Coffee and a Case Note

By James d'ApiceEducation

Coffee and a Case Note episodes

June 09, 2021 PNJ Investment v ST.K Family Pty Ltd [2021] NSWSC 530
“Nope! It’s not convenient for the Court to stop that meeting.”

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A dispute arose about (i) rights to units in a unit trust, (ii) whether a Co that purported to be the unit trustee was indeed the trustee, and (iii) who owned the shares in the Co.

St sought an injunction to stop the Co having a meeting of the unit holders.

To get the injunction St had to show likelihood of success, and that the balance of convenience was satisfied.

St held 82 units in the trust; Pn the other 18 units: [11], [12]

Pn owned 80% of the shares in the Co; St the other 20%: [14]
The chief asset of the trust was valuable land ripe for multi-storey development: [15]

Pn lent St $3m for the purpose of the development: [24]

The trust bought the property for $20m - $13m was from Pn (including the $3m loan to St) and $7m was financed: [29]

Pn demanded repayment of the $3m plus interest and St did not repay: [32], [34]

In the absence of payment, and pursuant to the loan agreement, Pn’s director transferred St’s shares in the Co, units in the trust, and authorised the Co to borrow $30m for development: [35] - [37]

Pn went on to assert that St was no longer a shareholder or unitholder: [40]

Following some meetings, a number of caveats over the Property were lodged by St: [41] - [46]

In resisting the injunction, Pn relied on evidence that commercially attractive loan terms were currently available but might not be for long: [59]

The Court accepted on an interlocutory basis that there was a serious question to be tried about some clauses of the agreement: [76], [77]

The Court found other claims arose in St’s favour, though they were weak e.g. contractual penalty, invalidity of share transfer, corporate oppression: [82], [88], [95], [102]
Re balance of convenience: Pn relied on the commercially attractive loan terms that Pn said an injunction would put at risk: [113]

The thrust of St’s application was to “have a say” in the development, but the evidence did not reflect a desire of St or its appointed director to be involved in the best interests of the Co and the trust: [116]

St’s director did not, for example, agree to the Co issuing lapsing notices: [117]

There was a lack of evidence of what prejudice would flow from the meeting going ahead and the finance being obtained: [119]

The risk of injury to the company if the injunction was granted outweighed the risk to St if it was not: [122]

The undertaking as to damages offered by St was inadequate, noting St had previously failed to pay $3m: [123]

The Court did not grant the injunction due to the above and (while not determinative) the fact St only made the injunction application by cross-claim in response to Pn’s claim rather than taking steps of its own: [125] - [127]
10 min
May 22, 2021 Crosby v Hanley [2021] NSWSC 507
“I sued and got what I wanted, so pay my legal costs!”

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The Ps enjoyed an easement over the Ds’ land.

The parties were neighbouring farmers. The easement related to irrigation water and included rights to access the land to maintain pumping apparatus.

The Ds installed locks and fences that interfered with the Ps’ access.

The Ps commenced proceedings.

After that the Ds took steps to resolve the Ps’ complaints by removing padlocks, moving fences, and installing culverts. The Ps accepted all the impediments were then gone: [7]

The Ps were granted leave to discontinue the proceedings having achieved what they set out to: [9]

So what about legal costs?

Normally the discontinuing party (i.e. the Ps in this case) would pay: [11]

The Ps said the Ds acted unreasonably in defending and should pay: [12]

There was some possibility for legal argument (about the precise scope of the easement) and factual argument (about the precise impediments themselves) if the matter went to hearing: [17]

The Court found the Ps were justified in commencing and noted the Ds’ changes obviated the need for them to continue. The Ps would have almost certainly succeeded. The Ds could have acted more quickly: [20]

Noting this, the Court ordered the Ds to pay half of the Ps’ costs: [21]
5 min
May 11, 2021 Sara Stockham Pty Ltd v WLD [2021] NSWCA 51
“Get me out, and value my units properly!”
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Two dentists worked together using a unit trust in which D1’s and D2’s entities held units. The relationship between all was governed by an agreement.

The agreement contemplated a unitholder exit for “fair market value”.

D1 sought to exit. The T'ee sought judicial advice regarding a valuer. D1 applied for a stay and failed. The T'ee got the advice that instructing a valuer would be OK and did so: [5]

D1 commenced further proceedings, and the parties asked the Court to separately determine the meaning of Cl 7.8 of the agreement: [5]

D1 appealed the determination that Cl 7.8 did not apply to the valuation.

Cl 7.8 prevented the T'ee from effecting decisions on “Major Policy” issues (like dealing with assets worth >$50K) without unanimous unitholder approval: [16], [17]

D1 said that a Major Policy decision made without unanimous approval was void pursuant to Cl 7.8, and so should not be part of a valuation: [19] - [21]

The Court disagreed, finding Cl 7.8 renders void the T'ee’s decision but not the resulting transaction: [26]

There may be a later dispute about the valuation, or breach of the T'ee's duties, but those issues were not raised in this litigation: [32], [33]

Appeal dismissed: [1], [10], [44]
7 min
April 29, 2021 Mudgee Dolomite & Lime Pty Ltd (No. 4) [2021] NSWSC 393
“Can we liquidators defend this appeal, and use someone else’s lawyers?”

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A dispute between two Dirs and equal shareholders of a mining Co led to it being wound up.

Before the windup SH1 brought a derivative action on behalf of the Co against SH2 and related entities.

The claim succeeded re revenue from one mine which SH2 diverted away from the Co to their own interests, and failed in relation to redirected revenue from another mine.

SH2 appealed.

SH1 applied to lodge a cross-appeal on behalf of the Co.

The liquidators came before the Court to seek s 90-15 advice including that they would be justified in:
(i) causing the Co to defend SH2’s appeal
(ii) not opposing SH1’s cross-appeal
(iii) instructing the same lawyers SH1 used for the derivative action

Advice was given.

Re (i) the liqs were justified in defending the appeal: [40]

Re (iii) the liqs were justified as it would be in the best interests of the Co to making use of the earlier lawyers’ case specific knowledge: [46], [47], [56]

Re (ii) the liqs were justified in not opposing as SH1 bore many of the risks (including of an adverse costs order) and there was potential significant upside for the Co: [65]

The liqs’ costs of the proceedings were to be costs of the winding up: [68]
8 min
April 20, 2021 Capilano Honey Ltd v Dowling (No 4) [2021] NSWSC 264
“My product is not toxic. That’s defamatory!”

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A honey-making Co and its CEO kicked off injurious falsehood and defamation proceedings.

They wanted damages and orders restraining the D from making further publications.

The Ps complained about D saying:
- The Ps’ honey was toxic: [14]
- The Ps conspired with the judiciary and a consumer advocate magazine: [15], [20]
- There exists a “sex tape” showing the CEO discussing a sex act performed with an employee: [16]

The publications were made on the D’s website, Facebook and Twitter: [59]

The defendant put no evidence before the Court that the honey was indeed “toxic” or harmful: [11], [149]

The D (who was not represented by lawyers) did not raise usual defences, including truth, and indeed made a number of admissions in their defence: [53]

Working through the publication-identification-reputation matrix, the Court found the CEO had been defamed awarding $150K in damages: [135], [142]

The Co’s claim was in injurious falsehood, not defamation, meaning the Co had to prove the falsity of what was said: [146]

The Co did so, and proved malice, obtaining a “cautious” $25K in damages: [164]

The orders restraining further publication were made.
7 min
April 06, 2021 March 2021 TVED CLE - Partnership disputes discussion with Susanna Lobez
James spoke to the wonderful Susanna Lobez from TVED for this partnership disputes CLE.
Hope you enjoy!
You can find great offerings from TVED here: https://www.tved.net.au
33 min
March 27, 2021 Agha v Devine Real Estate [2021] NSWCA 29
“Don’t steal my confidential information!”

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A, a former shareholder in and employee of R, ceased being a shareholder, quit, and set up a competing business in the same industry.

A lost a set of proceedings at first, and appealed.

Before leaving:
- A arranged for another employee of R to send A R’s client lists: [26]
- On the day A gave notice they were intending to set up a competing business, a person using A’s password-protected username altered 905 contacts in R’s database by altering a digit or digits for each phone number: [27]

At first instance, each was found to be a breach of confidence attributable to A.

The inference was available that A was responsible for the sabotage, especially as A did not cross-examine R’s witness or give evidence: [68]

A sought to appeal this finding, but failed: [71]

The client lists were confidential and not part of A’s knowhow (as shown by A causing them to be emailed to their personal address). The conduct was restrained by contract and also by equity: [132]

The fact that R put the confidential information into affidavit evidence did not place it in the public domain, and so did not release A from duties of confidence: [134], [139]

The appeal failed. (Apart from some issues like the form of declarations: [145])
8 min
March 17, 2021 GA and RG Horn Pty Ltd [2021] NSWSC 210
“Hey! Give me those shares!”

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P, executor and sole beneficiary of an estate, pressed D to register the transmission of shares to them.

P did this by sending 2 letters in January. When the letters didn’t bear fruit, P commenced proceedings in mid-February: [2]

Later in February solicitors for D’s directors (but not for D) indicated instructions had been or would shortly be given for the transmission to be registered: [3]

The transmission happened, and P successfully applied to have the proceedings dismissed save as to costs: [6]

P argued that D should pay P’s costs because D had capitulated, and that it was reasonable to commence proceedings because that outcome was only achieved after the Court got involved: [8]

The Court did not find D’s failure to transmit earlier to be unreasonable.

P had not made clear in P’s first January letter whether they sought the share transfer as beneficiary or as executor: [11]

P’s second January letter was clearer but it was not unreasonable for D to take some time to consider: [12]

The Court found it was not unreasonable for P to commence proceedings so quickly, but that it would have been preferable for P to give further notice before doing so: [14]

The Court held each party ought to pay their own costs: [15] - [17]
4 min
March 10, 2021 Bio Health Pharmaceuticals Pty Ltd [2020] NSWSC 1790
P's shareholding was diluted from 70% to ~15%.

P sued the Co and its Dirs for causing the Co to issue over 3m shares to 2 Dirs: [3], [5]

P asked the Court to reverse the share issue, and replace the Dirs: [2]

Oddly, as the hearing approached all the Dir defendants consented to the P’s application, and most Ds withdrew instructions from their lawyers: [8], [10], [44]

However, P still had to prove its case!: [14]

ASIC docs suggested the >3m shares were issued at $4 per share, however there was no evidence of any payment: [21] - [25]

The share issue was found to be oppressive. Orders were made to reverse it: [40], [47]

The Court also removed the Dirs (a rare step) on the basis that they previously consented to the P’s orders and, in the circumstances, third parties would take comfort from Dirs being removed by Court order: [42], [43]

(The background of this dispute was a loan to P’s (former) parent company, ParCo. ParCo stumped up its shares in P as security. Interest on the loan went unpaid. It was suggested that the share issue was to defeat the lender’s power over the Co because P would no longer be majority shareholder of the Co when the lender came to own P. Get it?): [16], [17], [26], [30])
6 min
March 01, 2021 Pan v Cheng [2021] NSWSC 30
“Whoever’s sending those mean letters must stop!”
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Someone sent >20 anonymous letters about the Ps to many recipients: [34] - [74]

The writer (or writers) made allegations including that the Ps (or some of them) - who ran an aged care facility - breached their duties, overlooked medical misconduct, engaged in extra-marital affairs and nepotism, stole funds, claimed expertise they did not have, and were evil and ungrateful.

The Court found each letter was defamatory: [69]

D denied writing and sending the letters.

D was a former director of nursing at the aged care facility: [75]

Relations between D and the Ps became strained following D’s alleged conduct while employed, and D’s resignation: [90]

Despite D’s denial the Court found D was extremely angry with the Ps: [96], [97]

As there was no evidence D published the letters, the Court was left to draw an inference as to who wrote them: [99], [100]

Having found D had engaged in forgeries when sending some letters [124], otherwise finding D’s evidence “wholly unsatisfactory” [125], and working through a detailed chronology [108], the Court drew the inference that each letter was sent by D: [140]

D was ordered to pay $635K in damages and restrained from publishing similar material in future: [193]
5 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.