June 09, 2021

PNJ Investment v ST.K Family Pty Ltd [2021] NSWSC 530

9 minutes

“Nope! It’s not convenient for the Court to stop that meeting.”

____

A dispute arose about (i) rights to units in a unit trust, (ii) whether a Co that purported to be the unit trustee was indeed the trustee, and (iii) who owned the shares in the Co.

St sought an injunction to stop the Co having a meeting of the unit holders.

To get the injunction St had to show likelihood of success, and that the balance of convenience was satisfied.

St held 82 units in the trust; Pn the other 18 units: [11], [12]

Pn owned 80% of the shares in the Co; St the other 20%: [14]

The chief asset of the trust was valuable land ripe for multi-storey development: [15]

Pn lent St $3m for the purpose of the development: [24]

The trust bought the property for $20m - $13m was from Pn (including the $3m loan to St) and $7m was financed: [29]

Pn demanded repayment of the $3m plus interest and St did not repay: [32], [34]

In the absence of payment, and pursuant to the loan agreement, Pn’s director transferred St’s shares in the Co, units in the trust, and authorised the Co to borrow $30m for development: [35] - [37]

Pn went on to assert that St was no longer a shareholder or unitholder: [40]

Following some meetings, a number of caveats over the Property were lodged by St: [41] - [46]

In resisting the injunction, Pn relied on evidence that commercially attractive loan terms were currently available but might not be for long: [59]

The Court accepted on an interlocutory basis that there was a serious question to be tried about some clauses of the agreement: [76], [77]

The Court found other claims arose in St’s favour, though they were weak e.g. contractual penalty, invalidity of share transfer, corporate oppression: [82], [88], [95], [102]

Re balance of convenience: Pn relied on the commercially attractive loan terms that Pn said an injunction would put at risk: [113]

The thrust of St’s application was to “have a say” in the development, but the evidence did not reflect a desire of St or its appointed director to be involved in the best interests of the Co and the trust: [116]

St’s director did not, for example, agree to the Co issuing lapsing notices: [117]

There was a lack of evidence of what prejudice would flow from the meeting going ahead and the finance being obtained: [119]

The risk of injury to the company if the injunction was granted outweighed the risk to St if it was not: [122]

The undertaking as to damages offered by St was inadequate, noting St had previously failed to pay $3m: [123]

The Court did not grant the injunction due to the above and (while not determinative) the fact St only made the injunction application by cross-claim in response to Pn’s claim rather than taking steps of its own: [125] - [127]

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By James d'Apice

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