Coffee and a Case Note

By James d'ApiceEducation

Coffee and a Case Note episodes

June 28, 2020 Vicad Pty Limited [2011] NSWSC 166
"The directors aren't paying any rent!"
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P, a shareholder, applied to the Court for leave to sue a Co’s directors on behalf of the Co – a “derivative suit”.

The Co was the owner of farming property, and this dispute was one limb of a broader estate and succession dispute within a family: [3]

P said the directors were occupying the Co’s land without paying rent, and so benefiting themselves at the Co’s expense: [12], [23]

In relation to each of the s237 criteria “derivative suit” criteria:
(i) The Court found it was unlikely the directors would cause the Co to commence proceedings against themselves: [40]
(ii) Notwithstanding any personal animosity, and other litigation commenced by the P, the application was made in good faith: [57]
(iii) The Co would stand to benefit from the proceedings as it would receive money from the directors if successful (and conditional upon an indemnity from the P): [64]
(iv) There was a serious question to be tried in relation to the directors’ liability to the Co: [83]
(v) The required notice was provided: [86]

Conditional upon the plaintiff providing an indemnity to the Co, the Court granted leave for the plaintiff to cause the Co to pursue to the directors: [89]
7 min
June 14, 2020 Xijie Cao v Shumiao Zhu (No 2) [2020] NSWSC 647
“I want indemnity costs for the whole thing because your claim was so bad!”

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In a case we have previously discussed (Cao v Zhu [2020] NSWSC 321) P enjoyed complete success over D.

P made a settlement offer that was rejected. (Interestingly) The parties agreed that P should have its costs on an indemnity basis from the date of that offer: [2]

The P said (i) the D ought to have known its defences were hopeless and untenable, (ii) that a certain defence and cross-claim that led to a transfer to a different Court was disingenuous, and (iii) that the D knew the defences he was advancing were untrue: [17]

Further, the P said the D’s defence of the claim was an abuse of process designed to generate delay: [18]

The Court did not find the D lied: [20]

The Court considered it was easy to say a claim was doomed to fail in hindsight when in fact – as was the case in this decision – the outcome depended on disputed evidence being accepted, which it might not have been: [22]

Among other things: nor was the suggestion of an abuse of process accepted [23] nor was the D warned about potential indemnity costs [26]

The P got his costs on the ordinary basis up to the date of the offer, and indemnity basis from that time: [4], [28]
7 min
June 03, 2020 Sundara Pty Limited [2015] NSWSC 1694
“You’re too poor to stand in their shoes!”

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A shareholder sought leave to bring derivative proceedings; to “stand in the shoes” of 4 companies and litigate on their behalf: [1]

The shareholder said that each Co was a “farmer” and enforcement action was taken against them in breach of the Farm Debt Mediation Act 1994 (NSW): [2]

The shareholder said that meant the lender’s actions were void, allowing the Cos to recover some $50m: [6]

3 of the Cos were in liquidation. All were in receivership.

The Court had to consider whether to grant leave, to let the shareholder sue the lender and others in the name of each company.

The shareholder – strikingly! – owned $6.2K in assets, had $250K credit card debt, had given personal guarantees of $45m, had a judgment against him >$11m, and a personal debt to the lender of $23m: [76]

Regarding the 3 Cos in liq: only one Co had a claim with “solid foundation”: [44], [89], [109]

In relation to the other, there was no serious question to be tried: [130]

In relation to all 4, the fact that the shareholder’s financial position meant he could provide no “meaningful indemnity” was fatal the applications: [78], [93], [113], [125]

The applications were dismissed. Costs followed.
8 min
May 25, 2020 Carpenter v Pioneer Park Pty Limited [2008] NSWSC 551
“Can we get permission to appeal?”

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A Co was placed into liquidation. A member was granted leave to commence a derivative action: [1]

He did, and the Co lost: [4]

He then purported to cause the Co to appeal: [5]

He sought a declaration that the original leave extended to running the appeal; or, alternatively, that fresh leave should be granted: [6]

A company in liq can’t rely on the Corporations Act for a derivative action. It must rely on the Court’s inherent jurisdiction: [9]

The Court found the original leave did not extend to an appeal: [17], [18]

There being no existing leave, the Court considered whether leave to appeal ought to be granted; noting the CA could be of no assistance as the Co was in liq.

The Court had to consider (i) whether the appeal was well founded, (ii) the liquidator’s attitude, and (iii) practical issues for the liquidator and Co, like security: [34]

On (i) the member did not provide enough evidence to convince the Court: [48]

On (ii) the member’s failure to pay a $62K debt and adjourned bankruptcy proceedings added doubt to the value of his indemnity: [53]

On (iii) the points considered at (ii) were again relevant: [59]

The member’s application failed. Costs followed.
8 min
May 18, 2020 Jafari v 23 Developments Pty Limited [2019] VSCA 201
“So are we in partnership, or not?”
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A claimed to own property and was in financial trouble. It agreed with R that A would sell the properties to R and A would help develop them and share profits: [3], [4], [143]
This arrangement fell apart because A didn’t own the properties: [6]
R did buy the properties from the mortgagee in possession and – speaking broadly – discussions progressed further on the basis A would still play a role: [8], [43]
The parties couldn’t agree on how to proceed and relations broke down: [9], [49]
A claimed to be in partnership with R, and that R breached its partnership duties to the tune of $6M: [13], [143]
A said that, among other things, the “general tenor” of the agreement and the profit share element meant it was a partnership agreement: [146]
The Court disagreed.
There was no express term that R would own the properties on behalf of the partners, or provision of liability of one partner for a co-partner’s dealings; references to “the project” were not indicia of partnership; and references to “partners” in early drafts of the document had been removed in the final version: [164 – 170]
7 min
May 10, 2020 Murray v Feros [2019] NSWSC 260
“So we’re dissolving the partnership. What next?”
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One group. 6 pharmacies.
3 are run by partnerships between 3 pharmacists. The 4th is run by a partnership between those 3 pharmacists, and one other. The 5th and 6th are run by companies owned by companies controlled by the 3 pharmacists.
The parties were unable to work together: [18] Negotiations with a view to an exit lead nowhere: [19]
Further, the threat of the financier – who had become aware of the disputes – calling in its loans loomed: [20]
The Court was satisfied all 6 businesses ought to be wound up on the just and equitable basis: [21], [29]
All parties agreed, in substance: [62]
Extensive consideration was given to the question of costs. Without ventilating rights and wrongs, the Ps had submitted the owners couldn’t work together and dissolution would be just and equitable: [58]
The Ds agreed.
As the Ps bore the cost of preparing the necessary evidence, the Court ordered that those costs were to borne from partnership or company assets as the case may be, with the Ds to bear their own: [61], [66]
6 min
May 01, 2020 Azmac Pty Limited (No 2) [2020] NSWSC 363
"The liquidator personally, or the company?"
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Judgment was handed down confirming Co A was a secured creditor of Co B (in liq): [1]
The next question was: who pays Co A’s legal costs? Co A sought to have Co B’s liquidator, in his personal capacity, pay.
A liquidator will be personally liable for costs in “exceptional circumstances” due to unreasonable conduct: [8]
The Court considered the facts to form a view about reasonableness.
Early in the liquidation, the liquidator behaved as if Co A was a secured creditor including sending an email Co A described as an ‘undertaking’ to that effect: [21], [22]
Later, the liquidator pivoted from this position (apart from admitting that a nominal sum was secured): [24]
Land, which was Co B’s chief asset, was sold. The proceeds were applied to, among other things, the liquidator’s remuneration: [25]
The liquidator’s change from first accepting Co A was secured creditor and then bitterly [36] resisting that suggestion was self-interested: [46]
It was also unreasonable and unnecessary, meaning the litigation was provoked by the liquidator, such that Co A’s legal costs ought to be personal visited on him: [46]
6 min
April 21, 2020 ORKO v McClymont [2020] NSWSC 379
"Stop that! Or I'll get the Court to stop you."
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The granting of an interlocutory injunction - a binding Court order that *immediately* stops a party doing something - is often complex.
Speaking broadly and loosely, to get an interlocutory injunction you have to (i) convince the Court your claim is strong; (ii) convince the Court an injunction is more appropriate than an order for the payment of money; and (iii) give an undertaking to pay damages if the Court orders it.
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P and D entered into an agreement where D promised not to make disparaging comments about various parties.
Despite the agreement, D went ahead and made disparaging comments: [3] P sought an interlocutory injunction to stop him.
With admirable economy, the Court found P had an strong case and that damages would not be an adequate remedy for P: [7]
The injunction was granted.
6 min
April 17, 2020 Aardwolf v Tayeh [2020] NSWSC 299
“Sue a liquidator? First, get through us.”
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The liquidators of 2 Cos entered into a deed with a 3rd party. The deed assigned trade marks the liquidators thought the Cos owned: [38], [39]
The Ps said the liquidated Cos did not own the marks, having previously abandoned them: [64]
Common law rights in the abandoned marks arose, meaning other parties owned them: [74]
The Ps sued the liquidators alleging loss from the Cos assigning marks they didn’t own. To sue a liquidator, you need the Court’s consent: [81]
The negligence claim failed as the Ps were found not to be vulnerable. It was in their power to clarify the ownership position for the liquidators, but chose not to: [104]
The misleading and deceptive conduct claim failed as the sale was not entered into *by the liquidators* “in trade and commerce”: [121]
Nor did the Ps establish their own reliance on the representations in the deed, instead “relying” on the 3rd party’s reliance; an intriguing proposition: [125] Further: the Dirs of the liquidated Cos, who were also Dirs of the Ps (!) breached their duties to assist the liquidators, provided inadequate information, and engaged in “phoenix-like” conduct: [129]
For the above reasons, the claim failed. Costs followed: [130]
10 min
April 13, 2020 Cao v Zhu [2020] NSWSC 321
“Yeah, I promise to pay. Unconditionally!”
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P was a property developer. D was a real estate agent. D’s connect was developing a property. D was to be the selling agent.
D angled for P to invest in his connect’s development. As an incentive, he offered to pay P $500K if he did. That amount was calculated based on D’s speculation on what commissions he might expect to receive, and what an appropriate referral fee might be: [64]
D’s connect did not go ahead with the development, selling it to another developer before completion (meaning, obviously, D was not appointed selling agent).
Without D taking a role as selling agent, the D received no benefit of any kind: [57]
P sought payment of the $500K. D resisted on the basis his promise was conditional on being appointed selling agent.
D had entered into two written documents (one of which he prepared) that included his unconditional obligation to pay $500K in terms so clear it was “difficult to imagine clearer”: [83]
D failed to prove the agreement was unconscionable [158] or that there was no common intention such that the agreement ought to be the subject of rectification: [151]
P succeeded. D was obliged to $500K.
7 min

About Coffee and a Case Note

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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.