AUSTRALIAN STRATACORE HOLDINGS LTD (In liq) v SANWA AUSTRALIA SECURITIES LTD [1994] NSWCA 11

AUSTRALIAN STRATACORE HOLDINGS LTD (In liq) v SANWA AUSTRALIA SECURITIES LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, PRIESTLEY and HANDEY JJA 16 March 1994, 27 May 1994 [1994] NSWCA 11

UNDERWRITING AGREEMENT — reservation of right to terminate not repudiation — internal intention of party not relevant — incorrect stance not repudiatory without intention not to carry out obligations under agreement — no election to terminate — abandonment or abrogation of agreement — costs of appeal books open to consideration by the taxing officer.

The appellant company was proposing to raise capital by a public issue of shares and options to be listed on the stock exchange. The respondent agreed to be the appellant's underwriter in a written Underwriting Agreement made on 20 May 1987. Lancaster Securities Ltd was to act as the sponsoring broker to the issue but formally withdrew from this position on 9 July 1987. In anticipation of this the appellant entered into discussions with the firm May Mellor with a view to their becoming sponsoring broker. The respondent said it would not consent to May Mellor's appointment if May Mellor was prepared to place the whole issue, but in the event May Mellor never became sponsoring broker. On 9 July 1987 the appellant's solicitors wrote to the respondent seeking two letters of consent which were required by the Corporate Affairs Commission before the Prospectus could be registered and advising that if the letters were not received by 5 pm 10 July this would be regarded as a repudiation and the Agreement would be regarded as terminated. On 10 July 1987 the respondent's solicitors wrote to both the appellant and the appellant's solicitor advising that the refusal by the appellant to consent to a condition proposed by Lancaster Securities Ltd was a breach of the underwriting agreement and in the event that the appellant failed to consent to that condition within fifteen business days the respondent reserved the right to terminate the agreement. The appellant caused its prospectus to be issued without an underwriter. Ultimately the prospectus was a failure. In a letter dated 7 August 1987 the respondent's solicitors informed the appellant that the respondent formally terminated the agreement. By a letter dated 10 August the appellant's solicitors denied any breach of the agreement by the appellant and asserted that the agreement had been terminated with effect from 10 July 1987 due to the wrongful repudiation of it by the respondent.