3.1 are restricted securities as defined in the Securities Act 1933 of the United States of America and that MLW may not sell, deal in or transfer the shares referred to in clause 3.1 for a period of 12 months after the date of issue of the shares. 3.3 The Guarantors jointly and severally guarantee to MLW that on the first anniversary of the Commencement Date the ADVC Shares will have an aggregate value of not less than $2,300,000. 3.4 If the aggregate value of the ADVC Shares is less than $2,300,000 on the first anniversary of the Commencement Date, MLW may: 3.4.1 sell all (and not less than all) of the ADVC Shares after the first anniversary of the Commencement Date in such daily volumes as do not adversely affect the market price of the shares of Advanced Communications Technologies Inc and after all of the ADVC Shares have been sold give to the Guarantors 30 days' written notice requiring the Guarantors to pay to MLW the difference between the aggregate price (in Australian dollars) received by MLW for the ADVC shares and $2,300,000; or 3.4.2 within 30 days after the first anniversary of the Commencement Date give to the Guarantors 30 days' written notice requiring either one or both of the Guarantors to purchase from MLW the ADVC Shares for an aggregate purchase price of $2,300,000; or 3.5 If MLW gives to the Guarantors the notice pursuant to clauses 3.4.1 or 3.4.2, then either the Guarantors, ACT or May shall, within the time specified in the notice, pay to MLW the amount claimed by MLW against proof of the price received by MLW on the sale of the ADVC Shares or the transfer of the ADVC Shares (as the case may be). 3.6 If the Guarantors do not perform their obligations pursuant to clauses 3.4 or 3.5 then IMT shall pay to MLW the amount that the Guarantors were obliged to pay to MLW pursuant to clause 3.4.1 or 3.4.2 (as the case may be), in cash, in 12 equal monthly instalments of $191,666.66 each."

[50]

" ... Inasmuch as this warranted prediction does not come to pass, he, and his co-guarantor are liable to make good the promise. It is at this point that MLW's case encounters a difficulty. Clause 3 goes on to provide alternative ways for MLW to obtain the benefit of the promise, neither of which it has implemented. It still has the ADVC shares. It seeks in addition to have the warranted value of those shares. Counsel for Mr May is correct in submitting that MLW cannot have this double benefit. As a matter of principle, it seems to me that MLW had on the anniversary day a choice to hold the shares in the hope that the market might rise or to sell the shares, on the market or to the guarantors, and thereby recover the warranted value pursuant to 3.5 or 3.6. The present issue does not turn on questions as to causation or remoteness, but rather upon a more fundamental analysis of the transaction and the nature of the loss, if any, suffered by MLW. Nor is it a case where it was put that the value of the shares at the time of their issue was affected by the promise, so that MLW's loss is represented by the difference between the price paid for the shares with the promise and their value without it. The contract gave to MLW the expectation that the shares it received in exchange for its covenants would have a specific future value in 12 months. At that time it might sell the shares and take the profit or retain them in the hope of greater benefit. If the shares did not fulfil the promise MLW might at common law recover any shortfall in the event of sale, for it is against the risk of this loss that the promise provides protection. If, in such a case, MLW chose not to sell, it suffers no loss since it still has the shares. If, two years after the date of their issue, MLW sold the ADVC shares for a sum less than the warranted value then this loss does not flow from the breach of the contractual promise. This is because there is no promise as to the value of the shares on a date other than the anniversary date. This result obtains whatever might have been their value on the anniversary date. ... It follows from this that no loss and damage have been shown. There should therefore be judgment for nominal damages only."

[91]

In my opinion, the defence of acquiescence will arise if two matters are established, namely, that the plaintiff represents either expressly or impliedly that he will not require performance in specie and secondly, that in all the circumstances it would not be equitable to grant specific performance. As a general rule it is necessary to show that the defendant would be prejudiced if the plaintiff was permitted to resile from the abandonment of the remedy. In other words, if specific performance was granted, the defendant would suffer prejudice because of his reliance upon the representation that the right would not be pursued. In the end, as in many areas of equitable relief, justice is the final determinant and if the consequences in allowing the plaintiff to claim specific performance after he had abandoned the relief, would result in injustice to the defendant, in those circumstances, the abandonment is final. In other words, the defence of acquiescence is available. Mr Goldblatt did not suggest that Mr May has altered his position in response to the abandonment of the right, or that he would suffer any prejudice if the plaintiff was permitted to withdraw the concession made and seek specific performance. In my opinion, the defence of acquiescence is not available to the defendant precluding the plaintiff seeking the discretionary remedy. The purported abandonment during final submissions did not result in Mr May changing his position in any way. Indeed, if the plaintiff was to opt for specific performance on judgment, it would be on the basis that the plaintiff would transfer the shares to Mr May. He would benefit from the changed position. If the concession was made as a result of a mistaken understanding of the facts and the law, which resulted in the abandonment of the claim for specific performance and is now withdrawn, in my view justice would require the parties to be restored to the position they would have been in, which would therefore leave the options open to the plaintiff until entry of judgment. I do not accept Mr Goldblatt's argument. However, that does not resolve the question whether the plaintiff should have leave to withdraw the concession and be permitted to submit that the notice was valid.

At a glance

Court

Decision date

Before

Source

Judgment (156 paragraphs)

Parties