Evolution Traffic Control v Skerratt [2018] NSWSC 49

Supreme Court New South Wales

Medium Neutral Citation: Evolution Traffic Control v Skerratt [2018] NSWSC 49 Hearing dates: 4, 5, 6 and 7 December 2017 Date of orders: 06 January 2018 Decision date: 06 February 2018 Jurisdiction: Equity - Commercial List Before: McDougall J Decision: Plaintiff to have judgment against each defendant for $3,537,970 plus interest. Parties to bring in draft orders. Catchwords: COMMERCE — Pre-contractual representation — Inducement of purchase — Incomplete disclosure of material information — Whether misleading or deceptive conduct — Whether plaintiff reasonably relied on representations

COMMERCE — Misleading representations — Damages — Fair value — Whether Potts v Miller approach to assessment question is appropriate

No question of principle Legislation Cited: Australian Consumer Law Cases Cited: HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 Jones v Dunkel (1959) 101 CLR 298 Potts v Miller (1940) 64 CLR 282 Category: Principal judgment Parties: Evolution Traffic Control Pty Limited (Plaintiff) Anne-Louise Skerratt (First Defendant) Jonathan Mark Skerratt (Second Defendant) Representation: Counsel: C Amato / P Strickland (Plaintiff) R Colquhoun / M Daniels (Defendants)

Solicitors: Webb Henderson (Plaintiff) James Legal (Defendants) File Number(s): 2015/281296

Judgment 1. HIS HONOUR: By a written agreement made on about 3 December 2014 (the precise date is a little uncertain), the plaintiff (Evolution) agreed to buy from the defendants (respectively, Mrs Skerratt and Mr Skerratt) all the issued shares in the capital of a company then called Silver Trowel Trade Training Pty Limited (Silver Trowel). The purchase price was $10 million. On 30 January 2015, the balance of the purchase price (less a retention amount of about $460,000) was paid over and the shares were transferred. 2. In the course of negotiations leading up to the sale, the defendants and their broker, Mergers and Acquisitions (WA) Pty Ltd (MAWA), provided financial and other information to Evolution. Specifically, Mr Prentice of MAWA provided a number of financial forecasts. Those forecasts incorporated projections of the revenue that Silver Trowel might derive from the provision of Recognition of Prior Learning (RPL) courses (relatively short training courses that enable a person who has substantial practical experience, but no formal qualifications, to gain a recognised trade qualification). The share purchase agreement included warranties as to the accuracy of all financial information provided in the course of negotiations. 3. Evolution says that the forecasts were misleading or deceptive, and in breach of the relevant warranties in the share purchase agreement. The complaint is that the forecasts made no reference to the fact that, for the calendar year 2015, revenue derived from RPL courses was likely to drop sharply because Evolution had not complied, and could not comply, with a condition imposed by the relevant government department (the Western Australian Department of Workplace Training and Development, to which I will refer as "the Department") on the allocation of, and hence payment for, RPL places in 2015. The parties referred to that condition as "the RPL condition", and I shall do likewise. I shall return to the detail of that condition. 4. In those circumstances, Evolution says, the shares were worth substantially less than it paid for them. Had it known the true situation, Evolution says, it would not have agreed to pay $10 million for the shares. 5. Evolution sues the defendants for damages for misleading or deceptive conduct, alternatively for breach of warranty, or alternatively again for indemnity against loss pursuant to a clause of the share purchase agreement. It calculates the damages or indemnifiable loss as the difference between the amount paid for the shares and the amount in fact earned by their subsequent sale.