When a Share Sale Goes Wrong: The Costly Consequences of Failing to Honour a Business Agreement
Aug 27, 2025The New South Wales Court of Appeal's decision in Tok v Rashazar [2025] NSWCA 94 provides significant insights into contractual obligations, the enforcement of share sale agreements, and the principles surrounding unjust enrichment. This case underscores the importance of adhering to contractual commitments and the legal consequences of failing to do so.
Background
In January 2016, Mr. Atilla Tok, the sole shareholder of Fresh Cut Australia Pty Ltd, entered into an agreement with Rashazar Pty Ltd for the sale of 30% of his shares in the company. The agreement stipulated a two-tranche payment: $100,000 upon execution and $175,000 two years later. While Rashazar fulfilled its payment obligations, Mr. Tok failed to transfer the agreed-upon shares, despite notifying the Australian Securities and Investments Commission (ASIC) of the purported transfer.Facebook+4NSW Supreme Court homepage+4Facebook+4
Rashazar initiated legal proceedings, seeking damages for breach of contract and restitution for payments made under the mistaken belief that the share transfer had occurred. The District Court ruled in favor of Rashazar, awarding damages and ordering restitution. Mr. Tok appealed the decision to the New South Wales Court of Appeal.NSW Supreme Court homepage
Legal Issues
The appeal raised several critical legal questions:
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Breach of Contract: Whether Mr. Tok's failure to transfer the shares constituted a breach of the share sale agreement.NSW Supreme Court homepage
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Damages Assessment: Whether the damages awarded for breach of contract were appropriately calculated based on the principle of wasted expenditure.NSW Supreme Court homepage
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Unjust Enrichment: Whether the restitution orders for unjust enrichment were valid, considering the payments made by Rashazar under the mistaken belief of share ownership.NSW Supreme Court homepage
Court's Analysis
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Breach of Contract
The Court of Appeal affirmed the District Court's finding that Mr. Tok breached the share sale agreement by failing to transfer the 30% shareholding to Rashazar. Despite receiving the agreed payments and notifying ASIC of the transfer, Mr. Tok did not execute the necessary documentation to effectuate the share transfer, thereby violating the terms of the agreement.
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Damages Assessment
The court upheld the damages awarded for breach of contract, calculated based on the principle of wasted expenditure. This principle allows a party to recover expenses incurred in reliance on a contract that the other party has breached. The damages included the initial $100,000 payment, the subsequent $175,000 payment, stamp duty, and late payment fees, totaling $285,110.45.NSW Supreme Court homepage
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Unjust Enrichment
Regarding unjust enrichment, the court agreed that both Mr. Tok and Fresh Cut Australia Pty Ltd were unjustly enriched by payments made by Rashazar under the mistaken belief that it held a 30% shareholding. The court ordered restitution of $16,965.48 from Fresh Cut Australia Pty Ltd for payments made to the Australian Taxation Office on its behalf and $84,147 from Mr. Tok for other payments made under the same mistaken belief.Facebook+4NSW Supreme Court homepage+4Facebook+4
Implications
This decision reinforces the legal principle that parties must adhere to their contractual obligations, and failure to do so can result in significant financial consequences. It also highlights the courts' willingness to enforce restitution claims where one party has been unjustly enriched at the expense of another, particularly in cases involving mistaken payments.
Conclusion
Tok v Rashazar serves as a cautionary tale for individuals and entities entering into share sale agreements. It emphasizes the necessity of fulfilling contractual commitments and the potential legal repercussions of non-compliance. The case also illustrates the courts' approach to calculating damages and addressing unjust enrichment, providing valuable guidance for future contractual disputes.
Contact the Shire Legal team if you have any questions.
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