In the recent Supreme Court case of Meng v Wang [2022] NSWSC 833, the parties, Meng and Wang were former business partners involved in the provision of skin and beauty treatment services -which was operated through two companies, Comfortzone Clinic Pty Ltd and Comfortzone Spa Pty Ltd. Wang held 55% of the shares and Meng held the remainder. Ms Meng, the Plaintiff sought to enforce a contractual obligation under which Ms Wang was to pay her $378 000 for her shares in the companies.
Ms Wang opposed an order for specific performance and contended that the claim should be dismissed. The agreement in question provided for Ms Wang to buy Ms Meng out of the Confortzone business by purchasing the her shares in the Comfortzone companies, but Ms Wang contended that the agreement only gave her an option to purchase the shares and did not oblige her to do so. Hence, the first issue was whether the share sale agreement obliged Ms Wang to buy the shares, and the second issue was whether a reasonable time to buy them was within six months.
Clauses 1 and 4 of the agreement specified that there was an obligation to purchase the shares, but Clause 2, which Ms Wang relied on, indicated that the purchase was optional. The clauses were thereby inconsistent. In those circumstances the Court decided to exclude Clause 2 from the contract on the basis that it was ‘repugnant to the main thrust of the agreement’, so Ms Wang was obliged to purchase the shares. The Court also determined that a reasonable time to purchase the shares was 12 months not six.
However, despite these findings the Court refused to grant specific performance of the agreement because Ms Wang had ‘unclean hands’ as she had pressured Ms Wang to obtain payment by removing machinery and assets from the company premise, which amounted to a form of economic duress and prevented Ms Wang from being able to source the money to comply with her obligations to purchase the shares.
Instead, Ms Mang was only permitted to claim damages for breach of contract.