Sharbutt v Supatech Holdings Pty Ltd (ACN 120 898 679) [2009] FCA 612

FEDERAL COURT OF AUSTRALIA

Sharbutt v Supatech Holdings Pty Ltd (ACN 120 898 679) [2009] FCA 612

DAVID EDWARD SHARBUTT v SUPATECH HOLDINGS PTY LTD (ACN 120 898 679) and BRIAN WOOD

VID 132 of 2009

GORDON J

9 JUNE 2009

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 132 of 2009

BETWEEN: DAVID EDWARD SHARBUTT

Applicant

AND: SUPATECH HOLDINGS PTY LTD (ACN 120 898 679)

First Respondent

BRIAN WOOD

Second Respondent

JUDGE: GORDON J

DATE OF ORDER: 9 JUNE 2009

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. There be judgment for the Applicant against the First Respondent: (a) for US$2,000,000 together with interest at 8% per annum from 2 February 2007; and (b) for US$500,000 together with interest at 8% per annum from 21 June 2007. 2. The First Respondent pay the Applicant's costs of the application for summary judgment. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 132 of 2009

BETWEEN: DAVID EDWARD SHARBUTT

Applicant

AND: SUPATECH HOLDINGS PTY LTD (ACN 120 898 679)

First Respondent

BRIAN WOOD

Second Respondent

JUDGE: GORDON J

DATE: 9 JUNE 2009

PLACE: MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION 1 The Applicant, David Edward Sharbutt ("Mr Sharbutt"), is a resident of Lubbock, Texas in the United States of America ("the USA"). He describes himself as an "investor in various business enterprises". These proceedings concern his investment in Supatech Holdings Pty Ltd ("Supatech Holdings"), the First Respondent. 2 Supatech Holdings is part of a group of companies and businesses ("the Supachill Companies") operated and controlled by the Second Respondent, Brian Wood ("Mr Wood"). Mr Wood resides in Victoria. The Supachill Companies are involved in the manufacture of commercial refrigeration systems and food technology services in Australia, the USA and Europe. The Supachill Companies own patents relating to a high speed freezing technology known as Supachill and also high speed defrost technology used in the food industry. 3 On 27 February 2009, Mr Sharbutt commenced proceedings in the Federal Court of Australia against Supatech Holdings in relation to Mr Sharbutt's investment in Supatech Holdings. Mr Sharbutt's application claims damages for breach of contract together with claims for breach of trust, breach of fiduciary duty, damages and consequential orders for allegedly misleading and deceptive conduct in contravention of ss 51A and 52 of the Trade Practices Act 1974 (Cth) ("the TPA"). Mr Sharbutt makes other claims and seeks other relief against Mr Wood, the sole director of Supatech Holdings. 4 Mr Sharbutt applied for summary judgment of part of his overall claim against Supatech Holdings, being the recovery of US$2,500,000. The sum of US$2,500,000 was paid in two tranches by Mr Sharbutt to Supatech Holdings: US$2,000,000 on 2 February 2007 and US$500,000 on 21 June 2007. Mr Sharbutt seeks to recover the amounts paid as debts due and owing by Supatech Holdings to Mr Sharbutt under two Convertible Notes: one dated 22 February 2007 in the sum of US$2,000,000 ("the First Note") and the second dated 15 June 2007 in the sum of US$500,000 ("Note 1A"). Supatech Holdings does not dispute that the amounts were paid by Supatech Holdings to Mr Sharbutt or that the amounts were paid pursuant to the terms and conditions set out in the Convertible Notes. 5 Initially Supatech Holdings' contention was that Mr Sharbutt had 'elected' to convert his investment in Supatech Holdings into shares by conduct said to comprise the execution of a Conversion Agreement dated 21 December 2007 ("Conversion Agreement") and by subsequent conduct including requests in writing. On the hearing of the summary judgment application, Counsel for Supatech Holdings properly conceded that it was not correct to characterise Mr Sharbutt's conduct in terms of 'election or waiver'. Instead, Supatech Holdings' case in answer to the application for summary judgment was that by Mr Sharbutt's conduct, Mr Sharbutt had represented to Supatech Holdings that he would invest up to $5 million in Supatech Holdings, he would convert his investment into shares in Supatech Holdings and then encouraged the application of the funds he invested and the additional funds to be provided by Mr Sharbutt for the expansion of the Supachill Companies. Supatech Holdings contended that in reliance on those representations it had incurred significant expenses and then suffered loss and damage when Mr Sharbutt failed to convert his investment into shares and called for repayment of the amounts invested as debts.