Dufficy Progeny Pty Ltd v Manhire [2021] QDC 232

DISTRICT COURT OF QUEENSLAND CITATION: Dufficy Progeny Pty Ltd v Manhire [2021] QDC 232 PARTIES: DUFFICY PROGENY PTY LTD (ACN 104 149 260) AS TRUSTEE FOR THE DUFFICY FAMILY TRUST (plaintiff/applicant) v TROY JOHN MANHIRE (defendant/respondent) FILE NO: 172/21 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 22 September 2021 DELIVERED AT: Brisbane HEARING DATE: 28 June 2021 JUDGE: Richards DCJ ORDER: 1. Pursuant to r 292(2) of the Uniform Civil Procedure Rules 1999 (Qld) summary judgment be entered for the plaintiff on paragraphs 1 to 3 of the plaintiff’s claim, filed, 21 January 2021; 2. The defendant specifically perform his obligations under clause 19.5 of the Agreement signed by the parties on or about 11 September 2013 by: a. Completing and executing a share transfer form in respect of the plaintiff’s shares in EM Legal Services Pty Ltd, ACN 158 496 854; b. Providing the plaintiff with a bank cheque or other immediately available funds equal to $150,000 in exchange for the shares. 3. Pursuant to s 58 of the Civil Proceedings Act 2011 (Qld) the defendant pay interest to the plaintiff on the sum of $150,000 from 30 December 2020 until the date of judgment at the rate prescribed by Practice Direction 6 of 2013; 4. The defendant pay the costs of the proceeding including this application. -- 1 of 7 -- 2 CATCHWORDS: SUMMARY JUDGMENT – CONTRACTS – CONTRACTUAL PRINCIPLES – EXERCISE OF OPTION – EFFECT OF EXERCISE AND RELATED MATTERS – where parties entered into a Shareholders’ Agreement – where, in breach of a put option, the plaintiff obtained summary judgment against a party to the Agreement requiring the party to purchase the plaintiff’s shares – where that party failed to comply with the judgment – where that party became a bankrupt – where the plaintiff now seeks summary judgment against the current defendant – where the defendant submits the plaintiff already exercised its singular right as to who it required to purchase the shares – where the defendant contends the plaintiff cannot exercise the put option against the defendant in the circumstances – whether the plaintiff can exercise its right to purchase the shares against the defendant LEGISLATION: Civil Proceedings Act 2011(Qld) s 58 Uniform Civil Procedure Rules 1999 (Qld) r 292(2) CASES: Avis & Anor v Mark Bain Constructions Pty Ltd [2011] QSC 80 Peterson v Maloney [1951] 84 CLR 91 COUNSEL: J P Hastie for the Applicant/Plaintiff P W Hackett for the Respondent/Defendant SOLICITORS: McPherson Kelley Pty Ltd for the Applicant/Plaintiff Chancery Legal for the Respondent/Defendant Introduction [1] On 11 September 2013 the plaintiff entered into a Shareholders’ Agreement (‘Agreement’) concerning EM Legal Services Pty Ltd (EMLS). The Agreement was between the plaintiff, EM Legal Services, Troy John Manhire and David Allen Evans. Clause 19 of the Agreement contained a put option. It stated in part: “19. PUT OPTION 19.1 The Company and the Covenantors irrevocably grant Dufficy an option to require either of the Covenantors or the Company (or its nominee) to purchase Dufficy’s Shares for the Exercise Price in accordance with this clause 19 (the “Put Option”). 19.2 The Put Option may be exercised by Dufficy: -- 2 of 7 -- 2 19.2.1 if either of the Covenantors cease to be employed by the Company and/or Evans Lawyers; or 19.2.2 at any time after August 2016. 19.3 The Put Option may be exercised by Dufficy by: 19.3.1 delivering a written notice (“Put Notice”) to either of the Covenantors or the Company (and if to either of the Covenantors with a copy to the Company) specifying that Dufficy is exercising the Put Option; and 19.3.2 specifying a proposed date for completion of the Share Transfer; … 19.6 The amount payable on exercise of the Put Option set out in this clause 19 is the greater of; 19.6.1 $150,000.00; or 19.6.2 the sum equal to 20% of the Fair Market Value of the Company and/or Evans Lawyers (the “Exercise Price”).” [2] On 17 March 2020, the plaintiff delivered a put notice to David Evans. Mr Evans did not comply with that put notice and as a consequence, the plaintiff commenced proceedings in the District Court of Queensland seeking specific performance of the Agreement, upon delivery of the notice to Mr Evans. Summary judgment was entered in their favour on 30 November 2020. [3] On 11 December 2020, the plaintiff sought to enforce its rights under that judgment and in January made an application for an enforcement hearing in relation to Mr Evans. On 24 February 2021, Mr Evans filed a debtors’ petition and declared himself bankrupt. The plaintiff has not recovered any money from Mr Evans and the shares have not been transferred. [4] As a result of Mr Evans’ bankruptcy, the plaintiff sought to recover from the defendant in this action, Troy Manhire. -- 3 of 7 -- 3 [5] On 18 December 2020, the plaintiff gave written notice to the defendant that they were exercising a put option, specifying the proposed date for completion of the share transfer and sent the share transfer form to the defendant to be signed. The defendant has neither signed the share transfer nor paid the money for the shares to the plaintiff and hence this action was commenced and the sum of $150,000 sought. Discussion [6] The defendant does not deny that he was a party to the Agreement. The argument is simply that as the put option was already exercised against Mr Evans, it extinguished the option to pursue it against Mr Manhire. [7] There is no dispute in relation to the facts of this case. The defendant resists the claim on the basis that a proper construction of the word “either” in clause 19.3.1 of the Agreement means that the put option could be exercised against only one of the defendants, Mr Evans or EMLS. The defendant further submits that as the plaintiff elected to deliver an irrevocable put notice on 17 March 2020 to Mr Evans, the plaintiff is no longer able to exercise a put option against Mr Manhire. [8] The matter to be resolved therefore is a question of law and both parties accept it is appropriate to deal with it by way of summary judgment. [9] The plaintiff submits that that interpretation of the Agreement is wrong and that the rights to be exercised by the plaintiff against the defendant are independent to and separate from its rights against Mr Evans. The plaintiff’s case is that the put options can be exercised independently and of course, would be extinguished once the share transfer is signed over to whichever party complies with the put notice, but until that happens, it remains enforceable against any of the parties to the Agreement. [10] The defendant relies on the High Court decision of Peterson v Maloney [1951] 84 CLR 91 and particularly the proposition stated by the Court: “The case is clearly one of alternative liability. Either Moloney or Pulbrook might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against -- 4 of 7 -- 4 one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: see Morel Bros. &Co. Ltd. v. Earl of Westmoreland (1903) 1 KB 64; (1904) AC 11.” [11] The case of Peterson v Maloney concerns a different situation to the one here. The liability in Peterson v Maloney of the two parties, that is the purchaser of the property and the real-estate agent were alternative liabilities. The judgment at first instance against the agent resulted in a finding that he was the agent of the vendor. This was inconsistent with the finding sought on appeal that the agent was not authorised by the vendor to act as he did and payment should have not been made directly to the agent by the purchaser. Therefore, the judgment in relation to one could not stand against a judgment in relation to the other. [12] In Avis & Anor v Mark Bain Constructions Pty Ltd [2011] QSC 80, the compromise of an action against the second defendant did not bar the plaintiff pursing the first defendant. That case was a case of joint liability. The settlement of the matter with the agent simply meant that the principal could offset the amount paid by him in settlement of the action against the final award. [13] I adopt the statement by Qaioliu in the article, Rethinking Election: A General Theory1 tendered in this hearing where the concept of election is described as consisting of four elements, namely, a unilateral act being an expression of intent to adopt a particular option; secondly, an inevitable choice between alternative options that is: options that are inconsistent with each other in that both cannot be adopted; thirdly, a deliberate choice; fourthly, a choice that is final, binding and irrevocable. In this case, the argument is whether the exercise of the put option against more than one of the covenantors amounts to an exercise of irrevocable and inconsistent rights such as in Peterson v Maloney. [14] The defendant raised the issue of estoppel in relation to the judgment obtained against Mr Evans, but he has not demonstrated any reliance, to his detriment, on the judgment. I do not accept that the issue of estoppel arises in this situation. 1 Re-thinking Election: A General Theory, Qiaoliu, (2013), Sydney Law Review 5, 599 at 602. -- 5 of 7 -- 5 Conclusion [15] I accept the plaintiff’s argument that the exercise of the put option against both parties are not inconsistent rights. The very nature of the put option in this case is to compel the purchase of the plaintiff’s shares for a certain price. Despite there being a judgment against Mr Evans which was pursued until bankruptcy proceedings started, this is not a case where there has been a simple award of damages. The terms of the order against Mr Evans dated 30 November 2020, were that there be specific performance by the execution of share transfer to Mr Evans, and upon that, a bank cheque or payment in some other form of $150,000 for those shares. The share transfer was never executed and cannot now be executed in light of the petition for bankruptcy and a trustee in bankruptcy having been appointed. [16] In a case such as this, there is no danger of inconsistent judgments or unjust reward to the plaintiff because the specific performance remains unsatisfied. The shares are still in the name of the plaintiff and can be only transferred once. In those circumstances it seems to be that the proper reading of the put option is that the plaintiff can then seek satisfaction from one of the other parties, namely, Mr Manhire or EMLS until he succeeds in a transfer of the shares into the custody of one of those parties. Therefore, it is appropriate to order summary judgment in this matter. Order [17] Pursuant to r 292(2) of the Uniform Civil Procedure Rules 1999 (Qld) judgment be entered for the plaintiff on paragraphs 1 to 3 of the plaintiff’s claim filed, 21 January 2021. [18] The defendant specifically performs his obligations under clause 19.5 of the Agreement signed by the parties on or about 11 September 2013 by: • Completing and executing a share transfer form in respect of the plaintiff’s shares in EM Legal Services Pty Ltd, ACN 158 496 854; • Providing the plaintiff with a bank cheque or other immediately available funds equal to $150,000 in exchange for the shares; -- 6 of 7 -- 6 [19] Pursuant to s 58 of the Civil Proceedings Act 2011 (Qld) the defendant pay interest to the plaintiff on the sum of $150,000 from 30 December 2020 until the date of judgment at the rate prescribed by Practice Direction 6 of 2013. [20] The defendant pay the costs of the proceeding including this application. -- 7 of 7 --