BARISA PTY LTD v LARGA BROS INVESTMENTS PTY LTD [1991] NSWCA 21

BARISA PTY LTD v LARGA BROS INVESTMENTS PTY LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

SAMUELS, PRIESTLY and HANDLEY JJA 22 April 1991, 22 April 1991

[1991] NSWCA 21

CONTRACT — Sale of shares — Covenants in contract expressed to be conditions — Vendor's breach of covenants — Purchasers election to complete and claim damages for breach of warranty Whether warranties effected value of shares and reduced value Whether prospective purchaser of company shares entitled to confidential information. held Market value is necessarily affected by all uncertainties and risks associated with future events and it would be artificial to have regard to subsequent events as throwing light on market values.

Lynall v Inland Revenue Commissioners [1972] AC 680

Handley JA This is an appeal by a defendant from a judgment in favour of the plaintiff for $125,000 entered by Cole J. The proceedings arose out of a contract for the sale of shares in a company which entitled their owner to occupy part of the company's real estate. The company, Reid House Pty Ltd, at all material times owned the property at 75 King Street, Sydney. Both liability and damages were in issue at the trial but, in the result, the defendant's appeal has proceeded only on the question of damages.

The shares in question were submitted to public auction on 10 December 1987 through LJ Hooker International Limited and sold to the plaintiff. The contract of sale contained a number of covenants by the vendor which were expressed to be conditions of the contract. The vendor has been held to have breached its covenants contained in CL7(d), CL7(g) and CL7(h) of the contract.

CL7(d) provided that on completion the company, that is Reid House Pty. Ltd would have title to the property free from any mortgage, charge or encumbrance. In fact, on completion the company's title was subject to a registered mortgage which then secured advances totalling $140,000. CL7(g) relevantly provided that so far as is known to the vendor, there were no legal proceedings pending in any court against the company. In fact, at the date of contract as known to the vendor, proceedings were pending against the company in the Equity Division of this Court in which six shareholders had cross-claimed for damages. On 28 November 1986 Needham J found that the company had breached its obligations for quiet enjoyment owed to those shareholders and had referred the assessment of their damages to the Master. At the date of contract those assessments were still pending.