Pacific Rim Corporation Holdings Pty Ltd, Re [1992] PGNC 108; [1992] PNGLR 491 (4 November 1992)

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[1992] PNGLR 491 - Re The Companies Act Ch146 and Pacific Rim Corporation Holdings Pty Ltd

IN THE MATTER OF THE COMPANIES ACT CH 146 AND IN THE MATTER OF PACIFIC RIM CORPORATION HOLDINGS PTY LTD (IN LIQUIDATION)

COMPANY LAW - Summons for direction by liquidator - Question of concluded contract for sale of assets of the company in liquidation - Application of principles - Use of phrase "subject to contract".

The liquidator of Pacific Rim Corporation Holdings Pty Ltd (in liquidation) sought directions pursuant to s 254(3) of the Companies Act Ch 146 to approve or disapprove a sale of the company assets. A prospective purchaser, Pactim Resources Pty Ltd, had offered to buy the assets on terms. On 14 September 1992, the liquidator wrote saying inter alia, "I am pleased to advise that your offer is accepted subject to contract".

Subsequently, various documents came into existence, including a draft lease agreement, a draft of the contract for sale of the business and a contract for sale of equipment on expiry of lease. In addition, the liquidator proposed to take a guarantee from directors of the leasing company and a fixed and floating charge over assets of the leasing company to secure the obligation by Pactim. Negotiations were carried on, during which time various amendments and inclusions were made to the documentation.

Later on, a new purchaser was introduced and it became necessary to determine whether a concluded contract had eventuated in the circumstances, or if the liquidator was free to treat with the new purchaser.

N1>1. That whether or not a concluded contract can be found is a question of fact Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353.

N1>2. The phrase "subject to contract" admitted of various meanings, and it was for the Court to draw the proper conclusion on the facts.

N1>3. This case falls within the third category referred to in Masters v Cameron i.e. the intention was not to make a concluded bargain unless and until there was a concluded contract.

BROWN J: Mr Birch, the liquidator, seeks directions pursuant to s 254(3) of the Companies Act Ch 146, to approve or disapprove a proposed sale of assets of the company in liquidation. That proposed sale was to Pactim Resources Pty Ltd. Mr Coady deposed to the negotiations. The offer to buy preceded the letter of 14 September 1992, which said:

"Thank you for offer to purchase the assets of the above company. I am please to advise that your offer is accepted subject to contract. Please note in particular that the leasing agreement will require shareholders guarantees, and a fixed and floating charge (equitable mortgage) over the new company.

The offer was addressed to Pacific Timbers, presumably a trading name of Pactim Resources Pty Ltd. Subsequently, the negotiations resulted in a fresh purchaser being introduced.

"During those negotiations, it was proposed that the Liquidator lease the assets to a new Company, Waigani Timber Pty Limited and upon the expiry of the lease to sell the assets for a nominal sum to Pactim Resources Pty Limited. Annexed hereto and marked with the letter "B" is a draft of the Lease Agreement. Annexed hereto and marked with the letter "C" is a draft of the sale of the business, annexed and marked "D" is a Contract of Sale of Equipment on expiry of the lease. In addition, the Liquidator proposed to take a guarantee from Directors of the leasing Company and a fixed and floating charge over the assets of the leasing company to secure the obligations of the lease. The effective value to be received by the Liquidator over the period of eighteen (18) months from the proposed transaction is K360,000.00".

Mr McQuoid, an employee of the liquidator, was specifically detailed to report on the position of the sale to Waigani Timbers, and did so in his report of 2 November 1992, forming part of Mr Birch's affidavit, read today.

He recited a meeting with Mr Aitken of Waigani Timbers. Since there is no argument about the fact that the lease and contract for sale in evidence were in fact the documents prepared and submitted by the liquidator to the purchasers, I accept the recital as evidence of the fact of various meetings, including that of 25 October 1992, taking place. The lease and sale documents in evidence are the best evidence by the liquidator of his proposals for sale. I accept that those have not been delivered to the liquidator signed by the proposed purchaser.

I find that since 14 September negotiations have continued by the liquidator with interested parties for the sale of Pacific Rim (in liquidation).

Those negotiations have resulted in material variations to the leasing agreement envisaged as the vehicle for the sale described in that letter of 14 September. There has been a new lessee-purchaser introduced. The terms and conditions have been varied to include a subsequent sale upon the expiry of the lease agreement. I find, in effect, that there is no sufficient description of an eventual purchaser in that letter of 14 September 1992 to enable me to identify a contracting party.

I am satisfied that this case falls within the third category referred to me by Mr Shepherd, described in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353. The intention was not to make a concluded bargain unless and until there was a concluded contract. In fact, the lease agreement eventually prepared contained some 35 clauses which were submitted from time to time after negotiations between the parties. In these circumstances, on the last statement of the letter that "your offer to purchase the assets is accepted subject to contract" cannot be said to illustrate a finality of purpose awaiting some particular documentation. The terms and conditions set out the purpose and are part of a relatively involved commercial transaction which awaited the agreement of the parties. It follows that such agreement was lacking as at 14 September 1992.

I am further satisfied on the authorities quoted by Mr Coady that the phrase "subject to contract" does not mean here mere physical execution of a written document evidencing an agreement of 14 September 1992. The negotiations subsequently proved to my satisfaction that without exchange or delivery, no contract can be elicited on the fact of the letter of 14 September 1992.

The contributor has introduced a new purchaser and the liquidator seeks this Court's directions and findings in relation to the circumstances surrounding the proposed sale to Pactim, whether a concluded contract had, in fact, eventuated, or if the liquidator was free to treat with the new purchaser, because there was no contract.

That the liquidator is not bound to complete a contract of sale of the assets of the company in liquidation to Pacific Timbers, Pactim Resources Pty Ltd or Waigani Timber Pty Ltd and, further, that no contract for sale arises by fact of the existence of the letter of the liquidator of 14 September 1992 addressed to Pacific Timbers.

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National Court of Papua New Guinea

Pacific Rim Corporation Holdings Pty Ltd, Re [1992] PGNC 108; [1992] PNGLR 491 (4 November 1992)

Papua New Guinea Law Reports - 1992