Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 5)

I gave judgment in this matter on 10 December 2019: Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 3) [2019] NSWSC 1759.

These reasons assume familiarity with that judgment. I will use the same abbreviations here.

I held that, amongst other things, the Kitchin Parties were entitled to exercise their right under cl 5.6 of the 25 March 2019 Share Purchase Deed to “reverse” the “actions” involved in the Resilium Transaction. The parties referred to this as “unwinding” the Resilium Transaction.

One of the “actions” involved in the Resilium Transaction was the entry by Coverforce and the Kitchin Parties into a loan agreement dated 25 March 2019 (the “Loan Agreement”) pursuant to which Coverforce loaned $20 million interest free to the Kitchin Parties to enable them to purchase from Suncorp the shares in Resilium.

The Loan Agreement provided that the loan was repayable on the “Termination Date”: 10 years after the first “Drawdown Date”, that is in 2029.

In closing submissions the Kitchin Parties submitted that, were the Resilium Transaction to be unwound:

In that regard, in final oral submissions, senior counsel for the Kitchin Parties submitted:

Later in closing written submissions, the Kitchin Parties submitted:

Thus, arguably, the Kitchin Parties made inconsistent submissions concerning the nature of their obligations concerning the $20 million, assuming the Resilium Transaction were to be “unwound”.

In my judgment, I did not turn my attention to and did not intend to decide the question of whether, assuming (as has happened) that the Kitchin Parties elected to “unwind” the Resilium Transaction, the Loan Agreement would remain binding on Coverforce such that the Kitchin Parties would not be liable to repay until the Termination Date.

As can be seen from what I have set out earlier, some of the Kitchin Parties’ submissions appeared to recognise that, were the Resilium Transaction to be “unwound”, the $20 million would have to be repaid “within a reasonable time”.

At [504]-[506] of my 10 December 2019 judgment, I found that the entry by Coverforce into the Loan Agreement required Special Majority Board Approval, that no such approval was given and that it followed that “Coverforce did not agree to loan the $20 million to the Kitchin Parties”.

On the other hand, at [587]-[588] I said that, were the Kitchin Parties to elect to unwind the Resilium Transaction, a number of transaction documents would remain and that the Kitchin Parties accepted that the Loan Agreement in those circumstances would “remain binding”. I was there referring to submission that I have set out at [6] above.

However I accept that a tension may appear to exist between my finding at [506] and [588].

I dealt with the Kitchin Parties’ submissions concerning their entitlement to rely upon the assumptions referred to in s 129(1) of the Corporations Act 2001 (Cth) at [548]-[556] of my 10 December 2019 judgment. Notwithstanding my use of the plural “documents” at [556], I did not intend there to make a finding about any document other than the Share Purchase Deed.

The question of whether, in the events that have happened and now that the Kitchin Parties have elected to “unwind” the Resilium Transaction, they can retain the $20 million “interest free” until the Termination Date referred to in the Loan Agreement (that is, until 2029) or whether they must make restitution of those loan funds less any proper deduction “within a reasonable time” (for example, as soon as the “unwinding” of the Resilium Transaction is completed) is obviously one of great importance.

I propose to invite the parties to now make submissions on that question.

That will involve, amongst other things, addressing the question of any role played by statutory assumptions pleaded by the Kitchin Parties.

Other questions may also arise.

I do not see this as permitting any party to “reopen” their case. It is addressing a question that, in the urgent circumstances in which I was asked to deliver my judgment (see [34]-[35] of the 10 December 2019 judgment), I have not yet decided.

The parties should now confer and agree on an orderly timetable for submissions to enable the matter to be determined.

If any party wishes to make oral submissions on the question, the parties should contact my Associate.