One of Australian golf’s longest and costliest legal disputes was finally resolved last month, with Barnbougle Dunes and Lost Farm developer Richard Sattler successfully defending himself in the Federal Court of Australia against charges of fiduciary and conflict of interest breaches brought against him by his minority shareholders at Barnbougle Dunes.
Sattler had been sued by Links Golf Tasmania (LGT), a company that operates the Barnbougle Dunes golf course under lease and is majority owned (56.7%) by Sattler himself (the landlord). The case, which lasted more than a year, centered on the belief of the minority shareholders in LGT that Sattler had no legal right to build Lost Farm, and had used expertise gained while operating Barnbougle Dunes to set up a competing business.
The plaintiffs believed they were entitled to have been part of the Lost Farm development, despite the absence of such terms within their lease agreement. Their claim for an account of the profits Sattler had made while operating Lost Farm, its restaurant, lodge, pro-shop and bar was rejected.
Judge Jessup’s detailed 316-page ruling included several damning findings against the minority shareholders, and in particular its founding director Greg Ramsay. As golfers familiar with the Barnbougle Dunes story will recall, it was Ramsay in late 2000 who approached Sattler with the idea of leasing part of his farm at Bridport for the purpose of building a links course.
The judge described Ramsay as a ‘persuasive optimist’ and at times questioned the credibility of his testimony during the trial, at one point labeling his evidence as ‘being substantially a matter of reconstruction rather than recollection.’
Justice Jessup added that his general impression of Ramsay was of a ‘young man with clear goals, and lofty ideals, who tended to view past events and relationships through a prism which would tend to the achievement of those goals and the fulfilment of those ideals.’ By contrast, Sattler was described as a ‘clear, firm and credible’ witness.
On the subject of the option to build a course on the Lost Farm property, Ramsay and Sattler’s recollections were vastly different. Sattler said he agreed to consider an option over the Lost Farm land if it helped secure further investment in the first course. Ramsay countered by stating that Sattler had, indeed, granted LGT an option to buy Lost Farm for $1 million, and produced an email he wrote to his solicitor at the time as proof of the agreement.
While the judge accepted that ‘normally, a communication of this kind would be good objective evidence of the matters referred to in it’ he was somewhat skeptical in this instance and noted that ‘Ramsay appears to have had a tendency to push the boundaries of established facts in communications, which he made with third parties otherwise unfamiliar with such facts.’ He concluded by stating, ‘I am disposed to approach his statement as to the content of Sattler’s then “in principle” agreement with some caution. As will be seen, the lease for Barnbougle Dunes, as later executed, said nothing about any option over the Lost Farm part of Sattler’s property.’
Whilst trying to secure the finance required to build the first course, Ramsay made what were determined to be misrepresentations to industry heavyweights such as Mike Keiser, Medalist Developments, Troon and Greg Norman Golf Course Design in which he stated that he had an option to purchase an adjoining 650-acre parcel of coastal dunes (the Lost Farm site). This representation was described by the judge as ‘unjustified at best on the facts then known to Ramsay.’
As it turns out, Ramsay’s efforts to attract investors and sell foundation memberships failed, as did attempts to secure a low interest loan from the Tasmanian government. Having been convinced of the potential of his property for world-class golf Sattler, a non-golfer, decided to underwrite the development himself and personally inject much of the capital needed to build the course. His contributions ensured that Barnbougle would be built, and opened the door for a number of shareholders to acquire a minority interest in its operation.
What’s interesting to note about this case, is that the shareholder agreement of LGT drafted between Sattler and Ramsay included a non-competition clause with a clear amendment – which in part read that, ‘Each of the parties may conduct a business or other venture in competition with the business of the Company on any part of the balance land at Barnbougle not leased to the Company.’
During the trial Ramsay insisted that the clause referred only to accommodation, as LGT had no initial option to include accommodation. Sattler denied this, and the judge found in his favour, noting that, ‘the idea that he (Sattler) should have been concerned to amend the non-competition clause in the draft shareholders’ agreement solely for the purpose of enabling him to conduct an accommodation business elsewhere on his land is, in my view, an improbable one.’
Even more staggering than the clause itself, were Ramsay’s fellow plaintiffs, who had joined LGT after the drafting of the agreement and had either never read the document, or were sent the wrong version and unaware of the competition clause.
After determining that LGT had no option on the Lost Farm land, nor any right to participate in the building of the second course, the judge turned to the fiduciary responsibilities Sattler had while a director and CEO of the company.
At the very core of this dispute was the view held by Ramsay, and fellow plaintiffs Peter Wood, Justin Hetrel and Jonathon McCleery, that Sattler had dishonestly used his position at LGT to establish a competing business. Despite there existing plans from 1993 for a golf course on the Lost Farm land, Ramsay insisted it was he who had initiated the idea and it was only after Barnbougle was successful that the building of Lost Farm became a viable option.
Sattler does not dispute that the success of Barnbougle helped convince him to build Lost Farm, but argued that his position as landowner predated the fiduciary duties imposed upon him as a director of LGT and that the opportunity to use Lost Farm, in any way, belonged to him prior to any involvement with the company.
Here again the judge agreed with Sattler, and noted that prior to signing a lease to use the Barnbougle Dunes land, Ramsay, as LGT’s alter ego, had ‘pressed Sattler for an option over Lost Farm, and none was given… He even went to the length of having his solicitor draw up an option, thereby demonstrating that access to Lost Farm for the purpose of golf was a serious matter which warranted black and white terms. Knowing these things, and knowing that no option had been granted, LGT committed itself to a lease of the Barnbougle Dunes land for a period of 10 years from January 2002. On any objective view of things, these events favour the defendants’ case that Lost Farm was Sattler’s to use or not as he chose and, if the latter, when he chose.’
Justice Jessup added that, ‘The investors committed their moneys well appreciating that they had no contractual assurance about Lost Farm, and that the ability of LGT to participate in any future development at that site was wholly for Sattler to decide.’
There were a number of other accusations made against Sattler during the proceedings, including that he had used Barnbougle staff to help build Lost Farm and had abused his board position with the company for the purpose of acquiring major loans. The financial claims made by LGT were variously described as opportunistic and ‘unconscientious’ and were rejected. The judge also found that Sattler acted honestly in having LGT staff members carry out work on Lost Farm, which they had done outside their traditional working hours.
There were a couple of very minor wins for the plaintiffs, including the finding that the accommodation commissions paid to LGT by Sattler had not been agreed at board level, but had instead been set by Sattler in his role as CEO. Regardless, the judge ruled that ‘LGT has stood by too long and allowed the 10% commission arrangements to operate for Sattler now to be held to account at the level of detail which is proposed.’
While the Federal Court ruling in this matter is incredibly detailed, for those able to wade through the document it sheds great light on the building of Australia’s best two public golf courses as well as the crumbling of the relationship between Sattler and Ramsay. Much of Ramsay’s case was based on letters, emails and proposals he sent during the development of Barnbougle Dunes, where the carrot of a possible second course was dangled in front of potential investors to attract their interest. The fact the lease agreement between Sattler and LGT makes no reference to the Lost Farm land, or any additional golf courses, and explicitly allows Sattler to build a competing business on his land is telling. To the main thrust of Ramsay’s argument, the judge clearly determined that telling people you had an option over the Lost Farm land was quite different to actually having an option on said land.
The lengthy legal stoush down at Barnbougle is believed to have personally cost Richard Sattler and his family several million dollars, owing to an earlier ruling that determined as majority shareholder in Links Golf Tasmania he was partly responsible for their legal fees. Justice Jessup stated that a determination on costs would be made next week.