Coffee and a Case Note

In July and August 2023 James d'Apice gave a series of one hour CLEs "live" on Facebook, Instagram, Linkedin and YouTube.

This one concerns s66G of the Conveyancing Act 1919 (NSW) and has the following structure:

1. The law

2. Litigated examples

3. Practical suggestions

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“Hey! That was the Co’s opportunity to sell baby formula!”
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A Co that made infant formula had two shareholders: P as to 51%, DCo as to 49%: [1], [2]
DCo was controlled by a married couple – D1 and D2 – who had roles including as the Co’s former director and former CEO: [3]
P alleged D1 and D2 breached their duties to the Co: [4]
P said D1 and D2 caused an opportunity for the Co to promote and distribute a certain brand of infant formula to be diverted away from the Co, and toward entities related to D1, D2 and members of their family: [5] – [10]
P said D1 and D2 caused the Co to transfer ownership of its trademarks to entities related to them: [11] – [15]
P said D1 and D2 caused the Co to make payments to entities related to them based on fraudulent invoices and otherwise improperly: [16]
P said the entities related to the Ds were aware of these breaches and knowingly took the benefit: [18], [19]
P sought leave to bring a derivative suit to agitate these claims, and also alleged s232 corporate oppression: [23], [24]
Interim freezing orders were made pending the outcome of this application: [24]
The Court considered the five s237(2) criteria in relation to the proposed derivative suit.
The 1st (the Co probably not commencing the proceedings), 2nd (the P coming in good faith on the basis that increasing the Co’s value would increase their shares’ value), 4th (the P showing there was a serious question to be tried) and 5th (the Ds had notice of the claim) were all met: [32] – [37]
This left the question of whether the granting of leave would be in the best interests of the Co.
P submitted that the nature of the claim, and its prospects, were so compelling in the context of the Co’s affairs that a grant of leave would be in the Co’s best interests even if supported by only a limited indemnity from P: [41], [42]
The proceedings were likely to be factually and legally complex with claims against multiple defendants and an estimated 16 days needed for the final hearing: [45]
The Court found that any grant of leave to P ought to include an indemnity from P to the Co for any adverse costs orders, but not to the extent pressed for by the Ds: [46]
Many of the relevant Ds were based in China. The cost of enforcing the judgment in China was uncertain (as were the prospects – with expert evidence suggesting no judgment of an Australian Court had been registered and enforced by a Chinese Court). The Court found it would only be in the best interests of the Co for leave to be granted if P indemnified the Co in respect of this cost: [47]
Leave was granted to P to bring the derivative suit, conditional upon the indemnities being provided: [78]

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In July and August 2023 James d'Apice gave a series of one hour CLEs "live" on Facebook, Instagram, Linkedin and YouTube.

This one concerns the law of partnership and the disputes that arise in that area and has the following structure:

1. The law

2. Litigated examples

3. Practical suggestions

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“Restrain our (former?) partner from competing with us!”
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In 2020, the Ps entered into a partnership agreement with D1 to run an accounting practice: [3]
In 2022, D1 incorporated D2: [4]
Ps wanted the Court’s help to immediately stop D1 and D2 from chasing the Ps’ clients: [5] - [8]
The partnership agreement had various restrictions including on partners not trading as accountants for 2 years after the end of the agreement in the relevant area: [46]
RE whether the Ps had a prima facie case (the first of the two interloc injunction criteria) the Court gave a (respectfully) excellent summary of the applicable restraint of trade principles: [66]
This matter concerned restraining a *partner*, not an employee, however the Court held the same general principles apply: [70]
The Ps gave evidence saying in May 2022 D1 indicated a planned resignation: [72]
The Ps sent an internal email regarding the resignation saying it would be effective on 30 June 2022. D1 was CC’d and made no objection to the email at the time: [75], [77]
In December 2022, D1 ceased receiving partnership drawings and was “cut off” from IT systems, clients and staff without notice: [88]
In January 2023, D1 commenced employment apparently by a firm with a similar name to D2, but later continued to hold himself out as a partner of the partnership in some contexts: [92], [93] 
In March 2023, an employee of the firm resigned, giving the reason they were following D1 to their new firm, D2: [94], [95]
At around that time, a client of the firm said they were approached by D1 and sought clarification. This galvanised the Ps into action: [96], [97]
A number of the firm’s clients indicated they were following D1 to give their work to D2: [100] - [105]
In May 2023, the Ps’ lawyers wrote to D1 asserting a breach of partnership obligations: [112]
There was contested evidence about the timing of D1’s resignation, or whether he resigned at all! D1 remained listed on the firm website in 2023 but for the purposes of the interloc application, the Court finds there is a prima facie case D1 has resigned: [114] - [129]
Following argument about whether a clause precluded D1 from soliciting the firm’s clients or (more broadly) competing with the firm at all - the Court accepted it was arguable that the covenant against competition (the broad one) was enforceable: [130] - [134]
Evidence showing clients of the firm withdrawing work on account of D1’s conduct was found to ground an arguable position that D1 had breached the partnership agreement: [148]
The Court accepted, too, that there was evidence of a prima facie case to restrain D2 noting a covenanter cannot evade a covenant simply by creating a new entity: [151], [160]
In relation to the balance of convenience the Court accepted there was evidence D1 would suffer financial hardship, and that there was evidence the Ps would suffer loss. On balance the Court considered injunctive relief appropriate and made the orders sought: [171]

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In July and August 2023 James d'Apice gave a series of one hour CLEs "live" on Facebook, Instagram, Linkedin and YouTube.

This one concerns s236 of the Corporations Act 2001 (Cth) and has the following structure:

1. The law

2. Litigated examples

3. Practical suggestions

Please give James and Coffee and a Case Note a follow on your favourite platform!

In July and August 2023 James d'Apice gave a series of 5 CLEs "live" on Instagram, Facebook, Linkedin and YouTube.

This one covers corporate oppression pursuant to s232 of the Corporations Act 2001 (Cth) using the structure:

1. The law of corporate oppression

2. Some litigated examples

3. Practical suggestions

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“You complied with the contract by paying someone else, but pay me too!”
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P and their (then) spouse, X, agreed to lend $1m to D. The money - which was actually P’s solely - was lent: [1]
X directed D to repay the money into one of X’s accounts. D did so. At this time P and X were separated. They later divorced: [2]
P sued X for the money and, X having been made bankrupt, expects receive under $20K from X on account of their claim: [4]
P went on to sue D alleging breach of the agreement and negligence: [5]
D said X had actual or ostensible authority to direct the payment. D also said that by suing X, P made an election to pursue X rather than P and so ratified X’s conduct: [6]
D was a developer. When P and X were introduced to D they were asked for a refundable for a development, and nominated a joint bank account for the refund if necessary: [8]
X agreed to buy a unit in the development and later added P’s name. There were subsequent EOIs for other units: [9], [10]
P and X entered into a note facility agreement with D: [17]
X provided D with $1m in bank cheques - the $1m being P’s money X held on trust: [18]
Interest was initially paid into a P and X joint account: [19]
X sought for refundable deposits to be repaid to an account of his choosing, which they were: [21]
P introduced herself to D and had various discussions about possible developments, the refunded deposits, and disclosed the marital difficulties between P and X: [23] - [28]
Ahead of the expiry of the notes facility, D asked X where the $1m should be repaid. X nominated an account that was solely X’s and it was paid there: [31], [32]
P pursued X for the $1m, and X was bankrupted on P’s application: [35], [36]
P now turned their attention to suing D.
Two questions arose. Did D discharge its obligations by paying X? By suing X did P make an election from which the couldn’t resile?: [37]
After giving the issue lengthy consideration, the Court found D was OK to make payment to an acct nominated by the “Lender”, and that X’s nomination met this: [52], [56], [68]
X did not have authority to nominate on P’s behalf *BUT* D nonetheless complied with the contract by making payment *HOWEVER* the question of whether P was still entitled to pursue D for the debt remained: [69]
An act done without authority can be ratified by the person on whose behalf the act was done: [72]
Once ratification happens, the principal cannot then exercise rights that are inconsistent with the ratification: [73]
P original claim against X proceeded on the basis that P had rights to bring the claim against X. By making that claim, and seeking to enforce that judgment P ratified the acts of X: [78]
P did not dispute this analysis specifically, but pursued D on the basis of a breach of contract. This claim failed. By repaying X, D had complied with their contractual obligations: [79]
The application was dismissed with P obliged to pay D’s legal costs: [90]

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“That’s my warehouse, or at least half of it is…”
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From its purchase in 2010 P and D were registered as 50-50 TiC co-owners of a warehouse. P was D’s parent.
P had borrowed the money to buy the property. D operated a business from the property until 2012 when it become non-viable: [4]
From 2017 the property was leased with all rental proceeds being paid to D: [7]
P commenced proceedings (not by tutor, but following some earlier litigation about P being able to represent P due to P’s Alzheimer’s) seeking orders that D holds their 50% interest for P, that s66G trustees be appointed, and that D account for 50% of rental proceeds: [8], [16]
D’s father - P’s former spouse - died in 1990. The estate passed unequally, and in large part to D’s siblings (with none to P). D said this unequal distribution was relevant background for P buying him at least part of the property: [25] - [33]
There was very little admissible evidence that D held their 50% share on trust for P: [42]
P’s child, who is D’s sibling, gave evidence in support of P’s application. The evidence suggested P wanted the property wanted the property sold from around 2012 but that was not conclusive in relation to the parties’ legal rights: [44] - [53]
D said that P had “always” said they would bequeath the property to D in their will: [54]
Over the years D brought various investment opportunities to P, which they sometimes invested in, including (unsuccessfully) a Kenyan gold mine: [61]
Various letters prepared by P were tendered. Ultimately these did not assist due to uncertainty about P’s mental capacity at the time they were prepared: [86]
P was unable to demonstrate D held their 50% share on trust for P: [87]
The Court considered, on the balance of probabilities, that it was more likely that P intended to assist D by the purchase of the property making him 50% owner: [88]
While other possibilities might arise, the Court considered that: “(t)here is simply a dearth of evidence and speculation does not assist”: [92]
D did not press their initial claim that they were in fact the 100% owner: [93] - [96]
D asserted that P gifted them the rental income from 2017 to 2022. This was not accepted. P was in a difficult financial position, suffering from Alzheimer’s, and a number of requests were made for P’s share of the rent. This stood in the way of the Court finding the rent was gifted to D: [108]
It was ordered that D pay to P 50% of the rent D had collected: [111]
P sought appointment of s66G trustees. D resisted on irrelevant bases. The Court noted hardship or unfairness was not a barrier to making of s66G orders: [117]
The Court appointed the s66G trustees.
Regarding costs - s66G costs are normally paid out of the trust corpus. However, noting P succeeded in their rental income claim and failed in their resulting trust claim, the Court ordered that only 50% of their costs be paid from the proceeds of the property’s sale: [126]

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“But you’re who’s stopping the Co from bringing the claim!?”
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The Ps (a parent and their child) were the dirs and only shareholders of the D. The D was trustee of an SMSF and the Ps were beneficiaries: [1], [2]
The Ps, proceeding without legal advice, sought leave to cause D to sue for some alleged trust property: shares.
The Ps said FormerTCo, a former Tee of the SMSF, owned shares in OtherCo, that FormerTCo became deregistered, and the shares (which the Ps said were trust property) were unlawfully bought back by OtherCo: [5]
The Ps sought leave to cause the D to sue OtherCo to get the shares back. (A claim against the Commonwealth was not pressed): [5], [6]
The Ps said they could not cause D to commence the proceedings as to do so would breach their fiduciary duties: [7]
The evidence regarding the alleged buy-back was unclear and included heavy redactions: [13] - [23]
In 2016 FormerTCo resigned and was later deregistered. The Ps appointed themselves trustees. In 2022 they retired as trustees and appointed the D: [25] - [27]
The Court was left to consider the s237 derivative action criteria: [30]
s237(2)(a): the Court found D would not bring the proceedings, but that was only because the Ps refused to cause it to do so: [33] - [38]
s237(2)(b): the Court found Ps’ application was not brought in good faith. It was the Ps’ conduct that prevented D from bringing the application. The purpose of the derivative action is the opposite - to allow people *without* control of a company to bring proceedings on its behalf: [39] - [43]
s237(2)(c): the Court considered it was not in D’s best interests that leave be granted as the Ps’ indemnity was insufficient, and the claim’s prospects were poor: [44] - [46]
s237(2)(d): the Court found there was “little more than bare assertion” to suggest the buyback was unlawful or improper, but the evidence did disclose a serious question to be tried: [48]
The facts were the subject of twelve (!) other related pieces of litigation over the years from 2013: [52]
The Ps’ heavily redacted evidence and failure to disclose apparently relevant matters traversed in the other litigation left the Court in a state of “considerable disquiet” about whether the entire position had been disclosed by the Ps: [53]
Questions of abuse of process and Anshun estoppel also arose, without sufficient evidence to make a definite finding: [54]
Noting a number of criteria for leave had not been satisfied, leave to bring the derivative action was refused: [60]
The Ps also sought a mandatory injunction requiring D to bring the proceedings but failed to show they would suffer grave damage if the injection were not granted, nor to indemnify D: [62]
The Ps’ application failed.

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"This motel ain't big enough for the both of us!"

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Two families operated a motel together until their relationship deteriorated.