Atlas International Travel Pty Ltd & Anor v Bennet & Ors [1999] NSWSC 877

New South Wales Supreme Court CITATION : Atlas International Travel Pty Ltd & Anor v Bennet & Ors [1999] NSWSC 877 CURRENT JURISDICTION : Common Law Division FILE NUMBER(S) : 011156/99 HEARING DATE(S) : 5 July 1999 JUDGMENT DATE : 2 September 1999

Atlas International Travel Pty Ltd (First Plaintiff) Pacific and International Travel Company Pty Ltd (Second Plaintiff) PARTIES : Warwick Donald Bennet (First Defendant) Alan Graham Smith (Second Defendant) Shirley Margaret Smith (Third Defendant) Warwick Bennet Pty Ltd (Fourth Defendant) JUDGMENT OF : Bell J at 1

COUNSEL : G A Sirtes (Plaintiffs) P Robinson (Defendants) SOLICITORS : Alan Brown & Company (Plaintiffs) Lyons Barnett & Kennedy (Defendants) CATCHWORDS : CONTRACT; Privity; Agreement for sale of share/unit holding; Whether acknowledgment that vendors' costs 'shall be payable by the business' enforceable against company ACTS CITED : Local Courts (Civil Claims) Act 1970 Justices Act 1902 CASES CITED : Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Muirhead v Commonwealth Bank of Australia (1996) 125 FLR 434 DECISION : See paras 25 and 26

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

BELL J

Thursday, 2 September 1999

011156/99 - ATLAS INTERNATIONAL TRAVEL PTY LTD ACCN 001 971 282 & ANOR. v WARWICK DONALD BENNET & ORS.

JUDGMENT

1 HER HONOUR: This is an appeal brought pursuant to s 69(1) of the Local Courts (Civil Claims) Act 1970 against the determination of a Magistrate given on 20 April 1999. Accordingly, the provisions of Pt 5 of the Justices Act 1902 together with Pt 51B of the Supreme Court Rules apply. 2 The defendants (the plaintiffs in the proceedings before the Local Court) sued the appellants, Atlas International Travel Pty Ltd ("Atlas") and Pacific and International Travel Company Limited ("PITC") by Statement of Liquidated Claim for the sum of $10,000. It was pleaded that the plaintiffs had agreed to pay the defendants' legal costs in relation to the sale of a business conducted by the plaintiffs and that they had failed so to do. The proceedings were commenced in the Local Court at Tamworth but subsequently transferred to the Downing Centre. 3 The Magistrate gave judgment for the defendants in the amount of $10,000. 4 The defendants sued upon an agreement made on 9 October 1997. On the face of it the plaintiffs were not parties to that agreement. 5 The plaintiffs appeal against the whole of the decision of the court below. It is contended that the Magistrate erred in law in finding the plaintiffs liable to the respondents in the sum of $10,000. In the Statement filed pursuant to r (8) Pt 51B SCR the plaintiffs contend that the Magistrate disregarded the doctrine of privity of contract and decided the matter upon a consideration of the intention of the parties. This, it is submitted, disclosed error. 6 The defendants tendered a number of documents before the Magistrate. No oral evidence was adduced. The material before his Worship comprised agreements signed by the defendants dated 3 October 1997, 9 October 1997 and 10 December 1997, a statement of Warwick Donald Bennet, certain ASIC historical extracts, and two other documents not presently relevant. 7 The agreement sued upon was a handwritten agreement dated 9 October 1997. It was stated to be a variation of an earlier agreement dated 3 October 1997. The latter was described as being a "preliminary agreement". The preliminary agreement contemplated, upon the happening of certain events, that the parties would enter into a formal contract for the defendants to sell their share and unit holdings in Atlas and the Atlas International Travel Trust ("the Trust") to Siva Subramaniam or his nominee. The defendants did enter into such an agreement on 10 December 1997. The Magistrate had regard to the contents of the three agreements read together in arriving at his decision. It is not submitted that he erred in so doing. 8 Atlas and/or PITC operated the business of a travel agency. Atlas was the trustee of the Trust. In that capacity Atlas owned all of the assets and the whole of the issued capital of PITC. In the period 3 October to 10 December 1997 the two directors of Atlas were Warwick Donald Bennet (the first defendant) and Allan Graham Smith (the second defendant). Shirley Margaret Smith, the third defendant, and Warwick Bennet Pty Ltd (ACN 000 583 415), the fourth defendant, owned units in the Trust. 9 The preliminary agreement entered into on 3 October 1997 recited that Siva Subramaniam ("the purchaser") had offered to purchase the shares and units held by the defendants in Atlas and the Trust and that the defendants had agreed to accept his offer. The purchase price was expressed to be $2,050,000 subject to the net tangible assets of the business being not less than a named amount. Provision was made for two "due diligence periods" during which the purchaser might make certain inquiries and raise requisitions in respect of the same. It was agreed that the purchaser might nominate a substitute purchaser to enter into the final contract. Upon completion, and subject to the payment of the balance of the purchase price, the defendants agreed to procure: (a) the approval by the Board of Directors of Atlas of the transfer of the shares to the purchaser or his nominee; (b) the appointment as directors of Atlas and PITC of the persons nominated for that purpose by the purchaser; (c) the resignation of all other directors of Atlas and PITC; and (d) the registration of the purchaser (or his nominee) as holder of the units. 10 The preliminary agreement further provided for the purchaser to elect, by notice in writing, in lieu of the purchase of the shares and units in Atlas and the Trust, to call upon Atlas and/or PITC to sell to the purchaser all of their assets. In the event of the purchaser so electing the defendants agreed to procure Atlas and/or PITC to negotiate in good faith with the purchaser in relation to the sale and that it should be a term of any resulting contract between the purchaser and Atlas and/or PITC that the purchaser be entitled to select any of the employees of the business to join the purchaser and the defendants must make (and procure Atlas and PITC so to do) such employees available to accept such offers. 11 By handwritten agreement dated 9 October 1997 the parties agreed to vary the preliminary agreement in certain respects. The purchase price of the business was fixed at $1,575,000 (AUD). Provision was made for the deferred payment of a portion of that sum. 12 Cl 9 of the agreement of 9 October was in these terms: "Siva shall be entitled to any profit from 1 July 1997. Notwithstanding the aforesaid the business shall continue to operate in the normal manner and it is expressly acknowledged that Siva's bonus and the legal fees of John Lyons related to this transaction, not exceeding $10,000 AUD, shall be payable by the business."