Legal win for Chemist Warehouse

tribunal hearing legal case

A senior Chemist Warehouse manager has had a win in Federal Court, with the finding that his offer to buy a pharmacy described as having a “special and singular attraction” was binding

The dispute concerns the sale of a pharmacy in the Eastlands Shopping Centre in Rosny Park – Tasmania’s largest shopping centre, in greater Hobart. The centre includes about 100 retail businesses – only one of which is a pharmacy.

This pharmacy – Priceline Pharmacy Eastlands – is owned by Zomay Holdings, the sole director and sole shareholder of which is pharmacist Jeremy Hampton.

The applicant, pharmacist Warren Lucas, is the Tasmanian state manager of the Chemist Warehouse/My Chemist Group.

The judge noted that as the centre has less than 100 other “commercial establishments” only one pharmacy may be approved for the centre, under the location rules.

“Mr Lucas contends that he entered into a legally binding contract for the purchase of the Priceline Pharmacy Eastlands business and he seeks specific performance of it,” noted the judge.

Mr Hampton and Zomay contended that no binding agreement was entered into, and that if there had been a binding contract, it was repudiated by Mr Lucas’ proffer of a draft contract of sale.

Mr Hampton had engaged a pharmacy business broker to help him sell the Priceline Pharmacy Eastlands.

An information memorandum recorded the sale price as $2,600,000, for goodwill, furniture and fittings in the sum of $2,076,000 and estimated stock of $524,000.

The details of Zomay’s lease were also provided in the Information Memorandum, which explained that: the landlord’s agent is Vicinity Real Estate; the base rent is $443,910 per year; and the lease expires on 28 February 2021. The broker sent this IM to Mr Lucas in March 2018.

In October 2018, a representative of the broker sent Mr Hampton an Offer to Purchase, requesting that he sign and date it and return it to the broker.

He did so on 1 November 2018, faxing it back to them.

The Offer to Purchase set a total offer amount of $2,200,000, and was subject to conditions including due diligence, finance approval and negotiation of a lease suitable to the purchaser with the landlord.

The broker also sent the offer to Mr Lucas, suggesting that there be no due diligence and that settlement should take place on 4 February 2019, which would allow stock to run down after Christmas.

Mr Lucas proposed a settlement date of 12 February 2019, with a stocktake to take place on 11 February 2019.

His solicitor prepared a draft contract of sale which was sent to Mr Hampton and his broker, as well as Mr Lucas, Chemist Warehouse CEO Sam Gance and others.

Mr Lucas paid a 10% deposit on 19 November 2018.

However, legal representatives for the respondent wrote to Mr Lucas’ solicitor listing “a host” of reasons why the Offer to Purchase was not binding.

Mr Lucas contended that the Offer to Purchase was binding as it “contained the three essential elements of a concluded agreement, viz the parties, the subject matter and the price,” noted the judge.

He concluded that the Offer to Purchase was “clearly” a binding agreement for several reasons.

“First, it is contended that the agreement is not binding because it does not say in terms that it is. That submission cannot be accepted. It amounts to saying that a contract can only be binding if it says so expressly. Acceptance of that notion would wreak havoc on the jurisprudence of the interpretation of contracts,” he said.

The judge also said he could not accept the respondents’ contention that the proffering of the draft contract of sale constituted an act of repudiation.

He noted that on 29 May 2019, he was informed that an administrator had that day been appointed to Zomay.

He said that in the light of this, he would not yet make the declaration and orders he had decided on, but that he would do so had an administrator not been appointed.

He declared that the respondents were bound by the agreement for the sale of the Priceline Pharmacy Eastlands, a pharmacy he described as having “a special and singular attraction – it is the sole pharmacy, and remains the sole pharmacy under the existing regulatory regime, in the largest shopping centre in Tasmania”.

He ordered that the Mr Hampton specifically perform the agreement, providing Mr Lucas with all necessary tools to procure the necessary approvals.

“The applicant is to pay to the first respondent the sum of $1,700,000 together with an additional sum up to a maximum amount of $500,000 representing the stock of Priceline Pharmacy Eastlands at valuation,” he said.

The parties were also granted liberty to apply.

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