ENACON LTD v ABIGROUP LTD AND SONS [1992] NSWCA 66

ENACON LTD v ABIGROUP LTD AND SONS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, MEAGHER and CRIPPS JJA 9-10 July 1992, 4 August 1992 [1992] NSWCA 66

APPEAL FROM COMMERCIAL DIVISION — MANAGEMENT BUYOUT — CONSTRUCTION OF AGREEMENTS TO GIVE EFFECT TO BUYOUT.

APPEAL from Commercial Division — Management buyout — Construction of agreements to give effect to buyout — Whether, as result of agreement, debts between companies discharged or remained to be discharged by payment — Held: Some debts remained to be discharged by payment.

APPROPRIATION of sums by holding company — Effect on indebtedness between holding company and subsidiary on buyout when different accounting arrangements made by two companies.

ORDER Appeal dismissed with costs.

Mahoney JA Until the transaction here in question, Enacon Limited ("Enacon') was the holding company of Abigroup Limited ("Abigroup"). As at 1 July 1988, executives of Abigroup effected (as it was described) a management buyout of the company involving some $20 million. Enacon claims that the effect of the management buyout was that all indebtedness between Enacon and Abigroup was discharged; Abigroup contends that, inter alia, Enacon remains liable to Abigroup for the balance of (as it has been described) the Inter Company account between them.

Proceedings have been brought by Abigroup against Enacon. The proceedings have been of complexity and reference has been made to transactions and matters other than those to which I shall refer. But Mr Gyles QC for Enacon and Mr Emmett QC for Abigroup have reduced the issues which now require to be decided to the single issue to which I shall refer as "the Gold Copper issue". That issue relates to the way in which the proceeds of sale of Abigroup's shareholding in Gold Copper Exploration Limited ("Gold Copper") were dealt with between the two companies.