Griffiths v Duncan [2009] NSWSC 926

New South Wales Supreme Court

CITATION : Griffiths v Duncan [2009] NSWSC 926

HEARING DATE(S) : 27 August 2009

JUDGMENT DATE : 27 August 2009

JURISDICTION : Equity

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 27 August 2009

DECISION : Refer to paras 14-16 of judgment.

CATCHWORDS : No question of principle

Peter Thomas Griffiths & Anor PARTIES : v Adrian Stewart Duncan & Ors

FILE NUMBER(S) : SC 2631/09

COUNSEL : Plaintiffs: B O'Donnell Defendants: n/a

Plaintiffs: Tresscox Lawyers SOLICITORS : 1st & 2nd Defendants: Purcell Lawyers 3rd - 5th Defendants: NOT Lawyers

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WHITE J

Thursday, 27 August 2009

2631/09 Peter Thomas Griffiths & Anor v Adrian Stewart Duncan & Ors JUDGMENT 1 HIS HONOUR: By an agreement made on 30 May 2006 and varied on 21 July 2006 the first plaintiffs sold shares in a company called Chili's Restaurant Developments Pty Ltd to the first and second defendants. The share sale agreement included extensive vendor warranties. 2 The agreement as varied, provided that on completion of the sale Mr Peter Griffiths, one of the first plaintiffs, would place $100,000 on deposit in the joint names of the vendors' solicitors and the purchasers' solicitors, to be held by them as stakeholders. 3 The parties agreed that within seven days after completion the purchasers could serve a notice alleging breach of representation or warranty provided that such notice was bona fide. Such notice was required to set out in detail any such alleged breach. If a notice was not served in accordance with that provision, the parties directed the stakeholders to release the funds to the vendors, that is to say, the first plaintiffs. 4 Clause 2.6(g) of the variation agreement provided that if such a notice were served by the purchasers then the amount in dispute was to be retained by the stakeholders, pending resolution of the purchasers' claim in accordance with clause 24. Any amount not in dispute was to be released to the vendor. It was provided that any sum found to be due to the purchasers was to be satisfied in whole or in part by payment from the retention fund immediately upon a determination of such claim in accordance with the terms of agreement, or order of a Court. Any amount remaining outstanding in the retention fund was to be immediately released to the vendors. 5 Clause 24 provided that in the event of any dispute the parties were to use reasonable commercial efforts to resolve the same by negotiation. Legal proceedings were not to be resorted to except to obtain urgent interim relief until the process outlined in clause 24 was exhausted. The clause provided for negotiation and mediation. 6 A notice alleging breach of numerous warranties was served within the seven-day period. 7 Over the next few months, extensive correspondence followed between the parties' solicitors in relation to the alleged breaches. The vendors (the first plaintiffs) accepted that the value of stock at costs on completion was $6,408.84 less than the value which had been warranted. The vendors' solicitors directed the purchasers' solicitors to withdraw that sum together with interest of $432.58 from the retention fund to be paid to the purchasers, or as they might direct. 8 The procedures for dispute resolution envisaged by clause 24 failed because the purchasers' solicitors advised in November 2007 that they were without current instructions. Extensive efforts were made by the plaintiffs' solicitors to attempt to contact the first and second defendants. All such efforts were unsuccessful. 9 These proceedings were commenced in May this year. Orders for substituted service on the first and second defendants were made on 1 June 2009, and service in accordance with the orders for substituted service has been effected. There was no appearance for those defendants when the matter was called today. 10 I am satisfied that the reason the dispute resolution procedures envisaged by the agreement failed was due to the defendants' not making themselves available to receive communications. 11 Pursuant to clause 2.6(g)(vi), any amount remaining outstanding in the retention fund after a determination of the purchasers' claim was to be immediately released to the first plaintiffs. The necessary implication of clause 2.6(g) was that the purchasers were to take all reasonable steps to allow a determination of their claim. They have not done so. 12 Whilst the agreement does not make express provision as to how the retention fund is to be dealt with in those circumstances, it seems to me that the clear implication is that the moneys are to be released to the first and second plaintiffs. 13 For these reasons, the first plaintiffs are entitled to orders authorising the stakeholders to release the balance of the retention fund, that is to say, the sum of $93,591.16 together with interest on that amount which has accrued. 14 For these reasons I order that the second plaintiffs and the third defendants forthwith pay to the first plaintiffs from the moneys deposited in the "Chili's Retention Account" with the St. George Bank Ltd, Account Number 552570159, the sum of $93,591.16 together with interest accrued upon that sum. 15 The first plaintiffs are entitled to their costs from the first and second defendants. I order that the first and second defendants pay the first plaintiffs' costs of the proceedings. 16 Exhibit PD may be returned.