In this case the plantiff, Norcast succeeded in recovering damages amounting to US$22.4 million representing the difference in price it received upon the sale of a subsidiary, NWS, and that which it would have received had the sale price not been reduced as a result of a bid rigging arrangement. The original purchaser a Castle Harlan entity (CH) paid US$190 million and, immediately following settlement of the sale, sold NWS to a subsidiary of the defendant, Bradken for US$212.4 million. It was found that the original and ultimate purchasers had entered into an arrangement whereby CH would bid and Bradken would not.
There are many interesting legal questions raised by this case which is subject to appeal, however the impact of extensive email correspondence between the parties is arguably the one which attracts the most interest. The first point to be made is when a court is having to decide whether an arrangement has been made the intentions of the parties are crucial. Emails, a few of which are considered below, provided the Court with strong evidence from which to infer what the initial and ultimate purchasers were respectively thinking.
For example, the Judge infers from email correspondence in the early stages of the sale process: “For a company not interested in buying NWS, that was a lot of activity in one day directed to that end - the acquisition of NWS.” Later, when Bradken asserted that it was considering the value of NWS with a view to making a direct bid Gordon J observes: “The form and content of the various communications are consistent only with an arrangement whereby CH would bid, and Bradken would not bid, for NWS…”
On another occasion, W, a Bradken employee emailed, P, an employee of CH a few days after CH had submitted its letter of intent to purchase NWS. In his Honour’s view, this was because W “could no longer stand the suspense” and wanted to know if there was any news or feedback on the bid. His Honour’s view was that W “was not enquiring about the weather” and went on to reject W’s assertions that he was not aware that CH was actually making a bid of US$190 million. These assertions were, he found, contrary to contemporary documentary record, in particular, contemporary emails.
It can be said in defence of emails that, in the circumstances of this case, they facilitated the negotiation of a complex international transaction involving a significant number of participants. As is common, negotiations were fast moving, at times requiring swift responses to changing circumstances. Electronic communication enabled this to happen efficiently. However, it also created a rich transcript from which the court inferred the intentions of the parties from time to time notwithstanding evidence to the contrary from some very distinguished business people and organisations.
It was once said that the nature of an 'arrangement' is such that evidence of its existence will be hard to find as it may be arrived at as easily as by a wink or a nod. Electronic communication, emails especially, may have changed all of that.
Peter is a Professor of Business Law, Executive Dean of the QUT Business School and a Consultant to McCullough Robertson on Corporate Advisory issues.