Coffee and a Case Note

By James d'ApiceEducation

Coffee and a Case Note episodes

August 30, 2021 Alon Pty Ltd [2021] NSWSC 1021
“Just transfer the shares to me!”

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Years ago, mum and dad incorporated a Co and, among other things, became shareholders of the Co’s Class “A” voting shares: [10]

The Co held assets in its own capacity and as trustee of the family trust: [13]

Mum and dad’s two sons, S1 and S2, eventually became directors of the Co: [12]

In 2011, Mum retired leaving S1 and S2 as sole directors. In the same year the family trust deed was amended effectively placing the Co in complete control of the trust, as both trustee and appointor: [16]

In 2018 S2 ceased being a director, leaving S1 as sole director: [17]

In 2019 mum died.

In 2020 an administrator was appointed to mum’s estate: [19]

The administrator found the Co then had 11 Class “A” shares in the Co - 9 owned by mum, and one each owned by S1 and S2: [20]

The administrator served on S1 an application to transfer mum’s shares to him: [22]

If the application was registered, the administrator would hold 9 voting shares, allowing him to instal new directors and take control of the Co: [26]

The administrator chased S1 a number of times to seek to become registered, and threatened Court proceedings and an indemnity costs order if the matter was litigated: [28] - [34]

S2, in 2021, then transferred mum’s Class “A” shares to himself and alloted more shares of other classes to himself: [36]

In May 2021 the administrator commenced the proceedings seeking to rectify the Co’s share register to reflect his ownership (as administrator) of Mum’s shares and to reverse the allotment: [43]

The Court found there was no just cause for S2 to fail to register the share transfer and made orders causing it to be registered: [55]

S2 did not have power to allot himself extra shares as the Co required two directors and, from 2018, S2 was its sole director: [65]

The transfer of mum’s shares and S2's purported allotment of further shares to himself were both made without power and had no effect: [66]

Due to S2’s intransigence, the administrator pressed for an indemnity costs order: [69]

An indemnity costs order arises from the unreasonable conduct of the litigation itself, not the conduct that led to the litigation: [73]

S2's intransigence and attempt to seize control as “majority shareholder” came before the litigation : [74]

However the administrator warned heavily of the possibility of an indemnity costs order in the correspondence sent before litigation was commenced, S2’s defence was hopeless, and the Court found the estate should not be depleted by S2’s unreasonable refusal to agree to the orders sought: [75]

The administrator got essentially what he came for, including the indemnity costs order: [77]
9 min
August 17, 2021 Yelland Security v Plus Architecture [2021] VSC 416
“You fired me just to get my Co’s shares at a discount!”

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Y owned and controlled a Co, P.

P was a shareholder in the Cos in a group that operated a national business. Y was a director of the Cos: [1]

Y was terminated as a director of each Co in the group and, and by operation of the shareholders agreements, P’s shares in those Cos were transferred to the other shareholders at a discount which P accepted under protest: [6], [325]

P relied on s232 of the Corporations Act to challenge the discount; alleging termination of Y was unfair: [11], [28]

Separately P claimed the discount was a breach of the shareholders agreements: [12]

The Ds said the termination was appropriate due to Y’s behaviour, and was not motivated by the share discount: [13], [14]

In 2017 Y, and the other directors, had fallen into serious dispute: [31]

The disputes concerned possible share dilutions to let in new shareholders, pay for senior staff, governance, and the future direction of the business: [36] - [38], [46], [111]

There was evidence Y bullied staff: [97], [104] - [106]

Y sought to renege on a more recent shareholder purchasing a departing “legacy shareholder”’s shares: [109]

This led to a mediation process: [115], [116]

Following mediation, the group’s board sent a letter to Y proposing resolutions that Y be terminated as a director at a board meeting a month later: [143]

The next day, Y purported to resign giving 3 months notice: [145]

Roughly a month later (and before the 3 month resignation notice period expired) the resolutions terminating Y passed: [149]

The Court found the group’s board had good reason for terminating Y; to bring to an end the problems Y was causing. It was not a mere share discount manouver: [192], [198]

The Court noted the terms of the shareholders agreement had been accepted by Y and P, so being held to them was not inappropriate: [212]

P’s primary oppression claim failed: [216]

(Interestingly, the Court raised the issue of whether unitholders in a unit trust could bring an oppression suit, suggesting it may be an open question: [222])

P also complained the discount was a breach of the various Cos’ shareholders agreements and constitutions: [263]

Whether the discount applied depended on whether termination or resignation took effect first: [270]

P argued that Y’s resignation took immediate effect, despite a 3 month notice period: [271]

The resignation would take effect 3 months after notice was given, so the termination resolutions passed in the intervening time took precedence: [298], [301]

P did not show that applying the discount was a breach of the agreements: [363]

The Court was taken to evidence about a “senior junior” colleague of Y’s valuer, whose work was about 70% of the invoices issued in preparing the report, was not independent: [372] - [435]

The Court dealt with the valuation at length: [436] - [553]

Speaking broadly, Ds’ valuer was preferred: [554]

The discount was found to be OK: [555]
12 min
August 10, 2021 SP98970 v Capitol Property Services Pty Ltd [2021] NSWSC 950
“Just keep those assets frozen a little longer…”

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P was an owners corporation that owned the common property in a building.

P sued the developer, D, in relation to alleged defects P afflicting the building - a breach of the HBA statutory warranties: [9]

P tried to organise site inspections of various experts to investigate and hopefully quantify the defects but COVID restrictions frustrated that: [12]

P’s pre-inspection estimate of damage was ~$1m and, P said, that was likely to increase after inspection: [13]

D owned Lot 2 in the building: [18]

P’s lawyers became concerned that D might sell Lot 2 and P’s lawyers raised this issue with D’s lawyers: [21]

Without P’s knowledge, D transferred Lot 2 to Q (a person who had a relationship with D) for a recorded price fo $3.78m, but with no money changing hands: [25], [26]

This left D with around $900K to pay any judgment P might get in the defect proceedings: [29]

P applied for, and got, a “freezing order” preventing Q from selling Lot 2, unless in an arm’s length transaction with the price paid to be held on terms both agreed: [37]

At the time the order was made, D had around $635K: [38]

The Court accepted there was a good, arguable case that the transfer of Lot 2 to Q was voidable, a transaction to defraud D’s creditors - s37A, Conveyancing Act: [41]

At the time of the hearing Q was already restrained by freezing orders. Today’s discussion is P’s application to extend them.

P sought an extension of the freezing orders to get its defect evidence on: [46]

D and Q did not oppose an extension but sought a reduction from the full value of Lot 2 to $800K, following a deposit of $200K into a trust account, and after giving an undertaking not to deal with Lot 2 without P’s knowledge: [48]

The Court accepted a freezing order is a drastic remedy, not to be used improperly as additional security: [50]

Because P undertook to bring s37A proceedings, with the potential to void the transfer of Lot 2 from D to Q, the Court extended the freezing order for Lot 2 (or its sale proceeds) by 4 months: [53]
7 min
August 02, 2021 Nergl Developments Pty Ltd v Vella [2021] NSWCA 131
“Our agreement was for a bigger easement!”
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In 2008 and then 2010, a developer, N, entered into agreements with adjoining landowners including V to develop some land: [2]

N commenced development and lodged caveats over land including V’s securing obligations purportedly pursuant to the 2010 agreement: [6], [7]

By 2018 the caveats were replaced by new caveats and V applied to the Court to have them removed: [9]

In December 2018 the parties attended a mediation and negotiated a Heads of Agreement settling all disputes arising out of the agreement: [10]

Things again stalled, however.

Each party sought specific performance of the HoA by executing certain document, but they disagreed on what precisely was to be done: [11]

The Court at first instance made various orders for the performance of the HoA: [12]

N appealed.

The Court at first instance found the HoA to be a Class 2 Masters v Cameron document: a complete record of an agreement conditional on the execution of a later formal document: [21]

The parties agreed he execution of further documents were consideration for, not replacement of, the HoA: [25]

The CoA considered the practical impact of N’s challenge on this point (i.e. that there should be some new document replacing the HoA) was obscure: even if N was correct and a new document replacing the HoA was required, little would change practically save for the form of the specific performance orders: [30]

There was extensive argument about whether the width of the easement was to be 16m or 21.6m, with the material such as the DA being unambiguously 16m: [37]

N referred to possible use of buses on the road to be built, and suggested that 21.6m was required. Noting that the 16m width of road could deal with garbage trucks and the like, and that only up to 19 lots were proposed, this was not found to be necessary. None of the further evidence founded an inference for departing from the 16m requirement implied in the HoA: [38] - [52]

N argued it was an implied term of the HoA that a construction easement be granted: [54]

The main purpose of the HoA was to terminate the tripartite agreement and it was not necessary that a construction easement be implied: [57], [60]

N’s argument for an easement for a roundabout was rejected: [64]

The costs order from the earlier proceedings was clarified to make clear it did not relate to “pre-mediation” legal costs, only costs after the HoA was entered into: [70]

N’s appeal was dismissed: [73]
10 min
July 26, 2021 Josey v InvestaFox Pty Limited [2021] NSWSC 827
“The proceedings were dismissed, so pay my costs!”
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P commenced legal proceedings seeking specific performance of a deed that saw D grant P a drainage easement.

Shortly afterwards, the proceedings were dismissed by agreement.

When proceedings are dismissed the plaintiff ought to pay the defendant’s costs, unless the Court says otherwise: UCPR r42.20

P said D had engaged in unreasonable delay in relation to the deed, forcing P to commence proceedings: [4]

D said the deed had not been entered into properly before the proceedings were commenced: [5]

There was a degree of delay of delay and disorganisation about entering into the deed, and confusion about when the counterparts were executed: [6]

There was some suggestion that D might have engaged in unreasonable delay, but there was also a complaint that it took P the best part of a year to pay an $800 invoice required by the deed: [7]

Due to the delay in progressing the matter, the Court found it was not unreasonable for P to have commenced proceedings: [8]

However, the Court ordered each party to pay its own costs: [9]

This judgment confirms that a plaintiff may stand disappointed if it relies too heavily on r42.20 to carry the day.
5 min
July 20, 2021 James d'Apice interview with Dean Cosgrove - GULS Law Student Podcast June 2021
James sat down to speak with Dean Cosgrove of Griffith University Law Society (GULS) in June and had a great chat about how the life of a commercial litigator works.
You can find GULS on LinkedIn here: https://www.linkedin.com/company/griffith-university-law-society
And you can find the GULS Law Student podcast wherever you get your podcasts!
36 min
July 18, 2021 de L’Isle v Knight [2021] NSWSC 809
"We settled those other debts, but you still owe me this one!"
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A joint venture of some complexity fell apart, as they sometimes do.
The relevant parties entered into a “Termination Agreement” dealing with the fallout.
P sued D for a debt of £500K. D said that debt was discharged by operation of the Termination Agreement: accord and satisfaction.
P and D’s commercial relationship was somewhat colourful. P and P’s spouse invested substantial sums with the D - over US$15m - over a number of years: [2] - [23]
The sole issue was: was the £500K debt among the debts released via the Termination Agreement, or did D still have to repay it?
The Termination Agreement included that assets were to be transferred to P “… in full and final satisfaction of all rights, claims or interests [P] may have in respect of the Joint Venture and all payment obligations which any [other relevant entities] may have to [P] and/or to any person not party to this Agreement and associated with [P].”: [24]
The Court found the purpose of the £500K loan was personal, and did not relate to the joint venture: [46]
Over subsequent years the £500K loan was referred to as the “personal loan” in correspondence between the parties: [47] - [58]
P said the Termination Agreement related to the joint venture and, as the £500K loan was not part of that venture, the agreement had no effect on it: [70]
D, perhaps unsurprisingly, took the opposite view: [72]
The court considered the clause’s two limbs. The first limb (the above extract up to the word “and”) was found to relate to the joint venture: [82]
The second limb had no such restriction: [84]
P submitted that various email exchanges showed the parties’ true intent in entering into the Termination Agreement was to deal solely with joint venture issues. The Court identified these exchanges as negotiation rather than binding terms and said the common objectives are best taken from the Termination Agreement itself, not earlier emails: [109]
The Court found that on a proper construction the £500K loan fit within the description of a “payment obligation” under the Termination Agreement (the second limb) meaning the D had no obligation to pay: [115]
7 min
July 11, 2021 Semantic Software Asia Pacific Limited [2021] NSWSC 785
“Stop that Co from selling shares. Right now!”
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P (who, incidentally, was the Australian corporations regulator, ASIC) commenced proceedings against a Co, and others, seeking to wind up the Co and - in the meantime - freeze the Co’s assets.

P’s evidence showed the Co had significant debts and minimal funds. The Co’s MD alleged they held funds for the Co in trust, out of reach of the Co’s creditors: [2]

The Co attracted shareholders, in part, by offering price guarantees to incoming shareholders - their shares would be bought back if they did not reach a certain price: [3]

The Co had no trading income. Its income came from issuing share capital (with buyback guarantees): [4]

The Co owned a patent portfolio and software, whose value not be realised without listing on the US stock market or being bought by a US entity: [5]

Clearly, the Co did not have the cash to support the guarantees.

Noting this, and despite the existing assets of the Co being minimal, the Court considered immediate freezing orders were needed to avoid them being further eroded: [7]

If the orders were made it would prevent the Co from conducting further fundraising activities, severing its source of funds and rendering it insolvent: [8]

The Co’s conduct in fundraising without disclosing (i) its inadequate assets to fund guarantees, or (ii) the need for a US buyer to realise its assets, were false and misleading: [6], [10]

The Court was not persuaded that it should restrain itself from making a freezing order when that would allow the Co to continue to mislead; even if the the outcome of that misleading conduct was the only source of income for the Co: [10]

Injunction granted.
6 min
July 04, 2021 Fuller v Albert [2021] NSWCA 88
“Let’s get our company to buy a block of land. I’ll take some and you can have… none?”

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F and A were directors and (with their families) 60/40 shareholders in a Co. The Co owned a block of land.

F and A discussed an arrangement where each would get - for themselves - a small parcel of land subdivided from the Co’s larger block without paying: [7]

A’s parcel was subdivided and transferred to A with a price of $175K recorded on the sale contract, but nothing paid: [8], [9]

F applied to subdivide their block but was unsuccessful: [8], [10]

Years later, after a curious meeting with F and a private investigator engaged by F, A paid the $175K to the Co: [11] - [17]

F commenced proceedings seeking (among other things) specific performance of the agreement: [20]

F lost, including because the primary judge found there was no binding obligation to cause the subdivision and distribute F's block: [26]
On appeal, the Court found that there was indeed a binding obligation in those terms: [37]

The CoA noted the payment of $175K was curious as it was never demanded and was made after A felt “intimidated and confused” following the private investigator meeting: [44]

A argued that even if there was a binding contract, F repudiated it by causing the private investigator to behave as they did and demanding the $175K: [39]

However as F had already performed their obligation to cause the Co to transfer the land to A; there were no obligations left for F to evince an intention not to be bound by. F did not repudiate: [46]

The net effect of the binding obligation, and A acting on it while F did not, is F received nothing from the arrangement and A received their land: [61]

(A may have a remedy to recover the $175K but that was not raised in these proceedings: [62])

A repudiated by purporting to accept F’s alleged repudiation, so evincing invention not the be bound b the Agreement: [63]

There were difficulties with the order for specific performance sought, including identifying the land that would be the subject of any order, and any planning or zoning issues that might prevent subdivision: [64]

The matter was referred back to the primary judge to consider specific performance versus damages: [66]

Appeal allowed.
8 min
June 25, 2021 James d'Apice interview with Lucy Dickens - Doing Law Differently Podcast May 2021
James spoke with Lucy in 2021 and they had a wide-ranging chat about James' approach to leveraging social media to build a legal practice, and how he feels like the term "innovative" may not necessarily suit him!
We hope you enjoy this fun chat!
You can catch Lucy's podcast everywhere you get your pods and her website is here: https://www.lucydickens.com.au/doing-law-differently/
45 min

About Coffee and a Case Note

From the publisher's feed

I’m Australian lawyer, James d’Apice. Coffee and a Case Note began as a video series where I sip a coffee and chat about recent legal cases. This is the audio version! I hope it brings you value.