DTM Investments (ACT) Pty Limited v Forager Pty Limited [2008] ACTSC 67 (10 July 2008)

Last Updated: 28 July 2008

DTM INVESTMENTS (ACT) PTY LIMITED (ABN 18 098 540 802) v FORAGER PTY LIMITED (ABN 63 076 584 382)

[2008] ACTSC 67 (10 July 2008)

EX TEMPORE JUDGMENT

EQUITY - injunctions - interlocutory injunctions - claim for specific performance of agreement to purchase business - no exchange of agreements - inference from conduct of parties that no agreement to arise before exchange - no agreement - no prospect of claim for specific performance succeeding - application for injunction refused

No. SC 529 of 2008

Judge: Master Harper

Supreme Court of the ACT

Date: 10 July 2008

IN THE SUPREME COURT OF THE )

) No. SC 529 of 2008

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: DTM INVESTMENTS (ACT) PTY LIMITED (ABN 18 098 540 802)

Plaintiff

AND: FORAGER PTY LIMITED (ABN 63 076 584 382)

Defendant

ORDER

Judge: Master Harper

Date: 10 July 2008

Place: Canberra

THE COURT ORDERS THAT:

1. The application be dismissed.

2. The plaintiff pay the defendant's costs of the application.

1. This is an application for an interlocutory injunction in an action for specific performance. The action was commenced on 3 July 2008 by originating claim. The application for the injunction was brought on the same date, seeking an order restraining the sale or completion of sale to any person other than the plaintiff of the Karabar Supabarn supermarket at the Karabar shopping centre in Queanbeyan.

2. To make these reasons intelligible I will need to introduce the dramatis personae and to go through a chronology of the events. The plaintiff DTM Investments Proprietary Limited is a company associated with the business interests of the Kondouris family, who own and operate a number of supermarkets in the Canberra region and elsewhere. The defendant, Forager Proprietary Limited, is the present owner of the Karabar Supabarn.

3. Other entities who I will mention in the course of the reasons are Abercraft Pty Limited, which is the owner of the land and buildings from which the supermarket operates and is the landlord of the supermarket. Woolworths Limited is a national supermarket owner and operator. Dealore Pty Limited is a company associated with the Krnc family. Supabarn Marketing Pty Limited is a company owned and controlled by the Kondouris interests and the licensor of the name, signage and other aspects of what has been described as the Supabarn brand.

4. Also playing roles in the matter are Mr Tony Hanley of Location Real Estate, Mr John Bradley of Bradley Allen, the solicitors for the defendant, Mr Dennis Martin of Snedden Hall & Gallop, the solicitors for the plaintiff, and Mr Pat Macarlino, a director of the defendant company, Forager Pty Limited.

5. On 24 February 2007 Abercraft executed a lease of the Karabar premises to Forager for a period of ten years. On 20 December 2007 Supabarn Marketing Pty Limited, over the signature of Mr Eric Kondouris, wrote a letter to Mr Macarlino of the defendant giving him notice that the Karabar Supabarn would effectively be expelled - that may be too strong a word but I think it is an appropriate one - from the Supabarn group with effect from 30 June 2008, and after that date would no longer be permitted to operate under the name Supabarn or to use signage associated with Supabarn, nor would it any longer be part of the Supabarn buying group.

6. A month later on 23 January 2008 Mr Hanley, the estate agent at Location Real Estate, wrote a letter to Mr Bradley at Bradley Allen giving him instructions to prepare contracts for the sale of the supermarket by the defendant to the plaintiff at a price of $2.9m with settlement to take place on 1 August 2008.

7. Mr Bradley, having obtained instructions from Mr Macarlino, prepared a contract and on 20 February 2008 sent the contract with a covering letter to Mr Martin in the conventional wording which included the sentence "no legal obligations are to arise between our clients until payment of the deposit and exchange of contracts".

8. Between then and 26 March there were communications between Mr Bradley and Mr Martin by letter, email and telephone. On 26 March Mr James Kondouris instructed Mr Martin that he was concerned about the delay in exchange of contracts. He said he had heard that the Forager interests were involved in negotiations with Woolworths for the sale of the supermarket to them.

9. On 26 March Mr Martin sent an email to Mr Bradley putting him on notice that unless contracts were exchanged by 28 March, that is two days later, the plaintiff's offer to purchase would be withdrawn. As contracts were not exchanged by that date, the offer must be taken to have been withdrawn on 28 March.

10. On 4 April 2008 the negotiations between Forager and Woolworths culminated in an exchange of contracts for the sale of the supermarket to Woolworths at a price which I infer - the contract is not in evidence - was $3.35m, conditionally on the sale being approved by the Australian Competition and Consumer Commission (the ACCC).

11. On 12 May 2008 Mr Kondouris on Supabarn Marketing Pty Ltd letterhead wrote to Mr Macarlino of Forager a letter in almost identical terms to that of the previous December, again putting him on notice that the Karabar Supabarn would no longer be part of the Supabarn group after 30 June.

12. The evidence on the basis of which I have found these facts consisted of affidavits by the solicitors, Mr Martin and Mr Bradley, both of whom also gave brief oral evidence. Not inappropriately for an interlocutory application of this kind, those affidavits contained a considerable amount of hearsay evidence. There was no direct evidence by anybody else, in particular by Mr Eric Kondouris or Mr Pat Macarlino.

13. There followed a period during which the ACCC scrutinised the deal between Forager and Woolworths. During that period, on 23 May, Mr Martin wrote to Mr Bradley saying that the plaintiff company, DTM, was still an interested purchaser if the ACCC refused approval to the sale to Woolworths. The ACCC published its preliminary findings on 4 June. The findings were not in evidence but Mr Bradley after reading them was pessimistic as to the prospects of the sale to Woolworths being approved.

14. On about 10 June Mr Macarlino and Mr Kondouris had a discussion at a coffee shop in Manuka. They talked about the possibility of the sale to DTM going ahead if the ACCC refused approval to the Woolworths sale. Mr Macarlino said that in that event he was still willing to sell to DTM, but that he would want the price that Woolworths had offered rather than the lower price originally offered by DTM. Mr Kondouris disagreed with such a proposal and said that if a sale to his company was to proceed, it would be at the originally agreed price from the previous January.

15. On 13 June Mr Martin wrote to Mr Bradley noting that ACCC approval to the Woolworths deal appeared unlikely. He renewed the offer by the plaintiff and enclosed the executed purchaser counterpart of the contract, and a cheque for the deposit. He said in the letter that if ACCC approval to the Woolworths sale was not forthcoming, Mr Bradley was at liberty to complete the exchange of agreements immediately.

16. On 24 June, Mr Bradley rang Mr Martin and told him that the ACCC decision was expected to be handed down the next day.

17. He said that there were two outstanding issues between the plaintiff and the defendant companies. One was about Mr Hanley's agent's commission. Mr Bradley's instructions were that Mr Hanley had not had the authority of the vendor to effect the sale to the plaintiff company. He said that if Mr Hanley was entitled to commission from anyone, he would have to look to the plaintiff.

18. The second issue was that Mr Bradley's client would require settlement by 30 June, acknowledging that that did not allow time for the consent of the landlord to be obtained, although Mr Bradley pointed out that under New South Wales legislation it was not open to the landlord to refuse consent.

19. From then, matters proceeded at a faster pace. On 25 June, the following day, the ACCC formally refused approval of the sale to Woolworths. There was a telephone conversation between Mr Bradley and Mr Martin.

20. There seems to have been agreement that settlement by 30 June was no longer possible. Mr Martin offered to settle on 22 July. He did not press the landlord consent issue. Mr Bradley made it clear that before exchange of contracts he would need to ensure that the contract with Woolworths had been rescinded.

21. There was further email correspondence between Mr Martin and Mr Bradley on the same day confirming the telephone conversation and correcting the proposed settlement date from 22 to 21 July.

22. On that same evening, 25 June, Mr Kondouris and Mr Macarlino met again at Manuka at a coffee shop. Mr Martin's hearsay evidence was that Mr Macarlino said that he was signing the contract on that day and that the settlement date might be able to be brought forward.

23. Mr Bradley's evidence about the conversation is that Mr Kondouris and Mr Macarlino had spoken about the possibility of completion being brought forward to 14 July, but Mr Kondouris had said that he had to organise finance and to meet with the landlord. As I have said, there is no direct evidence from the participants in the conversation.

24. On the next day, 26 June, some time after 3.00pm, the solicitor acting for Woolworths telephoned Mr Bradley. He told him that he had instructions to rescind the agreement for the sale to Woolworths. He had prepared and was sending the necessary documents to effect the rescission. At about 4.00pm, Mr Martin sent Mr Bradley an email letter. He referred to the meeting between Mr Kondouris and Mr Macarlino on the previous evening. He said that he had been told by Mr Kondouris that those discussions had been aimed at achieving an exchange of contracts immediately. Mr Martin said that he understood the rescission documents had been prepared and he concluded the letter "please let me know about exchange. I will be in the office until lunchtime tomorrow". Mr Bradley replied on the same afternoon at about 5.30 pm by email to Mr Martin saying that he would contact him as soon as he could in relation to exchange.

25. On the next morning, 27 June, the rescission documents reached Mr Bradley. Mr Martin telephoned Mr Bradley, who confirmed that he had received the documents. He said that Mr Macarlino and his daughter were coming in to sign the documents that morning. There was discussion about the target date for settlement being 21 July. Mr Martin and Mr Bradley, with the documents in front of them, went through the changes that were needed. Mr Bradley made changes in handwriting to the counterpart which had been executed by the purchaser, I take it with Mr Martin's agreement.

26. At about 11.15am Mr Macarlino and his daughter came into Bradley Allen's office. Mr Macarlino told Mr Bradley that he had received a phone call from someone who was interested in purchasing the supermarket and that that person was on the way in to Bradley Allen's office to talk about it. The people who came in, I infer, were John and Steven Krnc, the directors of Dealore Pty Limited. Discussions and negotiations took place between the Macarlinos and the Krncs at Bradley Allen's office, though not in Mr Bradley's presence.

27. These resulted in an agreement. Mr Macarlino instructed Mr Bradley to prepare a contract for the sale of the supermarket to Dealore at a price of $3.35 million, that being the Woolworths price. At about 2.45 pm on that day, 27 June, contracts were exchanged. Within half an hour, Mr Bradley sent an email to Mr Martin informing him that the sale to the plaintiff company was not proceeding and that he would be returning the counterpart contract and the cheque for the deposit.

28. Those are the facts as I find them. They are not seriously in contention between the parties. Counsel for the defendant, Mr Clynes, submits that on those facts it is not open to the Court to find that a concluded agreement was ever reached between the plaintiff and the defendant for the sale of the supermarket.

29. Mr Erskine of counsel for the plaintiff concedes that there was no formal exchange of contracts. He further concedes that that would be the normal way in which an agreement would be concluded, but submits that on the particular facts of this matter it is open to the Court to find that an enforceable agreement was reached during the meeting at the coffee shop in Manuka between Mr Kondouris and Mr Macarlino on the evening of 25 June 2008.

30. As I have said, the evidence of precisely what was said at that meeting is scanty and not entirely consistent as between the parties, but I am satisfied that both Mr Macarlino and Mr Kondouris were proceeding still on the basis that a formal exchange was necessary before a legally binding agreement came into effect. I am also satisfied that Mr Kondouris did not regard himself, during the course of that meeting, as legally bound to proceed with the purchase. I am influenced in that regard by his reference to having to organise finance and having to meet with the landlord.

31. I am satisfied that Mr Kondouris believed that exchange of contracts would take place within the next day or two. I suspect that Mr Macarlino was probably of that mind also, although it strains credulity that the first Mr Macarlino knew about the interest of those behind Dealore Pty Ltd was on the morning of 27 June. One must harbour a healthy suspicion that there had been earlier discussions between Mr Macarlino and the Krncs.

32. In the circumstances, I am not satisfied that a formal agreement for the sale and purchase of the supermarket between the plaintiff and the defendant giving rise to legal obligations was ever made. Although that point was approached, it was never reached. All involved contemplated that it would not be reached until there was a formal exchange of contracts.

33. I should make it clear that these findings of fact are made on the evidence which was before the Court on the hearing of this interlocutory application, and that if the action proceeds to hearing there may be other evidence given. The Court, as constituted for the hearing of the action, would not in those circumstances be bound by the findings of fact I have made on the limited affidavit material read on the hearing of the application.

34. It follows that the plaintiff has not made out the factual basis which would be required for the Court to grant an injunction.

35. On 27 June, what appears to have been a valid contract for the sale of the supermarket was entered between the defendant and Dealore Pty Limited. Dealore Pty Limited and its directors are not parties to the present proceedings and may, indeed, be unaware of them. The sale to Dealore, according to the contract which is in evidence, was to be settled on, 7 July, that is three days ago. That clearly did not happen but an injunction in the terms sought would freeze the sale to Dealore until the Court could hear the substantive action and determine it. I am not in a position to know how long that might take. If the plaintiff is to satisfy the Court on hearing of the substantive action on different evidence to make different findings of fact which support a claim against the defendant, whilst it may not be possible by then for the Court to order specific performance, I have no doubt that the Court would permit the amendment of the statement of claim to include a claim for damages, and that damages in all the circumstances would be likely to be an adequate remedy.

37. For those reasons, the application for an interlocutory injunction will be dismissed with costs.

I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 10 July 2008

Counsel for the plaintiff: Mr CM Erskine

Solicitors for the plaintiff: Snedden Hall & Gallop

Counsel for the defendant: Mr RP Clynes

Solicitors for the defendant: Bradley Allen Lawyers

Date of hearing: 8 July 2008

Date of judgment: 10 July 2008