Jowada Holdings Ltd v Cullen Investments Ltd
- Court
- Court of Appeal
- Judgment
- 5 June 2003
Areas of law
Judgment analysis
AI-generated summary
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Facts
In 2000, principals of Jowada, Ms Grierson and Mr Hayde, identified Bendon Group Limited as an attractive target for a leveraged buyout, devising a plan to use Bendon's own surplus cash via an amalgamation. They needed an equity partner and approached Mr Newland of Cullen Investments. On 29 March 2001, they entered an agreement whereby Jowada would receive an advisory fee if Cullen proceeded with a takeover of Bendon without offering Jowada an opportunity to participate. Initial plans stalled due to the reluctance of a major shareholder, AMP, to sell. After a period of no contact, a rival management buyout bid for Bendon emerged, backed by AMP. This prompted Cullen to re-engage with Jowada. Cullen, via a letter on 11 January 2002, proposed a new co-investment structure which Jowada rejected as being on different and unacceptable terms. Subsequently, Cullen, in association with the second respondent (Pacific Retail Group), successfully completed a takeover of Bendon in March/April 2002 using a different structure. Jowada sued for the advisory fee of $886,727, arguing the takeover proceeded without them being offered a proper opportunity to participate as required by the agreement. The High Court Master refused summary judgment, leading to this appeal.
Held
- On a proper construction of the 29 March 2001 agreement, the obligation to pay an advisory fee was triggered if the first respondent or an associate proceeded with any takeover of Bendon resulting in the acquisition of more than 51% of its shares, not just the specific amalgamation transaction originally conceived.
- The respondents did not have an arguable defence that the agreement had been abandoned by mutual consent, as a period of inactivity while awaiting a third party's decision was insufficient to infer abandonment.
- The first respondent's letter of 11 January 2002 did not constitute a valid offer of participation under the 29 March agreement because it proposed a transaction on terms that were significantly different from, and more disadvantageous to the appellant than, the transaction the respondents themselves pursued. The proposed deal maximised the appellant's risk and exposure, and was not an offer on 'equally favourable terms'.
- As the respondents proceeded with the takeover without providing the appellant a compliant offer to participate, the condition for payment of the advisory fee was met, and the appellant was entitled to summary judgment.
Orders
The appeal is allowed against the first respondent. The proceedings are remitted to the High Court for determination of the terms of the judgment to be entered. The appellant is entitled to costs of $5000 plus disbursements.
Key passages4
To obtain summary judgment under Rule 136 of the High Court Rules, a plaintiff must satisfy the Court that the defendant has no defence to its claim. The Court must be persuaded that on the material before the Court the plaintiff has established the necessary facts and legal basis for its claim and that there is no reasonably arguable defence available to the defendant.
“In essence, the Court must be persuaded that on the material before the Court the plaintiff has established the necessary facts and legal basis for its claim and that there is no reasonably arguable defence available to the defendant.”
Differences on factual matters do not preclude summary judgment if resolution of such matters is not necessary to provide the Court with sufficient contextual background to resolve the claim.
“That, however, does not preclude the Court from giving summary judgment in a contract claim if it is satisfied that resolution of the factual matters in dispute is not necessary to provide the Court with such contextual background as is necessary to resolve the claim.”
The meaning of a contractual document is what it would convey to a reasonable person having all the background knowledge which would have been available to the parties at the time of the contract.
“The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.”
Abandonment of a contract requires consensus. It may be established by showing conduct of each party that necessarily infers an implied agreement to abandon, or by showing conduct by one party leading the other to reasonably believe the contract was abandoned, with the other party altering their position in reliance (estoppel).
“Abandonment was a tenable proposition in such circumstances, might be established in two ways: The first way is by showing that the conduct of each party, as evinced to the other party and acted on by him, leads necessarily to the inference of an implied agreement between them to abandon the contract... The second method is by showing that the conduct of B, as evinced towards A, has been such as to lead A reasonably to believe that B has abandoned the contract, even though it has not in fact been B’s intention to do so, and that A has significantly altered his position in reliance on that belief.”
Cases mentioned in judgment
Legislation mentioned
- Companies Act 1993, amalgamation provisions
- High Court Rules, Rule 136