Coffee and a Case Note

On 15 November 2019 I was lucky enough to have the opportunity to present to the Chartered Accountants Australia New Zealand forensic accounting stream on corporate oppression.

We worked through the legislation, the case law, some practical suggestions and - somehow - managed to have a little fun along the way.

There were great questions along the way, and the whole session was brilliantly put together by Adam Giliberti with assistance from Jade Baena.

I hope to be invited back one day in future!

I hope there is some value in this session for you.

- Jd'A

“I (genuinely) dispute that!”  

A dispute between family members and various related Cos arose.  The dispute was complicated.   

It included a son making 8 stat demands on “family” Cos.  Earlier proceedings were settled on bases including that a property be sold, and $950K be paid to the son. The property was not sold and the $950K not paid.  

The son demanded that the Cos pay the money.   

If a Co receives a stat demand and fails to (i) pay, or (ii) get the Court to set it aside, it can be wound up.  

So the 8 Cos sought to set aside the stat demands.  

The Court considered whether there was a genuine dispute such that the stat demands ought to be set aside.  

There was: [63].   

The Cos had used their best endeavours to sell the property and failed (in part because of the son). The Court accepted there was “rational controversy” about whether the obligation to pay the son arose: [62].  

The demands were set aside: [75].

Can a director run legal proceedings on behalf of a company *without lawyers*?  

A company sought leave to appeal a decision of the NSW Supreme Court. 

A director sought to run the application on the company’s behalf.  If a company wants to start and run Supreme Court litigation by a director, without a lawyer, then that director must also be a party to the proceedings: UCRP r7.1(3).  

The director and the company were both parties seeking leave to appeal.  The Court of Appeal has the power to dispense with the requirement to comply with r7.1(3) in special or particular circumstances: [5] and [6].  

A number of factors weighed in the director’s favour: (i) she had a 25% shareholding, appeared to be the CEO, and there had been no previous challenge to her authority, (ii) it was alleged the corporation was too poor to afford solicitors, so preventing it from proceeding without them would effectively decide the case, (iii) the dispute is about a small quantum and a straightforward issue ($40K for security for costs), and (iv) the matter is ready to run; if the Court failed to dispense with the rule it would frustrate that process: [7] – [10].  

The Court dispensed with the requirement for compliance with r7.1(3) allowing the director to proceed: [11], [15], and [16]

On 29 October 2019 I was invited to present at the TEN Network Commercial Drafting Masterclass, speaking about exclusion clauses.

Due to my exuberant hand gestures, I disconnected my mic and failed to record the session.

This pod is a "do over" of that talk recorded in my offices the next day and I hope it brings you value.

We discuss:

A trade mark owner registered and – for a time – used a slogan.  

After it stopped using the slogan, another party sought the owner’s consent to register it as a trade mark, threatening deregistration for non-use if consent was not provided.  The owner consented.  

The other party became the new owner of the mark and the owner cancelled its own registration: [6].  

Following this – surprisingly – the new owner sued the former owner for trade mark infringement in relation to the slogan.  

A person does not infringe another’s trade mark if the person exercises a right granted by the Trade Marks Act i.e. the rights the former owner had while it was the owner: s122(1)(e) of the TMA.  

The Court found, with little difficulty, that the former owner was entitled to use the mark in the period in which it owned it: [20].  The document the new owner used to sue was struck out for being "embarrassing" in the legal sense.   

The Court made orders setting out a regime allowing the new owner to propose a new document.  In coming to its decision the Court noted the suggestion that expungement of a trade mark is not retrospective: [16].  

So, if you’re the owner of a trade mark, you’re allowed to do the things that owners do!

As you know, we three are Novocastrian optometrists.  

We operated a business through a unit trust. 

We were the directors of the trustee. Entities associated with, or controlled by, us were the unit holders.  One of us became worried about the behaviour of the other two. 

The concerned one appointed a new trustee, a Co controlled by him and his wife.  Eventually, over resistance from the other two (and the trust’s accountant whose conduct was “egregious”: [58]), the new trustee took control.  

Litigation followed.   

The Court considered (i) whether the appointment was valid and (ii) whether a receiver should be appointed to the trust: [17].  

The appointment was in writing ([41]) and in good faith: [61]. There is no rule preventing our appointor appointing a company he controlled: [65]. The appointment was valid: [68].  

The Court refused to appoint a receiver noting it has no power to “wind up” of a trust on the basis proposed: [75]. Though there are powers to order the existing trustee to do certain things: [77].  

The wisdom of 20/20 hindsight!

[Sorry for the awful audio this week!]

“Why don’t we pay everybody’s legal fees from the trust funds?”  

A council caused a property to be sold following non-payment of rates levied on it. Once council was satisfied, the balance was paid into Court.  Fine. So who gets it?  

A dispute erupts between two parties (in their capacity as LPR of two separate deceased estates) claiming an entitlement.   

Once that’s decided, there’s a dispute about – you guessed it! – legal costs.  s93(3) of the Trustee Act 1923 (NSW) includes a provision that the Court may order that – when there’s litigation about the management or admin of a trust – the parties’ legal costs can be paid from the trust funds.  

If a trustee applies to the Court for resolving an uncertainty and joins a beneficiary as a contradictor, it’s not unusual (even if the beneficiary fails) for all parties’ legal costs to be paid from the trust funds.  

However, truly adversarial litigation may well bring different cost consequences: [3].  Here the parties were in dispute as to whether the trust funds fell into the respective estates they represented.  

The Court found that the dispute was adversarial in nature meaning that orders were made for the payment of one party’ costs by the other party – rather than from the trust funds: [8].

In this episode I flesh out the reasoning and the tactical angle on my approach to lawyers and branding.

It's - in no small part -  my response to having to answer similar questions about this project over and over. From that perspective: I hope it helps you!

In this session I (passionately) recommend Gary Vaynerchuck: https://www.garyvaynerchuk.com/the-ga... In the session I recommend Chris Hargreaves' podcast: https://www.stitcher.com/podcast/the-... In this session I recommend Mitch Jackson's book: https://www.stitcher.com/podcast/the-...

Have a great day!

A coffee Co and a delivery firm, yes?  

Our delivery firm collects coffee-laden pallets from coffee Co and returns the equivalent number of empties the following week.  Cool.  

Now, coffee Co does its sums and realises it’s short >1,000 pallets over a 3 year period. 

The delivery firm was “almost continually (in) breach” ([48]) of the agreement.  Coffee Co complains. Importantly, the delivery firm had increased the number of pallets it was returning in the months immediately before the complaint, apparently to address the shortfall: [39], [40]  

An exclusion clause on every one of the delivery firm’s pallet dockets is: “NO CLAIM FOR PALLETS OWING BY (the delivery firm) WILL BE ACCEPTED AFTER 90 DAYS.”  Both sides accepted that the clause was binding: [13]  

The issue became: can a claim be pressed for (i) the entire three year period or (ii) just the 90 days and after?  

The answer is (ii). Coffee Co could only pursue for shortages in the period from 90 days prior to the complaint, up to the end of the relationship: [26]  

The next issue was maths: how to apply the pallets returned in the 90 day period? At [45] and [46]: First, to the previous week’s obligation. Next, the earliest breaches in the 90 day period. Finally, to past breaches from before the 90 day period.

“Do I really have to sell that flour mill?”  

A bread researching NFP went through a restructure.  Its subsidiaries held IP and physical assets the plaintffs alleged were held by way of chartiable trust. The assets included a significant landholding (~$62M) which had a “pilot mill” on it; for flour experimentation.  

The plaintiffs claimed the assets were held on charitable trust. 

A receiver was appointed in respect of the assets and granted leave to approach the Court for guidance.  Those overarching charitable trust proceedings settled: [15].  

But the Receiver approached the Court to seek confirmation it would be justified in not selling the property.  

It’s a tricky issue.   

The property might be worth up to $62M, with the potential for that value to fall. Also – if sold – the pilot mill may be demolished (against the spirit of the charitable trust): [19], [20] and [21].  

The Court considered the dominant consideration was the preservation of the pilot mill: [23]; especially as the pilot mill charitable trust would likely be upheld, meaning – if destroyed – the pilot mill would have to be rebuilt.    

The Court gave a direction that the Receiver would be justified in not selling: [24].