Club Hotels Operations Pty Limited v CHG Australia Pty Limited [2005] NSWSC 998

New South Wales Supreme Court

Club Hotels Operations Pty Limited v CHG Australia Pty Limited [2005] NSWSC 998 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 05/09/05, 06/09/05, 08/09/05, 12/09/05-15/09/05, 19/09/05-21/09/05

JUDGMENT DATE : 7 October 2005

Equity Division JURISDICTION : Commercial List

JUDGMENT OF : Einstein J

DECISION : Cross-claims fail. Short minutes of order to be brought in.

CATCHWORDS : Contract - Purchase of hotels - Contractual warranty that information attached as annexure was true and correct, complete and accurate and not misleading in any respect for period specified - Proper construction of warranties - Interpretation of words "sales" and "gross profit percentage" - Principles of construction - Suggested inconsistency as between (1) United Kingdom and High Court of Australia decisions and (2) two particular High Court decisions, as to width of admissible background which would have been reasonably available to the parties - Constructive knowledge principle - Finding that subject information was being warranted as being accurate as information contained in particular document - Whether contractual warranties were breached - Finding that warranty was that information was accurate as a record of the key performance indicators produced within the system operated by vendors - Causation - Post hoc ergo procter hoc - Purchaser claims that purchase price was determined by a formula comprised of one variable and one constant [variable being EBITDA for the hotels, constant being an earnings multiplier] - Purchaser claims as damages the difference between the value of the hotels as warranted and their true value to the purchaser - Test said to include element of subjectivity - Principles applicable as to quantum of damage - Novation - Sale contracts identifying purchaser as Macquarie Bank as promoter of defendant - Defendant incorporated after date of sale contracts - Corporation unable by adoption or ratification to obtain benefit of a contract purporting to have been made on its behalf before it came into existence - Whether purchaser succeeded to novated rights and obligations - Proper construction of interrelated contractual documents