ALS Limited v ECF Asia Pacific Pty Ltd [2016] QDC 340

DISTRICT COURT OF QUEENSLAND CITATION: ALS Limited v ECF Asia Pacific Pty Ltd [2016] QDC 340 PARTIES: ALS LIMITED (ACN 009 657 489) (plaintiff) v ECF ASIA PACIFIC PTY LTD (ACN 602 487 721) (defendant) FILE NO/S: BD2528/2015 DIVISION: Civil PROCEEDING: Trial ORIGINATING COURT: Brisbane DELIVERED ON: 20 December 2016 DELIVERED AT: Brisbane HEARING DATE: 3, 4 and 15 December 2015 JUDGE: Horneman-Wren, SC, DCJ ORDER: 1. The plaintiff have judgment against the defendant for $127,174.72 for damages and $13,497.06 for interest 2. I will hear the parties as to whether an order that the plaintiff be notified of the Updated DTA for the quarter ended 30 April 2015 calculated in accordance with cl. 3.5(c) as construed in these reasons ought to be made and, if so, as to its terms. 3. I will hear the parties as to costs. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the plaintiff as shareholder, and the defendant as buyer, entered into a share sale agreement– where the plaintiff alleges breach of contract – where the plaintiff claims that the defendant has failed to pay it an amount of $124,174.72 which it alleges is payable under the proper construction of Clause 3.5(d) – whether $127.174.72 is payable upon the proper construction of the contract – where dispute as to construction of Clause 3.5 – whether if Clause 3.5 were to be construed without recourse to matters external to the share sale agreement, the construction contended for by the plaintiff would be preferred – whether it is to be preferred because it gives due -- 1 of 67 -- 2 recognition to the definition of “Starting DTA in Clause 3.5(a) and the use of that expression in subsequent subclauses – whether any new deferred tax asset accrued by RSC following completion of the share sale is to be included in the updated tax asset – whether accruals of annual leave and long-service leave and retirement benefits subsequent to the Completion Date of the Share Sale Agreement are to be included in the calculation of the Updated DTA for the purpose of Clause 3.5 –where question of what a reasonable business person would have understood the terms to mean – where recourse to extrinsic material is available where there is a construction choice – where there is a construction choice – where interpretation assuming parties intended to produce a commercial result – where reference to the objective framework of facts within which the contract came into existence, and to the parties presumed intention – where actual intention of parties not to be taken into account – where accruals of annual leave and long-service and retirement benefits subsequent to the Completion Date of the Share Sale Agreement are not to be included in the calculation of the Updated DTA for the purpose of Clause 3.5 – whether the construction of Clause 3.5 of the Share Sale Agreement is considered by reference only to the terms of the share sale agreement itself, or with recourse to admissible evidence external to the contract, the construction contended for by the plaintiff is the proper construction of Clause 3.5 CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – whether plaintiff breached contract in failing to notify defendant of updated balance sheet position for relevant quarter – where plaintiff seeks order requiring the provision of the updated balance sheet – where what is sought is not required under Clause 3.5 – where plaintiff to be notified of Update DTA for the quarter ended 30 April 2015 in accordance with Clause 3.5(c) COUNSEL: D de Jersey for the plaintiff M Trim for the defendant SOLICITORS: Thynne & Macartney for the plaintiff Baker & McKenzie for the defendant [1] On 31 October 2014 the plaintiff, as Shareholder, and the defendant, as Buyer, entered into a Share Sale Agreement whereby the defendant agreed to buy from the plaintiff the issued share capital, being two ordinary shares, in Reward Supply Co. Pty Ltd (RSC). -- 2 of 67 -- 3 [2] These proceedings concern the proper construction to be given to cl. 3.5 of the Share Sale Agreement. The plaintiff’s claim [3] The plaintiff claims that the defendant has failed to pay it an amount of $127,174.72 which it alleges is payable upon the proper construction of cl. 3.5(d). It claims damages in that sum for breach of contract. [4] The plaintiff also claims that the defendant has failed to notify it of the updated balance sheet position for the quarter ended 30 April 2015, which it alleges the defendant was obliged to provide pursuant to cl. 3.5(d). The Share Sale Agreement [5] Clause 2.1 obliged the plaintiff to sell the shares in RSC to the defendant in exchange for the Purchase Price. [6] Clause 3.1 obliged the defendant to pay the Purchase Price to the plaintiff. The “Purchase Price” was defined by cl. 1.1 to mean an amount equal to the Net Assets less the RSC (NT) Minority Interest amount less the Financial Debt plus or less the October EBIT Adjustment as required under either cl. 3.7(b) or cl. 3.7(c). [7] The “Net Assets” are defined to mean the net assets of the Reward Group as at the Effective Time, to be determined pursuant to cl. 3.5, as disclosed in the Completion Statement.1 [8] The “RSC (NT) Minority Interest Amount” is defined to mean $500,000. [9] The “Financial Debt” is defined to mean, as at the Effective Time, the aggregate amount of all financial indebtedness of the group arising from certain identified sources as disclosed in the Completion Statement. 1 The reference to cl. 3.5 in the definition is erroneous. It should be a reference to cl. 3.6. It is clear that the parties failed to change the reference to cl. 3.5 in the definition when the new cl. 3.5 was inserted in the revised version of the Share Sale Agreement provided by Mr Simon de Young under cover of his email at 19:34:38 on 30 October 2014. The earlier versions referred to cl. 3.5 which was then the clause headed “Completion Statement”. That clause became cl. 3.6 in the revised version of 30 October 2014: see Exhibit SDY4 to the Affidavit of Simon de Young and the earlier versions which appear at Exs. SDY1 and SYDY2. -- 3 of 67 -- 4 [10] The “Effective Time” is defined to mean 11:59 pm on the Completion Date. The “Completion Date” is defined to mean the date of the agreement. [11] “Accounts” is defined to mean the balance sheet and profit and loss statement for RSC as at the Accounts Date. [12] “Accounts Date” is defined to mean the date stated in Item 1.2 [13] “Accounting Standards” is defined to mean the accounting standards and practices adopted by RSC in preparing the Accounts, being the accounting policies described in Note 3 of the ALS 2014 Annual Report.3 [14] Clause 3.5 provides: “3.5 Net Deferred Tax Assets (a) The parties acknowledge that RCS will have a net deferred tax asset on its balance sheet as at the Effective Time which exclusively relates to provisions for annual leave, long service leave and retirement benefits. The balance of this deferred tax asset is referred to in this agreement as the “Starting DTA”. The Starting DTA will be confirmed in the completion statement. (b) The parties agree that the Starting DTA will not be included in the calculation of either Net Assets or Financial Debt. (c) In respect of each three month period following the Completion Date (a “Financial Quarter”) for the four year period following the Completion Date, with the first Financial Quarter ending on 31 January 2015 and the final financial Quarter ending on 31 October 2018, the Buyer will procure that RCS will calculate the updated balance sheet position at the end of the relevant Financial Quarter in respect of both: (i) the component of the Starting DTA that exclusively relates to provisions for annual leave; and (ii) the component of the Starting DTA that exclusively relates to provisions for long service leave and retirement benefits, with the sum of these balance sheet positions as at the end of the relevant Financial Quarter referred to in this agreement as the “Updated DTA”. (d) Within 45 calendar days of the end of each Financial Quarter, the Buyer will notify the Shareholder of the Updated DTA in respect of the relevant Financial Quarter and pay an amount equal to the Starting DTA minus the Updated DTA to the shareholder, provided that if the 2 The items are set out in Schedule 1 to the Share Sale Agreement. Neither copy of the executed agreement which appears as Exhibit “PMN-1” to the affidavit of Paul Napier or Exhibit TD21 to the affidavit of Thierry Drecq includes Schedule 1. 3 The ALS 2014 Report and Note 3 to it, were not in evidence. -- 4 of 67 -- 5 amount equal to the Starting DTA minus the Updated DTA is negative, no payment will be made by the Buyer to the Shareholder. (e) Each time a payment is made by the buyer to the shareholder under cl. 3.5(d), the value of the Starting DTA will decrease by an amount equal to that payment for the purposes of preparing the relevant calculation under cl. 3.5(d) in respect of the following financial quarter. (f) In the event that the ATO denies the tax deductions made by RSC which are related to the Starting DTA, the Shareholder must within 20 calendar days of the Buyer providing the Shareholder with reasonable evidence of the required requalification pay to the Buyer an amount equal to the sum of all previous payments made by the Buyer under cl. 3.5(d) which were attributable to the denied tax deductions made by RSC. (g) Following completion of the process outlined in cl.3.5(a) to cl. 3.5(d) in respect of the Financial Quarter ended 31 October 2018, the Buyer will be definitely released from any further payment obligation to the Shareholder relating to any remaining balance of the Starting DTA held by RSC. (h) Any payments made by the Buyer to the Shareholder pursuant to cl. 3.5(d) will constitute an increase in the Purchase Price .” [15] The Share Sale Agreement contained an entire agreement clause; cl. 17.5. It provides: “This Agreement and any document expressly referred to in this Agreement constitute the entire agreement of the parties on the subject matter. The only enforceable obligations and liabilities of the parties in relation to the subject matter are those that arise out of the provisions contained in this agreement and any documents expressly referred to in this agreement. All representations, communications and prior agreements in relation to the subject matter are merged in and suspended by this Agreement and any documents expressly referred to in this Agreement.” The parties positions as to this construction of cl. 3.5 [16] The plaintiff and the defendant both contend that there is no relevant ambiguity in cl. 3.5 and that it can be construed by reference to the words in the clause and the contract alone. However, each also contends that if there were ambiguity, then recourse to extrinsic evidence of the objective background facts supports their respective constructions. -- 5 of 67 -- 6 [17] The plaintiff identifies, accurately so it seems to me, that the essential difference between the parties as to the proper construction of cl. 3.5 emerges from what is pleaded at paragraph 8(e) of the Defence. That is: “8. In respect of the allegations contained in paragraph 11 of the Statement of Claim, the defendant: … (e) says that the ‘Updated DTA’ as defined in cl. 3.5(c) of the SSA is equal to the tax asset value of the amounts accrued in the updated balance sheet of RSC as at 31 January 2015 in respect of the provision for annual leave and long service leave benefits, which consists of: (i) the accrued annual leave and long service leave entitlements as at 31 October 2014 (i.e. the Effective Time) updated to take into account accrued annual leave and long service leave entitlements that have been taken by employees; and (ii) additional annual leave and long service leave that has accrued between 31 October 2014 and 31 January 2015;” [18] The plaintiff contests that construction, in particular the inclusion of additional accrued annual leave and long service leave as set out in (ii). The plaintiff’s position is that any new deferred tax asset accrued by RSC following completion of the Share Sale Agreement is not included in the Updated DTA. [19] There are three matters central to the defendant’s contended for construction of cl. 3.5. First, it contends that only its construction gives proper meaning to the words “balance sheet” which are used in three places in the clause. [20] Secondly, it contends that only its construction gives the words “at the conclusion of cl. 3.5(d) “provided that if the amount equal to the Starting DTA minus the Updated DTA is negative, no payment will be made by the Buyer to the shareholder” any work to do. It contends that this is so because, on the plaintiff’s construction of cl. 3.5, the figure attained after the subtraction of the Updated DTA from the Starting DTA will never be negative as the Starting DTA will always exceed the Updated DTA. -- 6 of 67 -- 7 [21] Thirdly, it contends that cl. 3.5(f) suggests that the parties intended the Updated DTA to amount to the effective tax deductions for RSC in the future and that it is only on the defendant’s construction that this is the case.4 [22] The plaintiff contends that the expression “updated balance sheet position” as used in cl. 3.5 is expressly qualified by cl. 3.5(c) by reference to the relevant annual leave and long service leave components of the Starting DTA. [23] As to the proviso which appears at the conclusion of cl. 3.5(d), the plaintiff contends that those words were included in error.5 The plaintiff does not contend that there are circumstances in which, on its construction of cl. 3.5, the figure obtained after the subtraction of the Updated DTA from the Starting DTA could result in a negative figure thus giving the proviso some work to do.6 [24] The plaintiff further contends that if its construction of cl. 3.5 is not correct, then the defendant is estopped by conduct or representation from contending for the construction it alleges at para 8(e) of the defence. The conduct or representation upon which the plaintiff relies to found the estoppel is a statement contained in an email from the defendant’s solicitors to the plaintiff and copied to Mr Thierry Drecq, President of ECF Groupe of which the defendant is a subsidiary, Phillipe Hazard the Director of Finance of the ECF Groupe and Julien Robillard the defendant’s Business Developer. The statement upon which the plaintiff relies is: “Reward will calculate the updated balance sheet position at the end of the relevant Financial Year in respect of the deferred tax asset (that exclusively relates to the provisions for annual leave, long service leave and retirement benefit provisions) (the Updated DTA). For the avoidance of doubt, any new deferred tax asset (on top of the Starting DTA) that is accrued by reward following completion will not be included in the Updated DTA.”7 The proper approach to the construction of commercial contracts [25] In Electricity Generation Corporation v Woodside Energy Ltd & Ors,8 French CJ, Hayne, Crennan and Kiefel JJ said the following in respect of the construction of commercial contracts: 4 Defendant’s written submissions, para 6(c). 5 Transcript 3-51, L 45 to 3-52, L 27. 6 Transcript 3-35, ll 5-25. 7 Exhibit PMN-13 to the affidavit of Paul Napier, Exhibit 2. 8 (2014) 251 CLR 640 at [35]. -- 7 of 67 -- 8 “Both Verve and Sellers recognise that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose of objects to be secured by the contract. Appreciation of the commercial purpose of objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” [26] More recently, in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,9 French CJ, Nettle and Gordon JJ said: “46 The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to 9 (2015) 256 CLR 104 at [46]-[52]. -- 8 of 67 -- 9 identify the existence of a constructional choice, does not arise in these appeals. 50. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". 52. These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd. (citations omitted) [27] In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales10 Mason J (as his Honour then was) said: “The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. … Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be 10 (1982) 149 CLR 337 at 352. -- 9 of 67 -- 10 unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.” [28] These are the principles to be applied. [29] As already noted, each of the parties contends that the court is able to construe cl. 3.5 without recourse to matters external to the contract; but that having recourse to such matters supports their respective constructions. [30] The parties have adduced much evidence from persons negotiating the sale and purchase of RSC. No objection was raised by the parties in respect of much of that evidence on the basis that it was inadmissible for the purpose of construing the contract. However, in considering that evidence, the permissible purposes for which recourse may be had to it must be borne firmly in mind. To the extent that any of that evidence addresses the subjective intentions or expectations of those persons, it must be excluded from consideration. Objections to evidence [31] Objections were raised to some of the evidence on the grounds of relevance, hearsay and opinion. As the evidence was contained in the affidavits filed in the proceedings, the parties were content to have those objections noted and ruled upon in these reasons. i. Mr Napier [32] Paragraph 23 of Exhibit 2, Mr Napier’s first affidavit, will conclude with the words “executed by the parties” in line 9. All that follows in the remainder of the paragraph is either Mr Napier’s opinion, or subjective intention as to what had been agreed at the meeting held on 30 October 2014, and his opinion or intention as to how these provisions would operate. ii. Mr Kilmister [33] Paragraph 15(b) of Exhibit 5, Mr Kilmister’s first affidavit, is inadmissible. It is hearsay in that he purports to speak of improvements in the business of RSC by the defendant (Mr Kilmister being a representative of the plaintiff). It is otherwise speculative as it purports to speak of the current state of belief of the defendant’s representatives at the time of the making of the affidavit. It also speculates as to -- 10 of 67 -- 11 what effect an improvement in RSC’s business would have on the number of employees. iii. Mr Newnes [34] Objection was taken to paragraph 46 of Mr Newnes’ affidavit, which deposed to the real benefit or value of the deferred tax asset to Reward. Objection was on the basis that it is irrelevant; what is relevant being what was actually agreed regarding how the DTA was to be treated. Mr Trim for the defendant submitted that the relevance of the evidence was that it responded to evidence in the plaintiff’s case as to the actual tax benefit of the DTA. In my view, the evidence is responsive to evidence as to the benefit derived to Reward from the DTA.11 A constructional choice? [35] That each of the parties submit that cl. 3.5 of the Share Sale Agreement should be given the construction for which they respectively contend, and without recourse to matters external to the agreement, of itself, presents a constructional choice. No true choice would arise if one or other of the constructions respectively contended for were plainly wrong. [36] In my view, if cl. 3.5 were to be construed without recourse to matters external to the Share Sale Agreement, the construction contended for by the plaintiff is to be preferred. It is to be preferred because it gives due recognition to the definition of “Starting DTA” in cl. 3.5(a) and the use of that expression in subsequent subclauses. [37] By Clause 3.5(a), the Starting DTA is defined to be a particular net deferred tax asset. It is a net deferred tax asset on the balance sheet of RSC “as at the Effective Time which exclusively relates to provisions for annual leave, long service leave and retirement benefits.” [38] As set out above, one of the matters central to the construction of cl. 3.5 for which the defendant contends is the use of the words “balance sheet” in it. Those words are used in the expressions “the updated balance sheet position” and “these balance sheet positions “in cl. 3.5(c). It submits that the affidavit evidence of its witnesses 11 See Exhibit 2, Affidavit of Paul Napier at para 8; Exhibit 5, Affidavit of Gregory Kilmister at para 6; Exhibit 10, Affidavit of Richard Stephens at para 15; Exhibit 12, Affidavit of Michael Williams at para 14 and 16. -- 11 of 67 -- 12 make it “clear that in the balance sheet, the DTA is calculated by reference to leave that is taken and the leave that accrues: and is a ‘moving’ calculation which attempts to track a value for the amount of presently accrued leave and similar entitlements that may be paid in the future.”12 [39] On that basis, the defendant submits that: “The repeated references to ‘balance sheet’ confirms that the parties objectively intended to refer to the usual calculation that RSC would ordinarily perform in the ordinary course of business of preparing its financial statements and balance sheets. That would be the commercially sensible approach given the repeated use of this phrase.”13 [40] I reject those submissions. They fail to recognise the definition of “Starting DTA” as being something other than the asset which ordinarily is calculated for inclusion in RSC’s balance sheet. That it is different to the asset ordinarily included in the balance sheet is clear from the language used by the parties in the agreement. It is the net deferred tax asset which exclusively relates to provisions of annual leave, long-serve leave and retirement benefits. [41] Furthermore, what cl. 3.5(c) requires is the procurement by the defendant of RSC to calculate the updated balance sheet position of the components of the Starting DTA. That is, those components of the particular asset as defined, being the net deferred asset on the balance sheet as at 11.59pm on 31 October 2014, which exclusively related to the provisions for annual leave, long-service leave and retirement benefits. That asset was ascertainable, and was required to be ascertained at that time. Once ascertained as the Starting DTA, it was the components of that asset exclusively related to, respectively, provisions for annual leave, long-service leave and retirement benefits which were required to be updated. Those components, by definition, only related to provisions for annual leave on the one hand and long- service leave and retirement benefits on the other hand, accrued at the Effective Time. Those components of the Starting DTA were themselves each ascertainable amounts. 12 Defendant’s written submissions, at para 79. 13 Defendant’s written submissions, at para 80. In my view, that evidence is itself evidence of matters external to the agreement which should not be considered when considering the proper construction of Cl. 3.5 on the agreement loan. -- 12 of 67 -- 13 [42] Any provision for either annual leave of long-service leave and retirement benefits which accrued after 31 October 2014 was not, by definition, part of the Starting DTA. [43] The updated balance sheet position of the respective components of the Starting DTA is the value of those components at the end of the relevant three month period. It is the amount remaining on the balance sheet of that component of the Starting DTA which was previously ascertained as at the Effective Dates. The updated balance sheet position is ascertainable. It will reflect the change in that figure over the period. [44] Were any further amounts relating to provisions for either annual leave or long- service leave and retirement benefits which accrued after the Effective Date (31 October 2014) to be included in the calculation, then it would not be a calculation of the balance sheet position of the Starting DTA. It would be the calculation of the balance sheet position of some other asset. [45] Although I have expressed some reservation about having recourse to the defendant’s affidavit evidence as to the manner of calculating the DTA on the balance sheet when considering the proper construction of cl. 3.5 on the basis of the terms of the agreement itself,14 having recourse to that evidence only confirms the plaintiff’s construction, and is contrary to the defendant’s construction. [46] Mr Newnes, in his affidavit,15 says at paragraph 23: “As leave entitlements accrue, the tax related to those leave entitlements is recorded as a ‘deferred tax asset’ (DTA) or the ‘future tax income benefit’ in the accounts. The DTA is created due to the timing difference between the time that the leave entitlements are accrued and the time in which the corresponding tax is paid or recognised in the income statement. The taxable income is adjusted by the variation in leave entitlements at the end of the financial year, as I explain further in paragraphs 26-31 below. The direct tax impact is 30% (being the company tax rate) of the variation. The DTA relating to the leave entitlements is only one of the components of the DTA recorded in Reward’s accounts. Other components included in the DTA are timing differences related to accruals and pre-payments for a number of items such as audit fees, insurance payments and freight.”(emphasis added) 14 See footnote “13” above. 15 Exhibit 17. -- 13 of 67 -- 14 [47] That evidence clearly identifies that the DTA ordinarily recorded in RSC’s accounts includes components unrelated to provisions for leave. This demonstrates that the Starting DTA, as defined, was a separate ascertainable asset as at the Effective Date. It also demonstrates that what is prescribed under cl. 3.5(c) as the calculation of the updated balance sheet position of the components of the Starting DTA is different to the calculation of the updated balance sheet position of the components of the DTA relating to those components. [48] If, objectively, the parties intended for the calculation to be performed as contended for by the defendant, then the requirement under cl. 3.5(c) would have been for the calculation of the updated balance sheet position at the end of the relevant financial quarter in respect of both the component of the DTA that exclusively related to the provisions for annual leave and the component which related exclusively to the provisions for long-service leave and retirement benefits. That is not what cl. 3.5(c) requires. [49] This analysis, in my opinion, also answers the following further submissions of the defendant16 that: “The plaintiff’s construction requires some further, inconvenient, figures to be kept which would not normally be required (including, in time, keeping a distinction between the leave accrued at the time of the SSA and the leave accrued afterwards as only the former would be relevant when taken). The parties did not choose, in the agreement, to use the words ‘running account,’ ‘running total’ or similar. Instead, a specific set of references to the balance sheet appears and that should be given its proper weight in construing the clause.” [50] To the extent that the keeping of those figures might be said to be inconvenient, it is what was agreed. In any event, convenient or otherwise, the evidence establishes that the figures are ascertainable. Furthermore, as the above reasoning demonstrates, the references to “balance sheet” or indeed “balance sheet position” do not, of themselves, identify that which is to be ascertained. The balance sheet must record all the assets and liabilities of the entity as at the balance sheet date. The parties acknowledgement of the Starting DTA as an asset on the balance sheet as at the Effective Date, which is but a component of the DTA ordinarily recorded, demonstrates that any changes in that particular asset over the relevant period will 16 Defendant’s written submissions, para 81. -- 14 of 67 -- 15 also be reflected in the balance sheet at the end of the period. It may form part of another, more broadly defined, asset “the DTA”; but it will nonetheless be ascertainable upon a more narrow analysis. [51] In respect of the proviso in subclause 3.5(d), that no payment will be made by the Buyer to the Shareholder if the amount equal to the Starting DTA minus the Updated DTA is negative, I am of the opinion that those words are redundant. On a proper construction of cl. 3.5(d) as a whole, they perform no work. [52] Clause 3.5(d) creates two obligations. The first requires the Buyer (the defendant) to notify the Shareholder (the plaintiff) of the Updated DTA in respect of the relevant period. The second requires the Buyer to pay the Shareholder an amount equal to the Starting DTA minus the Updated DTA. Whilst a negative amount, as contemplated by the proviso, could only arise if the Updated DTA were a higher amount than the Starting DTA, the proviso does not affect the obligation to pay otherwise created by cl. 3.5(d). That is, cl. 3.5(d), read without the proviso, only creates an obligation for the Buyer to pay the Shareholder in any particular period if the Starting DTA is greater than the Updated DTA. The obligation is to pay an amount equal to the former minus the latter. If the Updated DTA at the end of the period is equal to the Starting DTA at the commencement of the period (the circumstance which will arise if no annual leave, long-service leave or retirement benefits are taken or paid in that period) then the difference will be zero. In those circumstances, nothing is payable. [53] If, as the defendant contends, the Updated DTA is to include any accruals of leave or retirement benefits as well as those benefits and leave taken, even without the proviso, no obligation for the Buyer to pay the shareholder would arise in that period, if the Updated DTA were greater than the Starting DTA. The proviso would, even on the defendant’s construction, have no work to do. It would be a commercial nonsense to construe cl. 3.5(d), without the proviso, as requiring the Buyer to pay an amount to the Shareholder equal to a negative amount. [54] Therefore, to construe cl. 3.5(d) with the proviso in the way the defendant contends on the basis that it is necessary to do so to allow the words of the proviso to have work to do, would be wrong. Those words would, in fact, not be doing any work at all. They would not, in any way, add to or alter the effect or operation of cl. 3.5(d). -- 15 of 67 -- 16 The defendant’s construction of the clause purports to use the words of the proviso to give a meaning to the other words of the clause which they do not have. [55] Once that error in the defendant’s construction of cl. 3.5(d) is identified, it demonstrates the error in the defendant’s construction of “Updated DTA” said to be necessary to give meaning to that clause because of the proviso. [56] In respect of cl. 3.5(f), the defendant submits that its reference to tax deductions by the defendant, which were related to the Starting DTA, points to the interpretation for which it contends as being that which the parties objectively intended. This submission is, again, based upon affidavit evidence in the defence case. The evidence is that, in light of accounting standards, the only tax deduction that will ever be claimed is where the amount of leave taken exceeds the amount of leave accrued in the financial year.17 [57] I do not accept the defendant’s submissions. The words “tax deductions made by RSC which are related to the Starting DTA” do not naturally refer to tax deductions calculated on the basis identified by the defendant. The basis for calculation of tax deductions identified by the defendant would be as much related to the Updated DTA as they would be related to the Starting DTA. This suggests, objectively, that what was intended by the parties by cl. 3.5(f) was something other than a calculation of a tax deduction on the basis identified by the defendant. [58] Furthermore, by its pleadings, the defendant admits that the tax asset value of the amounts accrued at the Effective Time for each of annual leave and long-service leave are the values of the tax deductions to RCS when those respective accrued entitlements are paid.18 [59] The defendant also admits that the tax asset values of the amounts accrued at 31 January 2015 in respect of the components of the Starting DTA that exclusively relate to annual leave and log-service leave are the values of the tax deductions to RSC when those respective accrued entitlements are paid.19 [60] Those admissions recognise the relationship between the tax deduction available to RSC and the payment of the relevant accrued entitlements. 17 Defendant’s written submissions, para 87 and 88. 18 See Defence paras 3(a) and 4(a). 19 Defence paras 5(a) and 6(a). -- 16 of 67 -- 17 [61] For these reasons, I am of the opinion that the construction of cl. 3.5 contended for by the plaintiff is that to be favoured. [62] However, as the construction for which the defendant contends cannot be dismissed as plainly wrong, and because the parties have gone into considerable evidence about matters external to the Share Sale Agreement, there is a constructional choice. Recourse may be had to that external material, in the manner which I have already identified, for the purpose of resolving that constructional choice. Construction of Clause 3.5 with Recourse to Matters External to the Contract [63] During early 2014, the defendant commenced discussions with the plaintiff to purchase the shares in RSC. On or about 26 February 2014, the parties signed a non-disclosure agreement relating to the purchase of RSC.20 [64] On 7 March 2014 the defendant wrote to the plaintiff in the form of an indication of interest in RSC.21 Mr Drecq, president of ECF Groupe deposes to this as being an offer by the defendant to the plaintiff to purchase RSC for a price of between $18 million and $22 million on the basis of information provided by the plaintiff in the non-disclosure agreement.22 It was not an offer. It was termed a “Letter of Interest”. It was said to detail the basis upon which the defendant would be willing to proceed with the acquisition of RSC. It clearly stated that it was only an indicative proposal which was not meant to be binding on either party. It was subject to completion of due diligence. It did indicate that the defendant was contemplating a Purchase Price of $18 million to $22 million on a “debt free cash free” basis, and that the transaction would be paid entirely in cash at closing. [65] On 30 April 2014 Mr Richard Stephens, the plaintiff’s Chief Financial Officer, sent Mr Julien Robillard, ECF’s Business Developer, a copy of the reward consolidated balance sheet as at 31 March 2014.23 It included highlighted assets and liabilities which were to be included in the calculation of the Purchase Price.24 Whether there was deliberate inclusion or exclusion of various assets, but particularly the deferred tax asset, is a matter to which I shall return to later in these reasons. 20 Exhibit 15, affidavit of Thierry Drecq, paras 12 and 13. 21 TD3 to Exhibit 15. 22 Exhibit 15, para 14. 23 TD1 to Exhibit 15. 24 Exhibit 15, para 10; evidence of Richard Stephens TD2-10, ll 7-9. -- 17 of 67 -- 18 [66] On 17 June 2014, Mr Drecq wrote on behalf of the defendant to the plaintiff confirming the defendant’s interest in acquiring RSC. He stated that on the basis of the analysis the defendant had completed to that point, and certain assumptions set out in the letter, the defendant valued RSC at $26 million. Again, this was on a “cash and debt free” basis.25 [67] The letter requested the opportunity to conduct standard due diligence on RSC and estimated that they could move toward a fully binding offer within six weeks assuming full access to management and information. It proposed a period of exclusivity to be granted to 30 September 2014 during which to complete due diligence and negotiate transaction documentation. [68] Again, the letter was stated to be merely confirmation of the defendant’s interest and was not intended to be binding on either party. [69] On 26 June 2014, Mr Stephens wrote to Mr Drecq responding to the defendant’s letter of confirmation of interest of 17 June 2014. He stated that it was:26 “…important to the plaintiff’s board that the equity value realised from a sale equates to no less than the net book carrying value of the operating assets of the business. We are not looking to recover any goodwill from a sale transaction.”27 [70] He expressed that the plaintiff was: “…generally comfortable with your proposal method of deducting net debt balances and a certain level of under-provisioning of inventory and receivables; however we need to guarantee the overall net book value of the business is realised by the definitions of both ‘normalised working capital’ and the value attributed to the minority interest.” [71] As to due diligence exclusivity, Mr Stephens indicated that the plaintiff believed it could populate an electronic data room within 8–10 working days and that the defendant and its advisors could achieve the level of comfort needed to make a decision within three weeks of commencing their review. He, therefore, indicated a preparedness to grant exclusivity to 31 August 2014 to conduct due diligence and concurrently negotiate a Share Sale Agreement. 25 TD4 to Exhibit 15. 26 RJT-3 to Exhibit 10, affidavit of Richard Stephens. 27 RJT-3 to Exhibit 10, Affidavit of Richard Stephens. -- 18 of 67 -- 19 [72] Mr Drecq responded on 16 July 2014.28 The response described terms and conditions under which exclusivity would be granted. Under “Valuation” it identified: “The consideration for the shares owned by ALS is the book value of total working capital including plant and equipment at transaction Completion Date.” [73] It included an exclusivity period to 30 September 2014. [74] Mr Greg Kilmister, the plaintiff’s Chief Executive Officer, and Mr Stephens signed the letter of exclusivity accepting its terms. [75] On or about 15 September 2014 Mr Drecq, on behalf of the defendant, sought an extension of the exclusivity period. On 16 September 2014, Mr Stephens responded stating that to even consider extending the exclusivity period the defendant needed to include several matters in an offer for RSC including “confirming book value of net trading assets as the Purchase Price for the business”.29 Mr Drecq then sent a binding offer dated 17 September 2014.30 Under “Price Consideration” it stated: “We confirm our will to purchase 100 per cent of share capital of Reward Supply for value of net trading assets as described over the process subject to depreciation of slow-moving inventories as per management reporting and discussions with Thierry Drecq on September 4th in Brisbane.” Technical adjustments such as deduction of minority interest value ($0.5 million) and dividend liabilities related to NT ownership in 2014/15 will need to be agreed. It is assumed that transaction will be performed on a cash free/ debt free basis. Therefore, all ALS-related liabilities will be cancelled prior to closing with no impact on rewards supply profit and losses.” [76] The offer was countersigned by Mr Kilmister and Mr Stephens. [77] Between 8 and 10 October 2014, Mr Drecq and Mr Phillipe Klocanas,31 on behalf of the defendant and Mr Kilmister, Mr Napier (the plaintiff’s Group Legal Counsel) and Mr Michael Williams (the plaintiff’s Group Finance and Taxation manager) met to discuss and finalise outstanding issues,32 following which Mr Drecq reported 28 TD5 to Exhibit 15. 29 TD6 to Exhibit 15. 30 TD7 to Exhibit 15. 31 Mr Klocanas is a partner and co-founder of Weinberg Capital Partners which is the majority shareholder in E.CF Equity. 32 Exhibit 15, para 26; Exhibit 8, affidavit of Phillipe Klocanas, para 10. -- 19 of 67 -- 20 back to the defendant’s board, shareholders and banks that the transaction would proceed on the basis that the Purchase Price would be the current book value of RSC’s assets.33 [78] It was common ground that, to this point, there had been no discussion between the parties of the future income tax benefit asset on the RSC balance sheet. The balance sheet, which had been provided by Mr Stephens to Mr Robillard on 30 April 2014 included that asset with a value as at 31 March 2014 of $975, 570. It had not, however, been one of the assets highlighted on the balance sheet as being included in the Purchase Price . It is also common ground that there was no direct discussion of this asset between the parties prior to 27 October 2014, although PricewaterhouseCoopers, who were accountants acting for the defendant in the due diligence period, had provided a questionnaire which, amongst other things, sought a confirmation of the key components of the deferred tax assets.34 [79] The completion of the transaction was scheduled for 31 October 2014. [80] On 27 October 2014 Paul Napier emailed Mr Simon De Young of Baker and McKenzie Solicitors attaching an updated draft of the Share Sale Agreement. Mr Philippe Hazard, the defendant’s former Director of Finance, describes Mr De Young’s role as having assisted the defendant “in the preparation of legal documentation required for the transaction.”35 Mr De Young, a partner of the legal firm Baker and McKenzie, describes himself as having “acted on behalf of ECF Group during its negotiations with ALS Ltd to acquire all the issued shares and Reward Supply Co Pty Ltd.”36 Mr Drecq says that Mr De Young “was acting on behalf of ECF.”37 [81] The updated draft of the Share Sale Agreement provided by Mr Napier included, as part of the defined “Financial Debt” “any net deferred tax balance.” As already noted, the Financial Debt was reflected in the calculation of the Purchase Price. The net effect upon the Purchase Price would be to increase it by the amount of the deferred tax balance because the deferred tax balance would reduce the Financial Debt which was to be deducted from the net value of the assets. 33 Exhibit 15, para 27. 34 PMN-3 to the Affidavit of Paul Napier, Exhibit 2. 35 Exhibit 14, Affidavit of Phillipe Hazard, para 19. 36 Exhibit 16, Affidavit of Simon De Young, para 2. 37 Exhibit 15, paragraph 52. -- 20 of 67 -- 21 [82] Mr Napier deposes to the inclusion of the deferred tax asset in the definition of “Financial Debt” in this way as having arisen at this time following a discussion he had with Mr Michael Williams in which it became apparent to Mr Napier that the deferred tax asset had not been taken into account in determining the price payable under the Share Sale Agreement and that it should have been.38 [83] Mr Williams deposes to having become directly involved in the transaction in or about mid-October 2014 when Mr Stephens was on leave.39 He deposes to it becoming apparent to him that although the future income tax benefit available to RSC on payment of accrued annual leave and long-service leave entitlements of its employees was included in the balance sheets of RSC which had been supplied to the defendant, no provision had been made in the sale for payment for that future tax benefit which would be received by RSC.40 Mr Williams had a view as to whether the sale of shares on a net asset basis should have made provision for the defendant to pay for the deferred tax asset. In his view, it should have. It is apparent from evidence of those involved in the transaction on behalf of the defendant that they took a different view. More will be said about that difference of view, and what, ultimately, if anything, is to be made of it, later in these reasons. [84] As a matter of fact, however, Mr Williams’ evidence as to how the inclusion of the deferred tax asset arose may be accepted. [85] Both Mr William and Mr Stephens deposed to the former having taken this up with the latter upon his return from leave.41 Mr Stephens, when cross-examined, gave evidence that prior to this time, and throughout the period when the transaction was being discussed, he “was of a mistaken belief that the tax assets and liabilities would remain with the plaintiff under the tax consolidation regime and that was the reason for their exclusion from the balance sheet.”42 [86] Mr Gregory Kilmister, the Chief Executive Officer of the plaintiff, deposes to being aware that the basis for the proposed sale of the shares in RSC to the defendant was that “the sale price of the shares was represented by the book value of the total 38 Exhibit 2, para 11. 39 Exhibit 12, Affidavit of Michael Williams, para 2. 40 Exhibit 12, para 3. 41 Exhibit 2, para 7; Exhibit 10, Affidavit of Richard Stephens, para 9. 42 T2-10, ll 11-15. -- 21 of 67 -- 22 assets of RSC at the Completion Date of the sale of shares.”43 He deposes to having first become “aware that an asset of RSC had not been taken into account by the parties to the SSA when the representatives were calculating the Purchase Price of the shares when I was informed of this by Michael Williams on or about Thursday 23 October 2014.”44 It was Mr Kilmister’s view, having been advised of the omission to include the amount of the deferred tax asset in the calculation of the Purchase Price for the shares, that the defendant should pay the net amount of that asset on completion of the transaction, as it was an asset of RSC, the benefit of which would be received by the defendant.45 [87] When cross-examined by Mr Trim for the defendant, Mr Kilmister said when asked if Mr Williams had explained that the deferred tax asset had only been overlooked by the plaintiff’s side; “it was certainly overlooked by us, yes.”46 [88] The defendant submits that the court should reject the evidence of the plaintiff’s witnesses as to the basis upon which the shares in RSC were being sold, and their evidence as to the inclusion of the deferred tax asset having been overlooked or forgotten. It invites the court to find that, to the contrary, the parties negotiated about and deliberately selected those assets which the defendant would pay for and deliberately excluded the deferred tax asset from that calculation. The defendant characterises the conduct of the plaintiff, knowing that the parties specifically excluded the deferred tax asset, to have “simply made a calculated decision to ask for an extra million dollars just prior to the close.” It suggests that there are credit issues which arise from the plaintiff’s witnesses having exhibited copies of documents to their affidavits which did not include the blue highlighting which had been used to identify assets which were to be included in the calculation of the Purchase Price .47 [89] I am not prepared to make those findings sought by the defendant. As I have already indicated, I accept the evidence of Mr Williams as to how the issue concerning the deferred tax asset arose in October 2014. I also accept the evidence of Mr Kilmister, Mr Stephens and Mr Napier in that regard. There was, in my 43 Exhibit 5, Affidavit of Gregory Kilmister, para 3. 44 Exhibit 5, para 4. 45 Exhibit 5, para 6. 46 T1-83, ll 27-34. 47 Defendant’s written submissions, paras 71. -- 22 of 67 -- 23 opinion, a persuasive frankness to that evidence. It is, in my view, more probable that the failure to include the deferred tax asset in the calculation of the Purchase Price arose from the circumstances which they identify, that is that it was an asset the benefit of which would pass to and be derived by the defendant rather than be retained by the plaintiff after sale, rather than it being the audacious last minute cash grab which the defendant alleges. [90] The evidence disclosed a divergence of views as to whether the particular asset fell within the description of the “current book value of the operating assets of the company,”48 or the “net book carrying value of the operating assets of the business,”49 or the “book value of total working capital including plant and equipment,”50 or “value of net trading assets as described over the process,”51 of the “current book value of RSC’s assets.”52 [91] Mr Hazard’s evidence was that the calculation of the Purchas Price was to be “on the basis of the current book value, i.e. the trading assets minus the trading debts, on a “cash free and debt free” basis. This means that RSC would not have any cash and that it would not have any debt when the shares were to be transferred from ALS to ECF. Also, the Purchase Price did not include any Goodwill for RSC.”53 [92] He considered, trading assets to be: “Current assets that can be converted into cash, such as property, plant and equipment, inventory or stock, receivables (or trade debts, i.e. money that is owed to RSC) and other current assets: the liabilities included the trading debts which were items such as the payments to be made by RSC to creditors, current tax liabilities and other current liabilities. The assets and liabilities that the Parties agree were included in the Calculation of the Purchase Price were listed in Schedule 2 of the Share Sale Agreement. It included the assets and liabilities I have identified above. The trading assets do not include any assets that are included in the balance sheet for accounting purposes only, such as the DTA. Those are referred to as “accounting assets”. Accounting assets cannot be converted to cash. They 48 As referred to by Mr Drecq as being the basis upon which Mr Kilmister insisted the Purchase Price would be calculated; Exhibit 15, para 7. 49 As referred to by Mr Stephens in his response of 26 June 2014 to the defendant’s letter of confirmation of interest of 17June 2014. 50 As the consideration was described in the letter of exclusivity from the defendant dated 16 July 2014; TD5- Exhibit 15. 51 As the price consideration was described in the binding offer from the defendant dated 17 September 2014; TS7 – Exhibit 15. 52 As Mr Drecq reported back to the defendant’s board, shareholders and banks after the meetings in Brisbane between 8-10 October 2014. 53 Exhibit 14, Paragraph 9. -- 23 of 67 -- 24 are recorded in the balance sheet to record potential assets or potential liabilities from year to year for the purpose of making yearly adjustments to the accounts. It is common accounting practice for a company to include an accounting asset that relates to the tax adjustments to be made in relation to annual leave and long service leave as they accrue and as leave is taken”.54 [93] Mr Kilmister was of the view that the deferred tax asset was part of the “real assets” on the company’s books.55 Mr Stephens saw the deferred tax asset as a real or tangible, rather than intangible, asset.56 He considered real assets to be those that had value. This what he was referring to as tangible assets. [94] Mr Williams was of the view that it was a real asset.57when asked whether he agreed that the deferred tax asset was an accounting asset rather than a real asset, Mr Williams disagreed saying that it was “different to an accounting provision in the sense that it attaches to the… employer entitlements to which it relates”.58 Mr Stephens expressed a similar view. He said “the DTA which we are referring here is linked intrinsically with the balance of leave provisions which was one of the liabilities that resulted in a deduction in the purchase price”.59 [95] As to the highlighting in blue of the various assets on the balance sheet, Mr Napier agreed that those were the assets that ultimately found their way into the Completion Statement,60 and that their highlighting in blue was intended to be the selection of the assets to calculate the Purchase Price.61 However, he did not agree with the assertion that the deferred tax asset was not to be included despite the fact that the parties had not included it in eight months of negotiations. Rather, he said, “I just don’t think we turned our minds to it, to be honest”.62 [96] Mr Stephens agreed that the highlighted numbers in the balance sheets represented those assets which the plaintiff and the defendant were discussing as being included in the Purchase Price “at that time.”63 That was during the period when he had the mistaken belief that the tax assets and liabilities would remain in ALS. He did not consider that the parties made a deliberate decision in their discussions between 54 Exhibit 14, Paragraphs 11-12. 55 T1-67, ll 20-23. 56 T2-11, ll 10-40. 57 T2-28, ll 20-21. 58 T2-28 lines 23-25. 59 T2- 13, lines 35-39. 60 T1-37, ll 38-39. 61 T1-38, ll 1-2. 62 T1-43, ll 15-25. 63 T2-10, ll 7-9. -- 24 of 67 -- 25 February and September 2014 about what assets would be included as part of the Purchase Price. He thought that the parties were trying to highlight the assets, which would be transferred to the defendant for which it would get value.64 [97] Mr Williams highlighted the figures on the balance sheet based on Mr Stephens having told him that he should highlight them on the basis of selecting net assets. Mr Williams was not himself involved in the conversations between the parties as to whether the highlighted assets had been selected by the parties to form part of the Purchase Price.65 [98] In my view, the highlighting of the various entries on the balance sheet does not establish definitively that those were the assets deliberately and conclusively selected to the exclusion of others, in particular the deferred tax asset, to be included for calculating the Purchase Price. It is certainly the case the deferred tax asset was not highlighted, however, that does not lead to the conclusion that a deliberate determination had been made by the plaintiff to exclude the asset on the basis that it was not an asset to be transferred and reflected in the Purchase Price as an asset of value, the benefit of which would be derived by the defendant. Both Mr Williams and Mr Stephens refer to the inclusion of the liabilities for leave to which the deferred tax asset relate, having been included for the purpose of Purchase Price with the effect that the price would be reduced. [99] It is noteworthy that it was Mr Williams who did the blue highlighting on the balance sheet which did not include the deferred tax asset, based upon what he had been told by Mr Stephens, but it was also Mr Williams who raised the issue of that asset not having been included in the calculation of the Purchase Price with Mr Stephens, Mr Napier and Mr Kilmister in late 2014. [100] The earlier highlighting of those other assets does not lead me to reject the evidence of the plaintiff’s witnesses that the deferred tax asset had been overlooked for the purposes of calculating the Purchase Price. [101] In any event, once raised by the plaintiff, it was clearly a matter to be addressed in the subsequent negotiations between the parties which resulted in the final version of the Share Sale Agreement, including cl. 3.5. Whilst the background to how the 64 T2-10, ll 25-40. 65 T2-27, L 36 – T2-28, L 18. -- 25 of 67 -- 26 issue arose informs, to some extent, the respective parties’ view of what had previously been agreed and, therefore, how this asset might then be addressed, what is of greater importance is how the parties in fact addressed it. [102] Mr Napier’s email on 27 October 2014 attaching a copy of the updated Share Sale Agreement, including any net deferred tax balance within the definition of Financial Debt, was copied to Mr Phillipe Hazard for the defendant. Mr Napier’s email had been sent at 2.03pm.66 [103] At 3.39pm on 27 October 2014, Mr Williams sent Mr Hazard an email to which he attached updated balance sheets for rewards, being on both stand alone and consolidated bases, and in which he responded to various queries raised by Mr Hazard in an earlier email from him to Mr Williams on 24 October 2014 at 8.07pm. Mr Williams’ responses were included within the text of Mr Hazard’s original email using red font.67 Mr Hazard’s email had sought clarification of the balance sheet positions so that, amongst other things, the defendant could check “Reward has no cash/debt left (please confirm also accounting treatment about existing tax assets/liabilities)”. Mr Williams’ responded to this particular query, “The pro forma September balance sheet is attached. The deferred tax assets and liabilities remain with the company as they relate to the net assets thereof”. [104] Mr Hazard deposes to this being the very first time that the plaintiff had raised the issue of the deferred tax asset and the potential future tax benefits to RSC.68 He says that, prior to that date, the plaintiff had not raised that asset in any discussions about the Purchase Price and nor had that asset been raised in any discussions at all. He further said that the Purchase Price was based on the net trading assets only as he had described them to be in paragraphs 9-13 of his affidavit. [105] As discussed above, however, there is considerable difference as between Mr Hazard’s view as to the nature and value of particular assets and the view of the plaintiff’s witnesses on those matters. That is, whether the deferred tax asset would fall within the description of a “trading asset” and “accounting asset”, a “real asset” or a “tangible” or “intangible” asset. 66 PMN-4 to affidavit of Phillipe Napier, Exhibit 2; PH1 to affidavit of Phillipe Hazard, Exhibit 14. 67 PH-2, Exhibit 14; MBM-1, Exhibit 12. 68 Exhibit 14, para 22. -- 26 of 67 -- 27 [106] Mr Hazard responded to Mr Williams’ email at 5.55pm on 27 October 2014.69 Mr Hazard deposes to having responded to Mr Williams, “indicating that I did not believe that ‘net tax assets (924KAUD) were ever part of the deal/ of the net assets calculation’”. He deposes to that, as reflecting his understanding at the time and his knowledge of the communications between the parties prior to that date.70 (emphasis added). [107] In the actual email, however,71 Mr Hazard does not actually express that belief. Rather, he addressed the issue of the net tax assets in more equivocal terms. He actually said, “I am not sure whether net tax assets (924KAUD) were a part of the deal/ of the net assets calculation…to be discussed in a few MN”. (emphasis added). [108] Following that exchange of correspondence, a conference call was held between Mr Hazard, Mr Williams, Mr Stephens and Mr Douheret of PricewaterhouseCoopers. Mr Hazard deposes to having responded to the proposal raised by Mr Stephens and Mr Williams that the net tax assets of RSC were to be included in the Purchase Price, that the defendant’s position was that he did not form part of the Purchase Price and would not be paid by the defendant under any circumstances.72 Mr Hazard further deposes to Mr Stephens, having agreed with him, that the deferred tax asset could not be transformed into cash unless the business went bankrupt and that it was an accounting asset and not a true asset of RSC from which the defendant would receive any financial benefit.73 [109] Mr Stephens contests Mr Hazard’s recollection of that meeting and, particularly, what Mr Stephens agreed with in his discussions with Mr Hazard. He disagrees that he agreed with either of the propositions which Mr Hazard says he put to Mr Stephens. He says that he disagrees because the propositions are incorrect. Mr Stephens says that the propositions are incorrect because the deferred tax asset, 69 Mr Hazard refers to it as being 6.55pm at para 23 of his affidavit. The Exhibit, PH3, identifies the time as being 18:55:34+1100. This suggests, where Mr Hazard obtained the time of 6.55pm. However, a comparison of other emails sent on that date demonstrate the time to have been one hour earlier, that is, 5.55pm. For example, Mr William’s email of 27 October 2014 as exhibited at PH2 to Mr Hazard’s affidavit shows the time of 16:39:22+1100. The same email as exhibited to Mr William’s affidavit at MBW-1 demonstrates the time to be 3.39pm, not 4.39pm. It may be that daylight saving in other parts of Australia accounts for the difference. 70 Exhibit 14, para 23. 71 PH3 to Exhibit 14. 72 Exhibit 14, para 24(a) and (b). 73 Exhibit 14, para 24(d). -- 27 of 67 -- 28 although not a trading asset had real value to RSC which would receive the cash benefit of the tax deduction available to it when the leave and entitlements of the employees were actually taken and the employees paid. He says that he would not have agreed that the deferred tax asset would not be transformed into cash unless RSC’s business went into bankruptcy because that was also not the case, although he would have agreed with the proposition that the deferred tax asset component, in respect of leave titles not taken, would be converted into cash upon bankruptcy.74 [110] At 8.48pm on 27 October 201475 Mr Hazard sent an email to Mr Stephens in which he said: “I refer to our call this morning (with Michael, Nigel and Eric Douheret). That was useful to understand the closing bookings prior to the closing. During the call, ALS indicated that net tax assets (920KAUD) are now included in the Purchase Price to be paid by ECF. We checked internally with Thierry, Julien (cf. your enclosed excel sheet (lines in blue, column B, showing assets to be purchased) that explicitly excludes (net) tax assets from the net assets definition, in line with definitions given in the Schedule 2, page 49 of the last version of the SPA dated today, plus all last week’s discussions between ECF and ALS): As we exchanged during the call, it was never agreed between ECF and ALS that these (net) assets were to be purchased by ECF, moreover, ALS indicated that it would “clean” these items prior to the closing in order for ECF to take over a company that had no tax impact. Therefore, it will not be possible for ECF to pay the 920KAUD in addition to what has been agreed. We would be grateful if you would indicate to us (ideally by tomorrow) which solution ALS considers in order to solve this issue.” [111] Mr Stephens disputes the statement in that email that the plaintiff had indicted that it would clean tax assets prior to the closing of the agreement in order for the defendant to take over the company with no tax impacts. He deposes that, in fact, the plaintiff undertook as part of the transaction to be responsible for all current tax liabilities but that the deferred tax asset was not the same as a current liability as it 74 Exhibit 11, second affidavit of Richard Stephens, para 4. 75 PH5 to Exhibit 14; RJTS-6 to Exhibit 10. Mr Hazard erroneously refers to this as being 9:48pm at Exhibit 14, paragraph 27. -- 28 of 67 -- 29 was an asset which would be of benefit to RSC in the future after completion of the Share Sale Agreement.76 [112] The plaintiff’s response to Mr Hazard’s email was provided by Mr Napier by email at 11.34am on 28 October 2014.77 Mr Napier said: “I refer to your email below. We have discussed this issue again today and wish to reassert our position. The tax assets have always appeared in the balance sheets provided to ECF, and the principle concerning the inclusion of these amounts is the same as the adjustment for finance leases and tax liabilities – this being the principle of matching liabilities and assets subject to transfer. We do not see that ECF is paying ALS an additional amount for these assets. Rather, ECF is merely paying the true value of employee entitlements. I understand that there was some discussion last night that ECF may not realise the benefits of these assets for a period. However (if this is the case), equally, ECF will not realise the liability (i.e. employee entitlements) that is associated with the tax assets for a period of time, if at all (i.e. employees may not ultimately become eligible for long service leave). We would be available to discuss this issue again further this evening if required.” [113] Mr Hazard deposes to the statement in this email that ECF may not realise the benefits of the tax assets for a period of time ‘matched’ with the defendant’s view that the deferred tax asset was not a real asset with any tangible benefit and that it was an accounting asset which could be described as an accounting fiction during the normal course of business as it did not crystallise into cash unless the company was liquidated.78 Further, it did not generate any cash or financial benefit other than the marginal amount of tax deduction (if any) that was to be made at the end of the financial year.79 [114] Mr Napier contests Mr Hazard’s interpretation of what was said in that email. He states that he was:80 76 Exhibit 10, para 10. 77 PMN-7 to Exhibit 2; RJTS-7 to Exhibit 10. 78 Exhibit 14, para 29. 79 Ibid. 80 Exhibit 3, second affidavit of Paul Napier, para 5. -- 29 of 67 -- 30 “…simply observing that the benefit of the DTA in the balance sheet of RSC at the Completion Date of the SSA might not be realised for some time following completion of the SSA because receipt of the benefit was dependent upon when RSC’s employees took their accrued entitlements to annual leave and long service leave, when those entitlements were paid by RSC and when RSC received the benefit of the tax deduction resulting from the payments.” [115] Mr Hazard responded by email at 5.16pm on 28 October 2014 addressed to Mr Napier. In it he said: “Thanks for your email. I confirm that the accounting treatment of these assets does not meet that we agreed and discussed that we should pay for it. This item only appears since yesterday… This has no real (cash) value and will not be converted into cash unless the company disappears. At this stage, we would like to have a call with Richard this morning, is 9h15 okay for you?” [116] Mr Napier responded at 5.23pm saying that they could be available at 9.15 Paris time and seeking that dialling instructions be provided. 9.15am Paris time would have been 6.15pm Brisbane time. [117] What was discussed, and from the defendant’s perspective said to have been agreed, during the discussions which followed this email exchange on 28 October 2014 is contentious. For its part, the defendant asserts that an agreement in principle was reached which agreement was ultimately reflected in cl. 3.5 of the Share Sale Agreement. That agreement, as alleged by the defendant, informs its construction of cl. 3.5. [118] At 6.09pm (9.09am Paris time) on 28 October 2014, Mr Napier sent an email to Mr Hazard.81 Mr Hazard deposes to receiving that email at that time and sets out an extract from it in his affidavit.82 In full, the email read: “Further to our call, I have spoken with Richard and we can accept that the net deferred tax balance can be removed from the definition of Financial Debt if ECF can agree to procure reward to pay the benefit it receives each financial year from the deferred tax balance (at completion) up to the change in control of ECF. 81 PNM 8 to Exhibit 2. 82 Exhibit 14, para 31. -- 30 of 67 -- 31 Please confirm that this principle would be acceptable to ECF?” [119] Mr Hazard deposes to not having provided any confirmation as sought by Mr Napier as the issue was about to be discussed during a conference call which had been scheduled for 6.15pm (Brisbane time) that evening (9.15am Paris time). He further deposes to not having provided any such information during the conference call.83 [120] Mr Hazard deposes to having received at or around 3.52pm Brisbane time (6.52am Paris time) on 28 October 2014, an email from Mr De Young attaching an updated version of the Share Sale Agreement and notes Mr De Young’s reference to the different views of the parties concerning the deferred tax asset.84 Mr De Young’s email was addressed to Mr Napier and copied to Mr Hazard, Mr Robillard and others.85 It read: “Dear Paul, Please find attached a revised draft of the Share Sale Agreement (“SSA”). This version of the SSA has not been shared with ECF and is therefore provided subject to further instructions. Also attached is a copy of the document to be included in the new Schedule 9 of the SSA. Further to our discussion earlier today and your subsequent email, we are obviously currently apart in terms of the definition of Financial Debt (and in particular, your proposal to effectively increase the Purchase Price by reference to the deferred tax asset that I understand is sitting in Reward). We also reserve the right to make further changes after reviewing the disclosure letter and when the position concerning landlord consents becomes clearer over the next 24 hours. Should you wish to discuss, please feel free to contact me.” [121] Two features of this email should be noted. First, although Mr Hazard was being copied into the email, express reference was made to the fact that the version of the agreement attached had not been shared with the defendant and was therefore provided subject to further instructions. Secondly, at that point, the issue concerning the deferred tax asset was reflected in its inclusion in the definition of 83 Exhibit 14, para 32. 84 Exhibit 14, para 34. 85 PH8 to Exhibit 14. -- 31 of 67 -- 32 “Financial Debt” as it had originally been included in the earlier version of the Share Sale Agreement provided by Mr Williams. [122] Another feature of the email which should be noted is that it is was in fact sent at 2.53pm, not 3.52pm as deposed to by Mr Hazard.86 [123] Mr Hazard further deposes to having received at or around 6.40pm Brisbane time (9.40am Paris time) an email from Mr Napier attaching a further proposed mark-up of the Share Sale Agreement.87 Mr Napier’s email was addressed to Mr De Young and copied to the same recipients as Mr De Young’s email to Mr Napier of 2.53pm that day. The email from Mr Napier reads, relevantly: “Hi Simon, Attached is our proposed mark-ups. As discussed, we have include (sic) the ‘net deferred tax balance’ item in the definition of Financial Debt – this will be discussed further by the parties tonight.” [124] Significantly, in my view, that email would, on the analysis of the times of other emails, appear to have been sent and received at or about 5.40pm on 28 October 2014, not 6.40pm as deposed to by Mr Hazard. The time disclosed on the email is 28 October 2014 18:40:21+1100. From an analysis of those other earlier emails, it would seem that Mr Hazard is mistaken as to the time by the extent of an hour. That too is evident from the email from Mr De Young which Mr Hazard exhibits in the same exhibit88 which, as discussed already, discloses a sent time of 2.53pm rather than 3.52pm as deposed to by Mr Hazard. [125] In respect of this email, the difference in the time at which it was sent as seemingly mistakenly deposed to by Mr Hazard as compared with the actual time at which it was sent, is significant. Had it been sent at 6.40pm, as deposed to by Mr Hazard, that would have been subsequent to the proposed telephone conference which had been arranged to take place at 6.15pm. However, if it was sent at 5.40pm, then it preceded that telephone conference. The reference to the inclusion of the net 86 This appears to be another example of the one hour difference in time between that deposed to by Mr Hazard and that reflected in the emails themselves. 87 Exhibit 14, para 35. 88 PH8 – Exhibit 14. -- 32 of 67 -- 33 deferred tax balance item in the definition of Financial Debt as being a topic for further discussion “by the parties tonight”, suggests that the email was in fact sent prior to, and in anticipation of, the then scheduled teleconference, it having been agreed for 6.15pm in the earlier email from Mr Napier sent at 5.23pm. [126] That takes on further significance when one considers the content of Mr Napier’s email of 6.09pm that evening. Mr Napier in that email to Mr Hazard commences by referring “further to our call.” This strongly suggests that they had spoken prior to that email having been sent. The subject of such discussions is then to be inferred from Mr Napier stating that having spoken with Richard (Mr Stephens) “we can accept that the net deferred tax balance can be removed from the definition of Financial Debt if ECF can agree to procure reward to pay the benefit it receives each financial year from the deferred tax balance (at completion) up to the change in control of ECF.” In the context of the other emails, that would strongly suggest that there had been a telephone conversation between Mr Napier and Mr Hazard, subsequent to an email from Mr Hazard at 5.40pm, in which that issue had been discussed. Mr De Young’s email of 2.53pm had identified the inclusion of the deferred tax asset in the definition of Financial Debt as being the issue that divided the parties. Mr Napier’s reply email, including a further updated version of the Share Sale Agreement in which that asset remained in the Financial Debt definition, noted that that item was for further discussion. Then, at 6.09pm, prior to the scheduled telephone conference call, Mr Napier puts forward a proposal which would see the removal of the net deferred tax balance from the definition of “Financial Debt” if certain other matters were agreed. [127] Mr Hazard, however, makes no reference in his affidavit evidence to there having been any other discussion with Mr Napier outside of the telephone conference call. By contrast, however, Mr Napier refers to having had a number of telephone conversations with Mr Hazard on the afternoon of 28 October 2014 concerning various aspects of the transaction, including a discussion of the deferred tax asset.89 He deposes to his email of 6.09pm on 28 October 2014 having been sent subsequent to one such discussion with Mr Hazard. [128] Mr Napier’s evidence is to be preferred to that of Mr Hazard concerning those discussions which were held. Mr Napier’s reference in his 6.09pm email to “our 89 Exhibit 2, para 14. -- 33 of 67 -- 34 call” accords with his evidence that there was more than one conversation which he held with Mr Hazard on 28 October 2014. On Mr Hazard’s evidence, there could have been no call between Mr Napier and Mr Hazard to which that opening statement in Mr Napier’s email referred. Mr Hazard gives no evidence of any call taking place between himself and Mr Napier from the time at which the deferred tax asset issue was raised on 27 October 2014 in emails received from Mr Napier and Mr Williams which occurred prior to the telephone conference set for 6.15pm Brisbane time on the evening of 28 October 2014. [129] Mr Napier’s evidence is consistent, both textually and contextually, with the contemporaneous documentary evidence. [130] Mr Napier deposes90 to having proposed in that email a compromise between the respective positions of the plaintiff and the defendant in respect of the deferred tax asset and describes that compromise as being the plaintiff accepting a payment from RSC of the benefit RSC received each financial year in respect of the deferred tax asset up until the time it was sold by the defendant, rather than requiring the amount of the deferred tax asset to be reflected in the Purchase Price payable under the agreement, with any balance remaining at the time at which RSC was sold by the defendant being paid to the plaintiff. That description is consistent with the email sent by him at 6.09pm on 28 October 2014. [131] Mr Hazard gives the following evidence concerning his recollection of the discussions which occurred during the telephone conference call on 28 October 2014, although at the time of making his affidavit he did not recall the specific details. He states that he maintained the defendant’s position that the deferred tax asset had not been included in the negotiations as to how the Purchase Price would be calculated and that it was not to be included at that late stage of the negotiations. He informed Mr Stephens and Mr Napier that if the plaintiff insisted on the deferred tax asset being included in the Purchase Price, then the defendant would not proceed to sign the Share Sale Agreement and would not conclude the deal. He stated that Mr Drecq would cancel his flight to attend the completion meetings in Brisbane on 30 October 2014. (Mr Drecq was due to fly from Paris that evening.) He informed Mr Stephens and Mr Napier that the defendant had only received approval from its shareholders to pay a Purchase Price that was calculated on the basis of the current 90 Exhibit 2, para 14. -- 34 of 67 -- 35 book value, that is the trading assets less the trading liabilities, as had been agreed with the plaintiff since the beginning of the negotiations. He informed Mr Stephens and Mr Napier that the defendant was not able to change the basis of that calculation at that late stage of the negotiations. He expressed that the deferred tax asset was not a trading asset and that, in effect, it increased the Purchase Price by nearly $1 million. He stated that if ALS insisted on payment for the deferred tax asset, the defendant would have no choice but to walk away from the deal. [132] He states that he discussed the real value of the deferred tax asset with Mr Stephens and Mr Napier and whether or not it would have any real cash value and whether the annual leave and/or long service leave entitlements would be realised. He states that Mr Stephens informed him that the long-service leave entitlements probably had no real cash value, as it was unlikely that all of those entitlements would be taken by employees and that they were therefore unlikely to materialise in cash at any period of time.91 He went on to depose as follows: “To the best of my recollection, I proposed the following arrangement in words to the effect set out below, and Mr Stephens and Mr Napier expressed their agreement with that arrangement (Agreement in Principle): (i) The DTA would be retained on the balance sheet of RSC when the parties entered into the SSA; (ii) Each year, starting October 2014, RSC would calculate its updated closing balance sheet position per the end of its financial year on 31 March with respect to the DTA; (iii) After each yearly tax return lodged by RSC by each October (the first year being October 2015), RSC would make a tax accounting adjustment and declare and deduct from its income tax payments an amount equal to the DTA starting in October 2015 (which can be referred to as the ‘Starting DTA’) minus the DTA as updated as at October 2015 (which can be referred to as the ‘Updated DTA’); (iv) Once the tax return had been filed and accepted by the Australian Tax Office, then ECF would pay to ALS an amount equal to the difference between the ‘Starting DTA’ (as at October 2014) minus the ‘Updated DTA’ (as at October 2015); (v) If the ‘Starting DTA’ minus the ‘Updated DTA’ resulted in a negative amount, then no payment would be made by ECF to ALS; and 91 Exhibit 14, paras 36(a)-(c). -- 35 of 67 -- 36 (vi) This adjustment would be made for a period of four years, such that by 31 October 2018, ECF would be released from making any further such payments to ALS in relation to the DTA.”92 [133] In response to Mr Napier’s evidence concerning the telephone conference on 28 October 2014 between himself, and Mr Hazard, Mr Napier refers to that telephone conference call as being one of the discussions held with Mr Hazard on 28 October 2014 to which he had previously referred.93 Mr Napier agreed that Mr Hazard had stated in the course of the discussion that Mr Drecq would cancel his flight to Brisbane. He does not recall Mr Stephens having advised Mr Hazard that the long- service leave component of the DTA had no real value as it was unlikely that all those entitlements would be taken by employees and that it was therefore unlikely to materialise in cash at any period of time. Mr Napier’s best recollection in relation to the long-service leave entitlement component was that it was discussed that the benefit of it might not be received by RSC for some time after completion of the agreement as the benefit was dependent upon the employees taking their long-service leave. He says that, in contrast, it was discussed that the annual leave component would be realised fairly quickly as the employees of RSC generally took their annual leave entitlements as they accrued or shortly thereafter. [134] In respect of the agreement in principle which Mr Hazard said had been reached, Mr Napier deposed that there was a discussion of the proposal that the defendant would cause RSC to pay the benefit it received each year for four years after completion of the agreement in relation to the deferred tax asset in the balance sheet as at the date of completion. He did not believe there was specific discussions between the parties in relation to the mechanism for calculating payments to be made in respect of the deferred tax asset, as were asserted by Mr Hazard, and that he also did not believe there were any discussions concerning a potential negative result of the calculation of that payment. [135] In his second affidavit,94 Mr Stephens does not respond to paragraph 36 of Mr Hazard’s affidavit. As noted above, however, he did respond to paragraph 24 in respect of Mr Hazard’s evidence concerning Mr Stephens’ expressed views as to the nature of the deferred tax asset and whether it had any real value said to have been 92 Exhibit 14, para 36(d). 93 Exhibit 3, second Affidavit of Paul Napier, para 7. 94 Exhibit 11. -- 36 of 67 -- 37 expressed in the call between Mr Hazard, Mr Stephens and Mr Williams on 27 October 2014. [136] At 6.58pm Brisbane time (9.58am Paris time)95 Mr Hazard sent an email to Mr Drecq and Mr Robillard setting out what he states to have been the agreement reached with Mr Stephens and Mr Napier during the conference call. The email was in French, but he provided an English translation in his evidence.96 [137] The English translation set out in his evidence is as follows: “Good morning again, After the call, Richard agrees that we were reimbursed annually to ALS, the tax that will be deducted (we do not pay the 920K AUD at closing). Richard thinks that 50 % will be used within four years (Eric [Douheret from PricewaterhouseCoopers] and I think a small part may be used). After 4 years (thus eventually after ECF’s sale), the balance of ‘deferred tax asset’ (for annual leave and long-service leave provisions) not used will be abandoned by ALS. It seems to me that this solution is good to the extent that any subsequent payment on our part to ALS corresponds primarily to the deduction of RSC’s income tax, so it is neutral for us in cash. Baker will write the corresponding deed. … Here is the solution I’ve found with Paul: to pay the tax asset only when we have been able to deduct it on our due income tax… if ever but in case of ECF’s change in control if no deduction is obtained, no reason to pay the balance of the DTA I guess. I go on a call with Richard.” [138] Mr Hazard gave evidence that that email sent to Mr Drecq recorded the agreement reached with Mr Napier and Mr Richards in the telephone conference of 28 October 95 On this occasion, Mr Hazard deposes to the correct Brisbane time. The email itself, which is at PH9 to Exhibit 14 shows the transmission time as being 19:58:03+1100 on 28 October 2014. Mr Hazard’s identification of that time as being 6.68pm is correct. If he had converted that time consistently with other earlier conversions, he would have erroneously stated the time to be 7.58pm. 96 Exhibit 14, para 37 and PH9. -- 37 of 67 -- 38 2014.97 In my view, that email sent to Mr Drecq provides very little support for the conclusion that an agreement had been reached between Mr Hazard, Mr Napier and Mr Stephens in the terms of the “Agreement in Principle” which Mr Hazard sets out in his affidavit at para 36(d). It is in quite different terms. It makes no mention that each year, starting from October 2014, RSC would calculate its updated closing balance sheet position as at the end of its financial year on 31 March with respect to the deferred tax asset. It makes no mention of the lodgement of tax returns each October or of RSC making a tax accounting adjustment and declaring and deducting from its income tax payments an amount equal to the DTA starting in October 2015, minus the DTA as updated as at October 2015. It makes no mention of the former being referred to as the “Starting DTA” or the latter being referred to as the “Updated DTA”. It makes no reference to payment by the defendant to the plaintiff of an amount equal to the difference between the Starting DTA minus the Updated DTA once the tax return had been filed and accepted by the Australian Tax Office. It makes no mention that if the Starting DTA minus the Updated DTA resulted in a negative amount, then no payment would be made by the defendant to the plaintiff. [139] Those matters appear to be significant omissions of detail in correspondence to the defendant’s Chief Executive Officer purportedly recording an agreement reached in respect of highly controversial issues which had arisen very late and only recently in negotiations, and which threatened a potential $24 million transaction due to be settled within days. [140] By contrast, it appears quite consistent with Mr Napier’s email of 6.09pm on 28 October 2014 in which he was proposing a means of resolution, albeit that it expresses those matters in more detail. That is consistent with Mr Napier’s evidence that Mr Hazard’s email to Mr Drecq and Mr Robillard accurately reflects the proposal discussed and observations made in the telephone conversations.98 [141] At 4.40pm on 29 October 2014, Mr Napier wrote an email to Mr Hazard99 in which he, relevantly, said: “Hi Philippe, 97 T2-68, ll 34-40. 98 Exhibit 3, para 8. 99 PMN-9 to Exhibit 2. -- 38 of 67 -- 39 We have discussed with Greg Kilmister the principle of passing through the net deferred tax balance that we discussed last night. Greg accepts the principle, however, his view is that the full balance must be paid by ECF to ALS within 12 months of completion. It may be necessary for Greg and Thierry to discuss this matter directly.” [142] Mr Napier deposes to this email, having followed his discussions with Greg Kilmister on 29 October 2014. He deposes to not having discussed the compromise which he proposed in his email of 6.09pm on 28 October 2014 prior to sending it or prior to having discussions with Mr Hazard.100 Having discussed the proposal with Mr Kilmister and Mr Stephens on 29 October 2014, Mr Kilmister’s initial view was that the defendant was obtaining the benefit of the deferred tax asset and should pay for it on an upfront basis as they were acquiring the net assets of which the deferred tax asset was one. Mr Napier and Mr Stephen discussed with Mr Kilmister their belief that Weinberg Capital would not permit an increase in the Purchase Price and Mr Kilmister accepted that the deferred tax asset would not be paid on completion. However, it was his view that it had to be paid for within 12 months of completion of the agreement. It was that position of Mr Kilmister which was reflected in Mr Napier’s email of 4.40pm on 29 October 2014. [143] Mr Hazard’s response was in two parts, being emails sent at 5.02pm and 5.15pm on 29 October 2014. The 5.02pm email read: “Hi Paul, I think we cannot change our opinion ever day two days before closing on such important matters like Purchase Price … After you raised the point very late on Oct 27, four days before the closing, we however reached a firm and acceptable agreement with Richard and you yesterday, both of you representing ALS, and we should respect it. Again, it was never discussed that ECF should pay this amount and we will not deviate from the position agreed yesterday: We will refund ALS dollar for dollar only when the tax differed (sic) asset of 920K AUD does materialise in cash, i.e. upon its effective deduction from our future tax payments. 100 Exhibit 2, para 14 and 15. -- 39 of 67 -- 40 Any remaining balance after four years will be forgotten by ALS. Please tell Greg that his late wish is not acceptable and will not be accepted.” [144] The 5.15 email read: “Hi again Paul, To complete my email sent just a few minutes ago, I am very surprised about the point on the guarantee in Yatala and does not match with the discussions held with ECF and Greg mid- October. We would like ALS to keep its guarantee in Yatala until the lease expires, as agreed two weeks ago. Please confirm as quick as possible that Greg agrees with the agreement about tax asset made by us and the CFO of ALS who has obviously full power to negotiate and represent ALS (see also your email yesterday proposing the solution we reached). Any other position from ALS contrary to our agreement yesterday will be considered by me as an unfair breach of negotiations.”101 (emphasis added) [145] In his affidavit, Mr Hazard sets out the email sent by him to Mr Napier at 5.02pm.102 [146] Mr Hazard also deposes to having sent the email at 5.15pm stating that he requested: “That ALS expressly confirm its acceptance of the Agreement in Principle as had been negotiated the night before. My understanding was that Mr Stephens, as ALS’s Chief Financial Officer, had authority to negotiate and reach agreement on behalf of ALS, and that therefore ALS had agreed to the Agreement in Principle.” Mr Hazard exhibited the email of 5.15pm.103 [147] The following observations can be made about Mr Hazard’s evidence concerning his 5.15pm email. First, insofar as Mr Hazard deposes to requesting that the 101 PNM-10 and PNM-11 to Exhibit 2. 102 Exhibit 14, para 40. 103 Exhibit 14, para 42 and PH12. -- 40 of 67 -- 41 plaintiff expressly confirm its acceptance of the “Agreement in Principle”, as had been negotiated the night before, in terms he did not request that. He requested confirmation that Mr Kilmister agreed with the agreement about the tax asset made by Mr Hazard, Mr Napier and Mr Stephens. Secondly, insofar as he refers to the “Agreement in Principle” which is an expression defined for the purposes of the affidavit at para 36(d) as being the agreement there set out, there is no recital of any of those terms of the asserted agreement in respect of which he was purportedly seeking confirmation. Thirdly, Mr Hazard makes no reference in his affidavit to having referred to Mr Napier’s email of 28 October 2014 “proposing the solution we reached.” Fourthly, that reference in Mr Hazard’s email at 5.15pm on 29 October 2014 to Mr Napier’s email as having proposed “the solution we reached”, lends support to Mr Napier’s evidence as to the solution which had been discussed between he and Mr Hazzard on 28 October 2014 and in the telephone conference between them and Mr Stephens on the same date. Fifthly, the reference to that email proposing the solution reached lends very little, if any, support to Mr Hazard’s evidence that agreement had been reached in terms of the “Agreement in Principle” to which he deposes at para 36(d) of his affidavit. [148] At 6.04pm Brisbane time (9.04am Paris time), Mr Napier emailed Mr Hazard in, relevantly, the following terms: “Hi Philippe, Further to our calls, Greg will agree to the following:  ECF will pay the proportion of the deferred tax asset that relates to annual leave on 31 March 2015 (being the end of Reward’s financial year), given that a majority of the annual leave balance should be paid out to employees (most employees that major holidays (sic) in December – February, being the summer months); -- 41 of 67 -- 42  The remainder of the deferred tax asset will be paid as it is realised over four years (as discussed last night). Can you please confirm this is acceptable?”104 [149] Mr Hazard’s response was sent to Mr Napier by email at 6.43pm on 29 October 2014. Relevantly, it was as follows: “Hi Paul, ECF board has looked through your proposal and confirms our willingness to stick to the agreement reached yesterday.”105 [150] In his affidavit, Mr Hazard deposes that the reference to the defendant board’s “willingness to stick to the agreement reached yesterday” is a reference to the Agreement in Principle reached during the conference call on 28 October 2014.106 [151] In my view, Mr Hazard’s assertion that it was the Agreement in Principle in terms described by him in para 36(d) of his affidavit to which he was referring in his email of 6.43pm on 29 October 2014 is attended with the same difficulties as those set out above in respect of the assertion that the agreement referred to in the earlier emails was also the Agreement in Principle. Again, in terms, it was not referred to and nor were its terms ever set out. Indeed, the assertion that it was the Agreement in Principle to which reference was being made in the 6.43pm email of 29 October 2014 is even less likely. It is improbable that Mr Hazard would not have stated with some precision the terms which he was alleging had been agreed in the face of Mr Napier persisting to raise an entirely different and inconsistent basis for resolution. However, Mr Hazard’s response at 6.43pm is consistent with his response of 5.15pm referring to agreement having been reached on 28 October 2014 based on the solution proposed by Mr Napier in his email of 6.09pm on that day. [152] Mr Napier’s further response to Mr Hazard, at 6.54pm on 29 October 2014 was that he and Mr Stephens would speak further with Mr Kilmister the following morning.107 104 PH-13 to Exhibit 14; PMN-12 to Exhibit 2. 105 PH-13 to Exhibit 14; PMN-12 to Exhibit 2. 106 Exhibit 14, para 44. 107 PH-13 to Exhibit 14; PMN-12 to Exhibit 2. -- 42 of 67 -- 43 [153] At 8.28am the following day, 30 October 2014, Mr De Young sent the following email to Mr Napier. It was copied to, amongst others, Mr Hazard, Mr Robillard, Mr Drecq and Mr Klocanas. The subject line read “Deferred Tax Asset.” It said it was of “high importance”. It read: “Dear Paul, To assist any discussion which may occur this morning between yourself, Greg and Thierry regarding the treatment of Reward’s deferred tax asset within the context of the transaction, we thought it would assist to clearly articulate ECF’s position on this matter. Reward will have recorded in its balance sheet a net tax deferred asset of approximately $920, 000 as at 31 October 2014. This deferred tax asset exclusively relates to provisions for annual leave, long service leave and retirement benefits. In the text that follows, Reward’s deferred tax asset that exclusively relates to provisions for annual leave, long-service leave and retirement benefits as at 31 October 2014 is referred to as the Starting DTA. The Starting DTA will not be included in the calculation of either net Assets or Financial Debt in the Share Sale Agreement. In summary, the Starting DTA will not be factored into account when determining the completion payment or the deferred payment under the Share Sale Agreement. Rather, the value associated with the Starting DTA will be dealt with as follows as between ECF Asia Pacific Pty Ltd (ECF) and ALS. In respect of each financial year of Reward following completion (a financial year), with the first financial year ending on 31 March 2015, Reward will calculate the updated balance sheet position at the end of the relevant financial year in respect of the deferred tax asset (that exclusively relates to provisions for annual leave, long-service leave and retirement benefit provisions) (the Updated DTA). For the avoidance of doubt, any new deferred tax asset (on top of the Starting DTA) that is accrued by Reward following completion will not be included in the Updated DTA. Rather, the Updated DTA will be assessing movements in the Starting DTA on a year on year basis. ECF will disclose the Updated DTA within six months of the end of the relevant financial year – i.e. the first disclosure will be made by ECF on or before 30 September 2015. After Reward has filed its tax return in respect of the financial year (which will occur within seven months of the end of each financial year), Reward will declare and deduct (before the end of October in respect of the financial year) from its income tax payments a “net” amount equal to the Starting DTA minus the Updated DTA (if the Starting DTA minus the Updated DTA is positive). -- 43 of 67 -- 44 Within one month of the ATO accepting Reward’s tax return in respect of the financial year, ECF will pay an amount equal to the Starting DTA minus the Updated DTA to ALS, provided that if the amount equal to the Starting DTA minus the Updated DTA is negative, no payment will be made by ECF to ALS. Each time a payment is made by ECF to ALS under the above mechanism, the value of the Starting DTA will decrease by an amount equal to that payment for the purposes of preparing the relevant calculation for the following financial year. In case of a tax audit that would requalify former tax deductions made by Reward (related to provisions for annual leave, long-service leave and retirement benefit provisions) for any reason, ECF will be entitled to claim back previous payments made to ALS and/or deduct amounts requalified from future payments to ALS. ALS would undertake to pay back to ECF, within one month, any amounts requalified at the reward level, upon presentation by ECF of the tax audit conclusions. After the four year anniversary of completion (i.e. 31 October 2018) (i.e. following completion of the above procedure in respect of the financial year ended 31 March 2018), ECF and Reward will be definitively released from any further payment to ALS related to any remaining balance of a deferred tax asset held by Reward. Any payments made by ECF to ALS under the above mechanism will be treated as being reductions in the Purchase Price under the Share Sale Agreement . This structure has the important benefit of shielding the directors of Reward from risk associated with making payments to ALS that could be construed as constituting the provision of illegal financial assistance in connection with ECF’s acquisition of all the issued shares in Reward. The following worked example illustrates the ECF position: Amounts are expressed in a $, 000S DTA end of October 2014: 920 DTA end of March 2015: 900 ECF pays to ALS: 920 – 900 = 20 DTA end of March 2016: 800 ECF pays to ALS: (920 – 20) – 800 = 100 DTA end of March 2017: 500 ECF pays to ALS: (920 – 20 – 100) – 500 = 300 DTA March 2018: 400 ECF pays to ALS: (920 – 20 – 100 – 300) – 400 = 100 -- 44 of 67 -- 45 (Total paid = 20 + 100 + 300 + 100 = 520 = 920 – 400) No amount will be paid by ECF (or Reward) to ALS in respect of the remaining 400.”108 [154] In its Reply, at para 8(a)(iii), the plaintiff pleads in response to paras 8(b), 8(d) and 8(e) of the defence that they are untrue because by Mr De Young’s email, the defendant’s solicitors said: “Reward will calculate the updated balance sheet position at the end of the relevant financial year in respect to the deferred tax asset (that exclusively relates to the provisions for annual leave, long-service leave and retirement leave provisions) (the Updated DTA). For the avoidance of doubt, any new deferred tax asset (on top of the Starting DTA that is accrued by Reward following completion will not be included in the Updated DTA.” By that pleading, the defendant relies on that part of Mr De Young’s email of 30 October 2014 to deny the allegation that the Updated DTA in cl. 3.5 of the Share Sale Agreement was to include additional annual leave and long service leave that had accrued between 31 October 2014 and 31 January 2015 as pleaded in para 8(e)(ii) of the defence. [155] Although the defendant relied only on that portion of Mr De Young’s affidavit pleaded in its Reply, in its Rejoinder, at para 5(b), the defendant set out further parts of Mr De Young’s 30 October 2014 email and, at para 5(c), pleaded that it would rely upon the entire email at trial. Therefore, the court is to have consideration of the entire email of 30 October 2014, notwithstanding the limited extent of its content pleaded by the plaintiff. [156] Notwithstanding that Mr De Young copied each of Mr Hazard and Mr Drecq into the email, that its subject matter was the deferred tax asset which had become such a contentious and potentially deal-ending issue, and that it was marked to be of high importance, each of them gave evidence that they paid little attention, or any at all, to it. I find each of their evidence to be quite unsatisfactory in that regard. 108 PMN-13 to Exhibit 2. -- 45 of 67 -- 46 [157] In his affidavit, Mr Hazard deposed to his belief that he read the email the following morning Paris time, which would have been the morning of 30 October 2014 in Paris. That, therefore, would have been the evening of 30 October 2014 Brisbane time, which, although overnight, was several hours prior to the scheduled date of completion which was 31 October 2014.109 [158] When cross-examined about having received the email the following morning Paris time, Mr Hazard responded; “technically, yes.”110 [159] He said that when he read it he did nothing about it.111 In an attempt to explain that, he then seemed to give quite exaggerated evidence. He said “we had most of negotiations with thousands of emails, thousands of drafts of SSA.”112 He then said: “Well, of course. I mean, this negotiation – how can you – I cannot tell you exactly when I read this email and when I did. I think – now I see it’s totally inconsistent and it has played no role in the negotiations. So ---.”113 When reminded of his evidence in his affidavit that he believed that he had read the email the following morning, and having accepted that evidence, and that it had been put to him that that was before the Share Sale Agreement was signed, he said: “I don’t really recall correctly. Sorry. I don’t recall. I mean, I had a lot of mails. Probably – I don’t recall. I don’t remember this – this specific email on this day. I’m sorry. I received a lot. I’m sorry.”114 [160] Later, when asked why, when he did become aware or conscious of the email, he did not raise it with ALS that it was wrong he said: “I don’t know. I did not raise because I had anything – other things to do.”115 He stated that when he became conscious of the email he did not discuss it with Mr Drecq, and when pressed about that, sought to refer to what was contained in his affidavit.116 109 Exhibit 14, para 52. 110 T2-64, L 19. 111 T2-64, ll 21-22. 112 T2-64, ll 28-29. 113 T2-64, ll 31-33. 114 T2-66, ll 7-13. 115 T2-66, ll 44-48. -- 46 of 67 -- 47 [161] It was suggested to him that that was something which he would be expected to remember without having to refer back to his affidavit. I agree with that suggestion. Mr Hazard could not remember when it was that he discussed the email with Mr Drecq.117 [162] Mr Drecq deposed to having received Mr Hazard’s email of 9.58am on 28 October 2014.118 He also deposed to having discussed with Mr Hazard and Mr Klocanas the compromise which had been reached with the plaintiff. That discussion took place after what he describes as Mr Hazard’s second conference call with ALS.119 In context, the first conference call between Mr Hazard and ALS was that between Mr Hazard, Mr Stephens and Mr Williams on 27 October 2014.120 It is not clear from Mr Drecq’s affidavit as to whether the discussion which he and Mr Klocanas had with Mr Hazard occurred before or after he had received Mr Hazard’s email of 6.58pm. Of that discussion with Mr Hazard and Mr Klocanas, Mr Drecq says: “Mr Hazard informed me that the agreement that had been reached with ALS was that ECF would pay to ALS any tax refunds or deductions that RSC made or received in its tax return in relation to the leave entitlements (Agreement in Principle). As an acceptable agreement had been reached with ALS, Mr Klocanas and I agreed that I could take the flight to Brisbane that evening (i.e. 28 October 2014) to conclude the transaction.”121 [163] What Mr Drecq describes as the “Agreement in Principle”, is quite different to that which Mr Hazard describes as the “Agreement in Principle” in para 36(d) of his affidavit. What Mr Drecq describes as the “Agreement in Principle” though, is not inconsistent with Mr Hazard’s email of 6.58pm on 28 October 2014. Nor is it inconsistent with Mr Napier’s email of 6.09pm on 28 October 2014 in which he proposed a basis for resolution and to which Mr Hazard referred in his email of 5.15pm on 29 October 2014 as being that in which Mr Napier had proposed the solution reached. [164] There is some ambiguity in the information provided by Mr Hazard that the agreement reached was that “ECF would pay to ALS any tax refunds or deductions that RSC made or received in its tax return in relation to leave entitlements”. 116 T2-67, ll 13-19. 117 T2-67, ll 20-45. 118 Exhibit 15, para 41. 119 Exhibit 15, para 53. 120 Exhibit 15, para 35. 121 Exhibit 15, para 43. -- 47 of 67 -- 48 However, it appears to contemplate both refunds or deductions made or received in relation to the leave entitlements to which the deferred tax asset related. In context, those leave entitlements could only be those accrued as at the Completion Date. The ambiguity lies in whether the words “in its tax return” relate to both the tax refunds and deductions. Even if the words relate to both refunds and deductions being made or received in RSC’s tax return, it contemplates that a deduction made or received is something different to a refund made or received. [165] Mr Drecq deposes to having been informed my Mr Hazard during discussions he had with him on 27 October 2014 “that the only benefit of the DTA was the tax deduction that RSC could claim at the end of the financial year in the event that there were variations in leave entitlements”, and that “this tax deduction was marginal compared to the amount of the DTA in the accounts.”122 [166] Mr Drecq deposes that: “On 29 October 2014, whilst I was travelling from Paris to Brisbane to attend the completion meetings, I was copied on a number of emails between Mr Hazard and Mr Napier relating to further concessions that ALS was seeking from ECF even though the parties had reached an Agreement in Principle during the conference call on 28 October 2014.” The emails to which he referred are: (a) Mr Hazard’s email of 5.02pm; (b) Mr Hazard’s email to Mr Napier at 5.15pm; (c) Mr Napier’s email to Mr Hazard of 6.02pm; (d) Mr Hazard’s email to Mr Napier at 6.43pm; and (e) Mr Napier’s email to Mr Hazard at 6.53pm.123 [167] Mr Drecq deposes to his belief that he did not receive those emails until he landed in Brisbane on the morning of 30 October 2014.124 He deposes to having received a very large number of emails during the flight, including those listed. He says that due to the large volume, it was not physically possible for him to read all of the emails and attachments he received when he landed.125 122 Exhibit 15, para 32. 123 Exhibit 15, para 45. 124 Exhibit 15, para 46. 125 Exhibit 15, para 47. -- 48 of 67 -- 49 [168] He deposes to having had telephone discussions with Mr Hazard relating to the deferred tax asset issue when he arrived in Brisbane and Mr Hazard informing him that the plaintiff “had changed its mind and that they were not willing to stick with the agreement in principle that had been reached during the second conference call on 28 October 2014.”126 [169] He states that having been informed by Mr Hazard that the plaintiff was trying to change the agreement, he prepared himself for his meeting with Mr Kilmister, as he anticipated that the meeting would involve tough negotiations. He deposes to not having approval to increase the Purchase Price, and to that extent, to change the position of the defendant in respect of the deferred tax asset issue. He states that he was prepared to walk away from the transaction if an acceptable agreement could not be reached with Mr Kilmister during the meeting.127 When he landed, he went straight to the offices of Baker & McKenzie in Brisbane to prepare for the meeting with Mr Kilmister.128 [170] In respect of Mr De Young’s email of 30 October 2014, Mr Drecq deposes: “I now understand that I was copied on an email that was sent by Simon De Young (Mr De Young) from Baker & McKenzie, who was acting on behalf of ECF, to Mr Napier at or around 8.27am (Brisbane time) (9.27am Melbourne time) on 30 October 2014. I do not recall seeing or reviewing Mr De Young’s email at the time. As I have indicated above, I was only reviewing emails from Mr Hazard due to the large volume that I had received during the flight to and since arriving in Brisbane. I only became aware of Mr De Young’s email when ALS brought this email to my attention in or around May or June 2015. I now understand that Mr De Young purported to set out and clarify ECF’s position in relation to the DTA issue in this email and that some of the description was not an accurate reflection of ECF’s position.”129 [171] In my view, Mr Drecq’s statement that he now understands that he was copied into Mr De Young’s email is evasive. It appears to be language deliberately chosen to somehow convey that, to his knowledge, the email was not received at the time. It appears to be a choice of language deliberately different to that used earlier in his 126 Exhibit 15, para 48. 127 Exhibit 15, para 50. 128 Exhibit 15, para 51. 129 Exhibit 15, para 52 and 53. -- 49 of 67 -- 50 affidavit, where he deposes that “I was copied on a number of emails between Mr Hazard and Mr Napier.” [172] When cross-examined by Mr de Jersey for the plaintiff, in respect of his checking emails on the morning of 30 October 2014, Mr Drecq said that the first time he checked his emails was when he was able to have internet connection, which was likely to have been at Baker & McKenzie.130 He said that he certainly consulted some of his emails in the two hour period that he was at Baker & McKenzie.131 [173] The following exchange then took place: “Mr de Jersey: Yes? Mr Drecq: But, I mean, for sure – I haven't been – I mean, most of the – all of the subject done by Mr [indistinct] I took them for granted. That was – Mr de Jersey: Which subjects would? Mr Drecq: All the subject and – I mean, the emails once Philippe goes to me I've been doing this or being doing that, that was fine for me. And I was – I wouldn't read a copy. Mr de Jersey: Do you mean by that that because you spoke with Mr Hazard you didn't feel it necessary to- Mr Drecq: Yep. Mr de Jersey: ---look through emails from your solicitor? Mr Drecq: That’s right. Mr de Jersey: Okay. Now, after the – what time was the meeting, do you recall, approximately? Mr Drecq: The meeting, I mean, the meeting was like 11, and I perfectly remember that Mr Kilmister and Stephens and [indistinct] arrived fairly late in my book I note three- quarter of an hour. I wouldn't have recall from memory, the three-quarter, but I wrote it so it’s – and so they arrive in the like of 11.30 they--- Mr de Jersey: Mr Drecq, after the meeting occurred there was a period of some – almost a day, wasn't there, before the agreement was signed and completed? Mr Drecq: Yes. Mr de Jersey: And during that period did you refer to your laptop at all to read your emails? 130 T2-99, ll 26-28. 131 T2-100, ll 46 – T2-101, L 1. -- 50 of 67 -- 51 Mr Drecq: I certainly referred to my laptop to read the emails that I was – the direct destinator – the direct receiver. I wasn't reading emails that – of which I was copy. Mr de Jersey: I see. So your – is that the reason why you didn't see Mr De Young’s email? Mr Drecq: Yeah. Mr de Jersey: Because you were only seeking out emails to which you were the direct recipient rather than copied? Mr Drecq: Direction recipient. I wasn’t looking at any other of the cc – cc emails. Mr de Jersey: I see. So are you able to identify from your laptop screen readily those emails to which you were copied and those emails to which you're the direct recipient? Mr Drecq: Yeah. Again, so many things to do, I mean, you can only deal with the things that your direct report in charge of the process are writing you. Mr de Jersey: That’s not what I was quite interested in. What I was wondering is your email set up in such a way where you can – or was it at the time – where you can easily filter out emails to which you're only copied in for – Mr Drecq: You can – you can see when go through, yeah. Mr de Jersey: And do you regularly do that? Mr Drecq: Yeah. Mr de Jersey: Do you make the other emails invisible or -? Mr Drecq: No, I don’t make them invisible, but you don’t look at them.”132 [174] In my view, that evidence is inconsistent with Mr Drecq’s evidence at para 52 and 53 of his affidavit as set out above. His explanation that because he had spoken with Mr Hazard he did not feel it necessary to look through emails from his solicitor, is inconsistent with his affidavit evidence. So too his evidence that he was not looking at any other of the CC emails is inconsistent, as is his evidence that he did not make them invisible but he did not look at them. [175] His evidence under cross-examination demonstrates an awareness of emails other than those of which he was the direct recipient, but which had been copied to him. That evidence is directly inconsistent with his evidence in his affidavit that he only 132 T2-101, L 3 – T2-102, L 10. -- 51 of 67 -- 52 became aware of Mr De Young’s email when it was brought to his attention in May or June 2015 and that it was since that time that he had come to understand that he was copied in on that email. [176] His evidence in his affidavit that he only became aware of that email in May or June 2015, is also inconsistent with Mr Hazard’s evidence that he had discussed the email with Mr Drecq “afterwards.” Whilst Mr Hazard did not specify when “afterwards” was, in context, it did not relate to a period some seven or eight months following the closing of the transaction. [177] I reject Mr Drecq’s evidence in paras 52 and 53 of his affidavit. In my view, that evidence is self-serving and highly improbable. It is highly improbable that upon arrival in Australia from France for the purpose of completing a $24 million transaction, having been made aware of difficulties associated with a particular issue concerning that transaction which may have imperilled its completion, and having received and read several emails between Mr Hazard and Mr Napier (of which he was also only a copied recipient) concerning that issue, he would not read an email marked of “high importance” from the solicitors representing his company in that transaction identified to be in respect of that very issue. [178] As to the evidence concerning what occurred in the meeting of 13 October 2014 itself, Mr Kilmister deposed to having advised Mr Drecq that the plaintiff was looking for the net deferred tax asset to be included in the Purchase Price of the shares, to which Mr Drecq had responded to the effect that such was an increase in the Purchase Price which was unacceptable to the defendant. He states that he suggested deferring completion for one month to enable the parties to consider their positions, but that was rejected by Mr Drecq. He says that, subsequently, there was a discussion about paying the deferred tax asset as the income tax deduction crystallised to RSC and that there was general discussion about the fact that it was expected that the majority of RSC’s employees annual leave would come into account within a year of completion of the Share Sale Agreement, and that some of the employees long service leave would not be taken into account at all.133 [179] Mr Kilmister deposed that: 133 Exhibit 5, para 10-13. -- 52 of 67 -- 53 “It was agreed, in order to resolve the dispute in relation to payment of the net DTA, that ALS would accept the proposal put by ECF’s lawyer in his email received earlier on 30 October 2014, namely that the net amount of the DTA be paid by ECF to ALS after completion of the SSA as and when the income tax deduction, which represented the DTA, was realised by RSC with the payments to be made in arrears after completion of the SSA for a period of four years with any then remaining balance to be written off. A modification to the proposal was also agreed as part of the compromise of the dispute in relation to the DTA, namely that the payments by ECF to ALS of the net amount of the DTA would be quarterly, not annually.”134 [180] In his affidavit, Mr Drecq contested that passage of Mr Kilmister’s evidence saying that Mr De Young’s email was never raised by either Mr Kilmister, Mr Stephens or Mr Napier during the 30 October 2014 meeting.135 In his second affidavit, Mr Kilmister refers to his earlier evidence referring to Mr De Young’s email in the context of the 30 October 2014 meeting and said: “I did not state in paragraph 14 of my earlier affidavit that Mr De Young’s email received on the morning of 30 October 2014 was tabled or specifically referred to. What I intended to convey in paragraph 14 of my earlier affidavit was that, in effect, the proposal contained in the email was agreed to by the parties at the meeting.”136 [181] Mr Drecq recalls that the deferred tax asset issue was the first issue discussed in the meeting of 30 October 2014 “as it was a deal breaker for ECF”.137 Mr Drecq set out the following recollection of the discussions at the meeting after reviewing handwritten notes which he made at the time: “(a) I informed Mr Kilmister, Mr Napier and Mr Stephens that the terms that had been agreed in relation to the DTA with Mr Hazard, on 28 October 2014 (i.e. the Agreement in Principle set out above), were the terms to stick to; (b) Mr Kilmister turned his head to Mr Stephens and Mr Napier and said words to the effect of ‘did you effectively agree these terms with ECF on 28 October.’ Mr Stephens and Mr Napier confirmed that they had agreed to those terms. Mr Kilmister then said words to the effect of ‘then we should stick to the terms approved then’; (c) In other words, the ALS representatives agreed that the agreement in principle had been agreed by the parties during 134 Exhibit 5, para 14. 135 Exhibit 15, para 58. 136 Exhibit 6, para 5. 137 Exhibit 15, para 55. -- 53 of 67 -- 54 the discussions with Mr Hazard and that ALS was happy to comply with the terms as agreed with Mr Hazard; (d) The ALS representatives did not make any comment, either explicitly or implicitly, to suggest that there had been an alteration to their understanding of the Agreement in Principle since it had been agreed with Mr Hazard. The ALS representatives did not seek to alter the terms of the Agreement in Principle at any time; (e) The ALS representatives never suggested that the new leave entitlements that would be accrued after the completion of the SSA would not be taken into account in the calculation of the payment that was to be made to ALS following completion, nor did they state that the tax treatment of the leave entitlements would be any different to that discussed in paragraphs 41-43 above; (f) The ALS representatives did not, at any point, refer to the email sent by Mr De Young that morning, nor did they raise any questions or make any comments about Mr De Young’s email and the apparent inconsistency between Mr De Young’s email and the Agreement in Principle. The ALS representatives stated that they would comply with the Agreement in Principle, but now seek to rely on a statement which is inconsistent with that agreement, despite having never noted or mentioned the inconsistency to me during this meeting; (g) As I have outlined above, I was unaware of any potential or apparent inconsistency between Mr De Young’s email and the Agreement in Principle at the time of this meeting.” [182] Both Mr Kilmister and Mr Drecq depose to the resolution reached in the meeting, being on the basis of an earlier proposed agreement. They differ as to what the earlier proposal was. Mr Kilmister refers to a proposal as contained in the email of 30 October 2014 from Mr De Young, whereas Mr Drecq refers to agreement on what he describes as the “Agreement in Principle”, that being what he had been informed had been agreed between Mr Hazard and Mr Napier on 28 October 2014. As discussed above, that which Mr Drecq describes as the Agreement in Principle as detailed by Mr Hazard to him, is not consistent with what Mr Hazard describes as the Agreement in Principle in para 36(d) of his affidavit; but is not inconsistent with either Mr Hazard’s email to Mr Drecq at 6.58pm on 28 October 2014 nor the email exchange between Mr Hazard and Mr Napier on the evening of 28 October 2014. [183] In my view, Mr Drecq’s observations that the plaintiff’s representatives did not make any comment to suggest that there had been an alteration to their understanding of what he calls the “Agreement in Principle” reached with Mr -- 54 of 67 -- 55 Hazard on 28 October 2014, and did not seek to alter its terms, does nothing to advance the defendant’s case. Rather, it further supports the plaintiff’s case. [184] Their understanding of any agreement reached with Mr Hazard would not have included that it involved the inclusion of post completion accruals of annual leave and long-service leave and retirement benefits in the calculation of the Updated DTA in the methodology for determining the payments to be made by the defendant to the plaintiff for the deferred tax asset. Mr Drecq’s evidence that they did not suggest that those accruals would not be included is, for the same reasons, of no consequence. On the basis of any agreement reached with Mr Hazard, as found by me, there was simply no reason for them to raise that because there had never previously been any suggestion, proposal or agreement that those accruals would be taken into account. [185] Similarly, Mr Drecq’s evidence that the plaintiff’s representatives did not refer to Mr De Young’s email or question or comment upon what he describes as the apparent inconsistency in that email is of no consequence. Accepting that there is some inconsistency in the email in its reference to a potentially negative outcome, it was not such as to cast any doubt on the fact that any new deferred tax asset that was accrued post completion would not be included in the Updated DTA. Whatever the reference to a negative result meant, it would not be a cause to doubt that clear and unambiguous statement which had been made, expressly, for the avoidance of doubt. [186] On a plain reading of Mr De Young’s email, if the reference to a negative outcome when the Updated DTA was subtracted from the Starting DTA caused the reader138 to have some uncertainty as to how that might arise, the one matter the reader could be certain of was that it did not arise from the inclusion of post completion leave accruals in the Updated DTA. This is particularly so when the reader would be considering the email against a background of the inclusion of post-completion accruals never having featured in any earlier discussion, proposal or agreement concerning the treatment of the deferred assets. [187] As Mr Kilmister said when it was put to him in cross-examination that nobody discussed whether or not leave or retirement benefits that accrued after completion 138 Being a reasonable businessperson. -- 55 of 67 -- 56 would be included in the calculation of Updated DTA; “Correct, because it would not be relevant”. [188] In my view, the statement in Mr De Young’s email, which he says is for the avoidance of doubt, that any new deferred tax asset on top of the Starting DTA that is accrued following completion, will not be included in the Updated DTA, is also not inconsistent with what Mr Hazard described to Mr Drecq on 28 October 2014. Nor is it inconsistent with the email exchange between Mr Hazard and Mr Napier on that date. Mr De Young’s statement in the email is, however, quite inconsistent with what Mr Hazard describes as the Agreement in Principle as set out in para 36(d) of his affidavit. [189] If Mr Hazard’s evidence as to the Agreement in Principle which he now says was reached on 28 October 2014, as set out in para 36(d) of his affidavit, were to be accepted the only inference open would be that the email of 30 October 2014 was composed by Mr De Young without any proper understanding of the defendant’s position. I am unwilling to draw that inference. [190] First, because it is not inconsistent with the other evidence to which I have referred. [191] Secondly, because of its statement in terms that “we thought that it would assist to clearly articulate ECF’s position on this matter”, which is a statement entirely at odds with Mr De Young not understanding the position he purported to articulate. [192] Thirdly, in stating the defendant’s position as to the exclusion of post-completion accruals, he did so expressly “for the avoidance of doubt.” [193] Fourthly, because the express purpose for his articulating the defendant’s position was to assist any discussion which was to occur that morning between the Chief Executive Officers regarding the treatment of the deferred tax asset within the context of the transaction. [194] Fifthly, because unlike his earlier email at 2:53m on 28 October 2014 in which he expressly referred to sending a further update of the Share Sale Agreement which had not been shared with the defendant and which was being provided subject to further instructions, no such reservation was expressed in the 30 October 2014 email. -- 56 of 67 -- 57 [195] Sixthly, because the worked example included in the email is entirely consistent with the statement that post-completion accruals will not be included. [196] The defendant focused much attention upon what it describes as the internal inconsistency in Mr De Young’s email. That inconsistency is the express exclusion of post-completion accruals from the Updated DTA and the potential for the subtraction of the Updated DTA from the Starting DTA to result in a negative figure. Mr De Young gave the following evidence about a potential negative outcome when cross-examined as follows: “Mr de Jersey: That issue wasn’t specifically discussed in the meeting on the 30th? Mr De Young: I don’t recall that being discussed in the meeting. No. Mr de Jersey: Now, in your email, in – I think it’s the sixth paragraph, if you count down from the paragraphs beginning “To assist any discussion”? Mr De Young: Mmm. Mr de Jersey: You’ve referred to the possibility that there might be a minus figure for an Updated DTA? Mr De Young: Yes. Mr de Jersey: And you’re aware of how that issue came to be discussed between you and Mr Napier later that day, I think? Mr De Young: No. I’d have – I’ve got a different recollection of the discussion with Mr Napier later in the day. Mr de Jersey: What do you remember of that? Mr De Young: The discussion with Mr Napier later in the day? Mr de Jersey: Yes? Mr De Young: From what I remember, it was focused upon this – the issue of my concern, really, around the ATO denying a tax deduction at the reward supply level in circumstances after -- 57 of 67 -- 58 ECF had made a payment to ALS under the DTA mechanism pursuant to clause 3.5 of the sale agreement and I wanted to ensure that there was a means by which ECF could effectively recall that payment in those circumstances. Mr de Jersey: So that is, is it, how you could get to a negative position? Mr De Young: No. I – I – I must confess I haven’t understood the possibility of that. I mean, I think if you read my email on the 30th of October there, it’s – it’s – it’s flawed, effectively, in terms of the negative scenario and in my discussion with Mr Napier later in the day I think the position had become clearer to me that we were accruing – accruing effectively fresh leave to determine the Updated DTA and, therefore, there was the possibility of the negative outcome, albeit that, from my memory, wasn’t the focus of the discussion with Mr Napier and Mr Williams on the 30th, later in the day. Mr de Jersey: Yes. No. That’s fine. And the fact – the aspect of this issue that you say was flawed – Mr De Young: Yes. Mr de Jersey: - was the possibility that there might be a negative DTA that – are you saying that it could only be zero or something above that? Mr De Young: In the context of this email. Mr de Jersey: Yeah? Mr De Young: Yes. Mr de Jersey: Yeah. No. That’s fine. So, in essence, it was, if I could call that money a lawyer’s mistake because we – at the day of the finalisation of the agreement, it wasn’t – it was a possibility that was envisaged by lawyers, but not one that people had had the time to think through to the extent of working out the mechanics of how you’d get to a negative DTA. Is that a fair -? -- 58 of 67 -- 59 Mr De Young: No, I don’t think so. No. I mean, I think this email was set as a framework for discussions as you – I think you – Mr de Jersey: I didn’t mean that in a pejorative sense. I wasn’t meaning you’d made a mistake that was material. I was meaning more that when you mentioned it as being a negative figure in the morning. You hadn’t had the time to work out how you would actually get to a negative figure, mechanically? Mr De Young: I think I hadn’t completely grasped, in fairness, how the DTA mechanism was to work and I hadn’t quite grasped my client’s intentions for the DTA mechanism at the time that this email was send, hence there are some mixed messages in the email, I think, regarding the prospect of a negative DTA and the sentence that has been focused on regarding accruals post-completion. Mr de Jersey: Two paragraphs above that is the one that the parties have been focusing on, obviously the sentence beginning: For the avoidance of doubt – Mr De Young: Yep. Mr de Jersey: Was anything said during the meeting on the 30th which you attended by telephone to make you understand that that proposition was incorrect? Mr De Young: I don’t recall anything along those lines being said. Mr de Jersey: And then, subsequent to the meeting, you drafted clause 3.5, I think? Mr De Young: Yes.” 139 [197] That evidence discloses that the reference to a potential negative result in Mr De Young’s email was, at least the time at which he wrote it, not an actual potentiality; and certainly not one based upon the inclusion of post-completion accrued leave in the Updated DTA. Therefore, the asserted internal inconsistency does not have the significance which the defendant seeks to attach to it. 139 T2-113, L 25 – T2-114, L 46. -- 59 of 67 -- 60 [198] A further issue upon which the defendant focused much attention was that the evidence establishes, on its submission, that, objectively, the agreement reached between the parties was that only the actual tax benefit would be subject of any payments by the defendant to the plaintiff, and that the defendant only derived tax benefit if the leave taken and paid in a particular period exceeded the further leave accrued in that period with the result that a deduction is made to the taxable income of RSC for that period. [199] It may be accepted that the treatment under the accounting standards is that an amount is deducted from the taxable income in circumstances in which leave taken exceeds further leave accrued and that an addition is made to taxable income in circumstances in which further leave accrued exceeds leave taken for the period. However, that does not lead to the conclusion that there is no tax benefit deriving from the deferred tax asset to RSC in any period in which further leave accrued exceeds leave taken. [200] There is a tax benefit to RSC in respect of any pre-completion accrued leave to which the deferred tax asset relates being taken. RSC’s tax position is benefitted by the taking and payment of that accrued leave. Whether RSC receives a tax deduction based upon the change in the overall deferred tax asset at the end of the period is not, ultimately, to the point. What is to the point is that the extent of the change over the period, and thus the ultimate tax adjustment, is affected by, and to the extent of, the taking of the accumulated leave and the application of the associated deferred tax asset relating to that leave. But for the application of that portion of the deferred tax asset relating to the leave taken, the net result to RSC would be that any deduction available to it would be less (such that it even may convert a deduction to an amount of tax payable), or any tax payable by it would be greater. [201] In my view, that is consistent with the evidence of Mr Newnes that the deferred tax asset is created due to the timing difference between the time that the leave entitlements were accrued and the time in which the corresponding tax is paid or recognised in the income statement, and that the taxable income is adjusted by the variation in leave entitlements at the end of the financial year.140 Because the deferred tax asset, as at the Completion Date, would comprise the tax associated 140 Exhibit 17, para 23. -- 60 of 67 -- 61 with leave entitlements accrued to that point, when that corresponding tax is paid or recognised in the income statements of RSC, the extent of the variation in leave entitlements, and thus the adjustment to taxable income, will be affected. It cannot be said, because it is not the case, that RSC (and thus the defendant) has had no benefit from that portion of the Starting DTA realised in a particular period merely because when accruals in that period are taken into account, it results in a lesser deduction, or even an amount of tax payable. [202] That analysis, in my view, is consistent with the information which Mr Hazard provided to Mr Drecq on 28 October 2014 when he explained that the agreement reached between the plaintiff and the defendant was that the latter would pay the former any tax refunds or deductions that RSC made or received in its tax return in relation to the leave entitlements.141 The expression which appears in Mr Hazard’s email to Mr Drecq is “used”. That suggests an exhaustion of the deferred tax asset accrued at the completion. It is also consistent with Mr Hazard’s email of 6.58pm that day that the solution he had found with Mr Napier was that the defendant would pay the tax asset only when it had been able to deduct it on its due income tax. If the starting deferred tax asset did not exist and its benefit taken into account as periods of leave were taken and paid (and the associated tax was paid) in particular periods, the amount of income tax payable by RSC would be greater for that period. To that extent, RSC has been able to deduct the tax asset from income tax otherwise due for the period. [203] The reference in Mr Hazard’s email of 6.58pm as to paying for the tax asset when deductions from income tax have been made “if ever” is consistent with a proportion of the deferred tax asset not being realised within four years, particularly in relation to long service leave entitlements which, although accrued at the Completion Date, might not be taken in that four year period. This is reflected in Mr Hazard’s email to Mr Drecq where he discusses varying expectations of Mr Stephens, Mr Douheret and himself as to the proportion of leave that may be taken. [204] It is also, in my view, consistent with other evidence. Mr De Young, in his affidavit, recalls the discussions in the meeting of 30 October 2014 including reference being made by the plaintiff’s representatives to a proposal for the defendant to make payments to the plaintiff on a quarterly basis in respect of the 141 Exhibit 15, para 43. -- 61 of 67 -- 62 deferred tax asset “upon RSC receiving the tax benefit with respect to the leave entitlements taken by RSC employees (emphasis added)”.142 On the analysis set out above, RSC would receive the tax benefit. [205] It is also consistent with the evidence of Mr Kilmister. It was put to him in cross- examination that the only time in which RSC would only obtain a real tax benefit was if the amount of leave taken during the financial year was more than the amount of leave that was approved, and that that was the only time at which it would actually get a tax deduction. Mr Kilmister’s response was: “Well, that’s – that’s not correct. I mean we had – we had put a value on the balance sheet there of whatever it might be - $1,000,000 – for leave which was accrued in our time and had everybody taken in January or – or at a particular point in time then we would have had the tax benefit of that or had we paid the leave out prior to acquisitions we would have had the tax benefit of it so it was --- .”143 [206] Similarly, when cross-examined, Mr Stephens accepted that under accounting standards a business must deduct or add to its taxable income the movement and leave entitlements from one financial year to the next. In agreeing to the proposition, he described those as the mathematical formulas employed to adjust the accounting profit.144 He did not, however, agree that a business does not get an income tax deduction simply by virtue of paying accrued tax entitlements. His view that was that the business does get an income tax deduction.145 The following exchange took place: “Mr Trim: Well, you agreed with me earlier that the deduction in the financial affairs of a company is between the difference from one year to the next? Mr Stephens: That’s correct but the opening balance, the adjustment will be very different. Mr Trim: Yes, but the reality is, there is always an opening balance and in business that’s the going concern. Do you agree with that? Mr Stephens: And I think that’s – I think that’s the point here. That’s correct. 142 Exhibit 16, para 7(d). 143 T1-71, LL 35-44. 144 T2-7, L 35 - T2-8, L 10. 145 T2-13, LL 9-11. -- 62 of 67 -- 63 Mr Trim: Yeah. So when you say there’s an income tax deduction simply because leave is paid, that’s not right is it? Mr Stephens: I know it’s correct. There is no deduction unless any leave is paid. No deduction is available to the tax payer until the leave is paid in cash.”146 [207] In my view, Mr Stephens’ evidence in that regard neatly encapsulates the position. That is, that the adjustment would be very different but for the opening balance which is, effectively, the Starting DTA. As I have said in the above analysis, the variation which is the adjustment is affected by that opening balance. RSC has the benefit of it in reducing any income tax payable in the period in which the leave is taken and paid. [208] It is also consistent, in my view, with Mr Williams’ evidence. When he was cross- examined on the issue he gave the following evidence: “Mr Trim: Yes. And I suggest to you, Mr Williams, that, in fact, the effect of those accounting standards, and – sorry, I’ll withdraw that. The effect of the accounting standards, Mr Williams, is that a business that complies with them must deduct or add to its taxable income effectively the movement between leave entitlements from one year to the next? Mr Williams: That’s correct. You would add back the closing balance and subtract the – the opening, correct. Mr Trim: Yes. And - - -? Mr Williams: To get the movement, yes. Mr Trim: But the typical tax treatment is that if more leave has been taken than accrued, you’d get a deduction? Mr Williams: Correct, yes. Mr Trim: And, conversely, if more leave has been accrued than taken, you’d get a – you’d have to add it to your income? 146 T2-13, ll 13-25. -- 63 of 67 -- 64 Mr Williams: Yes. So the fundamental principle is you don’t get a tax deduction until the leave is actually taken. Mr Trim: That’s right. Yes? Mr Williams: Yes. Mr Trim: Which means recognising the continual accruals and taking. It’s only if more is taken than accrued you actually get a deduction? Mr Williams: In any given period, yes, that’s correct. Yep. Mr Trim: And that’s the basis upon which Reward actually treated their deferred tax asset prior to the sale of the shares, isn’t it? Mr Williams: No, that’s not correct.”147 [209] The adding back of the closing balance referred to by Mr Williams would include that component of the Starting DTA which remained untaken after subtracting the leave to which the Starting DTA related taken in the course of that period. The movement in the deferred tax asset which related to leave accrued as at the Completion Date is thus able to be ascertained. The fact that the movement in that particular asset also forms a component of the movement in a greater asset (one taking into account post- completion accruals for example) does not mean that RSC has not had the benefit of the deferred tax asset as it relates to the pre-completion accrued leave taken during a particular period with the effect that it has reduced its income tax otherwise payable. [210] Viewed in this way, the reference to updated balance sheet position in cl. 3.5 of the Share Sale Agreement is to be construed to mean the updated position of the deferred tax asset, as defined, being the amount by which that asset has been reduced in any particular period as a consequence of the associated leave having been taken and paid. [211] The mechanism for effectively refunding to the defendant any tax deductions ultimately disallowed by the Australian Tax Office is, in my view, consistent with this construction. If, for any reason, the Australian Taxation Office were not to allow the taking into account of the movement in the deferred tax asset relating to 147 T2-31, ll 15-39. -- 64 of 67 -- 65 the pre-completion accrual of annual leave and long-service leave entitlements, which would have the effect that more tax would be payable by RSC, the proposed mechanism for refunding would permit that to be recognised. [212] The preponderance of evidence external to the contract relating to the background and context of the transaction reflected in cl. 3.5 of the Share Sale Agreement supports the construction contended for by the plaintiff. The construction contended for by the defendant depends upon an acceptance of Mr Hazard’s evidence concerning what he describes as the Agreement in Principle in paragraph 36(d) of his affidavit. For reasons detailed above, that evidence is to be rejected. It finds no support in any of the other evidence, including evidence of which Mr Hazard himself was the source. [213] A reasonable businessperson would have understood Clause 3.5 of the Share Sale Agreement as requiring the defendant to pay to the plaintiff an amount each quarter in respect of the effective reduction in tax which it would have the benefit of as a consequence of annual leave and long service leave and retirement benefits having been paid in that period, being leave and benefits which had accrued prior to the Completion Date. The payment for that leave and of those benefits would result in part of the Starting DTA being used in that period, with the benefit of that being received by RSC. A reasonable businessperson would have understood that as the Starting DTA was used up in that way it would be reduced by the amount of the benefit derived by RSC which would be reflected in the Updated DTA. A reasonable businessperson would not have understood that accruals of further leave entitlements and retirement benefits after the completion date would be brought into account in calculating the Updated DTA. Conclusion as to construction of clause 3.5 [214] Whether the construction of cl. 3.5 of the Share Sale Agreement is considered by reference only to the terms of the Share Sale Agreement itself, or with recourse to admissible evidence external to the contract, the conclusion must be reached that the construction contended for by the plaintiff is the proper construction of cl. 3.5. Accruals of annual leave and long-service leave and retirement benefits subsequent to the Completion Date of the Share Sale Agreement are not to be included in the calculation of Updated DTA for the purposes of cl. 3.5. -- 65 of 67 -- 66 [215] For those reasons, the plaintiff should have judgment for the amount claimed. Estoppel [216] Because of the conclusion that I have reached concerning the proper construction of cl. 3.5 of the Share Sale Agreement, it is unnecessary to determine the plaintiff’s alternative claim in estoppel. The plaintiff’s claim for an updated balance sheet position for the quarter ended 30 April 2015 [217] Clause 3.5(c) obliges the defendant to procure that RSC will calculate the updated balance sheet position at the end of the relevant financial quarter in respect of both the component of the Starting DTA that exclusively relates to provisions for annual leave, and the component of the Starting DTA that exclusively relates to provisions for long-service leave and retirement benefits. The sum of those balance sheet positions as at the end of the relevant financial quarter is the Updated DTA. [218] Clause 3.5(d) requires the defendant to notify the plaintiff within 45 calendar days of the end of each financial quarter of the Updated DTA in respect of that quarter. [219] By its claim, the plaintiff seeks an order that the defendant cause RSC to provide to the plaintiff the updated balance sheet position for the quarter ended 30 April 2015. What is sought by that claim, is something different to that required by cl. 3.5(c) and (d) of the Share Sale Agreement. However, it would seem appropriate that the plaintiff have the benefit of an order that it be notified of the Updated DTA for the quarter ended 30 April 2015 calculated in accordance with cl. 3.5(c) as construed in these reasons. [220] I will hear the parties as to whether such an order ought to be made and, if so, as to its terms. Interest [221] The plaintiff claims interest pursuant to s 58 of the Civil Proceedings Act 2011 from the date from which the court determines the liability of the defendant to pay the -- 66 of 67 -- 67 sum arose until the actual date of payment. Section 58 provides for interest to the date of judgment. [222] I find that the date upon which liability to pay the sum arose is, in accordance with cl. 3.5(d), 45 days from 31 January 2015, being 17 March 2015. For the period from 17 March 2015 to 30 June 2015, a period of 106 days, the applicable rate of interest was 6.5%. For the period from 1 July 2015 to 30 June 2015, a period of 366 days, the applicable rate was 6%. From 1 July 2016 to 20 December 2016, a period of 173 days, the applicable rate was 5.75%. The total amount of interest to which the plaintiff is entitled at the date of judgment is $13,497.06. Disposition [223] The plaintiff should have judgment for $127,174.72 for claim and $13,497.06 for interest. [224] I will hear the parties as to whether an order that the plaintiff be notified of the Updated DTA for the quarter ended 30 April 2015 calculated in accordance with cl. 3.5(c) as construed in these reasons ought to be made and, if so, as to its terms. [225] I will also hear the parties as to costs. -- 67 of 67 --