New South Wales Supreme Court CITATION : Ellby Trading Pty Ltd v Bathurst Coaches Pty Ltd (Administrators appointed) & Ors [2004] NSWSC 698 HEARING DATE(S) : 26/07/04, 27/07/04 JUDGMENT DATE : 10 August 2004 JURISDICTION: Equity JUDGMENT OF : Cripps AJ DECISION : Summons dismissed. Plaintiff to pay defendants' costs. CATCHWORDS : Contract - Misrepresentation LEGISLATION CITED : Trade Practices Act 1974 s52 EllbyTrading Pty Ltd - plaintiff Bathurst Coaches Pty Ltd (Administrators apptd) - first defendant PARTIES : 3F Pty Ltd (Administrators apptd) - second defendant Anthony Warner - third defendant Morgan Lane - fourth defenant FILE NUMBER(S) : SC 4055/04 COUNSEL : Mr J J Garnsey QC and Mr James Miller for plaintiff Mr C R C Newlinds SC and Mr D Jay for defendants SOLICITORS : Leary & Company for plaintiff PMF Legal Lawyers for defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST CRIPPS AJ Tuesday 10 August 2004 4055/04 ELLBY TRADING PTY LTD v BATHURST COACHES PTY LTD (Administrators appointed), 3F PTY LTD (Administrators appointed) & 2 ORS JUDGMENT 1 CRIPPS AJ: By summons dated 16 July 2004 Ellby Trading Pty Ltd (the plaintiff) sought an order that Mr Warner and Mr Lane (the third and fourth defendants) the voluntary administrators of Bathurst Coaches Pty Ltd and 3F Pty Ltd (the first and second defendants) be restrained from accepting any tender or offer received in their capacity as voluntary administrators for the assets of the first and second defendants unless the third and fourth defendants shall have provided the plaintiff with full details of all other offers or tenders for the assets and shall have given the plaintiff a reasonable opportunity to submit "a further offer and tender in respect thereof". 2 Although not stated in the summons it seeks an order that the contract it claims to have been entered into between it and Mr Warner in his capacity as administrator on 10 June 2004 be specifically performed. The contract claimed is that in consideration of the plaintiff making and agreeing to keep open an offer it made to purchase the assets of the first and second defendants Mr Warner in his capacity as administrator agreed to keep the plaintiff informed of all higher offers received, the amount of such offers and, prior to effecting any sale of the assets to afford the plaintiff an opportunity to increase its offer. 3 It also sought a negative injunction consequent upon its allegation that Mr Warner had engaged in misleading and deceptive conduct within the meaning of s52 of the Trade Practices Act 1974 (or its New South Wales equivalent). The relief, if granted, would effectively compel specific performance of what was the alleged agreement. 4 He sought an order of the Court setting aside any disposition of property by Mr Warner to any person other than the plaintiff. However as at the date of hearing Mr Warner had not disposed of the assets of the companies. 5 The matter came on for hearing as a matter of urgency on Monday 26 July. On 27 July I informed the parties that I had come to the conclusion that the summons should be dismissed with costs and I would publish my reasons as soon as practicable. 6 The Bathurst Coaches (the first defendant) has been operating bus services from Bathurst for many years. In 1998 it became a wholly owned subsidiary of 3F (the second defendant) which operated bus and coach transport services in New South Wales and Queensland. 7 The plaintiff conducts its business through Mr Bultitude and Mr Maley who are and were at all relevant times the directors of it. 8 On 22 March 2004 3F entered into voluntary administration and Mr Warner and Mr Lane were appointed administrators. Mr Lane has played no part in the circumstances and events giving rise to this litigation. 9 In June 2004 Bathurst Coaches also went into liquidation and Mr Warner and Mr Lane were appointed administrators. On 12 July 3F entered into a Deed of Company Arrangement. 10 On 16 June the plaintiff submitted a formal offer to Mr Warner to acquire the assets of Bathurst Coaches and 3F. I shall refer to the letter of offer in detail in due course. The present dispute concerns an allegation by the plaintiff that on 10 June 2004 it promised to keep its offer open and Mr Warner promised it that it would not enter into any contract for the sale of the assets without informing the plaintiff of the details of other offers and giving it the opportunity to submit a further offer. 11 As is apparent on the plaintiff's version of the arrangement Mr Warner was not obliged to accept either the original offer or the subsequent offer it was permitted to make and the plaintiff was not compelled to increase its offer. 12 Its claim under the Trade Practices Act 1974 is that on 10 June 2004 Mr Warner falsely represented to the plaintiff that if it would keep open its offer to purchase the business assets of the companies Mr Warner would grant it the right to be a final bidder for those assets. 13 On 7 July Mr Warner called for tenderers. Those interested were told that the three top bidders would be given the opportunity (without knowing the details of the other two bids) of revising their bids. The plaintiff submitted a bid on 9 July. Later it was informed it was not one of the three top bids. 14 Mr Warner does not dispute that he had discussions with Mr Bultitude and Mr Maley in his capacity as administrator concerning the sale of the assets of Bathurst Coaches and 3F. What he does dispute is that he promised or made a representation to Mr Bultitude or Mr Maley on 10 June 2004 or at any other time that if they would keep their offer on the table (that offer being the one which was reduced to writing by the letter of 16 June 2004) that he, Mr Warner, would give the plaintiff an opportunity to outbid the highest bidder. 15 There was a discussion on 10 June concerning the sale of assets in which Mr Warner asked whether the offer of $7.2 million (previously made by the plaintiff) still stood. He was told it did not and Mr Maley told him that the plaintiff was looking to pay "around $500,000 all up". Although Mr Bultitude denied it in cross-examination in his affidavit in chief he said that on that occasion Mr Warner had said he could not accept any offer at that time and that he would want all potential bidders in by 25 June. Mr Warner asked that the offer be put in writing. On 16 June 2004 the plaintiff said that it would be prepared to pay $460,000 for the assets of Bathurst Coaches and $50,000 for the assets of 3F. The letter concluded: "At present we are willing to make an immediate $50,000 non refundable deposit to secure a contract of sale with balance of moneys being paid in full settlement. This offer is made with time being of the essence and request that an indication of the position of our offer be made no later than 22 June 2004 to allow for the acquisition of sufficient vehicles to operate the contract." 16 There was no mention in the letter of any promise or representation by Mr Warner that he would give the plaintiff details of all other offers to allow it to make a final bid. The offer referred to "time being of the essence" and that Mr Warner indicate his position before 22 June 2004. 17 On 25 June 2004 Mr Bultitude wrote to Mr Warner. He referred to the circumstance that the plaintiff at that time was interested in acquiring another business. He wrote, inter alia: "Please be advised that if the offer to purchase the other transport company is accepted we will not be in a position to purchase Bathurst Coaches and will be forced to withdraw our offer to purchase the contracts currently held in the name of Bathurst Coaches and 3F. Therefore we wish to alter our offer to purchase Bathurst Coaches. Our offer now being "subject to offer to purchase the other transport company being refused"." 18 This letter, in my opinion, is not consistent with an understanding by Mr Bultitude that the plaintiff could not withdraw its offer. He made it clear that if the plaintiff acquired the other company referred to in the letter it would no longer be bound by Mr Warner's acceptance of the offer referred to in the letter of 16 June 2004. 19 Mr Bultitude has given oral evidence that on 16 June Mr Warner is alleged to have said: "We're committed to that date (25 June). If a better offer comes in I'll keep you in the loop and let you know what it is. I've said I'll give you the opportunity to better it." Mr Warner has denied he had that conversation. 20 Conformably with his duties as administrator Mr Warner published an Information Memorandum and arranged for a PowerPoint demonstration to be held on 7 July 2004. There was a dispute in the proceedings concerning whether the Information Memorandum was in fact received by Mr Bultitude or Mr Maley prior to July 2004. Mr Warner thought it had been. Mr Bultitude and Mr Maley have said it was not. I think more probably than not Mr Bultitude did not get the Information Memorandum at the time Mr Warner thought he had sent it. But I do not think that that circumstance is of any real relevance to the issue I have to determine because Mr Bultitude knew about it on 7 July 2004 at the PowerPoint presentation. And, of course, he knew about it when he wrote another letter to Mr Warner on 9 July. 21 On 9 July Mr Bultitude wrote to Mr Warner which included the following: "Following the information session of 7 July 2004 I am pleased to provide our bid for the assets of Bathurst Coaches Pty Ltd and 3F Pty Ltd, in the revised manner as requested by yourself at the information session." The letter went on: "For Bathurst Coaches Pty Ltd we offer the sum of $500,000. Subject to the acceptance of this bid for Bathurst Coaches Pty Ltd we further offer the sum of $10,000 being for the "goodwill" component including the relevant contracts for 3F." (Underlining mine). 22 Of significance in the present proceedings is the circumstance that the letter of 9 July referred to a bid being made by the plaintiff for the assets of Bathurst Coaches and 3F. $500,000 was offered for Bathurst Coaches and $10,000 for 3F. I received no satisfactory explanation as to why this bid was made at all if Mr Bultitude's version of events is correct. After all on his version of events the plaintiff was not required to lodge a bid. Its offer was on the table and it was to be given the opportunity to outbid any other tenderer. 23 As I have said the Information Memorandum made it clear that the three top bids would be allowed to put in revised bids but they would not know the identity of other bidders or the quantum of the other bids. 24 On 14 July 2004 Mr Warner wrote to the plaintiff referring to its offers made on 15 June and 9 July. He referred to the fact that there had originally been 21 interested parties (including the plaintiff) and six offers had been received. Three offers had been short-listed. The plaintiff was advised that its bid was not one of the three top bids and accordingly its offer would not be considered. Thereafter the plaintiff commenced legal proceedings. 25 On behalf of the plaintiff Mr Garnsey QC has submitted that I should accept the version of events given by Mr Bultitude and Mr Maley concerning the promise and/or representation referred to above. He points to the circumstance that Mr Warner had an interest in securing the best price he could for the assets of Bathurst Coaches and 3F and that one way of achieving this was to give the plaintiff the opportunity to outbid the highest bidder after the PowerPoint presentation. However, in my opinion, Mr Warner had also come under an obligation on 7 June 2004 to ensure the integrity of the tendering process. He told the meeting on 7 July that the three top bidders would be given the opportunity to revise their bids but without knowing the identity of the other bidders or the quantum of their bids. In my opinion it would have been an egregious breach of his obligations to the other tenderers to have thereafter told the plaintiff the details of their tenders. 26 Had Mr Warner done what the plaintiff claimed he promised to do he would, as I have said, have been in dereliction of his obligations to the invited tenderers. That circumstance does not, of course, mean he did not make the promise. However a person of integrity would not have made the promise as alleged by the plaintiff and thereafter have undertaken the re-tendering process as Mr Warner did. Equally a person of integrity would not have made the sort of promise the plaintiff alleges he made in circumstances where he knew at the time of making it he had no intention of honouring it. 27 When the matter came on for hearing certain documents were called on a Notice to Produce. Some were produced. Some however were said by Mr Warner not to be relevant to present proceedings and put in a sealed envelope. These documents concerned the details of the other tenders and Mr Warner expressed concern that he had undertaken to keep those details confidential. 28 Initially I thought the case could be disposed of without access to the documents although Mr Garnsey had sought leave to inspect them. Later, however, I took the view that there may be material in those documents which might have advanced the case the plaintiff sought to make by damaging Mr Warner's integrity. Accordingly I allowed Mr Garnsey and his junior to inspect the material upon an undertaking given by him and his junior that the contents of the documents would remain confidential. As events turned out there was no attack made on Mr Warner's integrity other than that he was not telling the truth when he denied the assertions made by Mr Bultitude and Mr Maley. 29 As at 9 July 2004 Mr Warner had received two bids from the plaintiff to purchase the assets of two companies. The first was an offer of $460,000 for the assets of Bathurst Coaches and $50,000 for the assets of 3F. That bid referred to time being of the essence. On 9 July a bid was submitted of $500,000 for the assets of Bathurst Coaches and, if accepted, a further offer of $10,000 for the assets of 3F. As I have said if its version of events was correct the plaintiff need not have submitted a tender at all after 7 July. 30 I have come to the conclusion that Mr Warner did not make the representation or promise alleged by Mr Maley and Mr Bultitude. There is nothing in the documentary material that corroborates the plaintiff's version of events. Even if the offer of the plaintiff made by letter of 16 June was open after 22 June it was conditionally withdrawn by letter of 25 June 2004. On 25 June it was made clear to Mr Warner that if the plaintiff purchased the "other transport company" it would not purchase the assets of the companies being administered by Mr Warner. Mr Warner did not respond to the conditional offer (if that is what it became) because, as I infer, he saw no need to do so. 31 Upon my appreciation of what happened I would hold that between 10 June and 16 July 2004 Mr Bultitude and Mr Maley on the one hand and Mr Warner on the other remained in negotiations and no concluded contractual arrangement was entered into between them. As I have said, I do not think Mr Warner made the representations Mr Bultitude and Mr Maley claim he made on 10 June or at any other time thereafter. 32 In the light of these findings it is unnecessary for me to determine whether even if there had been a contract on 10 June 2004 as evidenced by the letter of 16 June that contract was rescinded or abandoned on 7 July or shortly thereafter. Similarly I need not determine whether if, as has been alleged, a representation was made by Mr Warner in breach of the Trade Practices Act 1974, it was not entitled to relief because when it put in its bid on 9 July it knew perfectly well that only the three top bids would be considered for revision. 33 In my opinion the summons should be dismissed. The plaintiff to pay the defendants' costs. ********** Last Modified: 09/07/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.