Aberdeen Asset Management Ltd (formerly Equitilink Australia Ltd) v Challenger Wealthlink Management Ltd & Ors [2001] NSWSC 1009

Reported Decision : [2001] NSWSC 1009 [2001] ACL Rep 110 NSW 66

New South Wales Supreme Court

CITATION : Aberdeen Asset Management Ltd (formerly Equitilink Australia Ltd) v Challenger Wealthlink Management Ltd & Ors [2001] NSWSC 1009 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 50132/99 HEARING DATE(S) : 08/05/01-18/05/01, 6/09/01, 10/09/01-13/09/01 JUDGMENT DATE : 14 November 2001

PARTIES : Aberdeen Asset Management Ltd (formerly Equitilink Australia Ltd) v Challenger Wealthlink Management Ltd & Ors JUDGMENT OF : Foster AJ at 1

COUNSEL : Mr D. Hammerschlag SC/Mr T.D. Castle - Plaintiff Mr B . Walker SC / Mr I.M. Jackman - Defendants SOLICITORS : Atanaskovic Hartnell - Plaintiff Mallesons Stephen Jaques - Defendants CATCHWORDS : Consultancy Agreement drawn up between plaintiff and defendants -construction of the provision of a particular clause in Agreement - entitlements in accordance with that clause. CASES CITED : Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-353 DECISION : 1. The plaintiff's action against each defendant is dismissed; 2. The plaintiff is to pay the costs of each defendant.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL DIVISION

CORAM: FOSTER AJ

WEDNESDAY, 14 NOVEMBER, 2001

No. 50132/99 - ABERDEEN ASSET MANAGEMENT LIMITED (formerly called EQUITILINK AUSTRALIA LIMITED - v - CHALLENGER WEALTHLINK MANAGEMENT LIMITED & ORS JUDGMENT 1 HIS HONOUR: The plaintiff in these proceedings, Aberdeen Asset Management Limited (formerly called Equitilink Australia Limited) is and was during the period with which this litigation is concerned, the operating company of a group of companies referred to as the EquityLink Group, which undertook funds management operations. As such, it managed funds referred to as retail funds, in which the investors were members of the public. It also operated funds referred to as wholesale funds which were funds comprising monies invested by institutions. For convenience, I shall refer to the plaintiff as EAL. 2 Laurence Stephen Freedman ("Mr Freedman") and Brian Michael Sherman ("Mr Sherman") were, at all relevant times, directors of EAL and joint managing directors of the Equitilink Group. Barry Sechos ("Mr Sechos") was a director of EAL and General Counsel for the Group. Ouria Sananikone ("Ms Sananikone") was a director of EAL and chief executive officer of the Group. 3 The third defendant, Challenger International Limited ("CIL") is a publicly listed company and the holding company for companies referred to as the Challenger Group. The first and second defendants are wholly owned subsidiaries of CIL. The first defendant was previously called Challenger Asset Management Limited. It was and is also involved in the business of funds management. The second defendant was and is a life insurance company. 4 William Edward Baker Ireland ("Mr Ireland") was and is the managing director of CIL and a director of the first and second defendants. 5 On 28 May 1998, the plaintiff and the first defendant entered into an agreement entitled "the Consultancy Agreement" ("The agreement"). The second defendant was involved in the agreement as guarantor of the obligations of the first defendant. CIL was not a party to the agreement. However, part of the consideration for the agreement was the issue to EAL by CIL of 1.25 million shares in that company. 6 The agreement is a lengthy one but only one clause is the subject of dispute in these proceedings. The agreement, in effect, provided for the purchase from EAL by the first defendant of the right to manage certain retail funds. EAL would retire as the manager of those funds and appointed the first defendant as manager in its place. The first defendant would then have full responsibility for the management of the funds, including their general administration and marketing. However, the agreement provided that EAL would be employed to carry out certain of the management functions, namely investment management. 7 The entry into the agreement was preceded by a period of negotiation. This involved the production of draft forms of agreement. At relevant times there were announcements to the Australian Stock Exchange and press releases. The clause of the agreement referred to above was numbered 6.8. During the course of negotiations, it went through earlier modifications to which it is now convenient to make reference. 8 On 6 April 1998, Mr Sechos, who was closely involved in the negotiations on behalf of EAL, forwarded to CIL for the attention of, inter alios, Mr Ireland, a draft document referred to as "Terms of Agreement". Clause 3(e) thereof contained the following proposed term: "In addition, any issue of shares by Challenger International Limited by way of private placement to any third party for the purposes of raising additional capital will first be offered to EquitiLink on the same terms and conditions as offered to that third party."