Background
In 2002 a recruitment business called Carmichael Fisher was founded. It did well and in 2006 incorporated a company in England to expand the empire (CF UK) and in 2008 Mr Hobday, the Defendant/Cross-Claimant was recruited. Around mid-2008, the plaintiff, CF International was incorporated in Australia and on 30 June 2008 it acquired all shares in CF UK.
Various agreements were put in place to establish how the entities would interact. Despite those agreements, by November 2009 CF UK owed $350,000.00 to the Plaintiff.
By 2016 the Defendant proposed that CF UK should exit the group and to that end on 6 October 2017 a share sale agreement (the Agreement) was entered into for a purchase price of $1.4M. Additionally, the Agreement released the debt owed by CF UK to the Plaintiff, which was agreed at $1.2M.
The Agreement allowed for payment by instalments, which CF UK initially made. Those payments amounted to $860,902.00. However, after November 2018 no further payments were made and on 18 December 2019 a liquidator was appointed for CF UK.
The Court Proceedings
On 12 June 2020, the Plaintiff filed a Statement of Claim (SOC) seeking damages, interest, costs and any other order the Court deemed fit.
The SOC relied on a guarantee and indemnity by the Defendant in relation to CF UK’s obligations.
On 3 November 2020 a Defence and Cross Claim (CC) were filed. The Defence admitted much of the SOC but claimed some clauses in the Agreement were not enforceable because of reasons in the CC.
The CC alleged, amongst other things:
- Misleading and deceptive conduct;
- Unconscionable conduct;
- Undue influence and pressure placed on the Defendant.
The CC alleged that unless the Defendant gave a personal indemnity the Plaintiff would immediately call in the money owed, which the Plaintiff knew could not be paid. In so doing, it was alleged the Agreement went beyond protecting the Plaintiff’s legitimate interests. That conduct was said to be in contravention of ss18 and 20 of the Australian Consumer Law, and s12CB of the ASIC Act.
On 25 February 2022 the Defendant filed a Notice removing Maddocks as his solicitors. Then in early June 2022, he suffered a heart attack. The Defendant requested time to recover before further steps were taken in the proceedings. The Plaintiff objected saying it had prepared for trial.
On 15 June 2022 a bankruptcy order was made in UK on the Defendant’s own application. The Official Receiver was appointed.
Before the trial scheduled for 22 and 23 August 2022, the Defendant wrote to the Associate stating:
“Whilst I would have wanted to defend the claim that has been brought against me and to have shown the unconscionable conduct that Mr Markiewicz applied to me to create the circumstances, it is no longer possible for me to so do (both for health and financial reasons).
I await the outcome of the Court’s decision.”
As a result no evidence was led in relation to the Defence or the Cross Claim.
The Court found that in the absence of evidence to refute the Plaintiff’s case or support the cross claim:
- CF UK owed $539,098.00;
- The Plaintiff was entitled to default interest under the Agreement of 15% per annum, calculated daily and payable monthly;
- Costs payable by the Defendant on a solicitor-client basis (as provided in the Agreement);
- If the judgment and interest were paid it may be necessary to transfer remaining shares pursuant to the Agreement to ‘finalise the relationship between the parties’;
- As the proceedings were determined in the absence of the Defendant and the Official Receiver it is possible that a future application to set aside or vary the orders may be made, pursuant to r36.16 of the UCPR.
In light of those conclusions, the Court ordered that:
- The Plaintiff prepare orders to give effect to the reasons for the decision.
- The matter be relisted for consideration of those proposed orders.
Takeaway:
In commercial litigation the Court is prepared to proceed with a final hearing and to make orders in the absence of one of the parties even in circumstances where health issues, experienced close to the trial, were (at least part) of the reason for the absence.
If you have a question relating to Commercial Litigation please contact Kristy Nunn or David Collins of our Dispute Resolution and Litigation Team.
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