Plaintiff v Defendant

2 The SPA provides the process for the determination of the Adjustment Amount (the AA resolution process). In summary, it provides for the defendant to prepare draft Completion Accounts, for the Sellers to review them, for any dispute to be the subject of a Dispute Notice, for any Dispute Notice to be subject to good faith negotiations to attempt to resolve those disputes (the good faith obligation) and for any remaining disputes to be determined pursuant to an expert determination process (EDP). The Adjustment Amount is to be paid within five business days of the expert's determination pursuant to the EDP.

3 The plaintiff issued a Dispute Notice under the AA resolution process on 15 July 2022. After negotiations failed to resolve the dispute by late August 2022, the defendant sought that an Expert be appointed. Notwithstanding the AA resolution process, the plaintiff declined to nominate an Expert and issued this proceeding, claiming the defendant had breached certain obligations under the SPA relating to the preparation of draft Completion Accounts (the preparation obligation) and the good faith obligation. The plaintiff seeks a declaration as to the true quantum of the Adjustment Amount and the payment of that sum. It also seeks damages for not being paid the full Adjustment Amount and for unnecessary costs incurred in the AA resolution process. In response, the defendant, by summons dated 28 October 2022, seeks a stay of this proceeding until the determination of the EDP. The plaintiff opposes this application.

4 It is not in dispute between the parties before me that the Court has the power to stay this proceeding pending resolution of an agreed expert determination process. The issue before me is whether, as a matter of discretion, the power to stay this proceeding should be exercised. This is in circumstances where the plaintiff, in summary, submits that the EDP would deal with only part of the dispute between the parties and would lead to a duplication of effort, and that the dispute as to the Adjustment Amount is inapt for determination by an expert, including because it raises complex questions of law and fact. As is evident, there is an overlap between these grounds.

5 For the reasons that follow, I have concluded that the defendant's application to stay this proceeding pending the completion of the EDP should be allowed.

6 The SPA was entered into on 13 December 2021 between the defendant as the Buyer on the one hand and the Sellers on the other. Under the SPA, the defendant agreed to purchase shares in companies owned by the Sellers (with the companies in which the shares were held collectively referred to in the SPA as the Sale Companies, but which I will refer to collectively as Minova in these reasons). As stated above, the purchase price was made up of the Completion Amount (payable on the Completion Date in the sum of $149,364,000) and the Adjustment Amount. There is no dispute that the Completion Amount was paid.

7 I note in passing that under cl 22.1 of the SPA each of the Sellers appointed the plaintiff as their agent in all matters required or permitted to be done under the SPA by the each of the Sellers. As a result and for convenience, unless otherwise required, when referring to the Sellers, I will refer to the plaintiff.

8 Clause 7 of the SPA provides, in summary, that the Adjustment Amount is the result of the set off between two adjustments, one relating to Working Capital and one related to Net Debt.

9 Clause 7.2 provides for the determination of a Working Capital Adjustment based upon a comparison of the Target Working Capital (of $58,078,463 set out in the SPA) and the Completion Working Capital (to be ascertained from the final Completion Accounts). Clause 7.3 provides the determination of the Net Debt Adjustment based upon a comparison of the Target Net Debt (of $30,636,000 set out in the SPA) and the Completion Net Debt (to be ascertained from the final Completion Accounts).

10 Clause 7.4(a) provides that the Working Capital Adjustment and the Net Debt Adjustment are to be set off to derive the Adjustment Amount. Clause 7.4(b) then provides for the payment of the Adjustment Amount. It provides:

The Sellers or the Buyer (as the case may be) must pay the Adjustment Amount to the other in Immediately Available Funds without counter-claim or set off within five Business Days after:

(i) the finalisation of the Completion Accounts; or

(ii) determination of any dispute by the Sellers and the Buyer or the Expert,

in each case, in accordance with Schedule 7.

2.2 Determining the Adjustment Amount by agreement

11 I have outlined a summary of the AA resolution process in [2] above. I will now set out the relevant provisions relating to resolving the Adjustment Amount by agreement.

12 Clause 7.1 of the SPA provides that following Completion 'the parties must procure [that] the Completion Accounts are prepared in accordance with Schedule 7'. Schedule 7 is divided into Part A, Part B and Part C.

13 Part A of sch 7 is headed 'Preparation of draft Completion Accounts'. In summary, it provides for the preparation of draft Completion Accounts by the Buyer, for their review by the Sellers and for any disagreement to be the subject of a Dispute Notice. The relevant provisions may be summarised as follows:

(1) the defendant must prepare draft Completion Accounts as at the Calculation Time (defined in the SPA as 11:59 pm on the Completion Date) and deliver them to the Sellers within 60 business days after Completion [cl 1.1(a)];

(2) the draft Completion Accounts must be prepared in accordance with sch 7 and the format set out in Part C of that schedule [cl 1.1(b)];

(3) the Completion Accounts must be prepared in accordance with a specified order of precedence of accounting principles and policies (the accounting principles and the accounting principles hierarchy), namely [cl 1.2]:

(a) the specific accounting principles, policies, procedures, methodologies, categorisations and estimation techniques set out in Part B of sch 7 (the Part B accounting principles);

(b) where an item claimed is not covered by the Part B accounting principles, then in a manner consistent with the accounting principles, policies, procedures, methodologies, categorisations and estimation techniques used to prepare the Accounts (defined to mean the accounts concerning Minova which were provided to the defendant prior to entering into the SPA, the Minova accounting principles); and

(c) where an item in the Completion Accounts is not covered by the Part B accounting principles or the Minova accounting principles, then, in accordance with Australian Accounting Standards;

(4) the Sellers must review the draft Completion Accounts and notify the defendant in writing whether they agree or disagree with them within 30 business days after receipt of them [cl 1.3(a)];

(5) the defendant must promptly provide, or procure the provision of, all relevant information that may be reasonably requested by the Sellers in relation to the Sellers' review of the draft Completion Accounts [cl 1.3(d)];

(6) if the Sellers disagree with the draft Completion Accounts or any item therein, they must notify the defendant by a Dispute Notice setting out full details of any matter in dispute (the Disputed Matters) [cl 1.3(b)];

(7) if the Sellers agree with the draft Completion Accounts, those accounts are deemed to be the final Completion Accounts [cl 1.3(c)]; and

(8) where the Sellers have sent a Dispute Notice, the defendant and the Sellers must enter into good faith negotiations and use all reasonable endeavours to reach agreement in relation to the Disputed Matters, and if the parties are able to reach agreement the agreed Completion Accounts will be final and binding [cl 1.4(a)].

2.3 Determining the Adjustment Amount by the EDP

14 Part A of sch 7 then sets out what is to happen if any of the Disputed Matters are not resolved by the good faith negotiations referred to above. In summary, it provides that the Disputed Matters are to be referred to the EDP as follows:

• (1) the Expert will determine the remaining Disputed Matters in accordance with the Resolution Institute Expert Determination Rules (the Resolution Institute and the Resolution Institute Rules) [cl 1.4(b)];
• (2) in the absence of agreement between the parties, the Expert is to be nominated by the Resolution Institute [cl 1.4(c)];
• (3) the Expert is to be provided with the draft Completion Accounts (together with any working papers, the Dispute Notice and an extract of the relevant provisions of the SPA) [cl 1.4(d)];
• (4) the parties must supply the Expert with any information, assistance and cooperation requested in writing by the Expert in connection with its determination [cl 1.4(f)];
• (5) the Expert must be instructed to determine the Disputed Matters and provide that determination as soon as reasonably practicable [cl.1.4(e)];
• (6) the Expert will determine the Disputed Matters based solely on the provisions of the SPA, the application of the accounting principles hierarchy and the submissions of the parties (including responsive submissions) and will not conduct an independent review of any other amounts or related financial information [cl 1.4(g)]; and
• (7) in the absence of agreement between the parties, the Expert will decide the procedures to be followed to resolve the Disputed Matters [cl 1.4(i)].

15 There are other provisions of cl 1.4 of sch 7 to the SPA which are relevant to this application. For example, cl 1.4(h) provides that:

(1) the Expert's determination of any value must be within the range for such items as claimed by the Sellers and the Buyer; and

(2) to the extent that the Expert's determination assigns a value outside that range, the value to be used use for such items shall be the value claimed by the Sellers or the Buyer that is closest to the Expert's value for that time.

16 Further, cl 1.5 of sch 7 of the SPA provides that:

(1) the Expert must act as an expert and not as an arbitrator;

(2) the Expert's written determination will be final and binding on the parties in the absence of manifest error; and

(3) the draft Completion Accounts must be amended according to the Expert's written determination and will be deemed to be the final Completion Accounts which will be final and binding on the parties.

17 Rule 4(2) of the Resolution Institute Rules provides that, where the parties to a dispute have agreed to an expert determination in accordance with the those rules, the parties are bound to comply with them unless, relevantly, the parties agree in writing to modify the application of those rules. It was not suggested in argument that the Resolution Institute Rules did not apply to the EDP in the SPA.

18 Some of the Resolution Institute Rules relevant to the determination of this application include:

(1) the Expert shall adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay and expense, so as to provide an expeditious, cost effective and fair means of determining the dispute [r 5(3)];

(2) the parties shall do all things reasonably necessary for the proper, expeditious and cost-effective conduct of the expert resolution process [r 6(1)];

(3) without limiting the generality of r 6(1) the parties shall:

(a) be represented at a preliminary conference or meeting convened by the Expert by a person or persons with authority to agree on procedural matters;

(b) comply without delay with any direction or ruling by the Expert on procedural or evidentiary matters; and

(c) where appropriate, the parties may take, without delay, any necessary steps to obtain a decision of a court on a preliminary question of jurisdiction or law [r 6(2)];

(4) the purpose of a preliminary conference, among other things, is to agree on the issues in dispute or formulate a procedure by which those issues can be clarified or agreed [r 8(2)(a)];

(5) subject to any rule of law or equity or written agreement between the parties to the contrary and the requirements of r 5, the Expert shall make such directions or rulings in relation to the EDP as he or she sees fit (including rulings as to the provision of submissions, documents and evidentiary material and meetings between the parties, their representatives and/or their experts) [r 9]; and

(6) subject to any rule of law or equity or written agreement of the parties to the contrary, the Expert's determination shall contain a statement of reasons in such form as the Expert considers reasonably appropriate having regard to the amount and the complexity of the dispute [r 10(2)].

19 Part B of sch 7 sets out the matters to be addressed in the Completion Accounts and how they are to be prepared. Relevantly, cl 1 of Part B requires that the Completion Accounts contain a statement of the Completion Working Capital and the Completion Net Debt.

20 There are some other provisions of the SPA which the plaintiff contended were relevant in light of the foreshadowed claims by the defendant, namely, the Seller Warranties in cl 10 and sch 4 which relevantly include that the Sellers warrant that:

(1) the Accounts were prepared in good faith, with due care and attention, and give a true and fair view, in accordance with the Australian Accounting Standards with respect to the assets and liabilities, the financial position and the results of the Business (as defined in the SPA) as at the Accounts Date [cl 5(a) of sch 4]; and

(2) the Disclosure Material (as defined in the SPA) was prepared in good faith and that no information has been omitted from the Disclosure Material that could be expected to be material to a buyer's valuation of the Sale Shares and the Business [cl 6 of sch 4].

21 There are limitations on when a claim for breach of the Seller Warranties can be commenced. First, cl 11.8(a) requires the defendant to notify the plaintiff as soon as reasonably practicable if it decides to make any claim for breach of any Seller Warranty against the Sellers under the SPA. Second, cl 11.9(b) provides that such a claim 'will not be enforceable against any of the Sellers and is to be taken for all purposes to have been withdrawn unless legal proceedings in connection with the Claim are commenced within twelve months after [the defendant] serves written notice... in accordance with clause 11.8(a)'.

22 On 31 May 2022, the defendant served the draft Completion Accounts.

23 On 15 July 2022, the plaintiff (presumably as agent of the Sellers) served a Dispute Notice in respect of many items in the draft Completion Accounts (i.e. the Disputed Matters). As a result, between 19 July and 22 August 2022, the parties engaged in negotiations in respect of the Dispute Notice with the negotiating window running out on 19 August 2022. This included a letter from the plaintiff to the defendant dated 5 August 2022, setting out a detailed response to many of the items claimed (5 August letter). It would appear that the defendant agreed to delete one item and vary the amount claimed for other items.

24 On 22 August 2022, the plaintiff sent a letter to the defendant asserting that the adjustments asserted by the defendant were not justified and had no proper basis. The plaintiff asserted that the Adjustment Amount was $31,294,000. In addition, it alleged that the defendant:

(1) had prepared the draft Completion Accounts in breach of the preparation obligation (because the draft Completion Accounts were not prepared in accordance with sch 7); and

(2) was in breach of the good faith obligation (i.e. by failing to use all reasonable endeavours to seek to reach agreement in relation to the Completion Accounts based on the draft Completion Accounts).

25 On 26 August 2022, the defendant wrote to the plaintiff re-iterating its view that the Adjustment Amount was $9,239,000 and that it looked forward to working together under the EDP. On 31 August 2022, the defendant proposed an expert to conduct the EDP. On 20 September 2022, the plaintiff's solicitors refused to agree to the appointment of an Expert under the EDP. The letter:

(1) expressed the view that the plaintiff's claims for breach and the Disputed Matters were outside the scope of the EDP and otherwise were inapt for expert determination; and

(2) advised of the plaintiff's intention to issue proceedings in relation to the 'calculation and payment of the Adjustment Amount in accordance with the SPA'.

26 On 6 October 2022, the plaintiff commenced this proceeding. In this proceeding, the plaintiff alleges that the defendant has not prepared the draft Completion Accounts in accordance with the preparation obligation i.e.:

(1) cl 7.1 of the SPA which provides that the Completion Accounts must be prepared in accordance with sch 7; and

(2) cl 1.1(b) of sch 7 (which provides that the draft Completion Accounts must be prepared in accordance with sch 7 and in the format set out in part C of the schedule).[2]

27 I note that in the SOC in this proceeding the plaintiff alleges that the true Adjustment Amount payable to the plaintiff is $31,616,000 while the draft Completion Accounts provide that the Adjustment Amount payable is $7,015,000. I note that in oral argument counsel for the plaintiff confirmed the difference between the parties was approximately $24 million. This was not disputed by the defendant.

28 The plaintiff also alleges that the defendant has breached cl 1.4(a) of sch 7 (i.e. the good faith obligation). This is because the defendant prepared the draft Completion Accounts and then did not accept (in the course of the good faith negotiations after the Dispute Notice was served) that the adjustments put forward by the plaintiff in the Dispute Notice were in accordance with sch 7.

29 The principal factual basis of these allegations is a number of 'erroneous' adjustments in relation to the Working Capital Adjustment and the Net Debt Adjustment included in the draft Completion Accounts which comprised the Disputed Matters (the disputed adjustments). Six of the disputed adjustments relate to Working Capital (with three sub-issues relating to inventory and provisions) and four relate to Net Debt.

30 The disputed adjustments relating to the Working Capital Adjustment are:

(1) doubtful debts claimed by the defendant in the sum of approximately $119,000;

(2) VAT and sales tax claimed by the defendant in the sum of approximately $255,000;

(3) the HR litigation claimed by the defendant in the sum of approximately $65,000;

(4) spare parts claimed by the defendant in the sum of approximately $393,000;

(5) inventory and provisions claimed by the defendant in the sum of approximately $1,307,000 made up of adjustments '[t]o accrue inventory provisions', '[t]o adjust Provisions' and adjustments for '[i]nventory obsolescence'; and

(6) 'Global Orica Charges' claimed by the defendant in the sum of approximately $1,927,000.[3]

31 The disputed adjustments relating to the Net Debt Adjustment are:

(1) the Trapped Cash claimed by the defendant in the sum of approximately $1,029,000 (the disputed Trapped Cash adjustment);

(2) the Cash Collateral claimed by the defendant in the sum of approximately $18,690,000 (the disputed Cash Collateral adjustment);

(3) the LTIP (Long-Term Incentive Plan) claimed by the defendant in the sum of approximately $265,000; and

(4) unspent capital expenditure in the sum of approximately $684,000.

32 As to the relief sought, the plaintiff claims a declaration:

(1) as to the amount of the Working Capital Adjustment, the Net Debt Adjustment and the Adjustment Amount (claimed to be the sum of $31,616,000) [A-D]; and

(2) that the Adjustment Amount is due and payable by the defendant to the Sellers [D].

33 Finally, the plaintiff seeks interest under cl 22.4 of the SPA and/or damages for being deprived of the opportunity to have access to the Adjustment Amount, and for incurring costs, including accountants fees and legal fees in connection with review of the draft Completion Accounts, preparing the Dispute Notice and undertaking negotiations with the defendant pursuant to cl 1.4(a) of the SPA.

34 In opposing this application, the plaintiff relied upon the fact that the defendant had indicated that it may issue proceedings for breaches of the Seller Warranties set out above. In this regard, among other things, the plaintiff relied upon the following facts:

(1) on 20 May 2022, the defendant served a notice under cl 11.8(a) of the SPA claiming breaches of the Seller Warranties (the Seller Warranty claims);

(2) on 10 June 2022, the plaintiff responded disputing any breaches of the Seller Warranties;

(3) on 1 July 2022, the plaintiff declined the defendant's request for the provision of certain documents, asserting the defendant had access to all the Disclosure Material and bore the onus of establishing any warranty; and

(4) on 28 July 2022, the defendant again requested copies of certain documents, advising that, absent provision/identification of the documents, it would be compelled to commence legal proceedings.

35 As noted above, it is not in dispute that the Court has the power to stay this proceeding pending the resolution of an agreed expert determination process. The issue before me is whether, as a matter of discretion, the power to stay this proceeding should be exercised.

36 I was referred to a number of authorities that provide an indication as to how the discretion should be exercised in this case. However, as the exercise of the discretion depends on the facts of each case, it is the guiding principles from these cases which are most relevant. In this regard, I have been very much assisted by the decision of the full Court of the Federal Court in Onslow Salt Pty Ltd v Buurabalayji Thalanyji Aboriginal Corporation (Onslow)[4] which helpfully includes a review of relevant authorities. That decision sets out the following principles as to how the discretion to grant a stay in light of an expert determination procedure should be exercised:

(1) in considering whether to grant such a stay, the discretion of the court is wide;

(2) parties are to be held to their agreed dispute resolution procedure unless good reason be shown to the contrary, indeed such an agreed process is a 'weighty consideration' against the refusal of the stay;

(3) the onus of showing good reason to refuse a stay is on the party opposing the stay; and

(4) a stay will be refused if it would be unjust to deprive a party of its right to have its claim determined judicially.[5]

37 Further, the court in Onslow identified a number of matters which have influenced the exercise of a court's discretion to stay a proceeding, including whether:

(1) the agreed process would deal with only part of the dispute between the parties;

(2) there would be duplication of effort if the agreed process was to be followed in the particular case;

(3) the refusal of the stay would result in a multiplicity of proceedings;

(4) the expert determination of a dispute is inapt because it does not involve the application of specialist knowledge or is outside the expert's field of expertise; and

(5) the agreed procedures are inappropriate or inadequate for the nature of the dispute.[6]

38 I note the court in Onslow considered that another relevant factor in the exercise of the court's discretion was whether there were interests beyond those of the parties, such as a wider public interest in the dispute being dealt with in the courts. By way of example, in Onslow, the fact that the relief sought included a claim to public law relief in respect of a decision by a Minister was such a factor.[7]

39 As is evident, there is much overlap between a number of the principles and relevant matters set out in [36] and [37] above. When applying these principles, the cases often consider the nature of the issues for expert determination, for example, whether they included a question of law or disputed fact or whether the expert has the necessary qualifications and/or procedural mechanisms (including the ability to receive or test evidence) to determine those issues. In cases involving more than one dispute for expert determination, where some of the disputes seem inappropriate for expert determination, issues arise as to whether there will be a multiplicity of proceedings if the expert process is to take its course. Nevertheless, there remains a heavy onus on the party opposing the stay to establish good reason why the stay should be refused in light of the agreed expert process.

40 The plaintiff submits that there are four relevant matters which should influence the Court to decline to stay this proceeding, namely, that the EDP:

(1) would deal with only part of the dispute in this proceeding (the partial resolution issue);

(2) is inapt because the disputed adjustments raise complex questions of law and/or fact (the complexity issue);

(3) is inadequate for the nature of the disputed adjustments, including because there is no mechanism for the single expert to receive, let alone test, evidence (the inadequate procedure issue); and

(4) would lead to a duplication of effort in light of the issues in this proceeding (the duplication issue).

41 As to the partial resolution issue, the plaintiff submitted that while the Expert's determination of the Adjustment Amount (and the disputed components of that amount, i.e. the disputed adjustments) would be binding in the absence of 'manifest error', it would not resolve or determine the allegations of the breach of the SPA by the defendant in this proceeding.

42 Further, the plaintiff submitted that the EDP could not resolve the foreshadowed Seller Warranty claims which the plaintiff submitted was relevant to the exercise of the Court's discretion, given the limited time period in which any such claim must be brought under the SPA.

43 As to the complexity issue, the plaintiff relied upon the complexity of two disputed adjustments: the Trapped Cash adjustment and the Cash Collateral adjustment which together total approximately $19.719 million.

44 The plaintiff submitted that the Trapped Cash adjustment raised issues of fact and of construction of the SPA. In summary, this adjustment relates to the issue of whether a Minova company (Minova Russia) was unable to transfer cash from the Russian Federation to Australia at the Calculation Time by reason of sanctions being imposed by Australia and others on the Russian Federation.

45 The plaintiff submitted that there were 'hotly contested' issues in relation to, among other things, whether Minova Russia was, at the Completion Date/Calculation Time, an ongoing operation in Russia and whether Minova Russia then had 'Cash' (as defined in the SPA) in the Russian Federation. The plaintiff also submitted that there were disputed issues as to whether there were any sanctions imposed on the Russian Federation at the relevant time which restricted Minova Russia's ability to transfer cash. The plaintiff pointed to a spreadsheet which set out the Trapped Cash adjustment, the defendant's position, the Sellers' position and the defendant's position in response.

46 As to the Cash Collateral adjustment, the plaintiff submitted that this required consideration of the definition of 'Debt' and 'Cash' under the SPA and whether the transactions of Minova fell within those definitions. The relevant definitions of Debt and Cash in the SPA are:

Debt means the aggregate of all amounts owing ... by [the Sales Companies/ Minova and their subsidiaries] as at the Calculation Time in respect of the following:

...

(g) an [sic] obligations in respect of any cash collateral to secure bank guarantees, letters of credit or performance bonds to the extent this is required to avoid negative impacts to the business;...

Cash means the aggregate amount of cash and cash equivalents of the Group Companies[8] (whether on hand or credited to an account with a banking, financial, lending or other similar institution or organisation), including all interest accrued thereon, but excluding loans or deposits from one Group Company to another Group Company, in each case as recorded in the general ledgers of the Group Companies.

47 The plaintiff noted that the defendant claimed six items or 'facilities' in respect of the Cash Collateral adjustments. These are set out in a report prepared by the accountants EY Germany dated 19 April 2022. The plaintiff submitted that the Expert appointed under the EDP would need to consider various questions of fact and law to determine whether these items should be included in the Adjustment Amount, namely:

(1) the nature of the legal obligations of the types of contracts (financial instruments) referred to in (g) of the definition of Debt i.e. of a secure bank guarantee, of a letter of credit and of a performance bond;

(2) the legal nature of each of the facilities stated to give rise to the Cash Collateral adjustment;

(3) whether any of those facilities in (2) fall within the obligations of the kind referred to in (1); and

(4) in respect of any facilities falling within (3), whether they are required to avoid negative impacts on the business.

48 As best I understood it, the plaintiff submitted that the first and second questions are legal questions, or involve legal questions, and the last question is a lay question ordinarily within the domain of the experience of an expert. I note that at least some of these issues were raised, in substance, in the 5 August letter.

49 Further, the plaintiff submitted that the 5 August letter recorded that the defendant has admitted that:

(1) most of the facilities were cancelled on or after 28 February 2022 due to the change of ownership;

(2) the only collateral cash which has been paid since the Completion Date was the amount of US $2.5 million paid in March 2022; and

(3) the amount claimed in respect of the sixth facility was not a claim in respect of a bank guarantee, letter of credit or performance bond.

50 I noted in oral argument that the 5 August letter made clear that the parties were aware, and thus the Expert would be aware, of the kinds of issues necessary to determine this adjustment. Counsel for the plaintiff responded that the question was not whether they were capable of being determined by the EDP: rather, these issues demonstrated the risks inherent in the EDP and that 'the risk of manifest error looms large'.[9]

51 As to the inadequate procedure issue, the plaintiff submitted, by reason of the complexity issue, there is a real risk (if not a probability) that:

(1) the single expert to be appointed under the EDP will fail to have sufficient expertise both in legal and accounting matters to competently determine each of the disputed adjustments;

(2) the Expert would not be able to receive evidence or, even if the Expert was able to receive evidence, there is no ability to test that evidence; and

(3) there would be no procedure for the disclosure of relevant documents.

52 These submissions were linked to the complexity issue i.e. that the two disputed adjustments relied upon by the plaintiff raised complex questions of law and fact. As to [51](2) and (3), the plaintiff submitted that there was no obvious means for receiving evidence under the SPA or the Resolution Institute Rules. The plaintiff submitted that there was doubt that the Expert's ability to determine the 'procedure' under the Resolution Institute Rules could include the calling of oral evidence. Further, the plaintiff submitted that there was also doubt about the nature of the 'evidentiary material' that could be received under the Resolution Institute Rules. In any event, there was no means to test any such evidence.

53 As to [51](3), the plaintiff noted the usual judicial procedures available for the determination of all issues of fact and law, including expert evidence of the parties, expert conclaves, the appointment of a single expert or the appointment of an accountant as special referee. The plaintiff submitted that these judicial procedures would enable the Court to have the advantage of relevant accounting expertise while applying its inherent skill and highly developed procedures for the resolution of the dispute in this proceeding, such procedures and skills not being available by appointing one expert under the EDP.

54 The plaintiff relied upon the decision of Chesterman J in Zeke Services Pty Ltd v Traffic Technologies Ltd (Zeke) in support of many of the issues it raised in submissions, including the partial resolution issue and the complexity issue.[10] In that case, his Honour declined to order a stay where only three of a number of disputes were not suitable for expert determination by the agreed accountant.

55 As to the duplication issue, the plaintiff submitted that the EDP would lead to a duplication of effort, largely between the issues in dispute in the EDP and this proceeding. The plaintiff referred to the fact that the Expert's determination could be challenged on grounds of 'manifest error'. As to the meaning of manifest error, the plaintiff referred to the fact that that term is not defined in the SPA but appears to require no more than error, including an error of law, which appears on the face of the Expert's determination.[11]

56 In this regard, the plaintiff submitted that the grant of the stay would likely lead to a multiplicity of proceedings. The plaintiff submitted that, if the factual and legal issues are not appropriately determined in the EDP, then the grant of a stay is very unlikely to resolve the disputes, and may in fact lead to complication of it, by way of a collateral attack on the Expert's determination.[12] The plaintiff also submitted that the EDP would inevitably lead to a fragmentation of issues, noting the flexible procedures available to the courts to resolve all issues in a proceeding.

57 In all these circumstances, the plaintiff submitted that curial determination would provide a more appropriate process for determination of the Adjustment Amount by reason of the combination of non-legal experts and the Court's own legal expertise. It would also provide a better process by reason of the Court's fact-finding procedures and a more complete determination as all aspects of the controversy between the parties could be determined subject to appeal.

58 In the course of oral argument, I asked counsel for the plaintiff how the plaintiff intended that this proceeding should be conducted i.e. which of the Court's 'flexible' procedures the plaintiff submitted the Court should adopt. This was in light of my preliminary view (expressed in oral argument) that if the proceeding was to continue in its current form, the appointment of a special referee was almost inevitable to determine the disputed adjustments.

59 Counsel for the plaintiff submitted that such a question (or the determination of how the proceeding was to be conducted) was premature. In substance, counsel submitted that it would be necessary to consider all the usual judicial procedures available, as set out in [53] above, after the close of pleadings (including any counterclaim) and further negotiations with the defendant. For my part I do not accept that the question as to how the plaintiff intended this proceeding should be conducted was premature.

60 In summary, the defendant submitted that the Sellers should be kept to their contractual bargain and that the plaintiff had not met the onus of showing good reason to refuse a stay until the EDP had been completed. To the contrary, the EDP was the agreed and appropriate process for determination of the disputed adjustments by a single expert.

61 As to the partial resolution issue, the defendant disputed that the EDP would deal with only part of the dispute between the parties. First, while the defendant accepted that the EDP would not determine the alleged breaches of the preparation obligation and the good faith obligation, it would in effect lead to the determination of the issues upon which those breaches depend, namely, the determination of the Adjustment Amount i.e. whether the particular adjustments in the draft Completion Accounts prepared by the defendant have been validly claimed. The defendant submitted that this issue would be dealt with by the EDP. This is because the breaches are based on the failure to properly calculate the Adjustment Amount by preparing the draft Completion Accounts in accordance with sch 7 of the SPA. The purpose of the EDP is to determine the final Completion Accounts and thus the Adjustment Amount in accordance with sch 7.

62 The defendant submitted there would be a number of possible outcomes of the EDP. First, if the Expert determined that the disputed adjustments had all been validly claimed by the defendant (absent manifest error), the plaintiff could not sensibly maintain the claims in the proceeding which would be amenable to summary judgment.

63 Second, and for similar reasons, if the Expert determined that some of the disputed adjustments had been validly claimed by the defendant (absent manifest error), that would limit or reduce the issues in this proceeding. In relation to any disputed adjustment not found by the Expert to have been validly claimed by the defendant, the issue would be whether there had been a breach of the preparation obligation and/or the good faith obligation for those disputed adjustments. However, the defendant submitted that all these issues would be very much limited (and informed) by the outcome of the EDP.

64 In relation to any alleged breach of the preparation obligation and/or the good faith obligation for those disputed adjustments, it was necessary to establish only whether the defendant had breached that obligation and whether any such breach would sound in anything other than nominal damages. In this regard, the defendant submitted that it could not be possible for the debt in respect of the Adjustment Amount to have arisen prior to the finalisation of the Completion Accounts under the terms of the SPA, relying upon cl 7.4 set out above. In all these circumstances, the defendant submitted that, at the very least, the outcome of the EDP would very much limit the remaining issues in the proceeding.

65 As to the foreshadowed Seller Warranty claims, the defendant submitted that this was not relevant to the exercise of the Court's discretion. In any event, the defendant submitted that these claims were independent of the claims made in this proceeding, relying upon the decision of Brown J in Hutson v Nerang Subdivision Pty Ltd (Hutson).[13] By contrast, the plaintiff submitted that in Hutson the court stayed a second proceeding because that second proceeding was dependent on the outcome of the first proceeding (which was itself stayed pending an expert determination process).

66 As to the complexity issue, the defendant noted that the overwhelming majority of the disputed adjustments in the SOC are founded upon non-compliance with accounting principles.

67 In relation to two disputed adjustments relied upon by the plaintiff, the defendant submitted that the plaintiff's submission very much overexaggerated the degree of complexity. The defendant noted that it was commonplace for an expert to form views about questions of fact and questions of law (including of the kind raised by the plaintiff) for the purpose of reaching his or her expert determination. In this regard, the defendant relied upon the comments of Hammerschlag J (as he then was) in Dance With Mr D Ltd v Dirty Dancing Investments Pty Ltd[14] (Dance With Mr D) that '[f]inancial or accounting matters will often (if not always) comprehend the proper construction of the agreement, even if it is not in dispute...'.[15] Indeed, the defendant submitted that that was always envisaged as part of the EDP given that the Expert was to be provided with extracts of the relevant provisions of the SPA.

68 In any event, the defendant submitted there is no reason why an expert accountant could not have legal training, also relying upon Dance With Mr D.[16]

69 As to the Trapped Cash adjustment, the defendant disputed that this issue involved any complexity, submitting that the validity of this adjustment was to be determined in accordance with the definition of 'restricted cash' in the accounting policy manual of Orica (referred to in the spreadsheet in [45] above), which the defendant contended forms one of the documents in the accounting principles under cl 1.4(g) of sch 7.

70 Further, in oral argument, the defendant referred to its letter dated 13 August 2022 (the 13 August letter) noting the basis upon which the plaintiff disputed the Trapped Cash adjustment i.e. that Minova Russia was operating an ongoing operation in Russia on the Completion Date and had Cash (as defined under the SPA) as at the Completion Date available to serve its business. Counsel for the plaintiff did not contend to the contrary in response.

71 As to the Cash Collateral adjustment, the defendant submitted that there was nothing complex in particular about the definition of Debt under the SPA. The defendant referred to the memorandum prepared by the accountants, EY Germany, in relation to the Cash Collateral adjustment. The defendant submitted that the question of whether the amounts fall within the definition of a Debt for the purpose of the SPA was plainly not beyond the expertise of accountants. In this regard, the defendant further relied upon the comments of Hammerschlag J in Dance With Mr D set out in [67] above.

72 Further, the defendant submitted, to the extent that there was uncertainty about any matter of law in relation to issues arising in the EDP, either party could approach the Court on a preliminary question of law under r 6(2)(c) of the Resolution Institute Rules.

73 As to the inadequate procedure issue, the defendant submitted that this overlaps with its submissions in relation to the complexity issue. The defendant disputed that the procedure under the EDP was inadequate given that under the SPA and the Resolution Institute Rules the Expert will be equipped with material provided by the parties to determine the validity of the adjustments, and the ability to request information and assistance under cl 1.4(f) of sch 7. Further, the defendant relied, in particular, upon:

(1) rule 8.2, which provides for the holding of a preliminary conference to address, among other things, a procedure to agree on the issues in dispute, the timetable for submissions, documents and any other evidentiary material; and

(2) rule 9.2, which provides that the Expert may make directions or rulings in relation to the provision of evidentiary material.

74 The defendant also relied upon cl 1.4(i) of sch 7 which provides that, in the absence of agreement between the parties, the Expert will decide the procedures to be followed to decide the Disputed Matters.

75 As to the duplication issue, the defendant disputed that there was any duplication of effort in the proceeding if the EDP was completed. The defendant referred to the submissions relating to the partial resolution issue set out at [64]-[65] above, noting a stay was sought until the completion of the EDP. In these circumstances, the defendant submitted that, at the very least, the EDP would limit the issues in dispute and that this is not a case where the Expert's determination would result in 'nothing more than an ad[17]sory opinion'.17

76 The defendant submitted that, subject to establishing manifest error, the determination of the Expert on the disputed adjustments could not be impugned by the parties. It was for this reason that the defendant sought a limited stay of the proceeding pending the conclusion of the EDP.

77 The defendant submitted that it is not the point that the expert determination might not be binding on the Court. By reason of cl 1.5 of sch 7, the expert determination is binding on the parties (subject to manifest error) and the parties could not re-agitate the disputed matters before the Court without having the Expert's determination set aside, relying on The Gull Lexington Group Pty Ltd v Laguna Bay (Banongill) Agricultural Pty Ltd.[18]

78 Counsel for the defendant did not dispute how far apart the parties were as to the quantum of the Adjustment Amount. Counsel submitted that while the quantum of the Adjustment Amount claimed by each party was considerable, the quantum should not affect the application of the relevant principles relating to the determination of those disputed adjustments.

79 In response to my question as to how this proceeding may be conducted in the event that a stay was not granted, the defendant submitted that it was 'almost inevitable' that a special referee would be appointed to determine the Adjustment Amount. Nevertheless, counsel for the defendant's primary submission was, and remained, that a stay of this proceeding should be granted pending the determination of the EDP as part of the AA resolution process. As a result, I have determined this application in accordance with the submissions of the parties.

80 After considering all the issues raised by the parties in this application, I do not consider that the plaintiff has discharged the onus of showing good reason why a stay should not be ordered until the completion of the EDP. Indeed, I have formed the view that there is good reason why a stay should be granted until that time. I will address each of the issues raised by the plaintiff, noting that I am conscious there is much overlap between them.

81 As to the partial resolution issue, counsel for the plaintiff accepted that the EDP would be binding on the parties in respect of the quantum of the disputed adjustments and, most relevantly, the Adjustment Amount, subject to manifest error.

82 As a result, I am satisfied that the EDP will have the effect of removing or, at the very least, substantially limiting the issues in dispute in this proceeding, in particular the disputed adjustments which are the subject of this proceeding. In this regard, I note that the primary relief sought in this proceeding (the determination and payment of the Adjustment Amount) is the very thing to be determined by the EDP.

83 I generally agree with the submissions of the defendant on the likely outcome of the EDP set out above. First, if the Expert found that all the disputed adjustments were validly claimed by the defendant, that would resolve those disputed adjustments for the purpose of this proceeding and that would practically resolve the alleged breaches of the preparation obligation and the good faith obligation in relation to those adjustments.

84 Second, if the Expert found that only some of the disputed adjustments were validly claimed by the defendant, that would resolve those adjustments for the purpose of this proceeding, thereby reducing or limiting the issues in dispute to those adjustments that were not validly claimed by the defendant. I am conscious that there may remain some outstanding issues in relation to the preparation obligation and the good faith obligation in respect of the disputed adjustments that the Expert found were not validly claimed by the defendant. However, the factual and legal issues that may arise in respect of these obligations would be much more limited in nature in light of the findings of the Expert. Further, in light of the damages claimed for these breaches and the likely amount of damages that may arise if the plaintiff is successful, I consider that there may be little commercial necessity or sense to pursue such claims.

85 I am also conscious that there may be a challenge or challenges to the Expert's determination based on manifest error. I will deal with this further below. However, any such challenge is likely to involve further consideration, framed in the context of manifest error, of the relevant disputed adjustment.

86 This is in a context where the SPA contained the AA resolution process, including the EDP, for the determination of the Adjustment Amount. The SPA contains a mechanism for determination of the Adjustment Amount by agreement, and, failing agreement, by expert determination in accordance with the terms of the SPA and the Resolution Institute Rules. There is also a provision for payment within five days of that expert determination. Further, there is another provision which deals with what is to apply if the Expert's determination is outside the range submitted by the plaintiff or the defendant. In my view, all these provisions confirm the objective intention of the parties that there be a quick and efficient process for determination of the Adjustment Amount under the EDP, far from the trial process that would apply in a court.

87 Further, although I have had regard to the Seller Warranty claims in exercising my discretion, they are far from determinative in the exercise of my discretion in this case. This is because I consider that, on the evidence before me, the Seller Warranty claims are legally and factually separate from the issues which arise in this application or in the EDP.

88 As to the complexity issue, I am conscious of the amount of the two disputed adjustments relied upon by the plaintiff, in particular, the Cash Collateral adjustment claimed by the defendant which is in the order of $18.7 million. However, based on the material I was referred to in written submissions and oral argument, I consider the plaintiff has overstated the complexity of these two disputed adjustments: rather, it would appear those issues are of a much more limited compass.

89 This is in a context where I consider that it is part of the role of the Expert:

(1) to consider the relevant terms of the SPA (including the definitions of items such as Debt, noting that relevant provisions of the SPA are to be provided to the Expert under cl 1.4(d)(iii) of sch 7) and form views on their construction for the purposes of reaching his or her determination; and

(2) to consider the relevant facts as submitted by the parties and to determine whether those facts fall within the relevant definitions of those terms and/or the relevant accounting principles (such as whether assets or liabilities exist as at a particular date).

90 My view in this regard is confirmed by my review of the disputed adjustments in the SOC. Most of the disputed adjustments in the SOC are alleged to be erroneous because they were not prepared in accordance with the accounting principles.[19] Some of the disputed adjustments are alleged to be erroneous because they do not fall within a relevant definition in the SPA such as 'Tax' (VAT adjustment) or Debt.[20] This includes the Cash Collateral adjustment which requires consideration of Debt and Cash under the SPA, and whether the transactions of Minova fell within those definitions. I also note it would appear that some of these disputed adjustments depend on establishing certain facts and whether assets or liabilities were in force at the Calculation Time.

91 In my view, these are the kinds of decisions that expert accountants often make in advising their clients or in reaching expert determinations. There is nothing unusual or out of the ordinary about such decisions so as to make those issues too complex or inapt for determination by such an expert.

92 As to any issues relating to the applicability of the relevant provisions of the SPA, I note the relevant definitions relied upon including Debt and Tax involve consideration of common types of financial facilities. I reiterate that these are the kinds of issues that expert accountants often determine in advising their clients or in reaching expert determinations. In this regard, I would adopt the comments of Hammerschlag J in Dance With Mr D relied upon by the defendant and set out in [67] above.

93 For completeness, while in my view it may be preferable to obtain an accountant with legal qualifications to be the Expert under the EDP in this case, I do not consider it necessary that the Expert has such qualifications.

94 Further, it is important to note that, as part of the EDP, the Expert will be able to receive submissions from the parties and request further information and assistance. Under the Resolution Institute Rules, the Expert may receive evidentiary material. This was not disputed in the hearing before me. Thus, the material before the Expert will include the relevant documents relied upon by the parties or requested by the Expert. In this regard, on the evidence before me, it appears that the scope of any factual and legal issues have been well identified already as part of the AA resolution process under the SPA: see for example the 5 August letter, the 13 August letter and the spreadsheet referred to in [45] above.

95 I note that the nature of the issues to be determined in respect of the disputed adjustments by the Expert under the EDP are very different from the nature of the issues for determination considered in Zeke. In that case, the parties had agreed upon the expert accountant to determine a number of issues, most of which were appropriate for determination by that expert. However, there were three issues which related to whether there had been alleged misrepresentations as to bad debts and whether some of the staff were in fact employed by the company and performed services for it.

96 His Honour concluded that those three issues were not amenable to resolution by the agreed expert determination processes which the parties had chosen. This was because these issues involved clear questions of fact and law relating to the making of representations, the meaning and effect of any representations made, whether they were false (including whether there were reasonable grounds for them) etcetera. Many of the issues raised required oral examination for them to be determined. Chesterman J concluded that each of these disputes was more amenable to determination by a trained lawyer such as a judge or an arbitrator.

97 In these circumstances, his Honour concluded that to order a stay of the proceedings to allow the expert to determine only some of the issues would be unsatisfactory, given that he considered the same decision maker should determine all issues in dispute. As a consequence, his Honour declined to make an order to stay the proceeding.

98 The relevant factors in Zeke are not present in this case. This is in light of my findings as to the issues involved in the expert determination, in particular, the Trapped Cash adjustment and the Cash Collateral adjustment and the extent of procedures available to the Expert under the EDP, including the Resolution Institute Rules, which I will set out further below.

99 For completeness, in respect of the disputed adjustments, in particular the Cash Collateral and Trapped Cash adjustments relied upon by the plaintiff, I am not satisfied that there are any questions of fact which cannot be determined by reference to the submissions or evidentiary material (such as relevant documents) relied upon by the parties. Nor am I satisfied that there are any questions of law (in particular, the construction of the SPA) which cannot be determined by reference to the terms of the SPA, the relevant documents relied upon or the application of the accounting principles and the accounting principles hierarchy. In my view, the disputed adjustments are matters to which an expert accountant is particularly well-equipped to answer: they are not matters in the provenance of a trained fact finder such as a judge or an arbitrator.

100 As to the inadequate procedure issue, and related to the complexity issue, I consider that the EDP is adequate to determine the disputed adjustments. This is in light of my conclusions on the complexity of the issues arising in relation to the disputed adjustments and the appropriateness of an expert accountant to determine them. In this case, in the context of the information to be provided by the parties to the Expert under cl 1.4(d) of sch 7, the Expert has the ability, as set out above, to:

(1) request any information, assistance or cooperation, which must be provided by the parties [cl 1.4(f)];

(2) adopt procedures suitable to the circumstances of the case 'to provide an expeditious cost-effective and fair means of determining the [d]ispute' [r 5(3) of the Resolution Institute Rules];

(3) hold a preliminary conference for the purpose of determining the procedures which will govern the EDP [r 8 of the Resolution Institute Rules]; and

(4) make directions or rulings for the provision of submissions and evidentiary material and meetings between experts, among other things [r 9 of the Resolution Institute Rules].

101 Further, I note that, if necessary, either party may apply to the Court for a determination on preliminary questions of law [r 6(2)(c) of the Resolution Institute Rules].

102 Consistent with my view as to the complexity of the disputed adjustments, I am not satisfied on the evidence before me that there is a need for testing any evidence by cross-examination. Rather, on the evidence to which I was referred in written and oral submissions, the factual issues appear of relatively small compass and can be determined by reference to submissions, documentary evidence or other evidentiary material without any requirement for cross-examination. I refer to my comments in relation to the Trapped Cash adjustment and the Cash Collateral adjustment in [88] and [94] above. For completeness, I accept the submission of the plaintiff that it is not open for the Expert under the EDP to hear oral evidence or to test any evidence by cross-examination. However, there was no suggestion on the material before me that the plaintiff wished to lead oral evidence in relation to any of the disputed adjustments.

103 As to the duplication issue, I have concluded that there is unlikely to be a duplication of proceedings if the parties apply the EDP as intended. This is in a context where the primary matter to be determined in this proceeding (i.e. the amount and payment of the Adjustment Amount) is the subject of the EDP. In my view, the outcome of the EDP will resolve, or otherwise very much limit, the issues in dispute in this proceeding.

104 I am conscious that there is a risk of other proceedings relating to the determination of the disputed adjustments under the EDP process. As noted above, counsel for the plaintiff submitted that the risk of manifest error challenges 'looms large', at least in light of the complexity of the issues as the plaintiff sees it in relation to the Cash Collateral adjustment. For the reasons set out above, I do not accept the plaintiff's analysis of the complexity of the issues of the disputed adjustments. Thus, I am unable to form the view that any such challenge 'looms large' in relation to the Cash Collateral adjustment or the Trapped Cash adjustment, notwithstanding the quantum of these two disputed adjustments and the fact that the plaintiff has issued this proceeding (and vigorously opposed this application).

105 Further, under r 10(2) of the Resolution Institute Rules, the Expert is to provide a statement of reasons in such form as the Expert considers reasonably appropriate, having regard to the amount and complexity of the dispute. I also refer to the plaintiff's submissions in [55]-[56] above in relation to the nature of any challenge based on manifest error which I generally accept. In my view, the fact that reasons will be provided is likely to limit any possible challenges, or at the very least, to limit the scope and nature of any such challenges.

106 Further, I am conscious that there is a more remote possibility of applications on questions of law arising from the conduct of the EDP.

107 However, despite the possibility of applications to challenge the Expert's determination or to seek clarification of questions of law arising under the EDP, in all the circumstances set out above, the plaintiff has not discharged the onus of showing good reason why a stay should not be ordered until the completion of the EDP. To the contrary, in all the circumstances set out above, I consider that I should exercise my discretion to grant the stay of this proceeding until that time. This is particularly so in light of:

(1) the 'weighty consideration' to be given to the agreed EDP;

(2) the nature of the primary allegations and relief sought in this proceeding (i.e. the determination and payment of the Adjustment Amount);

(3) related to (2), the issue to be determined by the EDP (the determination of the Adjustment Amount) which is likely to remove or reduce the factual and/or legal issues in dispute in this proceeding;

(4) the nature of the issues arising for determination in relation to the disputed adjustments (in particular, the Trapped Cash adjustment and the Cash Collateral adjustment) which call for the kinds of decisions that accountants would often make in advising their clients or in reaching expert determinations; and

(i) a means of determination of the disputed adjustments, including via the Resolution Institute Rules; and

(ii) a mechanism for prompt payment of the Adjustment Amount.

108 I will hear from the parties on the form of order and costs.

[1] It would appear that the former name of the defendant was Aurelius Giraffe Limited which is the named Buyer under the SPA: see paragraph 2 of the statement of claim dated 6 October 2022 filed in this proceeding (SOC). No issues as to the parties to the SPA or this application were raised before me.

[2] I note there appears much overlap between the two aspects of the preparation obligation, the substance being that the defendant failed to prepare to draft the Completion Accounts in accordance with sch 7 of the SPA.

[3] Which the plaintiff alleges the defendant has accepted ought not be included in the Completion Accounts: SOC, [44].

[4] [2018] FCAFC 118.

[8] Defined in the SPA to mean the five Sellers and their subsidiaries.

[10] [2005] QSC 135; [2005] 2 Qd R 563.

[11] Relying upon Middlemount South Pty Ltd v Anglo American Metallurgical Coal Assets Pty Ltd [2019] QSC 211, [55] (Jackson J).

[12] In making this submission, the plaintiff paraphrased and referred to a decision of Lansdowne AsJ: Meyertran Pty Ltd v TVS-Asianics Australia Holdings Pty Ltd (2020) 61 VR 320, 350 [118].

[13] [2021] QSC 323.

[14] [2009] NSWSC 332.

[18] [2018] VSCA 85; (2018) 55 VR 273, 290-95 [66]-[84] (Santamaria JA and McDonald AJA).

[19] See the adjustments referred to in [30](1), (3)-(5) and [31](3).

[20] See the Cash Collateral adjustment, the Trapped Cash adjustment and the Unspent Capex adjustment.