Coffee and a Case Note

By James d'Apice

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.... more

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Coffee and a Case Note episodes:

March 04, 2023 Trindall v NSW Aboriginal Education Consultative Group [2023] NSWSC 85
"Cancel the meeting you've set to remove me!"
___
An association relating to the education of First Nations people, D, planned to convene a meeting to consider removing its president, P. P applied to the Court on an urgent basis to restrain D from doing so: [1]

The meeting was set for a Sunday, P having been provided with very little notice. P approached the Court for an urgent hearing on the Friday beforehand, and the Court made the orders sought: [2]

The president said (i) the meeting was not called in accordance with D’s constitution, and (ii) for it to proceed would be to deny procedural fairness i.e. the chance to respond to criticism: [6]

The president had been involved in education for 40 years, was a life member of D, and had been elected president in 2021: [15]

P said that if their role as president was to end, they may need to reapply for their existing job, with a risk they might fail: [16], [42]

D’s work includes seeking, and then applying, funding. The evidence suggested P would argue that they deserved credit for $20m in funding for the association: [26]

Evidence suggested a power struggle and the passing of a motion of no confidence in P in December 2022: [28] – [30]

In January 2023, lawyers for the 8 other members of the management committee wrote to P setting out complaints and seeking a response: [31]

The complaints included complaints of misusing D’s funds: [32]

P denied the complaints: [38]

P was sick in hospital at the time of the hearing and would not recover in time to attend the meeting in any case: [43]

P satisfied the criteria for an interlocutory injunction: proving (i) there was a serious question to be tried and (ii) the balance of convenience favoured an injunction: [47]

The obligation of the association to afford P procedural fairness arose by inference: [49] – [51]

For the meeting to proceed would offend that requirement due to: P’s illness, the lack of particulars of the claims made, and the lack of time given to respond to the claims: [52] – [55]

As such, the Court found that a serious question arose: [58]

The Ds could not show any prejudice arose from the delay, the risk of the president incurring costs that were not reasonably identifiable was not apparent: [61]

P would likely suffer serious reputational loss if the meeting was to go ahead: [63]

Indeed, the D may suffer loss of funding for removing its president in circumstances where procedural fairness appears that it may have been denied. The external funding D relies on may be put at risk: [64]

P would almost certainly suffer financial loss if the meeting went ahead, where D would be unlikely to suffer loss: [65]

The balance of convenience was met and the injunction granted: [68], [71]
___
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8min
February 22, 2023 Zphere Pty Ltd v Pakis [2022] VSC 496
A partnership dispute (that I have previously summarised part of) was litigated in large part, then settled: [2]

Before final orders were made, deeds were signed that saw the D pay a sum, surrender their partnership assets, and the proceedings dismissed: [4]

P, a former partner of the partnership then sued D for the same breach: [5]

D said P (1) was bound by the deeds; (2) was estopped due to res judicata; and (3) was bringing a claim which was an abuse of process: [7]

The earlier litigation related to D taking an improper benefit in breach of partnership obligations. P was never joined to them or made aware of them: [15], [19], [118]

At the core of each of issues (1), (2) and (3) is the similarity of the old litigation, and the new: [45]

The doctrine of res judicata requires, in essence, two issues, to be dealt with.

Was the first litigation a final decision? Yes, the dismissal orders were final: [79] - [83]

Next: was P a “privy” of the parties to it?: [84]

P highlighted their absence from the earlier litigation, powerlessness to intervene, and lack of knowledge of it: [88]

P’s claim was for 9.8% of the value of the breach based on P’s partnership share. In fact the 9.8% was not a share as TiC, but an entitlement on dissolution not divisible into proportions as against D: [142] - [153]

The Court found a partnership interest is analogous to a trust. Like a trust, legal interests are subject to the equities of others. As trustees are privies then, following this analogy, so are partners: [137], [178]

As such, P was estopped from pursuing this element of the claim by the doctrine of res judicata: [70], [179]

RE (2): P joined the partnership pursuant to a 2006 deed which was in force at the time of the breach: [239]

The earlier proceedings were commenced by the partnership governed by a 2017 deed (which P did not sign, having previously left): [239], [240]

The breach was suffered by the partnership at the time of the breach (i.e. pursuant to the 2006 deed) and to be distributed pursuant to that partnership’s constitution: [243], [244], [246]

The 2017 deed appointed a representative of the (new) partnership. That representative and the (new) partners ran and settled the earlier litigation: [247]

As such, the deed did not release the Ds from P’s claim: [71], [257]

RE (3): D said P’s claim was an abuse of process due to (i) the prospect of inconsistent findings, and (ii) D’s prejudice suffered if forced to relitigate a claim D considered concluded: [279]

D failed to have the proceedings dismissed as an abuse of process. D could have joined P to the earlier proceedings, and didn’t. D could have sought to have P sign up to the settlement deed, and didn’t: [72], [280], [283]

D succeeded on (2), and lost on (1) and (3): [8]

P was prevented from bringing the claim.
___ If you'd like to contact me please look for James d'Apice or Coffee and a Case Note on your favourite social media spot - I should pop up right away! And please look out for my podcast, Coffee and a Case Note, wherever you get your podcasts. #coffeeandacasenote #auslaw
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12min
February 08, 2023 Ambrus v Buchanan [2022] NSWSC 1628
“Sell the land I own 1/56th of!”

___

From the early 1980s a property was owned as tenants in common. Ownership was divided in sevenths: [6]

P owned one 40th of the 5/7th intersect - a 1/56th interest in the land. P sought the appointment of trustees to sell the property pursuant to s66G of the Conveyancing Act 1919 (NSW)

Each co-owner had “spheres of influence”. Some constructed residences: [9]

The use was contrary to zoning and no DAs were obtained: [11]

A 5 page “policy” document purported to deal with co-owners’ rights including a “no sale of land or transfer of shares unless all co owners agree” term: [16] - [26]

Copies of the policy were not made. The original was held by various owners over the years: [27]

The policy was only adhered to when convenient, and was contradicted at other times. New owners were not made aware of it before purchasing: [33] - [36]

To the extent the Ds were aware of the policy, that occurred after their respective purchases: [36] - [42]

In 2011, P purchased their 1/56th interest for $60K: [48]

The vendor - one of the Ds - did not get consent from other shareholders (as the policy apparently required) before effecting the transaction: [61]

P said they had not received the “policy” document before the purchase: [49] - [54]

Prior to XX, the Ds had put the “policy” as a central governing document of the property. This was shown to be untrue as it was regularly contradicted, include by vendor D: [58]

P had not returned to land since 2013, though remained owner of the land with her “sphere of influence” inaccessible except by vendor D’s driveway: [69]

From 2020 P began exploring selling her share. The Ds, particularly vendor D, were obstructive: [72] - [76]

The Ds argued appointing Tees would be an “extreme hardship” as all Ds would lose their homes: [84]

The Ds’ said P’s small proportion should militate against an order being made: [85], [86]

Unfairness and hardship are not enough to oppose a s66G order: [89]

The D’s argued that P’s application breached fiduciary obligations, gave rise to an estoppel, or was unconscionable. The Court rejected all: [98] - [101], [102] - [113]

Ds who had improved the land (despite low value due to non-compliance, no possibility for insurance, and elevated bushfire risk) could claim contributions from the sale proceeds: [116], [122]

The Court made the orders appointing Tees: [123], [130]

The Tees proposed by the Ds were appointed, as they were located closer to the property than the P’s proposed Tees: [127]

___

Usually s66G legal costs are paid from sale proceeds: [1]

Unreasonable conduct may lead to a departure from this rule: [6]

P said the Ds should pay their own costs due to their unreasonable, failed defences; and that P’s fees should come from the sale. The Ds said all fees should be paid from sale: [7], [8]

The Court ordered that the Ds bear most of their own costs, save for those relating to the appointment of their preferred Tees: [9] - [16]
___

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12min
January 25, 2023 TVED CLE January 2023 - A discussion with James d'Apice and Susanna Lobez about "Shareholder Remedies"
James is sometimes invited to give presentations and talks for external legal training providers.
Please enjoy this talk James gives on the distinctions between corporate oppression and derivative actions.
And please don't forget to follow James and Coffee and a Case Note on your favourite platforms!
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42min
January 23, 2023 CIP Group Pty Ltd v So [2022] FCA 1490
“You said our companies wouldn’t have to pay back those loans!”

___

A group of entities controlled by P (“P”) was in business with a group of entities controlled by D (“D”). P and D did property development work together via various operating Cos (“OpCos”): [3]

P commenced oppression proceedings (s232) saying that D breached their duty to OpCos, and the ACL: [4]

P sought the Court’s leave to bring those derivative claims on behalf of OpCos (s236): [5]

P and D conducted their projects in quasi-partnership: [10]

In around 2019 D made loans to OpCos to support a development. P says D promised those loans would not be called in except for in certain circs which had not occurred: [15]

In late 2021 D, without notice, enforced their loans and appointed receivers to OpCos: [17]

P says this was a breach of D’s directors duties, and that all Ds had engaged in misleading or deceptive conduct by: giving assurances the loans would not be enforced, and then enforcing them: [18], [19]

There was a suggestion D did this to bring a specific development to an end: [22]

P sought leave to bring derivative actions on behalf of OpCos in relation to this conduct, having already commenced an oppression claim.

The Court worked through the s237(2) criteria:
(a) OpCos would not bring the claims as D would prevent that: [26]
(b) P came in good faith, pursuing a genuine claim for a missed opportunity for profit: [27]
(d) There was a serious issue to be tried, including because D provided no explanation: [28]
(e) The notice requirement was not met but the Court would waive it: [29]

This left s237(2)(c) for consideration: was in the best interests of OpCos for P to be granted leave?

It was “undoubted” that resolving the P and D conflict would be in OpCos’ best interests: [39]

Further, as OpCos were in receivership, litigation would not upset its day to day business: [40]

D suggested P’s claim was weak. This was rejected: [50]

The Ds suggested their worth was not proven (i.e. if leave was granted, would OpCos be suing parties with any assets?) Ds assets were within D’s knowledge and no evidence was put on it. Noting D’s ability to obtain big finance it was possible to infer D had substance: [51] - [53]

P provided $750K as security if OpCos faced an adverse costs order, which was sufficient: [64]

Extensive consideration was given to the contrast between the oppression remedy and a derivative action: [66] - [88]

Some of the Ds were found not to be proper parties to an oppression claim. This left s236 as the appropriate path to pursue them, not s233: [92] - [96]

Leave was granted to P to pursue the derivative actions against the Ds: [98]
___
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10min
January 16, 2023 Thynne v Jevny Pty Limited [2022] NSWSC 1774
P lodged a caveat on a property owned by D in Darling Point, Sydney. D sought its removal.

P was the deceased’s son by an earlier marriage. After P’s birth, the deceased married D and they had another child together: [4] - [7]

The deceased operated a cattle and macadamia business on land owned by an entity the deceased and D themselves owned and controlled: [9], [10]

In 2011 the deceased made a will and a Memorandum of Wishes. D counter-signed the latter: [12] - [15]

By the Will the deceased bequeathed the property to D. By the MoW, D agreed to bequeath the property (or its replacement if the property was sold and a new property was bought) to P and the other child in equal shares. Until then the deceased acknowledged D may need to use the proceeds of sale of the property for their upkeep, or for the cattle and macadamia business: [17]

(Perhaps unhelpfully, the deceased wished for the MoW to remain confidential: [18])

P sued seeking a declaration D held half the property on trust for them and lodged a caveat on the basis of this alleged trust: [21], [22]

D sought the removal of the caveat, including to allow them to deal with the property (possibly by refinancing) to help manage the farm and its business in the wake of flooding: [29], [30]

P argued that their (and their half-sibling’s) interest in the property was held by D on trust created by the MoW: [32]

P accepted D was free to sell the property: [33], [35]

The Court found D accepted their obligation under the MoW to make a will bequeathing the property to the children equally. There was no suggestion D did not intend to do so: [36], [39]

D’s “floating” obligation to bequeath the property to the children will only crystallise into a trust on D’s death, not before: [38]

As such, P had no beneficial interest to support to caveat: [40]

Even if a caveatable interest had been found, it was accepted that the caveat caused D inconvenience. However, P had the onus to show convenience favoured maintenance of the caveat and P failed to show that: [45], [46]

P was ordered to remove the caveat and pay D’s legal costs: [47], [48]
___
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7min
December 31, 2022 Flynn v PPK Mining Equipment Pty Ltd (No 2) [2022] NSWSC 1640
“We amended the contract, now give me my bonus!”

___

P agreed to sell their shares in SubjectCo to D for: cash, shares in D, and (if further earnout conditions were met) further shares in D: [1]

P sued D for those shares and unpaid dividends, saying the conditions were met: [2]

SubjectCo made hazardous area electrical equipment for mining machinery: [11]

D was a listed business whose strategy included buying smaller mining equipment firms: [17]

D bought SubjectCo to complement its existing holdings: [22]

In 2014 SubjectCo was in a difficult financial position, possibly insolvent. Evidence suggested P’s were engineering and product design, not finance: [28], [30]

The sale went ahead after P fired their lawyers and proposed no changes to D’s proposed share sale documents: [36]

The contract included the earnout bonus based on profit, with oral variation prohibited: [38] - [40]

P became an employee of D and began operating SubjectCo as part of D’s business: [41]

In around 2015 the coal market slumped. D’s senior E’ees took paycuts. P continued to cause SubjectCo to charge “full freight” for SubjectCo’s work to other parts of D’s business: [50] - [54]

To manage this, the CEO discussed P’s earnout criteria being varied to revenue, from profit. There were subsequent emails reflecting this: [57], [61] - [65]

P was moved from a business role to a more ideas-focused innovation role; a “good deal” for P: [99]

The CEO P left D, and D’s new leaders were unaware of the purported “revenue earnout” change: [77] - [79]

On the anniversary of the purchase, D issued a statement based on profit, not revenue. This (due in large part to the mining downturn) was an unhappy figure that missed the earnout criteria: [80]

Written notices were exchanged by D and P putting their positions, with arguments about the attribution of a “new” business introduced to D after P joined: [81] - [87]

D resisted the suggestion that the profit / revenue amendment had been made; and said even if it had P would not have met them as the “new” business was not P’s: [90]

The Court agreed the CEO and P has effectively varied the agreement to $1m revenue from $250K profit: [103]

There was extensive consideration of the “new” business and whether indeed P had brought it in: [166] - [187]

P was unable to prove it undertook the “new” work before the sale and so it should form part of P’s earnout criteria: [185]

Noting the above, revenue was less than $1m, and the earnout criteria were not met: [197]

P succeeded in proving the agreement was varied - “a legal question on which the principles were clear”. This success “counted for nought” where the Ps did not meet the earnout criteria, which should have been apparent at the time. As a result, the Court ordered that P pay 80% of the Ds’ costs: [198]
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11min
December 24, 2022 Walker Corporation Pty Ltd [2022] NSWSC 1609
"The vesting date is too early. Rectify the deed!"
___
In 1976 a trust was established: [2]

P and P’s parent signed the deed for Tee: [3]

The trust assets included land in SW Sydney; likely “substantially” exceeding $100m: [5], [20]

The trust vested on the earlier of: a date in 2032, the date of death of a royal family member (“royal lives” clause), or a date determined by the Tee: [7]

The trust’s land might take years to develop, perhaps until 2046: [9], [54]

The deed was amended by Tee various times (in accordance with the deed) but there was no power to amend the vesting date: [9], [23] - [37]

Tee commenced proceedings to rectify the trust deed’s vesting date.

Tee was the sole party to the proceedings. No benef opposed them: [11]

The Court appointed a barrister as contradictor, with Tee to indemnify them for their costs: [12]

The contradictor said: the criteria for rectification were not met, and the Tee had been too slow to apply: [13]

The solic who drafted the deed had been involved in legal proceedings about a similar deed described as badly drafted, and criminal proceedings regarding a crime of dishonesty: [38] - [41], [43] - [46]

P swore an affidavit in support of Tee’s application: [47]

P’s evidence said they first turned their mind to the 2032 vesting date in 2016: [14] - [22]

P gave evidence they did not understand, or intend, that the trust vest in 2032: [48], [49]

Rectification requires proving: (i) what is in the deed is not what was intended, and (ii) what was actually intended: [74]

The deed was created when the “no perpetuities” required a reference to a life or lives for a trust to last beyond 21 years: [78], [79]

P said they thought the trust would last indefinitely, like a company; a legal impossibility. None of the criticisms of the solic come close to explaining why the solic would have given this wrong advice: [92]

46 years after the fact P’s evidence was of little assistance, possible more reconstruction than recollection: [93]

The deed was amended 9 times. It seemed inconceivable P had not been advised many times of the 2032 vesting date: [95] - [98]

Tee pressed that P’s intention was not 2032, and no instructions were given for 2032: [103]

In any case (presumably because it spoke in favour of an outcome not legally possible) P’s evidence did not support the application: [106]

Importantly: P’s parent executed the deed for the Tee too - there was no evidence about their intention; and no evidence at all about the 1985 and 2001 restatements of the deed: [110] - [114]

A defence based on laches - delay - was made out. The Tee was free to bring this claim from 1976 onwards. Relevant evidence had since been lost: [120 - [124]

The Court said it would be better if a party could have been nominated as defendant (with the power to conduct XX etc) rather than a barrister act as contradictor: [125] - [133]
___
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11min
December 15, 2022 Anna Bay Resort Pty Ltd [2022] NSWSC 331
“I’m a director.” “No you aren’t.” “Yes, I am!”
___

Two people, and their Cos, founded a Co to develop property on the NSW coast: [1]

P was a director. PCo and DCo were equal shareholders: [37]

Their records could “fairly be described as a mess” with “gaping holes” in the evidence: [3], [11]

The parties agreed that they would share the profits, but disagreed on sharing investment: [175]

The Court found that there was a 50 / 50 agreement, where the party whose “50” required the Co to take a bank loan would cause that bank loan to be paid: [181]

In 2016, P and D caused the Co to buy an incomplete tourist resort for $2.95m: [37]

P provided 1/2 the funding. D did not have the funds to contribute their 1/2. D and P caused the Co to borrow that money, and provided personal guarantees: [46] - [51]

PCo ceased being a shareholder as P thought if PCo remained a shareholder PCo would be responsible for the bank loans: [53]

P agreed to being removed as dir, leaving D as sole dir, so P didn’t have to provide a personal guarantee: [56]

In 2017 P lent D $100K for another project P thought never went ahead. (In fact it did but D concealed that from P): [79]

P loaned the Co a further $300K to finish some unfinished buildings: [84], [86]

Later in 2017 P lent a further $65K to the Co: [88]

In 2018 an investor offered to buy half of DCo’s holding - 25% of the Co - for $2.25m. D said no. In circs where the Co needed funding, P had no director role or shareholding, and only P was funding it, this frustrated P: [89], [90]

P wished to resume as director: [91], [182]

D engaged in “ham fisted” attempts to confer legitimacy on the Co’s money funnelled to their spouse after opening a secret bank account: [92]. [94], [95], [99]

By June 2018, P learnt P was not back as a director and caused this to be corrected. By now P had loaned the Co over $2m with only $3K repaid: [113]

In July 2018, D caused the removal of P as a director and the transfer of PCo’s shares to DCo - all without P’s knowledge: [116]

In November 2018 P discovered his removal as director and was re-instated; from then P kept being re-registered as a director and D kept removing them: [130], [184]

D listed the land for auction seeking $12.5m without P’s knowledge, and refused to postpone the auction once P was aware and had sought postponement: [155]

Unusually, P and PCo sought orders via s233 for it to conduct litigation in the name of the Co (usually this would be pursuant to s236): [165]

Oppression established. D’s actions excluded P from management of the Co in breach of their agreement and where P had loaned the Co substantial funds: [187]

The oppression findings meant it was appropriate to grant leave to PCo to bring claim on Co’s behalf: [195]

s461 just and equitable grounds were met: the lack of deadlock was due to D removing P as dir, and breakdown of trust and confidence: [209]

Liq appointed *and* leave granted to PCo to bring the derivative applications: [217]
___
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10min
November 22, 2022 Komlotex Pty Ltd v AMP Ltd [2022] NSWSC 1525
"Investigation isn't legal advice. You waived privilege!"
___
D discovered ~29K documents in a piece of litigation, and claimed ~9K were privileged: [1]   The Court considered 27 representative docs. The docs included docs about an ASIC investigation re “fees for no service” claims: [2]
D had to prove the docs were privileged. If privileged, P had to prove privilege had been waived: [6]   D had self-reported the “fees for no service” issue, engaged various large law firms, and itself had a big in-house legal team: [17], [18]
In 2017 D engaged one firm to provide D called findings and advice, claiming privilege would attach to both: [24] – [27]
P argued the firm was engaged to investigate, rather than provide advice, meaning that firm’s work would not be privileged: [28]
The Court was also taken to an admission from the D during the Hayne RC that “it did not need to receive legal advice to know that [it] cannot charge somebody for services that [it is] not providing”: [28]
Importantly privilege is for legal advice rather than commercial or PR advice, though the concept of legal advice includes what a client should prudently or sensibly do, including in relation to an investigation: [34] – [37]
The dominant purpose is the thrust of the privilege. A document prepared for a number of reasons, with none dominant, is not privileged: [38], [39]
In relation to a report sent by external lawyers, to D’s in-house lawyers, and then to D’s senior executives, the Court found the dominant purpose of each email was legal advice to D. So they were privileged: [50]
Similarly, in relation to legal advice on the implications of the report, privilege attached: [53]   D produced the report (but not the associated advice) to the ASIC without a claim for privilege: [94]
P claimed this was a waiver of privilege of all documents concerned with the firm’s engagement: [95]
Reference to existence of privileged material is not enough for waiver, the contents of the privileged material must be relied upon for privilege to be waived: [99], [100]
The Court found that by waiving privilege in the report, D did not waive privilege in the advice. Privilege can by waived over the factual investigation report, and maintained in the subsequent legal advice given based on that report: [106]   The report could be understood without the help of the legal advice.: [106]
The Court found the sample documents were privileged with no waiver. P was ordered to pay D’s costs: [128], [129]
_
If you'd like to contact me please look for James d'Apice or Coffee and a Case Note on your favourite social media spot - I should pop up right away! #coffeeandacasenote #auslaw
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9min

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