Campbell v Backoffice Investments Pty Ltd [2009] HCA 25

High Court Decision 2009 - Misleading & Deceptive Conduct - Oppression - and More

by mike gutzinger

The High Court allowed an appeal against an award of damages for misleading or deceptive conduct - sale of a share representing a half interest in Healthy Water Pty Ltd (the Company) - the evidence did not support the finding by the Court of Appeal of New South Wales - that the purchaser had relied upon misrepresentations about the financial affairs of the Company. The High Court upheld the Court of Appeal’s decision that the primary judge had erred in making an order for the vendor of the share to buy it back from the purchaser - Campbell, established a water filtration systems - incorporated the Company to carry on that business - a capital restructure tookplace. Mr Weeks became interested - his company, Backoffice Investments, entered into a share sale agreement (SSA) under which Backoffice purchased one of the two issued shares in the Company from Mr Campbell for $850,000. Their relationship broke down. By consent a provisional liquidator was appointed in April 2005 and on 31 May 2005 - PL sold the assets to another company controlled by Mr Campbell for $196,815 – monies then used to pay the Company’s liabilities

and PL’s fees and expenses. The Company was left an empty shell and its shares were worthless. Mr Weeks claim against Mr Campbell and the Company alleging numerous causes of action including Oppression pursuant to section 232 of the Corporations Act 2001 (Cth), - he sought an order that Campbell buy back his share -

breach of warranties in the SSA plus damages; and claimed misleading and deceptive conduct in breach of section 42 of the Fair Trading Act 1987 (NSW) plus damages. The trial the primary judge allowed Mr Weeks’ oppression claim - Campbell ordered to buy back shares for $853,000, but damages for misleading and deceptive conduct failed - Weeks had not relied on the alleged misrepresentations when he purchased the share in the Company. A fatal misstate – and no damages, as buy-back order was made. By majority the New South Wales Court of Appeal allowed Campbell’s appeal against the buy-back order - By a different majority the Court of Appeal found Campbell had made

pre-contractual representations which were misleading and deceptive and relied by Mr Weeks. The Court of Appeal ordered Campbell to pay damages of $850,000 to Weeks/Backoffice.

The High Court granted special leave to appeal - all members of the High Court held that the Court of Appeal had been correct to set aside the primary judge’s buy-back order - However, considered that the evidence did not support a finding that certain pleaded representations were actually made – Weeks/Backoffice would not have purchased shares in the Company had he been aware of the falsity of certain statements made by Mr Campbell concerning the Company’s financial performance - The High Court ordered that the order made by the Court of Appeal setting aside the primary judge’s buy-back order should stand - judgment for Backoffice for $850,000 for reliance on misleading and deceptive conduct should be set aside - and issues concerning breach of contractual warranties, and any potential damages was remitted to the Court of Appeal.

Please contact the writer for a full copy of the Judgement.

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Reference Info: Decision | Australia

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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