ADI v NAB [1999] NSWSC 1080

New South Wales Supreme Court CITATION : ADI v NAB [1999] NSWSC 1080 CURRENT JURISDICTION : Equity Division - Commercial List FILE NUMBER(S) : 50097/98 HEARING DATE(S) : 1st November 1999 JUDGMENT DATE : 5 November 1999

PARTIES : ADI Limited - Plaintiff National Australia Bank Limited - Defendant JUDGMENT OF : Rolfe J

COUNSEL : Mr M.W. Hadley - Plaintiff Mr S.M.P. Reeves - Defendant SOLICITORS : Deacons Graham & James - Plaintiff Mallesons Stephen Jaques - Defendant CATCHWORDS : Construction of a one-off Agreement.; Australian Broadcasting Commission v Australian Performing Right Association Limited (1973) 129 CLR 99 at p.109 applied. DECISION : 1. Judgment for the defendant against the plaintiff in the sum of $743,738.58.; 2. The plaintiff pay the defendant's costs of the proceedings.

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I N D E X

Page

Introduction 1

The Terms Of The Agreement 4

A Consideration Of ADI's Submissions 11

The Bank's Cross-Claim 17

Conclusions 18

Orders 18

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

ROLFE J

FRIDAY, 5 NOVEMBER 1999

50097/1998 - ADI LIMITED v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT

HIS HONOUR:

Introduction 1 The plaintiff, ADI Limited, ("ADI"), for which Mr M.W. Hadley of Counsel appeared, commenced these proceedings against National Australia Bank Limited, ("the Bank"), for which Mr S.M.P. Reeves of Counsel appeared, by a Summons filed on 6 August 1998. 2 The pleadings were amended from time to time and, at the commencement of the hearing on 1 November 1999, I was provided with a Further Amended Summons, a Defence thereto and a Third Further Amended Cross-Claim. These documents reflected a degree of agreement to which the parties had come in relation to a number of matters, and the matters in issue. 3 On 8 February 1994 the Bank took a fixed and floating equitable charge over the property of a group of companies, to which I shall refer as "Stanilite". On 22 May 1996, the "Effective Date", Messrs John William Murphy and Martin Madden were appointed as Receivers and Managers of Stanilite pursuant to the charge and, on 12 July 1996, the Bank, as vendor, entered into an Agreement for Sale of Business with ADI, as purchaser, for the sale of the assets and business of Stanilite on the terms set forth therein. "Completion" was defined as settlement of the sale and purchase of the Assets in accordance with clause 5, and "Completion Date" was defined as 19 July 1996 or any other date agreed by the Bank and ADI. In the result it was 19 July 1996. 4 The introduction to the Agreement stated:- "A. Stanilite, primarily through SEPL, carries on the business of design, manufacture and service support of: (a) aerospace and defence equipment and systems; (b) wireless telecommunications equipment and systems; and (c) emergency and evacuation lighting. B. The Bank, being entitled under powers conferred upon it by the Charge has agreed to sell and the Purchaser has agreed to purchase the assets and the business of Stanilite on the following terms. C. The Purchaser has based its valuation of the Business on its own investigation and analysis of Stanilite's cost and cash flow position as at 22 May 1996. The Purchase Price will be adjusted upwards or downwards by changes in the net cash flow position of the Material Contracts which are agreed between the parties for the period between the Effective Date and Completion." 5 ADI claims an entitlement to an adjustment, pursuant to the terms of the Agreement, in the sum of $823,115 on the basis that the Bank and/or Stanilite have received five payments after the Effective Date and prior to and including the Completion Date in respect of goods to be supplied or services to be rendered after the Completion Date. It was common ground that the adjustments were sought for payments made in respect of Excluded Contracts, and Mr Hadley conceded that there was no assignment or novation of any Excluded Contracts to ADI, such that it came under any contractual obligations for Excluded Contracts. 6 In its Third Further Amended Cross-Claim the Bank sought judgment in the sum of $628,248 for various amounts, the only issue in relation to its entitlement to that amount being whether it is entitled to $60,000 incurred prior to the Effective Date but paid after it, in circumstances to which I shall refer. In its Further Amended Summons ADI claimed $254,867 being the difference between the gross amount it sought of $2,711,971 and allowances to the Bank of $2,457,104. 7 Essentially, the various amounts being agreed, each of the claims depends upon a proper construction of the Agreement. 8 During the hearing I rejected certain evidence, which ADI sought to tender. That evidence was Marked for Identification 1, 2 and 3. I have given sufficient reasons for rejecting the tender. After that occurred the parties requested me to decide the construction issues on the basis that adverse findings to ADI on the issue it propounded would mean that it was not necessary to seek to call, at some future time, the rejected evidence. The evidence was not necessary for the issue put forward by the Bank. I agreed to this course, as it seemed to me a sensible approach to bring about as speedy a possible resolution to the litigation.