Coffee and a Case Note

“My offer is: you lose.”

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Parties in a legal dispute often exchange settlement offers.

Speaking loosely, many of those offers might be characterised as: “I am claiming $X + Y, but I’ll go away if you pay me $X.”

Sometimes an offer is made that could be described as: “Let’s agree that you lose, but I won’t chase you for my legal costs. We will each pay our own.”

Generally, when a party “loses” in Court proceedings, they will pay the “winner’s” legal fees.

That way, an offer of “you lose, but I won’t seek costs” can be seen as a compromise.

The Court considered this recently.

A D made an offer that the D would get judgment - or “win” - but wouldn’t seek costs: [7]

The offer was not accepted. The matter went to final hearing, and the D got judgment - the D “won”: [1]

The D said that the P’s failure to accept the offer was unreasonably, meaning the P should have to pay the D’s legal costs at a high level, on the “indemnity” basis: [3]

To succeed the D had to argue the offer was a genuine compromise. The D failed to convince the Court of that. This is because there is no evidence of the D disclosing the amount of costs at the time of the offer, and because while the P’s claim was weak, there was still some doubt about how a Court might have ultimately received the evidence: [11], [12]

The original “ordinary” cost order remained.

#makdap

“You’re excluding me from the company, competing with the company, and taking money from the company?”

P and D agreed to cause a Co (“I Need A Massage Pty Limited”) to purchase a massage business.

“You’re not even saying I did anything wrong!”  

Ps brought claims against various Ds for corporate oppression and breach of directors duties.  The second defendant, D2 (a former spouse of D1), was mentioned only twice in the Ps’ evidence; once by mistake: [3] 

 The Ps’ proposed Statement of Claim repeated the mistaken reference: [6]  

The Ps asserted 2D was involved in the former spouse’s improper conduct or received profits or benefits as a result of it: [7], [9]  

2D said the evidence was on, it did not support any claim against 2D, and so the claim against 2D should be dismissed immediately or “summarily”: [10]  

The Court considered it could not conclude the Ps had no possibility of success against 2D, [17], but was satisfied the existing Statement of Claim did not properly plead a case against 2D: [17], [18]  

Despite the fact  leave to replead was granted, 2D enjoyed a “substantial success” and so a costs order was made in 2D’s favour: [23]

On Saturday 7 March 2020 I spoke at the Young Lawyers Property 1 Day Property CPD event.  

I was lucky enough to be able to chat about s66G of the Conveyancing Act and the appointment of trustees for sale pursuant to that section and s36A.  

I tried to do a bit of nifty time management, too, to make sure we all enjoyed a full lunch!  

The discussion covers: 

1. The law relating to s66G; 

2. A number of judicially considered examples of what happens when s66G matters are litigated; and 

3. Some practical suggestions.

I hope you take some value from it!

“OK, so we’re beneficiaries, but how much do we get? "

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 Two former lovers jointly owned a piece of land.  

The relationship ended with one co-owner moving away. After a time the other co-owner did too, though not voluntarily. (He was imprisoned.) 

The co-owner who left first applied for s66G orders appointing trustees to sell the property and divide the proceeds between the co-owners. A properly prepared application like this will almost always succeed. 

The imprisoned respondent co-owner said the orders would be unfair. Sadly for him, unfairness is not a basis to reject a s66G application: [33]  

Trustees for sale were appointed.  

Our applicant wanted more than a 50/50 share of the sale proceeds. She said that she’d paid the mortgage and council rates and so should get more: [19]  

The respondent said he’d made improvements and so should get more: [28]  

As it happened, neither party presented a full and adequate case for their allowances. 

Making orders about that issue without more evidence would do a disservice to both of them: [60]  

A sale was ordered, with the issue of allowances to wait for another day: [64]

“Forget assessment. Just pay me a fixed amount of costs!”  

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The plaintiff was trustee of a bankrupt estate that included a co-ownership interest in some land: [6]  

After some back and forth about selling it, the plaintiff commenced s66G proceedings and got the Court to appoint trustees for sale: [14]  

The orders made included an order that the other co-owner pay the legal costs of the plaintiff.  The property was sold, yielding a modest sum: [15]  

The plaintiff’s lawyer itemised the legal costs incurred in the s66G proceedings, discounted them, and sought the other co-owner’s approval that they be paid from the trust funds: [16]  

The other co-owner’s solicitor was, to put it politely, effectively unresponsive over a period: [17] – [25]  

Rather than getting the legal costs assessed, the plaintiff sought a fixed sum costs order.  The Court agreed a fixed sum costs order was appropriate, due largely to the conduct of the defendant who failed to engage with the “relatively simple” matter of costs: [41]  

The eventual costs order was more or less the sum sought: [43], [44]

DadCo sold its rent roll to P. P got to work collecting rent, employing DadCo’s former property manager, PM.  

P later made PM redundant. PM planned to take up employment with another estate agent, CousCo, 1.8km away performing the same role: [59]  

To add spice: PM’s dad was a director of DadCo and PM’s cousin was the sole director of CousCo. The relevant family name carried weight: [114]  

The employment contract between P and PM included restraints on her post-employment conduct: [13]  P sought an injunction preventing PM from working for CousCo: [12]  

The Court had to consider (i) whether there was a serious question to be tried, and (ii) whether the balance of convenience favoured an injunction.  

As PM was the “human face” of P, it was seriously arguable that a 4 month restraint would be too short and that a non-compete was legitimate protection for P: [102], [119]  

On balance of convenience, despite the hardship of being prevented from working within 5km PM was only paid a salary, meaning damages – rather than an injunction – would be fine: [131]  

P got up on balance of convenience and serious question to be tried. Injunctions granted: [141] to [143]

Dundeon Pty Limited v Richard Wills [2020] NSWSC 15

"Transfer the shares so we can solve this the Chinese way!"

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Without telling the rest of the board, and without payment beforehand, 2 of a Co’s directors transferred some of the Co’s shares to an entity owned by an influential person in China.  

The idea was to allow the Co to solve its problems “the Chinese way”: [96]   

The transfer gave the "optics" that the influential person had control: [258]  

The problems included Chinese State Authorities getting judgments against the Co, with any appeal “futile”: [344], [360]  

Ultimately, the judgments led the influential person to agree to a price of $2m (having previously entertained $13m): [350]  

The $2m saw some funds returned to shareholders and to meet the Co’s obligations, with no benefit to the 2 directors: [441]  The directors did not breach their duties: [466] and [545]  The transfer of shares was not beneficial; not a gift: [484] to [487], [508]   

The transfer was for appearances, to allow the influential person to exert her influence and not improperly benefit her: [520], [530]  

The directors’ failure to consult the board was a breach of duty, but not severe enough to impose liability: [528]

Mum died and relationships between her children eroded.  

Some (but not all) children were executors. Some (but not all) were directors of a Co, the shares in which were the chief asset of the estate.  

The Co had a substantial landholding which was being subdivided. Disputes arose.  The plaintiffs commenced oppression proceedings seeking new directors.   

They failed entirely.  

Without proving a “permanent director” power was misused, an irregular appointment was not oppressive: [52]  

One child (who controlled one P) was bankrupt when shares were to be transferred. He said that he couldn’t hold shares as trustee; a position which “may or may not be correct”: [60] 

The shares were eventually transferred and no harm was done. This irregularity (esp when he had not told the executors he was bankrupt) was not oppressive: [61].  

Refusal to give access to books can be oppressive [69] but not in this case: [74]  

The Ps (until a late, rejected amendment application) did not seek a wind up and pressed for the appointment of their preferred directors: [90] and [95]  

The Court considered this relief may create a “reverse oppression”, as the new directors would exclude the interests of the former directors: [91] and [94]