Lakomy v Accounting TEK Property Investment Pty Limited

1. [1]

   HIS HONOUR: On 15 July 2019, the third plaintiff, EnergyLink Holdings Pty Ltd (EnergyLink) went into voluntary administration and on 20 August 2019, it went into liquidation and the first and second plaintiffs were appointed its liquidators (the liquidators).

2. [2]

   The liquidators and EnergyLink sue the defendant company (ATPI) for damages alleged to have been suffered by ATPI’s breach of a written subscription agreement bearing the date 27 February 2019 (the Agreement) under which, they say, ATPI agreed to subscribe for 4,990,963 shares in EnergyLink for a subscription price of $2.50 per share, that is, for a total of $12,477,407.50. References to dollars are references to Australian dollars, unless otherwise stated. It is not clear why the liquidators joined as plaintiffs. Any claim is EnergyLink’s.

3. [3]

   For the reasons which follow, EnergyLink’s claim fails and the Summons must be dismissed.

The Protagonists

1. [4]

   In October 2018, EnergyLink released an Investment Memorandum in a quest to raise $12.5 million. In the Memorandum, it described itself as a leader in the world of smart energy. It held out that it had a smart energy management system that took power usage data and delivered real cash benefits through reporting, budgeting, benchmarking and performance tools. What this apparently means is that it had software to measure the way electricity is consumed in households which might help consumers to reduce their electricity bills.

2. [5]

   At the times relevant to this dispute, Anthony Hartman (Hartman) was EnergyLink’s Chairman and CEO, and Mark Sheridan (Sheridan) was a non-executive director. EnergyLink had three other non-executive directors.

3. [6]

   EnergyLink retained Christopher McCue (McCue) to introduce investors to it.

4. [7]

   ATPI trades in scrap metal, gold, and other commodities, and it is also a finance broker. Its sole director and secretary is Ashrun Ali (Ashrun). She is married to Ahmed Ali (Ahmed), an accountant.

5. [8]

   Ahmed is the managing director of an accounting practice in Adelaide called Accounting TEK Financial Services (ATEK) which is owned by an entity called City State Financial Services Pty Limited. Ashrun is the practice manager.

6. [9]

   Mahfooz (Marcus) Ali (Mahfooz) (who Ahmed says is both his nephew and son-in-law), is an accountant who works in the accounting practice, as well as for ATPI. He manages ATPI’s day to day business dealings.

7. [10]

   Syed Merajuddin (Meraj) is a private equity financier based in Singapore.

Facts Leading Up to the Signing of the Agreement

1. [11]

   At the outset, it is appropriate to record that Ashrun, Ahmed and Mahfooz all gave evidence. They were cross-examined to little (and, in the case of Ashrun, to no) effect. There were, as one would expect, some divergences but, in my opinion, each of them was a credible witness. Their evidence fits comfortably with the objective contemporaneous circumstances. Ashrun’s evidence was given with a degree of indignation for which, as will later be seen, she had some justification.

2. [12]

   Hartman and McCue did not give evidence. No other director of EnergyLink gave evidence either.

3. [13]

   McCue was (and may still be) a client of ATPI. In about November 2019 McCue introduced Hartman to Ahmed. He told Ahmed that Hartman was looking for finance for EnergyLink and that Hartman had been tasked by the board to raise capital.

4. [14]

   A telephone conference was organised between Ahmed, McCue, Meraj (who was then in India) and Hartman. Ahmed told Hartman that he needed to see a formal presentation to consider any proposal.

5. [15]

   On 30 November 2018, McCue forwarded to Mahfooz an email from Hartman giving details of a Data Room that had been created on the DropBox platform which gave access to information about EnergyLink.

6. [16]

   On 8 December 2018, Hartman flew to Adelaide and met with Ahmed, Mahfooz and McCue. Ahmed left the meeting with the understanding that further documents would be provided and that ATPI would canvass prospective offshore investors. Mahfooz said to Hartman that the type of investment that they could arrange was one where the investor provides funding through a Stand By Letter of Credit (SBLC) or similar instrument (such as a Letter of Credit (LC)) [1] , or through a conventional loan to EnergyLink. He said to Hartman that to secure its position the investor would require EnergyLink to issue equity to it. Hartman responded that this was acceptable and they should move forward.

7. [17]

   On 9 December 2018, McCue forwarded to Mahfooz an email from Hartman to which was attached the form of a subscription agreement. At this time, a potential investor which had been identified was a company called Golden Circle which had some connection with Meraj.

8. [18]

   The email which McCue forwarded opened with the words “thank you for acting in your [McCue’s] introductory and arrangement work” and included a request by Hartman to McCue to “proceed and get a signature on the subscription form”.

9. [19]

   On about 17 December 2018, Mahfooz had a conversation with McCue to the following effect:

10. [20]

    After this conversation, Mahfooz started taking steps to arrange an SBLC. At this time, it seems, Golden Circle was still on the scene as a potential investor. There were some communications with Westpac in Sydney and with ANZ Bank in New Zealand concerning the establishment of an SBLC to be issued by ANZ in favour of Westpac. Hartman had direct communications with Westpac (EnergyLink’s bank), of which he informed McCue, Ahmed and Mahfooz. Westpac requested Hartman for the background of the counter-party, a copy of the “Subscription Agreement” and wording for the SBLC. Westpac provided its preferred template for the SBLC.

11. [21]

    On 18 December 2018, Hartman emailed McCue attaching an updated subscription agreement showing ATPI as the investor, for onward transmission to Ahmed and Mahfooz.

12. [22]

    On 21 January 2019, Hartman emailed McCue with a further version of the subscription agreement. He wrote:

13. [23]

    Ahmed and Mahfooz had travelled to Fiji for a funeral.

14. [24]

    It is to be observed that Hartman referred to a condition precedent to their signing – being Meraj making the funds available – having occurred. In fact, Meraj had not made the funds available but the email reflects Hartman’s understanding that the investment was contingent upon the availability of investor funds.

15. [25]

    McCue forwarded the new subscription agreement to Ahmed and Mahfooz that day. That version of it made provision for the payment of a deposit of $249,548.15 on 25 January 2019 and a balance of $12,227,839.35 on 4 February 2019.

16. [26]

    On 22 January 2019, Ahmed emailed Hartman, Mahfooz and McCue:

17. [27]

    The proposed investor was now to be ATPI but they were still relying on Meraj to arrange the SBLC.

18. [28]

    On 24 January 2019, a resolution was passed by three members of the board of EnergyLink. The minutes record that ATPI [2] had agreed to invest, and would fund their investment “by funds provided by their own source of funds through an SBLC.” The minutes record that EnergyLink agreed to pay 50% of the establishment fee and the annual interest cost, which it would meet from the $12.5 million to be drawn down on the SBLC by EnergyLink as its beneficiary. The resolution passed was as follows:

19. [29]

    The resolution makes reference to “authority granted in…the Shareholder Agreement”. No such agreement was identified in the evidence. There is no specific resolution authorising execution of the Agreement by the directors, or a particular number of them.

20. [30]

    By 3 February 2019, the SLBC had not been established. Hartman wrote directly to Meraj, who had apparently had a mishap, conveying that he wanted the subscription agreement “signed today and the deposit paid on Monday with a settlement date by Feb 12 committed to”.

21. [31]

    By this time Hartman had become extremely eager to get the money.

22. [32]

    The agreement that Hartman wanted signed was emailed by McCue to Hartman, Ahmed and Mahfooz that day. It contained a provision for the payment of a deposit.

23. [33]

    On 6 February 2019, Hartman sent another version with the deposit requirement removed and a 20 February 2019 Completion Date.

24. [34]

    Mahfooz approached the National Australia Bank (NAB) with respect to the SBLC and met a representative of that bank on 13 February 2019. The NAB was not able to confirm that it would be willing to participate in the transaction. Later in February, Hartman himself apparently held his own discussions with the NAB.

25. [35]

    On 26 February 2019, there was a teleconference between Ahmed, Mahfooz, Hartman and McCue. Mahfooz said that the banks he was approaching were reluctant to participate and the financial information concerning EnergyLink was not adequate. Ahmed also referred to the insufficiency of financial information to satisfy themselves that it was a good investment. Hartman said that they had everything they needed, it was all in the Data Room. McCue said that they needed to find a way to move forward.

26. [36]

    Separately, after the teleconference, Mahfooz phoned McCue and a conversation to the following effect took place:

27. [37]

    On 27 February 2019, Hartman emailed Ahmed and Mahfooz, copying in McCue, requesting a subscription agreement. He said:

28. [38]

    On the evening of 27 February 2019, Ahmed and Mahfooz were about to fly to Dubai when Mahfooz received a phone call from McCue. A conversation to the following effect took place:

The Signing of the Agreement

1. [39]

   On the morning of 28 February 2019, when Ahmed and Mahfooz were in Dubai, Ashrun received a call from McCue and a conversation to the following effect took place:

2. [40]

   She says she was furious because Ahmed had given her no advance warning that McCue was to call. I accept her evidence that she would not have signed an instrument such as the subscription agreement, without clearing it with Ahmed first. She tried unsuccessfully to call Ahmed and Mahfooz. At about noon, McCue arrived at the office. A conversation to the following effect took place:

3. [41]

   She signed the Agreement and affixed ATPI’s common seal.

4. [42]

   McCue showed her Hartman’s email address on a piece of paper. She wrote it down on the back of the original Agreement which she had just signed. A copy of the original Agreement is in evidence. The handwritten email address is on it. Significantly, Ashrun did not hand over the original but kept it. It is still in ATPI’s possession. Hartman’s signature is on it but not Sheridan’s. On EnergyLink’s side, the Agreement had place for two signatures beneath the following notation:

Material Terms of the Agreement

1. [43]

   The Agreement defines EnergyLink as the Company and ATPI as the Investor.

2. [44]

   Clause 1 contains the following relevant definitions:

3. [45]

   The following further clauses are relevant:

4. [46]

   Schedule 1 is in the following form:

The Immediate Aftermath

1. [47]

   At 8:10 AM on 1 March 2019, McCue emailed Hartman, Ahmed and Mahfooz saying:

2. [48]

   The copy of the Agreement emailed had on it, in addition to the signature of Hartman (which was there when Ashrun signed the original), the signature of Sheridan, which must have been appended to the copy which Ashrun handed over to McCue.

3. [49]

   Ahmed says when he received the Agreement he phoned McCue to take the matter up with him and a conversation to the following effect took place:

4. [50]

   Mahfooz also telephoned McCue. A conversation to the following effect took place:

5. [51]

   Mahfooz called Ahmed. He was in the shower so he spoke to Ashrun. He asked her why she signed the document and she told him that McCue had brought it to the office and asked her to sign it, and that he told her that Ahmed said it was ok. Mahfooz says that Ashrun hung up on him.

6. [52]

   Shortly thereafter, Ahmed and Mahfooz called McCue together and the following conversation took place:

7. [53]

   On that day, being the same day that Hartman distributed the Agreement, but at 4:08 PM, McCue sent Mahfooz a draft instrument entitled “Service Agreement” under cover of the following email:

8. [54]

   The draft commences with the words “this AGREEMENT is made and entered into on this 22nd day of February 2019…”. It defines EnergyLink as Seller and ATPI as Purchaser and records that the Seller agrees to supply exclusive rights “to distribute EnergyLink” in India and South Africa for five years. It provides that the buyer will pay USD$9 million within one working day of the date of the delivery of the Assets, which is defined to mean “computer software distribution rights”. The draft bore Hartman’s signature.

9. [55]

   On 1 March 2019, the indicative USD/AUD exchange rate was 0.7093. Applying this rate, USD$9 million was worth AUD$12.58 million, almost exactly the Subscription Moneys under the Agreement. This was no coincidence. It was because the Service Agreement was the alternative mechanism intended to be used in place of a subscription for shares.

10. [56]

    The following day, Mahfooz forwarded the draft Service Agreement on to Meraj under cover of an email which said “please check and advise”.

11. [57]

    Ahmed says that from this time, he and Mahfooz no longer sought the issue of an SBLC, but instead sought the issue of an LC to finance the Service Agreement.

12. [58]

    On or about 5 March 2019, Meraj (apparently with the assistance of a Singapore organisation called W B Investments) was successful in securing an LC for an upfront fee of USD$60,000, which ATPI paid and EnergyLink reimbursed half.

13. [59]

    For the rest of March 2019, Hartman and McCue tried, one might say somewhat desperately, to find money for EnergyLink.

14. [60]

    On 20 March 2019, Hartman wrote to officers of the NAB that an LC was being made available that they would be drawing on that day. He wrote:

15. [61]

    The evidence does not record Hartman’s source of information that $400,000 was coming that day. It did not.

16. [62]

    Significantly, but surprisingly (or perhaps not), the Completion Date of 24 March 2019 under the Agreement passed without incident, including Completion. Neither party called for Completion or tendered performance.

17. [63]

    On 29 March 2019, Meraj wrote to Mahfooz, Ashrun and Ahmed that he had received the fees for processing and would be doing so in the next week, at the beginning of the next financial year (1 April in India).

18. [64]

    On 3 April 2019, EnergyLink and ATPI executed the Service Agreement. Significantly, the Service Agreement required a first payment of USD$400,000. On that day, ATPI issued a purchase order on EnergyLink for “1. Computer Software. Energy Management Systems 2. India and South Africa Territories” and, EnergyLink issued an invoice to ATPI for the same amount.

19. [65]

    It is to be observed that unlike the Service Agreement, the Agreement had no provision for the payment of instalments.

20. [66]

    On 12 April 2019, McCue wrote to the NAB about the expected LC. He wrote that he was acting “on behalf of CEO Anthony Hartman… who has given me the authority to contact you”.

21. [67]

    On 12 April 2019, a bank called Habib Bank Zurich (Hong Kong) Limited of Kowloon, Hong Kong issued an LC for USD$400,000.

22. [68]

    The LC did not find favour with the NAB. Despite Hartman and McCue’s direct intervention with the bank, it did not accept it.

23. [69]

    Other banks were approached but none of them were prepared to accept the LC or otherwise advance funds.

24. [70]

    Other sources of finance, including from a Singaporean second-tier lender, were explored. No finance was raised.

EnergyLink Fails

1. [71]

   On 15 July 2019, voluntary administrators were appointed to EnergyLink.

2. [72]

   It was wound up on 20 August 2019.

3. [73]

   No previous demand having been made, on 4 September 2019, the liquidators demanded $12,477,407.50 from ATPI, relying on the Agreement. They made no demand for payment under the Service Agreement.

4. [74]

   They could not then, and did not, tender to issue shares to ATPI.

5. [75]

   On 3 December 2019, ATPI wrote to the liquidators setting out its position and maintaining that if any binding agreement for the sale and purchase of shares was concluded, it was thereby terminating it.

Corporations Act 2001 (Cth)

1. [76]

   Section 127 of the Corporations Act 2001 (Cth) provides:

Competition and Consumer Act 2010 (Cth) (the Act)

1. [77]

   Section 4 of Schedule 2 to the Act (the Australian Consumer Law or ACL) provides:

2. [78]

   Section 18(1) of the ACL provides:

3. [79]

   Section 243 of the ACL provides, relevantly:

4. [80]

   Section 139B of the Act provides:

5. [81]

   EnergyLink contends that on the Completion Date of 24 March 2019, ATPI, in breach of clause 4.2.1 of the Agreement, failed to make payment of the Subscription Moneys of $12,407,477.50, as a consequence of which EnergyLink suffered damage in that amount.

6. [82]

   ATPI mounts a number of defences (some as alternatives, and some cumulatively) and it brings a cross-claim:

7. [83]

   It will be noticed that ATPI’s defences have a consistent and unifying theme. In different ways, they reflect its position that both parties knew, understood and operated on the basis that ATPI had no obligation to subscribe for shares in EnergyLink unless and until an investor made money available, something which did not happen.

8. [84]

   EnergyLink does not contend that its execution of the Agreement complied with s 127(1) of the Corporations Act 2001 (Cth). Its answer is that by executing the Agreement and handing it to McCue, ATPI made an offer to EnergyLink to enter into an agreement on the terms of that instrument, capable of acceptance by EnergyLink, which acceptance took place when it was signed by a second director. Additionally, it argues that after 1 March 2019, ATPI affirmed the Agreement by acting on it.

9. [85]

   EnergyLink’s response to ATPI’s claim of misleading or deceptive conduct is that, insofar as McCue engaged in such conduct, he did it on his own behalf and not on behalf of EnergyLink. It also argued, as I understood it, that no consequences flowed from such conduct because, on the evening of 26 February 2019, Ahmed agreed to sign the Agreement.

10. [86]

    EnergyLink’s response to ATPI’s estoppel claim is that the common assumption upon which ATPI seeks to rely consists of evidence of pre-contractual negotiations, evidence of which is excluded by the parol evidence rule. It made a feint submission that the assumption or convention asserted by ATPI was not established. It denies that the requirements for the implication of the term to the same effect are met.

11. [87]

    EnergyLink asserts that it was ready, willing and able to perform its obligations under the Agreement on the Completion Date, and at all times thereafter, until it went into voluntary administration.

12. [88]

    It denies that the Agreement was discharged or otherwise abandoned by entry into the Service Agreement, which it argues was intended to have binding effect in addition to, and not in place of, the Agreement.

Bindingness of the Agreement

1. [89]

   The Agreement does not bear the common seal of EnergyLink.

2. [90]

   The Agreement has the following execution notations:

3. [91]

   The non-efficacy of the execution of the Agreement by EnergyLink was raised for the first time during the hearing, after the Court observed that if Ashrun kept the original, Sheridan could not have signed the same document as did Hartman with the effect that s 127(1) of the Corporations Act 2001 (Cth) did not give effect to the execution. Although the issue was not raised on the pleadings, EnergyLink properly did not oppose it being dealt with.

4. [92]

   EnergyLink did not dispute that s 127(1) requires execution of a single static document: Bendigo and Adelaide Bank v Pickard [2019] SASC 123 at [70] (Stanley J).

5. [93]

   I reject the submission that by executing the Agreement and handing over a photocopy of it to McCue, ATPI made an offer to EnergyLink to contract on the terms of the Agreement, which offer EnergyLink was, without more, able to accept and bring into effect a binding agreement on the terms of that document. The contrary is the case. Ashrun retained the original on the express and clear conditions, and with the agreement of McCue, that he would do nothing with it until she had spoken to Ahmed and Mahfooz, and if everything was ok, she would sent the original to Hartman.

6. [94]

   Those conditions were not met, let alone when Sheridan signed, which must have been on or before 8.10 AM on 1 March 2019 when McCue distributed the signed version.

7. [95]

   The signing page has the notation that the instrument was “executed and delivered as an agreement”. This was never the case.

8. [96]

   EnergyLink did not identify with any precision how it is said that ATPI affirmed the Agreement. I reject the submission that it did. The suggestion is contrary to the evidence.

9. [97]

   By the evening of 27 February 2019, the parties were discussing an alternative fundraising mechanism and the subscription agreement route was never revived. On 1 March 2019, the very same day that the Agreement was distributed, McCue provided the Service Agreement.

10. [98]

    Both Ahmed and Mahfooz took the execution of the Agreement up with McCue on 1 March 2019. Their reaction can hardly be regarded as an affirmation of what they correctly took to have been the unacceptable behaviour of EnergyLink. When McCue confirmed that if finance wasn’t raised the Agreement was null and void, Mahfooz’s reaction was that that was not good enough.

11. [99]

    I find that ATPI was never bound by the Agreement. Strictly, this finding renders it unnecessary to consider ATPI’s other lines of defence. However, it is appropriate that I nevertheless do so in case I am wrong, and because they require findings of fact and as appears below, I would uphold nearly all of them.

12. [100]

    I would add that in my opinion, Ashrun’s signature and the affixation of the seal were not, in the circumstances, effective execution of the instrument in any event because, as is dealt with below, she was misled into signing it with the result that the principle in L'Estrange v F Graucob Ltd [1934] 2 KB 394 [3] did not apply to her acts: see Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2014) 219 CLR 165 at 181 [46], 184 [54].

Misleading or Deceptive Conduct

1. [101]

   The evidence did not disclose the terms of the agreement, if any, under which McCue was retained or the precise ambit of his retainer, except that he was remunerated on a commission basis.

2. [102]

   It is plain that McCue was expressly authorised by EnergyLink to obtain ATPI’s execution of the Agreement. He went to ATPI’s offices specifically with that task, and he had with him an original version of it signed by Hartman on behalf of EnergyLink. This, on its own, would be sufficient to make his conduct that of EnergyLink under s 139B of the Act.

3. [103]

   But his actual authority, or apparent authority, was much wider than this.

4. [104]

   His participation extended to the negotiation of the form of the potential investment that might be made in EnergyLink and the raising of finance. He forwarded various versions of the proposed subscription agreement (and later, the Service Agreement) to ATPI. Mahfooz gave unchallenged evidence of McCue having told him that he had spoken to the board of EnergyLink about the alternative approach. McCue wrote to the NAB on 12 April 2019, asserting that he had authority from Hartman in relation to the establishment of the LC.

5. [105]

   EnergyLink itself, in its opening submissions, asserted that he was retained to introduce investors.

6. [106]

   I find that the conduct that he engaged in on the occasion when he attended ATPI’s offices, including his representations that the instrument was “not a proper document”, that nothing would happen if Ashrun signed it, and that he would not do anything with it until he had heard from her, were within the course and scope of his actual or apparent authority within the meaning of s 139B of the Act and was therefore the conduct of EnergyLink.

7. [107]

   I find that McCue (on behalf of EnergyLink) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Act by misrepresenting to Ashrun that:

8. [108]

   The second two of these representations were as to future matters and transpired to be false. Under s 4(2) of the ACL, EnergyLink is taken to have made these representations without a reasonable basis, unless it adduces evidence to the contrary. It adduced no such evidence.

9. [109]

   But in any event, I would be prepared to infer, having regard to what he almost immediately thereafter did that McCue had no intention of keeping his word that he would not do anything with it until he had heard from her. I would be prepared to infer that he was motivated to help Hartman to preserve his precarious position.

10. [110]

    I find that his conduct was a material cause of Ashrun executing the document.

11. [111]

    The foundation for the assertion that Ahmed agreed on the evening of 26 February 2019 that the Agreement would be signed is Hartman’s email of 27 February 2019, which referred to “last night’s meeting”.

12. [112]

    Mahfooz was perfunctorily cross-examined about the teleconference and on the email. His evidence was that they did not discuss “the subscription agreement” and, as they had already moved on, that there was not supposed to be a signed subscription agreement. He was not cross-examined further on this subject. What was supposedly said at the meeting about signing a subscription agreement was not put to him.

13. [113]

    Ahmed was also cross-examined on the email and on the meeting. It was put to him that there was an agreement between the parties to sign the subscription agreement. Ahmed’s response was that this was “a part of it” because Hartman was in trouble, and part of the conversation was Hartman asking them to help him with “a substitute agreement to take to his board”. Ahmed added: “so that he could save his position in the board as a director”.

14. [114]

    There was the following additional cross-examination:

15. [115]

    The evidence of what was said at the meeting, if anything, about the signing of a subscription agreement, or some other agreement, is in an unsatisfactory state, not least of all because the cross-examiner was not in a position, apparently, to put either Hartman or McCue’s version of what was said. The Court is not in a position to achieve a feeling of actual persuasion as to what was said on that subject: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.

16. [116]

    I am not persuaded that Ahmed agreed to sign “the subscription agreement”.

17. [117]

    Two contradictory propositions were put to Ahmed: one that he had agreed with Hartman to sign the subscription agreement, and the other that he had told Hartman that he had signed it.

18. [118]

    What Ahmed had in mind by his reference to “a substitute agreement” for Hartman to take to his board was not explored. Mahfooz was not challenged on his denial. Ahmed and Mahfooz’s evidence fits together if they were not talking about the subscription agreement, but the alternative agreement (which transpired to be the Service Agreement).

19. [119]

    Mahfooz and Ahmed made it clear that they were not satisfied with the adequacy of the financial information about EnergyLink and, straight after the meeting, a different way of proceeding such as the sale of a licence to distribute EnergyLink’s intellectual property in India and South Africa was discussed between Mahfooz and McCue. On 1 March 2019, Mahfooz received an email from McCue attaching a draft “Service Agreement” which made provision for the sale of such a licence.

20. [120]

    In his affidavit evidence, Mahfooz says (and I believe him) that the Service Agreement that McCue and he discussed was, on his understanding, as an alternative to the subscription agreement on the evening of 26 February 2019, and again on the evening of 27 February 2019.

21. [121]

    Given the reservations about EnergyLink expressed by Ahmed and Mahfooz, the probabilities do not favour an agreement by Ahmed to sign the subscription agreement.

22. [122]

    But even if Ahmed did agree, this does not mean either that McCue’s behaviour was not misleading or deceptive, or that nothing flowed from it. As he told McCue, he hadn’t even read it.

23. [123]

    It is, however, to be borne in mind that EnergyLink did not attempt to enforce the Agreement, or sue ATPI on it, until the liquidators took control.

24. [124]

    To mark its disapproval of this conduct, it is appropriate that the Court make a declaration that EnergyLink engaged in conduct in contravention of s 18 of the ACL. I would, if I had not found that the Agreement was never binding, have made an order declaring it void ab initio.

Estoppel

1. [125]

   During the hearing, ATPI sought leave to amend its Commercial List Response so far as it pleaded estoppel. In the end result, EnergyLink’s only opposition to the amendment was that it was bound to fail. I said that I would deal with the application in my final judgment. As will be seen, the estoppel claim would have succeeded if I would not have found that the Agreement was not binding. Accordingly, leave to amend is granted.

2. [126]

   I find that from the outset of, and throughout, their dealings with each other, it was the mutual and common assumption or convention of EnergyLink and ATPI that any investment ATPI would make in EnergyLink would depend on funds coming from an offshore investor involving the issue of an SBLC or an LC (which would need to be accepted by an Australian bank). I find that if ATPI bound itself under the Agreement, it did so on that assumption or convention.

3. [127]

   Leaving aside that it was plain that an investor was needed, and the fact that both sides were engaged in the endeavour of trying to make the financial arrangements that were needed to enable Completion, it is telling that neither party called for, or tendered performance, of the Agreement on the Completion Date or indeed at any time thereafter until the intervention of the liquidators. I would find that the Service Agreement was entered into on the same common assumption or convention. Why the liquidators did not sue on the Service Agreement was not revealed.

4. [128]

   EnergyLink’s response to the estoppel claim was that the evidence concerning it was of pre-contractual dealings made inadmissible by the parol evidence rule. There was a passing reference to cl 9 of the Agreement which is “an Entire agreement” clause.

5. [129]

   For this proposition, EnergyLink relied solely on the judgment of McLelland J (as his Honour then was) in Johnson Matthey Ltd v A C Rochester Overseas Corp (1990) 23 NSWLR 190 (Johnson Matthey). His Honour found that the parol evidence rule operated to exclude evidence of an alleged estoppel arising from pre-contractual negotiations. His Honour considered that the presence, in the written contract there, of an entire agreement clause provided an additional reason for rejecting the estoppel.

6. [130]

   The decision in Johnson Matthey has been the subject of a significant amount of comment. In Wittet v State Bank of New South Wales (1991) 23 NSWLR 146 at 153, Rolfe J declined to follow it. Most recently, it was commented upon by the Court of Appeal of Victoria in F.J. & P.N. Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236 (Curran). The Court referred to various decisions in which the issue has been discussed, and in nearly all of which, as was the case in Curran itself, the issue did not have to be finally decided. This was because the dealings which gave rise to the estoppel were not solely pre-contractual but were part of a course of conduct in a continuum, some of which pertained to a period when contractual relations already were in place and which established the conventional basis upon which the parties later proceeded.

7. [131]

   In this case it is not necessary to decide the issue, for the same reason as in Curran.

8. [132]

   The dealings here are not exclusively pre-contractual but were part of conduct in a continuum which extended past, indeed long past, the date of the Agreement and which reflected both parties acting on the assumption or convention.

9. [133]

   Hence, on 1 March 2019, McCue said to both Ahmed and Mahfooz that the Agreement was null and void if they could not get the finances.

10. [134]

    It is inherently improbable that ATPI would have committed itself with coming up with over $12 million (let alone $25 million) on a date in the near future without having finance in place.

11. [135]

    If I had found that the Agreement was binding on ATPI, I would find that EnergyLink’s claim against ATPI under it is an attempt, unconscionably, to depart from the common assumption or convention earlier described and it is estopped from doing so.

12. [136]

    I would, however, not uphold ATPI’s contention that there should be an implied term to the same effect. Although the parties never contemplated that the Agreement (if entered into) would require payment if finance was not raised, the Agreement itself could have operated without a term to that effect and therefore such a term does meet the requirement of being necessary to give the Agreement business efficacy: see BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; (1994) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

Breach?

1. [137]

   The obligations, respectively, on ATPI to pay the Subscription Moneys and on EnergyLink to do the things specified in cl 4.3 of the Agreement (including issuing the Subscription Shares and Share Certificate) were expressly concurrent and interdependent upon each other by virtue of cl 4.4 of the Agreement.

2. [138]

   On orthodox contractual principles, neither party was guilty of a breach of contract by failing to complete on the Completion Date unless the other party tendered performance of its concurrent obligations: Foran v Wight (1989) 168 CLR 385 at 417 (Brennan J), 433 (Deane J), 455 (Gaudron J) (Foran).

3. [139]

   Neither tendered performance. If there was a binding agreement, it remained on foot past the Completion Date. But until EnergyLink itself tendered performance, it could not assert breach by ATPI of its concurrent obligation to pay.

4. [140]

   From the time that EnergyLink went into liquidation it could no longer perform any of its obligations under cl 4.3 of the Agreement and, given that it never tendered performance, could never establish any breach by ATPI.

5. [141]

   Additionally, readiness and willingness on EnergyLink’s part to perform its mutual obligations was a condition precedent to its right to recover and the burden of proving it rested upon EnergyLink: see Foran at 451 (Dawson J).

6. [142]

   EnergyLink has not established that it was ready, willing and able to perform at any time. Clause 4.3(a) required a unanimous resolution of the directors. No evidence was adduced from any director to establish that that condition would have been met.

7. [143]

   It is to be observed that cl 4.3 has two subparagraphs (a). The second one was obviously intended to be (d). That paragraph required delivery of the Shareholders Agreement, defined in cl 1, duly executed by all parties to it (other than ATPI). As mentioned earlier, the evidence did not reveal the existence of such an agreement, from which I infer that no such agreement had, or has ever, been “duly executed” with the consequence that EnergyLink could not have performed the obligation to deliver it.

8. [144]

   The reality is that neither party expected Completion to take place in the absence of the necessary finance being available.

9. [145]

   Added to this, cl 4.5 provides that Completion will not occur unless all the obligations of EnergyLink and ATPI are satisfied and if Completion does not occur, then either party may elect to terminate the Agreement. If there was a binding Agreement, ATPI effectively terminated it on 3 December 2019.

10. [146]

    One further matter is worthy of observation in this context. Plainly neither party insisted upon timeous performance. Both obviously abandoned the 24 March 2019 Completion Date. Under cl 4.1 of the Agreement, Completion had to take place on the Completion Date “or at another time and date agreed between the parties”. No such other time and date was ever agreed.

11. [147]

    Accordingly, if I had not found that the Agreement was never binding, I would have found that EnergyLink has not established any breach of it by ATPI.

Discharge

1. [148]

   In my opinion it is clear that the Service Agreement was an alternative way by which it was contemplated that money could be raised. EnergyLink submitted that the Agreement and the Service Agreement were cumulative. If this were correct, EnergyLink committed itself to pay not $12.5 million but double that amount. As I have said above, I consider this inherently unlikely.

2. [149]

   If the Agreement was binding, it was discharged when the parties executed the Service Agreement in its place.

3. [150]

   The analysis proffered by EnergyLink did not extend to identifying the nature of the damages it claims, for example loss of bargain damages or damages for delay. EnergyLink did not allege any repudiation by ATPI of the Agreement or other breach entitling it to terminate the Agreement. Indeed, on its case the Agreement was on foot when it made demand. As mentioned earlier, it never tendered performance, then or at any other time. Although it has not claimed that the Agreement was terminated, it would seem that the damages it claims are in the nature of loss of bargain damages, but it never articulated its claim in that fashion: see Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 260; Ronnoc Finance v Spectrum Network Systems Ltd (1997) 45 NSWLR 624 at 633. These difficulties were not the subject of argument. The hearing was conducted on the footing that if ATPI is liable for damages, they are to be quantified by taking the difference between what ATPI was liable to pay, less what it would have cost EnergyLink to issue the shares. I proceed on that assumption.

4. [151]

   ATPI argued that EnergyLink has not established any loss because it has adduced no evidence on what its position would have been had ATPI fulfilled its obligations. It argued that it was incumbent upon EnergyLink to lead evidence as to the value of the company, with and without issue of the Subscription Shares, taking into account opportunity costs of issuing shares to ATPI.

5. [152]

   It cited in support of this argument Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165 (Pilmer).

6. [153]

   In Pilmer, the plaintiff, a public company, acquired, at a significant overvalue, shares in another company for a combination of cash and the issue to the vendors of shares in itself. It acted on the basis of a faulty expert valuation of the takeover target. It claimed, as part of its damages, the market value of the shares which it issued. The High Court rejected that component of its damages because by issuing shares in itself it gave up nothing. The passage apparently relied on by ATPI is the following one by the Court at 195 [64]:

7. [154]

   If EnergyLink had issued the shares to ATPI it would have given up, or lost, nothing, except perhaps the administrative costs, if any, of issuing the shares.

8. [155]

   Unlike the situation in Pilmer, EnergyLink was not a public company and the shares would have been issued to only one shareholder.

9. [156]

   There is no evidence that any administrative costs would, in fact, have been incurred. ATPI did not identify any consequential effect on EnergyLink’s capacity to raise other equity or debt finance. I do not think that there was any burden on EnergyLink to displace these matters.

10. [157]

    ATPI did not assert any failure on the part of EnergyLink to mitigate its damage by failing to attempt to find another subscriber for shares.

11. [158]

    In my view, if EnergyLink were otherwise entitled to succeed, I consider that it has sufficiently quantified its loss as being the amount of the Subscription Moneys.

12. [159]

    I make the following orders:

    1. (1)

       The Summons is dismissed.

    2. (2)

       The Court declares that by its conduct on 28 February 2019 in representing to the defendant/cross-claimant that:

13. [160]

    I provisionally order that the plaintiffs/cross-defendants are to pay the defendant/cross-claimant’s costs of the proceedings. This order will solidify seven days after delivery of this judgment unless a party notifies my Associate and the other parties in writing that some other order is sought, identifies the terms of the order sought, and provides brief grounds for it. If such notice is received, I will make directions for the determination of any issues as to costs.

14. [161]

    The exhibits may be returned.