Simson v Wotif

History of the proceedings 12On 13 April 2002, his Honour Gzell J heard an application by Wotif for summary termination of the plaintiffs' proceedings and for summary judgment on the cross-claim. In the alternative, an application was made to strike out the whole or part of the relevant proceedings. 13The plaintiffs had pleaded in their statement of claim, filed 12 October 2011, that there was an implied term in the agreement in the following terms: "Wotif would not, within 12 months after the Completion Date, cause GoDo to operate the Business in a manner such as to make it materially more likely that GoDo would achieve a Post-completion EBITDA lower than the expected or anticipated figure of $632,000." 14In an ex tempore judgment, his Honour ordered the pleading of the implied term be struck out with liberty to replead. 15The plaintiffs filed an amended statement of claim pursuant to the order of Gzell J on 27 April 2012.

The current proceedings 16In the amended Notice of Motion filed before me on 10 December 2012, Wotif seeks the following orders: (1)Pursuant to UCPR rule 13.4, the proceeding sought to be advanced by the plaintiffs' amended statement of claim (filed on 27 April 2012) be dismissed on the basis that no reasonable cause of action is disclosed. (2)Alternatively, pursuant to UCPR rule 14.28, the plaintiffs' amended statement of claim, or such parts of it as the Court considers appropriate, be struck out on the basis that it: (a)discloses no reasonable cause of action; or (b)has a tendency to cause prejudice, embarrassment or delay in the proceedings. (3)In the further alternative, pursuant to UCPR rule 15.10, the plaintiffs file and serve the following particulars of the amended statement of claim: (c)the precise words said to have been spoken by each party to the conversations alleged in the existing particulars to paragraph 4 of the amended statement of claim, in so far as those words are relevant to the allegations of an oral term at paragraph 5A and/or of a representation at paragraph 6A; (d)as to paragraphs 5A and 6A, the alleged meaning of the expressions "operating model" and "manner in which GoDo conducted its business" including in respect of: (i)whether either or both of the expressions is said to encompass all or any of the matters set out at 14(d)(iii) of the defendant/cross claimant's letter dated 14 May 2012; and (ii)what is the time-frame, prior to entry into the written terms of agreement between the parties, said to be applicable to each expression; and (e)as to paragraph 6C, what the defendant/cross claimant is said to have done by way of conducting itself pursuant to the alleged conventional basis oragreed assumption; and (f)as to the existing particulars under paragraph 8, and the pleading and damage, each of the further and better particulars sought in numbered paragraphs 1 to 6 inclusive of the defendant/cross claimant's letter dated 22 November 2012 (by reference to particulars (a) to (f) inclusive under paragraph 8). 17In relation to the cross claim proceeding: (1)Pursuant to UCPR rule 13.1, judgment be entered for the cross claimant in relation to the whole of the cross claimant's claim for relief in the first cross claim. (2)Alternatively, pursuant to UCPR rule 14.28, the amended defence of the cross defendants to the first cross claim (filed on 27 April 2012), or such parts of it as the Court considers appropriate, be struck out on the basis that it: (a)discloses no reasonable defence; or (b)has a tendency to cause prejudice, embarrassment or delay in the proceedings. 18In relation to both proceedings: (1)Such further or other orders as the Court considers appropriate. (2)Costs of this motion and the proceedings. 19As noted in par 2 above, par 6(a) of the plaintiffs' amended statement of claim is not pressed in these proceedings. The attack on the pleading has three main bases. (1)the alleged oral term is precluded by an entire agreement clause in the written Share Sale Agreement; (2)there can be no equitable estoppel as alleged, because the alleged representation on which it is founded is not sufficiently clear and unambiguous; and (3)there can be no estoppel by convention, because the facts necessary to found the alleged convention are not alleged and the terms of the pleaded convention are not sufficiently clear and unambiguous.

The legislation 20Rule 13.4 of the Uniform Civil Procedure Rules 2005 reads as follows: "13.4 Frivolous and vexatious proceedings (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)." 21And UCPR r 14.28 reads: "14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)." 22In relation to the alternative order sought, UCPR r 15.10 reads as follows: "15.10 Order for particulars (1) The court may order a party to file: (a) particulars of any claim, defence or other matter stated in the party's pleading or in any affidavit relevant to the proceedings, or (b) a statement of the nature of the case on which the party relies, or (c) if the party claims damages, particulars relating to general or other damages. (2) Without limiting subrule (1), if a pleading alleges that a person had knowledge or notice of some fact, matter or thing, the court may order that party to file: (a) if the pleading alleges knowledge, particulars of the facts on which that party relies, and (b) if the pleading alleges notice, particulars of the notice." 23And in relation to the cross claim, UCPR r 13.1 reads: "13.1 Summary judgment (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to damages includes a reference to the value of goods."

The strike-out proceedings 24The plaintiffs' made the following submission regarding the principles the Court should apply when considering whether to strike out a pleading pursuant to r 14.28: "(a) The power to strike out pleadings because they disclose no reasonable cause of action should be exercised only in 'plain and obvious' cases; (b) A case is not 'plain and obvious' and the power to strike out should generally not be exercised where there is a real issue to be tried, whether it is one of fact or law; (c) The general principle that the power to strike out should be exercised only in plain and obvious cases precludes the court from an interim enquiry about the real merits of the plaintiff's case; (d) It follows that the allegations in the impugned pleading will ordinarily be taken as accepted. (In the present case, the conversations pleaded are not denied). (e) Further, there are numerous warnings in the authorities against entertaining strike-out applications where they involve a preliminary and necessarily inconclusive investigation of the facts on which the claim is based. Particular care should be taken when the issue under consideration is a question of law. The common law can, and does, change. Further, while the Court may, in an appropriate case determine a difficult question of law on a strike out application the Court ought not do so unless it is satisfied that doing so will either avoid the need for, or substantially reduce the scope of, a subsequent trial." (citations omitted) 25In the proceedings before Gzell J on 13 April 2012, reported at Simson v Wotif.com Holding Ltd [2012] NSWSC 432, Wotif sought summary termination of the plaintiffs' proceedings and for summary judgment on the cross-claim. In the alternative, application was made to strike out the whole or part of the relevant pleadings. At [18] his Honour said: "The termination of the proceedings is subject to principles that are well understood. The case must be very clear to justify summary intervention to prevent a plaintiff submitting a case for determination in the appointed manner (Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91). The court's powers of summary dismissal should not be exercised to deny a plaintiff access to the courts unless the lack of a cause of action is clearly demonstrated (General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129). It is for the applicant to demonstrate that the statement of claim is beyond saving by legitimate amendment (Penthouse Publications Ltd v McWilliam [1991] NSWCA 222; see also Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631)." 26In those proceedings, his Honour struck out the relevant paragraphs in the pleadings but gave liberty to the plaintiffs to re-plead within 7 days. The principles to which the plaintiff and his Honour referred are well known and require no further elaboration.

Does the Agreement include an oral term? 27In their amended statement of claim, the plaintiffs' plead the following in par 5A: "There was an oral term of the Agreement that within the 12 month period after the Completion Date, Wotif would not change, nor cause GoDo to change, the operating model which had been used by GoDo in the conduct of its business or the manner in which GoDo had conducted its business, prior to the sale of the shares in GoDo." 28In the particulars to par 5A, it is pleaded that the oral term is constituted or evidenced by conversations between the plaintiffs and Robbie Cooke and David Tomlins of Wotif prior to the Agreement which was reached with Wotif to purchase from the plaintiffs all of the issued shares in the capital of GoDo. The plaintiffs submit that prior to executing the Agreement, the plaintiffs sent an email to Robbie Cooke and David Tomlins of Wotif, setting out their concerns regarding the "earn out" provisions. After sending the email, but prior to entering in the Agreement, the plaintiffs had several conversations with Robbie Cooke and David Tomlins where they had said it would be "business as usual" in relation to the operation of GoDo, or words to that effect. Neither Robbie Cooke nor David Tomlinson deny that they made these statements and in any event, in an application such as the present, I should assume the correctness of the plaintiffs' allegations in this regard. 29It is the plaintiffs' case that in breach of the term pleaded in par 5A, Wotif changed, or caused GoDo to change, the operating model which had been used by GoDo in the conduct of its business prior to the sale of its shares. 30Wotif submits that the oral term, which was said to have arisen from pre-contractual negotiations, cannot survive the entire agreement clause in the Agreement at cl 19.2. 31Clause 19.2 of the Agreement states: "19.2 Sole Understanding This Agreement shall constitute the sole understanding of the Parties with respect to the subject matter and replaces all other agreements with respect thereto." 32Counsel for Wotif submitted that the law is clear that such a clause will exclude an alleged oral term: Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417 at 430; Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90; (1937) 59 CLR 348 at 358, 359, 363, 365 and 368; Lewison & Hughes, The Interpretation of Contracts in Australia (2012) at [3.13]; and generally Equuscorp v Glengallen Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 at 483-484. Counsel also referred me to the Victorian Court of Appeal where the Court held that any dispute as to whether the parties have embodied the entirety of their agreement in writing is precluded by an entire agreement clause: Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd [2012] VSCA 134 at [106-108]. 33Counsel for the plaintiffs referred me to Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 where Campbell JA at [90] summarised the principles to apply, in determining whether a contract is entirely in writing or partly oral and partly in writing, as follows (citations omitted): (a)When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties. (b)It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them. (c)The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing. (d)Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact. Similarly, finding the terms of a wholly oral contract is a question of fact. (e)In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed. (f)A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract. 34I note that this case did not concern a contract where there was an entire agreement clause. 35The defendant submitted that an express statement in a contract, which provides in clear and unambiguous terms that the written contract contains the entirety of the bargain between the parties, in respect of a particular subject matter, provides an evidentiary basis for the conclusion that in respect of the subject matter of that clause, the parties have agreed that their bargain is entirely in writing. 36In oral submissions before me, counsel for the plaintiffs submitted that the Agreement was a sale of shares agreement with an earn-out arrangement based on running the business over a period of time which would not permit a person in the position of Wotif to simply compete against the business. Wotif acquired the shares and it was the company, GoDo Pty Ltd, that was to run the business. There was no provision in the Agreement as to how the business was to be run. This was the subject matter of the oral term that the parties had agreed, that after the completion of the Agreement, Wotif would not change or cause GoDo to change the operating model which had been used by GoDo for the conduct of its business prior to the sale of the shares. 37Counsel for the plaintiffs referred me to the statement of Allsop J in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [440]: "Whilst 'entire agreement' clauses have sometimes received separate treatment as a genus, leading to an approach, as evidenced by the appellants' submissions here, that there is a rule of law individually to them, it seems to me that they only reflect the epitome of the operation of the parole evidence rule. The parties have merely expressly avowed that the totality of the contract, about the relevant subject matter, is to be found within the four corners of the document." 38Importantly his Honour uses the words "the relevant subject matter" and in that case there were separate preceding arrangements, which dealt with separate subject matters. 39It was submitted that the oral term pleaded is not inconsistent with the operative provisions of the Agreement and does not contradict them, but rather adds something for which the operative provisions did not provide, namely how GoDo was to be run during the earn-out period. 40Counsel for Wotif submitted that there was an inherent unlikelihood in commercial negotiations for the sale of an internet business to a much larger one, where there were lawyers in due diligence on both sides, that there would be a critical representation made to which there was no reference in any contract or agreement and where the same topic had been dealt with by the "cap and floor" mechanism previously addressed by Gzell J. 41In his judgment in the previous proceedings, his Honour said at [15]: "Here is seems to me that the parties did take into account that there might be, as a result of the determination of the EBITDA of the business during the 12 month period after sale, either an increase or a decrease in the purchase price. Each party was prepared to bear the risk of what might happen within the range from the minimum to the maximum adjusted price for the shares specified in the agreement for sale: the plaintiffs that it might be at the lower end of the scale, the defendant that it might be at the upper end of the scale." 42The question is of course what is the correct construction of the expression "the subject matter" in cl 19.2 of the agreement. The defendant contends for a wider reading of the expression, saying that it cannot sensibly be said that the operation of the business during the earn-out period was outside the subject matter of the Agreement. For their part, of the plaintiffs point to the nature of the sale agreement which was in fact a sale of the shares in GoDo Pty Ltd rather than the business which it operated. They also point to the provisions of the sale agreement which clearly say nothing as to how the business will be operated during the earn-out period. 43No doubt, if one takes a commercial view of the arrangement, one would favour the defendant's argument as to what is the subject matter. However, the plaintiffs' view is one which I would not describe is unarguable and because of this, I do not think it is appropriate on a summary judgment application to strike out the pleading.

Estoppel by representation 44The amended statement of claim contains a new [6A], which pleads a pre-contractual representation by Wotif to the plaintiffs, in trade or commerce, that: "if the Plaintiffs entered into the Agreement Wotif would not change, nor cause GoDo to change, within the 12 month period after the Completion Date, the operating model which had been used by GoDo in the conduct of its business or the manner in which GoDo had conducted its business prior to the sale of the shares in GoDo". 45It is the underlined words upon which the defendant focuses. In its submissions, it said: "The principal problem with this purported cause of action, which should lead to its strike out, is that the alleged representation is not sufficiently clear and unambiguous to disclose a reasonable cause of action: Legione v Hateley (1983) 152 CLR 406 at 435-7. It is also, as a matter of pleading, embarrassing for its ambiguity and vagueness. The ambiguities and uncertainties include: (a) what is the time-frame applicable to the words underlined above - is it referable to the conduct of the business immediately prior to completion, during some unspecified time before that, or for the whole period of GoDo's existence? (b) what is the meaning and limits of 'the operating model' and 'manner in which GoDo had conducted its business' and, since they are used disjunctively, what is the difference between them? (c) without limiting (b), does either of both of the expressions encompass for example: (i) whether the business was owned by the Simsons or by Wotif; (ii) whether management and/or staff of Wotif would play a role in the business; (iii) the management structure of the company and/or the individuals within it; (iv) the identity and/or roles of other staff employed by the company; (v) the IT and marketing support provided to it; (vi) its distribution channels (including branding and website addresses) and/or supplier channels; (vii) its scale, including the geographical reach of its offering; (viii) whether revenue would be generated for the business by websites operated by Wotif; (ix) the IT platform on which the business operated; and/or (x) the cost base and general financial structure of the business." 46There is much force in the defendant's submissions and in particular I find the lack of definition of the operating model, and also the manner in which GoDo Pty Ltd had conducted its business makes it hard for the reader, and indeed the defendant, to perceive what might be the breaches which have been alleged. Much was made in submissions by the plaintiffs of the fact that those involved in the purchase of the company must have had a good idea of what it was buying. I, as a reader of the pleading, have no such knowledge and in my view the defendant is entitled to know precisely what is meant by these expressions. 47It is plain that the plaintiffs have a number of complaints about what was done by the defendant in running the business. They are pleaded in par 8 in these terms: "In breach of the term of the Agreement pleaded in paragraph 5A Wotif changed, or caused GoDo to change, the operating model which had been used by GoDo in the conduct of its business or the manner in which GoDo had conducted its business prior to the sale of the shares in GoDo." 48The particulars relating to par 8 are as follows: "The best particulars which the Plaintiffs can presently provide are as follows. a) Prior to the Completion Date a full time manager, by the name of Vanessa, was employed by GoDo to manage the GoDo business. Following the Completion Date a manager, by the name of Renee Welsh, was employed on a part time basis to manage the GoDo business. The best particulars which the Plaintiffs can presently provide is that they believe that Renee Welsh was employed only 2.5 days per week, and that only 2 days of that time were spent in GoDo's office. b) Further, Robbie Cooke, on behalf of Wotif, authorised, permitted or acquiesced in Renee Welsh, through a company owned or controlled by her, named 'Codename: Tuesday Pty Ltd' conducting a web-based business in competition with the GoDo business which had been acquired by Wotif. The web-based business conducted by Codename: Tuesday Pty Ltd, at the control or direction of Renee Welsh, with the knowledge of Robbie Cooke, was operated through a web-site known as www.bookingboss.com. That business competed with the business conducted by GoDo by empowering or teaching its customers how to do the things which GoDo was marketing to its customers, without the need to pay GoDo to do so. Further particulars will be provided after discovery and other interlocutory steps. c) No budgets or targets were prepared by GoDo or communicated to any of its staff prior to March 2010 or thereafter. Further particulars will be provided after discovery and other interlocutory steps. d) After the Completion Date GoDo changed the architecture of its online platform. As a consequence of such change the website which was used by GoDo became unstable, resulting in fewer transactions proceeding to a completed sale. Further particulars will be provided after discovery and other interlocutory steps. e) After the Completion Date GoDo removed or changed the terms on which it used the distribution channels formerly used by GoDo. Further particulars will be provided after discovery and other interlocutory steps. f) Wotif merged GoDo's business into Wotif's existing business rather than operated GoDo as a stand-alone business. Further particulars will be provided after discovery and other interlocutory steps." 49Although these are quite disparate complaints, one would have thought that the plaintiffs could properly provide some further definition of the terms for the purposes of the pleading. Given that I will not be striking out the oral term and the matter can thus proceed to hearing, I will give the plaintiff leave to replead the pleading to give content to the expressions to which I have referred. 50There is a further problem with the estoppel case in that par 6F of the amended statement of claim pleads that it would be unconscionable for the defendant to depart from its alleged representation. It will be necessary for the plaintiffs to plead any material facts in respect of which they allege there has been a departure. The claim for common law or equitable unconscionable action, leaving aside the use of that term within the meaning of the Trade Practices Act 1974, is not the subject of any claim for relief and accordingly the relief should be pleaded.

Estoppel by convention 51This is pleaded in par 6C of the amended statement of claim and is in these terms: "Further, the Plaintiffs and Wotif adopted a conventional basis, or an agreed assumption, for the governance of their legal relations in respect of the manner in which Wotif would conduct or procure GoDo to conduct its business during the 12 month period after the Completion Date." 52In the particulars, it was pleaded that the agreed assumption or conventional basis was that Wotif would not change, nor cause GoDo to change, within the 12 month earn-out period, the operating model which had been used by GoDo in the conduct of its business or the manner in which GoDo had conducted its business prior to the sale of the shares in GoDo. It was then pleaded that acting on the conventional basis or agreed assumption, the plaintiffs entered into the agreement and that Wotif knew that the plaintiffs would enter and were entering into that agreement on the conventional basis or agreed assumption. 53There are of course the problems to which I have referred to above when dealing with the estoppel by representation case and they apply equally to the present pleading. 54An important matter raised by the defendant is the effect of a recent Court of Appeal case which concerns an ongoing debate between 1990 and this year about whether McLelland J was right to hold, in Johnson Matthey Ltd v AC Rochester Overseas Corporation (1990) 23 NSWLR 190 at 195, that the parole evidence rule operates to exclude evidence of an estoppel by convention alleged to arise from pre-contractual negotiations. That debate has now been resolved in favour of McLelland J's conclusion, by the decision of the Victorian Court of Appeal in Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd [2010] VSCA 134. That decision is binding on this Court: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [135]. 55In Johnson Matthey, there was an entire agreement clause (see 194 at D) so that the parole evidence rule applied (194 at F-G). McLelland J said at 195-196, after the conclusion already noted above, that: "It would be a serious threat to the stability of commercial relationships and dealings if parties who, after lengthy and intricate negotiations, deliberately recorded their agreement in permanent written form, were subject to the risk of having that permanent written record yield to the inherently less reliable evidence of oral statements made during the course of negotiation ...in my view, reasons of principle and policy combine to exclude evidence of alleged estoppels by convention or any other agreements or understandings arising in the course of pre-contract negotiations which culminate in a written contract, except in proceedings for the rectification of the written contract...The effect of any [entire agreement] clause will of course depend on its own terms and context, but in general it may be that except in the case of fraud, and subject to any statutory provision, an 'entire contract' clause will bind the parties in accordance with its terms, properly construed. Such a clause itself gives rise to an estoppel by convention which excludes any antecedent estoppel which might otherwise have had effect." 56The defendant submitted that Retirement Services Australia represents the end of any slim prospect of success, which the plaintiffs' purported cause of action in conventional estoppel might previously have enjoyed. Apparently there is an unresolved appeal to the High Court in respect of Retirement Services Australia. The Court of Appeal said the following: "137 In any event, we agree with McLelland J, who in Johnson Matthey v AC Rochester Overseas Corp held that 'the parol evidence rule operates to exclude evidence of an estoppel by convention alleged to arise from pre-contractual negotiations.' His Honour continued: In substance an estoppel by convention is in the nature of an agreement. There is no less reason in principle that such an agreement be treated as superseded by the subsequent written contract than that any other agreement arrived at during pre-contract negotiations be so treated. Furthermore, it would be subversive of the policy on which the parole evidence rule is founded, and would unduly shake the security of written contracts, if proof were permitted of such alleged estoppels. 138 We accept that Johnson Matthey was not followed by Rolfe J in the rather different case of Whittet v State Bank of New South Wales. Whittet was essentially about unconscionability. That claim was not made at trial and, so far as relevant, was raised for the first time on appeal. If the two authorities cannot be distinguished, and we think they can, we prefer Johnson Matthey. 139 In our opinion, no estoppel by convention arises on the facts of this case, and if it did it was superseded by the written agreements prepared by Darnley's solicitors." 57 I am of the view that I should follow the Victorian Court of Appeal's decision even though its view was obiter, and thus the pleading cannot stand. I will strike out paragraphs [6C], [6D], [6E(b)] and [6F(b)] with no leave to re-plead.

Paragraph 9 of the statement of claim 58There was a debate about this which is in the following form: "9. In breach of clause 3.4(a) of the Share Sale Agreement Wotif has failed or refused to provide the Plaintiffs with the EBITDA supporting documentation for the period ending 31 December 2010. PARTICULARS On or about 27 April 2011 Biren Joshi and John Phillips, of the firm C W Stirling & Co, the Plaintiffs' accountants, attended the offices of Wotif in order to review the book, records and other supporting documentation in order to review GoDo's EBITDA for the 12 month period ending 31 December 2010. On 27 April 2011 Mr Craig Dawson and Mr Sean Simmons, for and on behalf of Wotif, refused to permit Mr Joshi or Mr Phillips to inspect (i) sales break up by supplier by month, (ii) monthly management reports and notes, (iii) minutes of meetings of directors, (iv) an organisation chart, (v) a list of the number of meetings attended by directors, (vi) traffic monitoring on the web-site, (vi) budget for the 2010 financial year, or to meet with Information Technology staff including the new manager, Renee Welsh. Further, during the said meeting on 27 April 2010 Mr Craig Dawson and Mr Sean Simmons refused to answer a question asked by Biren Joshi and John Phillips as to why GoDo had such a high cost of sales during the first 4 months of the relevant 12 month period. By email dated 28 April 2011 Mr Dawson declined Mr Phillips' request to permit him to speak with Renee Welsh in order to ascertain what changes were implemented by GoDo, following the Completion Date, which caused the enormous drop in its EBITDA. A true copy of the email dated 28 April 2011 may be inspected at the offices of the solicitors for the Plaintiffs upon prior notice." 59The paragraph is referred to in the context of the defence to the cross claim where the defendant claims a refund as a result of the reduced EBITDA. 60The mechanism for determining the final adjusted purchase price is contained within cl 3.4 of the Agreement. It reads as follows: "The Final Adjusted Purchase Price shall be calculated and paid (either, as applicable, as an addition to the Base Purchase Price by the Purchaser or as a partial refund of the Base Purchase Price by the Vendor) in accordance with the following: (a) The Purchaser will within 3 months of the anniversary of the Completion Date: (i) produce the Relevant Audited Accounts; (ii) calculate the Post-completion EBITDA; and (iii) calculate the Final Adjusted Purchase Price and the Adjustment Amount (as described in clause 3.4(d)); and shall provide each of these items and supporting documentation to the Vendor. (b) The Vendor (acting jointly) and their accountants shall be entitled to inspect the books and records of the Company in order to ascertain and verify the material provided pursuant to clause 3.4(a). Inspection shall take place within 30 days following the provision of material by the Purchaser to the Vendor at a date (Inspection Date) and location to be agreed by the Parties acting reasonably. (c) If the Vendor does not agree with any or all of the Post-completion EBITDA, the Relevant Audited Accounts, the Final Adjusted Purchase Price or the Adjustment Amount as calculated by the Purchaser it shall notify the Purchaser within 30 days of the Inspection Date. The Parties shall in such event meet and attempt to agree the Items in dispute. In the event that agreement cannot be reached within 7 days of such meeting the matter shall be referred to dispute resolution in accordance with clause 11. (d) The Final Adjusted Purchase Price and the Adjustment Amount shall be calculated and paid as follows: (i) Step 1: multiply the Post-completion EBITDA by 10; (ii) Step 2: subtract the Base Purchase Price from the amount calculated in Step 1; (iii) Step 3: if the amount calculated in Step 2 is positive, that amount (the Adjustment Amount) shall be paid by the Purchaser to the Vendor subject to the qualifier that the sum of the Base Purchase Price plus the Adjustment Amount shall not exceed the Maximum Adjusted Purchase Price and In such circumstances the Adjustment Amount be reduced accordingly; and If the amount calculated in Step 2 is negative, that amount (in absolute value terms) (the Adjustment Amount) shall be paid by the Vendor to the Purchaser subject to the qualifier that the Base Purchase Price less the Adjustment Amount shall not be less than the Minimum Adjusted Purchase Price and in such circumstances the Adjustment Amount shall be reduced accordingly. ..." 61In cl 1.1 of the Agreement, post-completion EBITDA is defined as: "Post-completion EBITDA means the audited EBITDA for the Company for the twelve calendar month period following the Completion Date (if the Completion Date occurs mid-month, the twelve month period will commence on the first of the immediately following month). The Post-completion EBIDTA will exclude: (a) Any revenues generated/expenses relating to sales via websites owned or operated by the Purchaser or any of its related bodies corporate including but not limited to wotif.com with the exception of: (i) revenues generated and expenses relating to sales via lastminute.com.au on the commercial terms current as at the Execution Date; and (ii) revenues generated and expenses relating to sales via godo.com.au and godo.co.nz or other websites listed in Schedule 4, (b) Any inter-company charges from the Purchaser (other than IT hosting, data charges and other third party incurred expenses relating directly to the operation of the Business and for the avoidance of doubt no charges for the Purchaser's staff other than as mentioned below or overheads shall be included in the Post-completion EBITDA calculation) and it is agreed between the Parties that there should be no rental of premises charges allocated to the Company either when continuing at the current location during the Transition Period nor when relocated to alternative premises whether pre or post the Completion Date. Furthermore staff expenses allocated to the Business after the Completion Date shall remain fixed based on current staffing commitments." 62The plaintiffs were provided with audited accounts for the 12 month earn-out period to 31 December 2010 and a post-completion EBITDA and Adjustment Amount as per cl 3.4(d) of the Agreement. The post-completion EBITDA was calculated as $24,271, a rather lesser amount than the $632,000 the plaintiffs and their accountants had projected for 2010. 63The defendant submitted that par 9 should be struck out because: "(a) As to ASOC [9], it is not clear how it is said that the alleged failure would render Wotif unable to use the figures which it calculated as a basis for the cross-defendants' liability. In any event, 'supporting documentation' was provided as pleaded at paragraph 7(c) of Wotifs defence. There is no reasonable prospect of the cross-defendants establishing that what was provided was insufficient, and the matters particularised as supporting documentation under ASOC [9] readily illustrate that the complaint on this point is without substance: none of the matters there listed could sensibly be said to be supporting documentation for the purposes of clause 3.4(a). (b) No relief is claimed in respect of the alleged breach." 64Given the evidence before me it seems that there is a real debate as to whether appropriate books and records were provided to the plaintiffs. Given the structure of cl 3.4 in the Agreement and the failure to resolve the dispute, the paragraph is relevant to the defence to the cross claim and should not be struck out.

Particulars in paragraph 8 65There was a debate about a request for particulars in respect of par 8 of the amended statement of claim. The request is found in an annexure to the affidavit of Sean Phillips Simmons sworn 6 December 2012. On page 98, in a letter dated 22 November 2012, the request is made by reference to the relevant particulars in par 8. 66In this case, there has been no discovery and the plaintiffs have indicated in their particulars that they are the best particulars that can be given at this stage and that further particulars will be given after discovery. Given the nature of the present requests this is an appropriate response. After discovery it would be appropriate to ask for the information again. I will not order their supply at this stage of the case.

The cross-claim 67Wotif seeks pursuant to UCPR r 13.1 that judgment be entered for the cross claimant in relation to the whole of the cross claimant's claim for relief in the first cross-claim. In the alternative, Wotif seeks that pursuant to UCPR r 14.28, the amended defence of the cross defendants to the first cross claim filed on 27 April 2012, or such parts of it as the Court considers appropriate, be struck out on the basis that it discloses no reasonable defence or it has a tendency to cause prejudice, embarrassment or delay in the proceedings. 68Given my conclusions it is not appropriate to give judgment on the cross claim. 69So far as costs are concerned there has been a measure of success on each side so I will make an order that each party bear their own costs of the motion.

Orders 70I order that: (1)I strike out the amended statement of claim. (2)I give leave to replead the statement of claim in accordance with the principles expressed in this judgment by filing and serving the further amended statement of claim within 28 days of today. (3)Thereafter the matter is to proceed in accordance with the rules. (4)I make no order as to the costs of the motion to the intent that each party shall bear their own costs of the motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 February 2013