Coffee and a Case Note

“You tried to kick me out of the law firm partnership!”

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A partnership operated a law firm. A deed governed the partners’ relationship. The partners were either fixed draw (“salaried”) partners or (often more lucrative) capital partners: [1], [2]

Each partner was a trustee of a separate trust: [2]

P was a capital partner, purportedly expelled from the partnership in November 2020: [5]

P said the purported expulsion was contrary to the deed; meaning P remained a partner or was entitled to damages: [6]

The Ds characterised the partnership as “easy in, easy out” - partners did not make a contribution to join, and were not “paid out” on their exit: [13]

When a capital partner exited, that exit was a “complete, forced, and absolute divorce from the firm”: [29]

The Ds proposed P’s expulsion by email with a “voting button” mechanism and also proposed that the technical requirements for expulsion (e.g. the giving of 7 days notice) be waived or abridged: [38] - [40]

Crucially, only one button was required to be pressed in order to vote on both proposed Extraordinary Resolutions (which the deed said needed 80% of the vote to pass): first (i) expulsion, and then (ii) waiver of technical requirements: [39]

P said this process was invalid because (i) the waiver of technical requirements (like notice) should come before the substantive expulsion vote, and (ii) the question of waiver and the substantive expulsion vote should have had separate voting buttons, allowing partners to vote separately on each resolution: [41]

The Court found the requirement of notice was for a purpose including, potentially, the marshalling of support by the capital partner at risk of expulsion: [48]

The Court found it undermined the seriousness of the consequences of expulsion for the question to be bundled up with the technical variation resolution (or, in the alternative) before it: [49]

The Court found what had taken place was a “plainly invalid process”: [50]

P’s expulsion from the partnership was, therefore, invalid: [51], [101] - [103]

This view was bolstered by the Court’s finding that the Extraordinary Resolution (as defined in the deed) required 80% of all partners to vote in its favour in order to be passed.This was by contrast to the Ds’ position, who asserted that only 80% of the *voting* partners were needed for such a resolution to pass: [52] - [57]

Noting the solemnity of the outcome of an Extraordinary Resolution, and based on the general tenets of commercial construction, the Court found 80% of the partnership was required to pass an extraordinary resolution, not merely 80% of partners engaging in the vote: [58], [59]

P therefore succeeded in their liability argument, with a cost order made in their favour: [122]

The argument about damages was saved for another day.

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“Compensate the company. Then pay that money to me!”

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P, a former shareholder, sought to bring a claim on behalf of the Co and then have the proceeds paid to themselves: [1] - [3]

s237(2)(a): the Co was not going to bring the claim itself: [8]

s237(2)(d): the Court considered (i) whether the pleaded case could be proved, and (ii) if so whether that would ground the relief sought: [12]

When practising, P was the sole shareholder of the Co and principal benef of the trust the Co operated. That way, P’s work earned income for the Co: [16]

P chose that structure, and form of income distribution, likely due to financial advantages P considered arose - and so was bound to the risks arising from that choice: [17]

P made an agreement with some the Ds that would see advisory work referred to the Co, and would see NewCo established to do additional work: [19]

From 2013 the relationship between P and the Ds deteriorated with the Ds allegedly not referring work to NewCo and otherwise breaching the agreement: [24]

The Ds purported to remove Co from controlling NewCo thereby displacing P NewCo and diverting NewCo’s business to themselves: [31]

In 2017 P was made bankrupt, and later removed as beneficiary of the trust with the Ds buying P’s shares in Co from P’s bankruptcy trustee: [37], [53]

Despite a contract claim being out of time, it appeared there was “apparent unlawfulness” and claims that the Ds breached their duties to NewCo: [32], [35]

Importantly, the relief P sought chiefly was for distribution to be made to them as former benef of the trust, requiring the Co to on-pay its compensation to the P: [36], [40]

P attempted to characterise the Co’s loss as P’s loss due to their benef status at the time: [44]

P was unable to show (i) the Co’s income would inevitably be distributed [45], (ii) that if distributed that it would go to P solely, noting she was not the sole beneficiary [47], or (iii) that all the money paid to the Co would be distributed and not otherwise applied to e.g. costs of administering the trust etc: [48]

The Court found there was no entitlement to the distribution relief sought by P: [49]

An argument that P’s bankruptcy trustee may have entitlement did not require determination: [51]

The Court found there was no serious question to be tried as to P’s final relief, leaving other prayers arguably intact. However the problems with the relief meant the s237(2)(c) best interests test was not met: [56[

s237(2)(c): P’s claim was only for P’s benefit and without regard for the Co’s other obligations or objectives. It was not in the best interests of the Co that it be brought: [58] - [65]

s237(2)(b): In seeking an unlitigated determination that the Co pay all compensation to her the Court found P was not coming in good faith: [82], [83]

Having failed to meet the s237(2) criteria, P’s application was dismissed: [90]

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Please follow, James d'Apice, Coffee and a Case Note and Gravamen whereever you can! (If you'd like!)

In early 2024 James sat down (remotely) with David Turner to chat about starting a law firm from scratch.

Even though James was only a matter of weeks (!) into his journey he did his best to share everything he could - warts and all.

Please enjoy this revealing and entertaining chat between James and David.

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You can find other episodes of Hearsay: The Legal Podcast here: https://hearsay.legalcpd.com.au/episodes/

“Hey! Stop trying to work for our competitor!”

D was a consultant who, in 2022, left one large firm and joined another. D’s expertise was defence work: [2], [3]

The 2022 role included a 2 year restraint: [4]

The 2022 employer underwent a restructure following a scandal and D was then employed by P, or an entity related to it: [6], [9]

D’s contract with P included a 3 month notice period with a right for P to force D to take that time as “gardening leave” [11] and cascading restraints commencing at 12 months and Australia-wide: [12], [14]

In November 2023 D resigned indicating they planned to work at another firm.

Shortly afterwards P sent D a letter directing D to take gardening leave for 3 months and asserting the restraints: [16], [17]

D acknowledged gardening leave but resisted the restraints: [18]

By the end of D’s gardening leave, neither party had shifted from their position and P commenced proceedings seeking an urgent injunction: [19] - [24]

P had to show there was a “legitimate commercial interest” in enforcing the restraint and that it went no further than necessary to protect it: [28]

P said the restraint would protect P’s legitimate interest in (i) the relationships with P’s clients, or (ii) the confidentiality of P’s confidential information e.g. pricing: [32]

The Court spent some time considering the work done with P and the work to be done at the new entity (noting the evidence was “bedevilled with management jargon” [44]) concluding that the question was one of contractual construction to be set aside for final hearing: [47]

The Court accepted there was a prima facie case in respect of the information D had access to: [48], [49]

The Court noted D had previously accepted a 2 year restraint and so there was a prima facie case for a one year restraint: [51]

Generally, the Court considered P had a prima facie case and turned to the balance of convenience question: [52]

The Court noted D was well paid, had no evidence to show their asset position, had tax liability suggesting significant income in the past, and had their “eyes wide open” when accepting the restraints and then resigning: [53] - [64]

This weighed against D in a balance of convenience argument.

However, P’s delay was pivotal.P only brought the application at the conclusion of D’s gardening leave in February 2024 despite having first raised issues in November, and after various exchanges with D and D’s lawyers during leave: [65]

Delay can be a complete answer to an interlocutory application: [67]

The Court found it would be unreasonable now to restrain D from joining their new employer simply because P “has now belatedly discovered the urgency of the case” without P’s delay having been adequately explained: [80], [81]

This delay tipped “the scale the other way”. P’s application failed. Costs followed the event: [81]

“It’s my wind-up application, so surely I should get my choice of liquidator...?”
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The Ps brought an application to windup various entities on the s461(1)(k) just and equitable basis, and to appoint receivers to the assets of the associated trusts: [1], [2], [6]
The various entities were variously incorporated and settled to develop a marina. That development did not progress as hoped: [3], [13]
The relationship between Dir1 and Dir2, the 50-50 controlling minds and shareholders of the relevant entities, irrevocably broke down: [1], [4], [5]
The Court found it was just and equitable that the various companies be placed into liquidation on the just and equitable basis, and receivers appointed to the associated trusts: [10]
The sole area of dispute was the identity of the liquidator(s) to be appointed: [14]
Generally, a Court will appoint a plaintiff’s choice of liquidator, though will bear in mind partiality, fitness, qualification, cost, perceived independence etc. It is for a defendant to argue for a departure from that course: [15] - [18]
The different hourly rates of the parties proposed IPs were found to be likely to lead to significantly different cost outcomes: [19]
An argument that one IP had previous experience with marinas was “very thin” - especially noting that this venture did not proceed and that the Court was not provided with evidence of how this previous experience might assist: [20]
The difference in the price of flights from Sydney or from Brisbane (to the venture’s Bundaberg location) was a “minor consideration”, especially noting the Sydney IPs had offices in Brisbane staffed by employees who could assist: [21]
The Court was troubled by the perception (*perception* only - no finding or criticism was made) of possible conflict where the Ds’ proposed IP would likely use the advisory services of a firm who was the major shareholder in a proposed purchaser of the marina: [22]
The Cos were wound up on the J and E basis, and relevant trust assets placed in receivership, with the Ps’ preferred IPs appointed: [24], [25]

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“We put all our shit in mum’s name…”
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P was the deceased’s spouse, and administrator and sole benef of the decd’s estate: [1]
The Ds were the decd’s parent, D1; sibling, D2; and some related entities: [2]
The decd and D2 - members of a motorcycle club and charged with drug offences years ago - used various entities to engage in business: [4], [5]
In 2002 the decd and D2 transferred substantial assets to D1: [7]
P said the arrangement was that D1 would hold those assets, and the income they generated, on trust in equal shares for the decd and D2. P said this scheme was to protect the assets from confiscation pursuant to the Proceeds of Crime Act: [8], [118] - [132], [248]
D2’s evidence that they had no such concerns was rejected, as was the Ds’ evidence that evidence that D1 had a role in the businesses beyond book-keeping: [117], [138]
The Court formed an unfavourable view of much of the Ds’ evidence, as “unsupported… and inherently unlikely”: [38]
In 2002 steps were taken to put the “asset protection” regime in place including incorporating a corporate trustee of which D1 was director and shareholder; settling a trust with D1, D2 and the decd as beneficiaries; and causing D2’s and the decd’s assets to be transferred without consideration constituting the corpus of that trust: [142] - [152]
The decd had described the arrangements as “we put all our shit in mum’s name”: [151]
After the transfer D2 took some role in various business ventures and property developments for the trust, as did D2 and the decd: [154] - [212]
Contemporaneous notes suggest the decd understood that their entitlement to 50% of the trust assets would pass to P (as their sole beneficiary) on death: [218]
P made various submissions in support of their asset protection or “warehousing” characterisation of the arrangement between the parties. P also said the Ds’ arguments (such as they were) failed to take into account the Proceeds of Crime Act protections that the decd and D2 were pursuing: [260] - [263]
The Ds said P’s characterisation was “Kafkaesque” and the assumptions underlying it unfounded: [269]
The Court accepted P’s characterisation: [271], [287] - [289]
That was because: (i) the Ds’ lack of evidence and explanation about how any debt arose to D1 or the “implausible” suggestion that the parties were unconcerned about the Crime Commission ([272] - [276]), and (ii) the P’s case was supported by contemporaneous evidence: [277] - [286]
The Court found the parties intended to create a trust relationship, including because of language used by the parties to characterise it: [306] - [309]
The relief P sought could be granted against the TCo (i.e. not just D1) on basis that the TCo would not have its discretion fettered but that it would be prevented from exercising power in respect of 50% of its assets: [387]
Costs followed the event: [459]

“We can’t order a share sale. Decide yourselves, or it’s getting wound up!”

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A number of plaintiffs applied for relief in relation to a shareholder dispute.

Through the litigation the issues in dispute narrowed.Both the plaintiffs and defendants preferred for the Ds to buy out the Ps. A winding up order was all parties’ second preference: [1] - [6], [19]

Commencing in 2014, the Ps and Ds incorporated Co1 and Co2 to (i) operate a GF bakery and (ii) own the land the bakery was situated on: [8] - [10]

Evidentiary wrinkles included one of the Ds seeking a higher salary, one of the Ps resisting, the Ds causing the salary to be paid, the P then causing the same amount to be paid to their entity, and the Ds causing *that* payment to be recorded as a loan: [11]

The Court exercised caution in relation to a winding up, noting the Cos likely had more value as a going concern, than as assets sold via liquidation: [25]

All parties accepted that the relationship between themselves had failed such that an order winding up the Cos on the just and equitable basis would be appropriate: [29]

The Court accepted that it would be appropriate for the Cos to be wound up on the just and equitable ground (and the appointment of a receiver to the Cos’ property held on trust: [30]) unless (noting s467) the Court was satisfied a buyout order could be made instead: [29]

s467(1) grants the Court the power to make various orders on the hearing of a winding up application.

The Court considered at length whether this power was broad enough to impose a forced share sale on litigants, eventually finding “with a degree of hesitation” it was not sufficiently broad: [37] - [51]

The Ds sought a buyout order on the s233 “oppression” basis: [52]

The Ds argued the Ps’ failure to agree to Co1 entering into a formal lease with Co2 was oppressive. Noting a lease had not previously been required, with no formal advice and with the risk of a conflict of interest arising, the Ds were not able to show a failure to enter into a lease was oppressive: [62], [63]

Taken together: whether pursuant to s467 or s233 there was no basis for the Court to make a buyout order.

Though not strictly necessary (as no buyout order was made) the Court considered the expert evidence placed before it in relation to the value of both Cos - the trading entity and the property owning entity: [64] - [78]

The Court ordered that the Cos be wound up, but stayed the order for 14 days to allow possible negotiation of a share sale: [80]

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#auslaw #coffeeandacasenote #gravamen

Please follow James d'Apice, Coffee and a Case Note, and James' firm Gravamen wherever you can!

www.gravamen.com.au

In January 2024 James got to sit down and chew the fat with BB head honcho, Mike Bromley!

They spoke about the founding of Gravamen, the dreaded work / life balance, and why James finds TikTok boring.

You can find BB here: https://www.beyondbillables.com/blog

In December 2023 James caught up with Lara Quie from the Legal Genie Podcast to discuss social media, marketing, legal practice, horror films, battle rap, and everything inbetween!

You can find the Legal Genie podcast here: https://thelegalgeniepodcast.buzzsprout.com

“Yep! You can sue the author to get the company’s IP from them.”
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A Co’s Dir, P, sought to bring derivative proceedings against a Co’s majority shareholder, D.
P wanted declarations that the Co (and not D, who was also the book’s author) was the owner of all intellectual property rights in relation to a book: [1], [6]
P said that after D wrote the book, D and the Co entered into an agreement for the Co to acquire the IP in the book: [7]
Alternatively, P said D was estopped from asserting they owned the IP. Both D and the Co conducted themselves (including by the Co’s accounting and the collection of fees) as if D had assigned the IP. Indeed, in their capacity as co-director, D signed the relevant accounts reflecting this: [8], [10], [12]
Evidence showed D received a real financial benefit in their corporate loan account on the basis of the transfer of IP having been made: [24]
Evidence showed there had been negotiated of a written IP assignment agreement but that D had not signed it: [9]
P attempted to commercialise the IP with one childcare provider. Conflict arose as D tried to do something similar with a competing childcare provider: [11]
D did not lead evidence but said that, if leave was granted, they would defend the claim: [17]
The Co being solvent, the Court then turned its attention to the five criteria regarding whether leave to bring derivative proceedings ought to be granted pursuant to the Corporations Act.
(i) It was clear (from the deadlocked board and D’s refusal) that the Co was not going to bring the proceedings: [19]
(ii) The Court accepted P was coming in good faith, bringing a claim P believed was well-founded, with reasonable prospects, and likely to bring value to shareholders if successful: [20]
(iv) The Court accepted, on the basis of the material before it, that there was a serious question to be tried: [21]
(v) Notice of the application was given to D: [31]
This left the remaining criterion (iii) - whether it was in the best interests of the company for P to be granted leave to bring the application on behalf of the Co.
The Court noted it appeared the Co paid for but had not obtained the value of the IP. The inference arose that the IP might be put to productive use in future; an inference reinforced by the fact that the IP is at the core of the Co’s business purpose and - without it - it was not clear how the Co could pursue its business purposes: [25]
D’s suggestion that it was not in the Co’s best interests to be in dispute with its majority shareholder was acceptable on its face, but did not take the D’s argument very far noting this approach would serve only D’s interests, and not the Co’s: [26], [27]
The Court considered the Co was better off pursuing the IP rights it paid for than going without them: [30]
Noting the indemnity provided by the P for the Co’s costs (an indemnity obtained in part from a related trustee), leave was granted to P to bring the derivative suit: [32], [34]

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“Let’s appoint an IP to chase the group’s debts!”
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The Ps were 48% shareholders of a group of Cos that owned luxury car dealerships. The Ds were directors representing 52% of shareholders.
The 52% majority owed a judgment debt to the group. The Ps proposed a course for recovering the debt. The Ds used their votes at board level (including a casting vote) to vote down the Ps’ course and vote up their own: [2]
There was deep “anger” and “animosity” between the Ps and Ds and “very bitter and distrustful” feelings [58], [69]
The Ps argued the Ds had a conflict of interest. The Ds said the Ps did too: [3]
In previous litigation the Court found the Ds breached their duties to the group, pursuing litigation on the group’s behalf that benefitted them personally as part of a coordinated strategy to defeat the Ps: [12]
This led to the Ds’ $19.8m judgment debt, plus costs incurred by the group: [13]
To recover the debt the group needed to resolve: what were the group’s costs and how should they be pursued?: [14]
The Ds suggested an insolvency practitioner (IP) be appointed to by the group to recover the debt: [30]
The Ps proposed that they form a sub-committee to recover the debt: [31]
The Ds resisted on the basis the Ps were also conflicted: [32]
The Ds were critical of the Ps’ conduct in their dealings with the luxury car head franchisor, including providing them with Court documents and apparently paving the way for the Ps to take over the group’s operation of the dealerships: [44] - [48]
A reduced franchise term followed - from the usual 5 years to 1 year, apparently as a result of the Ps’ conduct: [48]
Despite the Ps’ conduct being “unwise” the Court found it was engaged in in an attempt to find a reasonable separation from the Ds. It was not found to be malicious: [49]
The franchisor later threatened perhaps reducing the term to 3 months or 6 months: [51]
The Ps accepted that if they were in charge of pursuing the judgment debt then negotiating that debt could be intermingled with negotiating the share price they wanted to pay for the Ds’ shares: [56], [57]
The Court had regard to the “ongoing bitterness, conflict, and lack of trust” as reasons not to appoint the Ps to pursue the debt: [64], [65]
The Court accepted the Ds’ submissions RE the appointment of an independent IP: [71]
The Ps’ oppression claim failed with the Court noting that more than disappointment in the minds of minority shareholders is required to show a company’s conduct is unfairly prejudicial: [77]
The Court dismissed the Ps’ claim and (noting the Ds were the majority and held the casting vote) was confident that the Ds’ resolution to appoint an insolvency practitioner would pass: [83]

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Please follow James d'Apice, Coffee and a Case Note and Gravamen on your favourite platform!

www.gravamen.com.au

On 3 November 2023 James gave a speech on marketing and branding for lawyers similar to one he had given a number of time before. However, this time, he gave the speech with a live case study: the lauch of his own law firm, Gravamen! Many thanks to Clarissa Rayward and the whole Happy Lawyer Happy Life and Retreat team for making this happen! https://www.happylawyerhappylife.com/ ___ Please support James' new firm, Gravamen, on your favourite platforms. www.gravamen.com.au #auslaw #gravamen #auslaw #coffeeandacasenote

In November 2023 James d'Apice sat down to chat with Alex Nielsen of The Australian Law Student Podcast about his approach to practice, overcoming "fuck ups" including bad marks on exams, and the future of James' law firm Gravamen.

You can find the Australian Law Student here: https://www.theauslawstudent.com

“Your share of the sale proceeds gets reduced for us dealing with your complaints!”

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3 siblings co-owned real property. They disagreed on what use it ought to have been put to. 2 siblings, the Ps, applied to appoint s66G Tees, successfully.The Tees sold the land and distributed the Ps’ shares of the sale proceeds. The remaining sibling - the defendant, D - contested the Tees’ fees and criticised their management of the sale: [1] - [4]

The Tees applied to be paid further remuneration from the D’s share (based on those costs arising from the D’s conduct) and to retire as trustees: [5]

The Tees took the view that they should have distributed the net proceeds (after paying themselves 2/3 of their fees) proportionally to the Ps, and that the costs of any dispute with the D be borne solely from D’s share. The Court endorsed this approach: [11]

The Tees retained the D’s 1/3 share, and an amount on account of 1/3 of the remuneration they were entitled to: [12]

The D made various criticisms of the Tees' conduct of the sale including in lengthy correspondence, and then refused to attend meetings or provide bank details in order to accept a payment: [13] - [15]

The Tees instructed lawyers, and then so did the D. The D later withdrew his lawyers’ instructions, and then said they would accept the figure first offered by the Tees without deduction: [16] - [18]

The Tees reiterated they intended to make deductions and the D reiterated their claims. The Tees delayed approaching the Court and tried to negotiate, but eventually brought this application: [19]

The Court noted trustees for sale are entitled to be indemnified for their costs in the normal course, and that where litigation is threatened those costs may be higher than usual: [22]

The Tees’ claim for their own further remuneration was reasonable and “could even be characterised as modest” noting they did not claim for their time trying to negotiate with the D: [26]

The Tees claimed further costs for their engagement with solicitors and in bringing the relevant motion: [27]

The Court considered once the D raised their complaints the Tees needed legal advice on whether to negotiate with the D, or to consider making an application to the Court: [28]

Broadly D complained about the Tees time entries and professional conduct: [30] - [32]

After extensive consideration the Court found the Tees discharged their duties reasonably, diligently, and honestly: [33]

The Court found it appropriate, and permitted, that the D’s share of the sale proceeds bear the Tees' further remuneration and costs: [34] - [36]

The Tees originally attempted to pay $235K to the D as their share. The Court accepted the Tees costs and remuneration substantially exceeded $65K but accepted that figure as a compromise of the Tees’ remuneration and the fees to be charged by the Tees’ legal team: [40] - [42]

Having failed to accept payment of $235K, the Court ordered the D was to receive ~$172K: [45]

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“Those notes aren’t privileged! Hand them over.”
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P sued D in relation to personal injuries P alleged at around the time they were giving birth. D, to oversimplify, was the hospital’s insurer: [7], [9]
D instructed an expert who produced a report.
P filed a NoM seeking access to a document produced by the expert in response to a subpoena, but over which D asserted legal professional privilege: [1], [9]
P said the document was not privileged or, if it was, privilege was waived: [6]
D had briefed the expert and invited the expert to initially provide a verbal opinion on 6 Qs. The expert gave evidence that during that conversation “(they) referred to.. 2 pages of handwritten notes (they) had prepared. (They) used them as the basis for expressing (their) verbal opinion to (D’s lawyer)”: [10] - [14]
These 2 pages constituted the document P sought and D asserted was privileged.
Privilege attaches to a *communication* not a document. D asserted the document was a communication: [20], [21]
Documents generated unilaterally by an expert in the course of forming an opinion do not attract privilege: [22]
Despite there being a “grey area”, privilege may be claimed in communication between the expert and solicitor if made for the confidential use in the litigation: [24]
A draft report, for example, is not a communication: [25]
It is for the party asserting privilege to prove privilege attaches to a document: [32]
Despite having prepared an affidavit on the topic there was no evidence that the document was intended to be a means of communication between expert and lawyer: [34]
Having so found, the Court did not need to consider the question of waiver. However - noting that disclosure of an expert’s report is an implied waiver of the instructions underpinning that report, and that there was no suggestion the document did not cover material that eventually formed part of the final report - the Court would have concluded privilege was waived: [34] - [37]
P was granted access to, and permitted to inspect, the document: [38]

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Please send a follow to James d'Apice, Coffee and a Case Note, and Gravamen on all your favourite platforms!

In November 2023 James gave a presentation for prominent CPD provider TEN about a developing area of trust law.

In this CLE, James explores:

1. The corporate derivative action

2. Some litigated examples of it

3. The Court's decision in Gillespie v Gillespies Cranes Nominees Pty Ltd [2022] NSWSC 1184

4. Practical suggestions for dealing with corporate derivative actions

5. Practical suggestions for the evolving landscape arising from Gillespie

A link to TEN's website is here: http://www.tved.net.au

#auslaw

#coffeeandacasenote

On 30 October 2023 James was lucky enough to accept an invitation from Dr Madeline Taylor to give a lecture in Dr Taylor's commercial law course at Macquarie University. During this talk James discusses the "gap" between the theory learned at university and what happens when the rubber hits the road, in legal practice. In the discussion, James refers to cases including: Carpenter v Morris [2021] NSWSC 1700 Campbell v Campbell [2022] NSWSC 554 SSC Super Pty Limited [2022] NSWSC 686 Gillespie Cranes Nominees [2022] NSWSC 1184 Australian Karting Association Ltd [2022] NSWCA 188 M & L Richardson Pty Limited [2021] NSWSC 105 #auslaw #coffeeandacasenote #macquarieuniversity

James was a guest of the Lawyers Weekly podcast hosted by the legendary Jerome Doraisamy in October 2023. The two discussed the process of finding your specialty, and the the importance (or otherwise!) of niches.

You can find a link to the Lawyers Weekly version of the podcast here: https://www.lawyersweekly.com.au/podcast/38383-choosing-your-niche-and-communicating-it-to-the-market

“Your Honour, would it be OK if I entered into this deed?”
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Long-running litigation was on foot relating to, among other things, land with a value of around $40m.
By NoM, a receiver appointed by the Court to the relevant Ds in the litigation sought the Court’s advice about whether they would be justified entering into a Deed settling all the pieces of litigation: [12], [15]
The receiver relied on evidence, including confidential advice from counsel on the nature of the settlement: [17]
Some earlier claims, being a portion of the matters in dispute, were settled in a deed 2019: [23]
Some orders in the proceedings were made in May 2023. The Ps filed a Notice of Appeal in respect of them: [30]
Various negotiations followed by correspondence leading to a proposed draft Deed: [31] - [36] 
That was the question before the Court in this matter: whether the receiver would be justified in settling the dispute on the proposed terms. 
There is settled law that a Court can give advice and direction to a Court-appointed receiver in a manner analogous to judicial advice given to a trustee: [37]
The law relating to judicial advice to trustees was relevant with the question of whether a claim can be settled on certain terms being a well-recognised area for the giving of advice: [41]
The Court noted the complexity of the dispute: originating in 1948, proceedings commenced in 2013, 4 years of mediation leading to only partial settlement in 2019, a valuable underlying asset: [43]
The Court said the giving of its advice required a comparison of the position if the deed was entered into versus the position if it was not: [47]
The draft Deed contemplated that all proceedings would be dismissed, mutual releases provided, and all parties bearing their own costs - a “walk away”: [48]
The 2019 deed included releases for costs related to the litigation, but not "additional costs": [49]
Considerable attention was paid to the implication of the releases if the draft Deed was entered into including a claim the “additional costs” outside the bounds of the 2019 Deed: [50] - [58]
The draft Deed would also see the receiver releasing any rights to enforce a damages undertaking made by the Ps in relation to a 2013 interoloctory injunction: [60] - [63]
Ultimately, providing releases of the “additional costs” claim and the damages undertaking were commercial considerations for the receiver: [59], [64]
If the Deed was rejected outstanding risks would remain, including the outcome of the impending appeal, and the difficulty recovering costs in the face of the 2019 Deed: [65] - [68]
The Court considered it would be reasonable for the receiver to enter into the Deed, giving the judicial advice sought: [69], [70]

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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 s461(1)(k) of the Corporations Act 2001 (Cth) - the just and equitable winding up remedy - and has the following structure:

1. The law

2. Litigated examples

3. Practical suggestions

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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 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!”
___
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!”
___
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

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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!”
___
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…”
___
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!?”
___
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!"

___

Two families operated a motel together until their relationship deteriorated. 2XD owned the land the motel was operated on and leased it to 1XD, a Co co-owned by 2XD: [2] 2XC had assisted 2XD over the years, and came to assist with the motel: [13] - [17] The arrangements (for 2XC to help at the motel, and to eventually purchase it from 2XD having paid a deposit) were informal and legally unclear - an arrangement defined by “uncertainty, if not confusion”: [24] 1XC (who was in a domestic partnership with 2XC) ran a separate business providing accomodation among other things. After a time 1XC obtained an EFTPOS machine to accept payments: [37] - [41] 2XD stopped payments to the XCs for their work at the motel, apparently planning to set those “non payments” against an eventual purchase price: [42] Sometimes the 2XC used the EFTPOS machine for motel payments: [44] This diverted funds away from the XDs’ motel bank account: [46] In early 2020, 2XD decided they did not want to proceed with the sale: [47] In around July 2020, the XDs forcibly evicted the XCs and commenced legal proceedings: [48], [49] The dispute crystallised into arguments which parties owed what money, and why: [51] Complexity arose from the messiness of the legal relationship: [52] The XCs were not employees, nor did they have an “equitable lease”, nor were they agents, nor did any equitable relationship arise: [54] - [65], [92] The Court found the parties had a loose, consensual arrangement whose terms were implied: [66] The XCs claimed their deposit and the unpaid “non payments” for motel work; a total of ~$105K. The Court found no reason existed for payment not to be made and the XCs succeeded in their claim: [86] The XDs claimed (among other things) ~$240K of payments made through the EFTPOS machine. There was no conclusive evidence about which payments related to the motel and which related to 1XC’s other business (noting sometimes guests would stay at 1XD’s premises if the motel was full). The Court considered the most fair outcome was to award around half the amount claimed to the XDs: [95] - [102] A number of other small claims brought by the XDs failed, including because no fiduciary obligations arose between the parties: [103] - [112] Orders were made that the XCs pay the XDs $132K, and the XDs pay the XCs $105K - a difference of around $27K: [113] The Court invited submissions on costs but suggested an appropriate order may be that each party bear their own costs. Without wishing to be flippant or disrespectful, each party might also bear their own regrets about failing to document their arrangement. ___ 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!

“Those unjust terms are void, but not the whole contract.”
___
A Co borrowed money. The Co’s dir and that dir’s spouse (together, “the Ps”) guaranteed the Co’s borrowing including by mortgage: [4]
The Ps said the contract was unjust pursuant to the Contracts Review Act 1980 (NSW): [6]
The Co borrowed ~$9m from the D on a 15 month term with ~$1m immediately payable to the D: [7]
On default a higher interest rate would be payable, even after the default was remedied: [15], [16]
A “hefty fee” - 5% of the ~$9m - could be charged by D in the case of *potential* default even for some circs the Ps and the Co could not control: [17], [18], [55]
A contract (unless it’s commercial, which this was not for the Ps) can be unjust due to its contractual operation (“substantive injustice”) or due to the way it was entered into (“procedural injustice”): [26], [33]
Through the prep of the contract, changes requested by the Ps were ignored: [38], [39]
The contract was not negotiated. The Ps’ 1st lawyer did not read it. The Ps’ 2nd lawyer was engaged so late they could only advise, not propose changes: [40]
This in part arose from D’s insistence at the last minute that the Ps change lawyers, having threatened not to continue with the deal if the 1st lawyers remained - an “unfair” tactic with “no good reason”: [42], [66]
The P who was a dir of the Co knew the D’s proposed term was likely too short for the development to be completed: [46]
The Ps had poor English skills and no experience with finance and property development. D was aware of this: [56] - [58], [71]
Independent legal advice was obtained, though in English with no interpreter: [60]
It is likely the Ps understood some of the legal impacts of the agreement, though likely not all of it without a translator: [62] - [65]
It was foreseeable that the Co would default (as the loan term was shorter than needed to finish building) and it was foreseeable that problems would emerge as a result: [68]
There was inequality in bargaining power between the Ps and D; and with the D’s added time pressure, no time to negotiate amendments or seek a translator’s help. D was aware of these issues: [69]
The Court did not find that the entire agreement itself was unjust; merely the “continuing” default interest rate and the “hefty fee”: [74]
The Court declared those terms void: [79]

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“You can’t bring your derivative suit; an oppression claim does that job!”
___
Ps, shareholders in a Co that produced fire collars and similar products for the building industry, sought leave to bring derivative proceedings on behalf of the Co.
The relevant IP for the Co was held in a unit trust with TCo as trustee.
Each of the Ps and the Ds were shareholders in Co and TCo, and unitholders in the trust: [2]
The Ds were directors of Co and TCo.
The relationship between the parties began to deteriorate from around 2014, when P1’s employment by the Co was terminated. From around this time the Ps wanted to sell their shares: [3]
First, the Ps said the Ds caused an improper capital raising by TCo, who then purchased and licensed back some of the Co’s assets. The Ps said this arrangement was on uncommercial terms with the impact of diluting the Ps’ interests: [6]
Second, the Ps said the Ds founded NewCo, and caused the Co to supply NewCo with products NewCo would then sell overseas at a profit. The Ps say the Ds caused the Co to provide services to NewCo on terms not beneficial to the Co: [7]
The Ps wanted leave to bring a suit chasing the Ds including for breaching their contract with the Co and breaching their duties to the Co. They brought additional claims including pursuant to s233 of the CA: [8]
The Ps said their derivative claims were “strong”, and would be pursued at no cost to the Co as the Ps would fund and indemnify the Co for any costs order. The Court noted the oppression claim would be brought in any case: [14]
The real debate surrounded whether the derivative suit was in the best interests of the Co: [15]
For leave to be granted the Court must be satisfied it *is* in the Co’s best interests that leave be granted; not that it could be or is likely to be: [17]
The Court noted it needed to consider whether the Ps could obtain relief from means other than forcing the Co to litigate against its will: [19]
While not determinative the Ps’ Statement of Claim revealed the dispute was really one between shareholders, and another means of achieving a similar result to the derivative suit is the oppression proceedings: [20]
The Court noted authority that the alleged breaches of duty could be accounted for in the valuation of the Ps’ shares in any buyout relief that might be available in the oppression claim: [22]
The Court did not grant the Ps leave to bring a derivative suit: [24]
The Court considered it was not in the best interest of the Co for a derivative suit to be brought where similar relief could be obtained by Ps by other means, and without involving the Co in litigation. It was not shown by Ps that the oppression relief would be inadequate: [23]

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“You can have their shares, even though they’re worth nothing!”
___
P commenced oppression proceedings seeking buyout orders, or a windup.
Co1 was owned 50-50 between P and D2, and bought a site for $4.6m: [4]
Co2 was owned 50-50 between P and D2, and bought a site for $2.9m: [5]
P said they contributed $1.3m to finance and D1 and D2 ~$700K between themselves: [6] Further funds were also contributed to all Cos by both.
Co3 was owned 50-50 between P and D2, and agreed to buy a site for $6.1m in future: [7]
During the hearing P showed debts owed by Co1 needed urgent payment, revealing the Cos needed P to meet their debts: [24]
D1 said D2, their spouse, was little more than a figurehead. D1 said that they operated in the Cos day to day: [31]
D1 said P agreed to provide additional funding for the Cos’ projects without Ds needing to contribute: [33] - [37]
The Court did not accept D1’s evidence, and D2 did not give evidence; the inference arising that it would not have assisted the Ds: [47]
The parties did not record their arrangement: [48]
P said the parties agreed to share the Cos’ expenses and profits 50-50: [51]
Neither P nor D1 proved the agreement they said was made: [56], [60], [62]
In late 2022, D1 instructed the Cos’ builders to stop work on the Cos’ projects, and stopped a finance application: [67]
P said Ds’ failure to pay 50%, the purported termination of the alleged agreement, and the Ds instructing some construction and a finance application to cease were contrary to s232: [76]
The Court found the Ds failure to contribute their 50% was enough to support either a buyout order or a winding up: [77]
The breach of the alleged agreement was not seen as oppressive as the agreement was not proved as pleaded, nor was the ceasing of construction and finance: [77]
The Ds also said, unsuccessfully: P caused inaccurate books to be prepared, and that P breached their directors duties. The Ds also said the relationship had broken down. This was made out, but not a defence to P’s claim: [78]
The next issue was: should relief be a share sale or a winding up (noting that a buyout order can be made for no consideration)?: [79]
P made various submissions in support of a buyout order: [79] - [85]
The Ds accepted the relationship had broken down, but pressed for a winding up: [86]
On balance, the Court found a buyout order was appropriate for Co1, Co2 and Co3: [99], [102]
Noting the indebtedness of each of the Cos to P and the Ds, the value of each Co as nil making the value of the Ds shares in each Co nil: [80], [84], [104], [106]
Having found buyout orders were appropriate, the Court did not need to consider P’s claim for a winding up: [107]
Noting the nil value of the Ds’ shares, the Court ordered that P had to pay certain amounts into Court on account of the Cos’ debts to the Ds and, once paid, cause the transfer of the shares to P: [125]

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“Is the whole group a partnership, and can we dissolve it?”
___
In the 1950s 3 brothers started a business which became successful. It was run as a group of Cos and trusts that grew in value and complexity.
The group was run informally by the 3 brothers (and later their kids) and structured pursuant to tax advice: [20] 
In 2018 P sued seeking to divide the business into 3 equal parts; each part passing to each brother’s family or estate.
The Court accepted the relationships broke down for “unclear and complicated” reasons including issues with a parcel of land allegedly owned by P and issues with the new generation running the group: [41] - [50], [126], [154]
P said the group was operated by an “overarching” partnership; saying the group had many of the attributes of a partnership (run by 3 bros, profit share etc.): [82], [101]
However, the group’s underlying assets were held on trust. A partnership can be a beneficiary of a trust, but not a legal owner of assets held on trust: [95]
Fatal to P’s claim: if a receiver was appointed to the “partnership” what could that receiver do about the assets held on trust? Nothing outside of the trust deeds’ bounds: [97]
P alleged parts of the group was a “sub-partnership” between the brothers’ spouses. However, the spouses were trustees, not partners: [98], [99]
The group was found to be an “overarching” partnership: [101]
P then said the group should be wound up on the just and equitable grounds: [103]
In 2017 one brother died, his child then representing his interests. Negotiations to divide the group were conducted and failed. This litigation was commenced. Together this showed the group could not return to its state when run by all 3 brothers: [115]
However the appropriate question re s461 is whether *each company* (many of which were trustees) should be wound up. Ps did not make submissions on each company: [119]
No suggestion was made that each Tee company was failing in its obligations with no suggestions trust assets were in jeopardy: [120], [121], [132]
In the absence of this evidence and submissions, it was not for the Court to try to find a basis for a s461 order: [124]
P sought the dissolution of the trusts in the group, but the only basis for that would be bringing forward each one’s vesting date. In the absence of hearing from the beneficiaries the falling out between the brothers was not a basis for the Court to direct the trustees to so exercise their powers: [139]
P was not itself a party to the partnerships in the group and so could not dissolve them: [146]
The Court considered its conclusions “could not be regarded as a satisfactory resolution of the case”: [154]
The Court found that the brothers, having chosen this structure in large part for tax effectiveness, must now live with the consequences and sought submissions on next steps: [155], [158]

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“Money down; then you can sue me!”
___
P sued the Ds for $4m claiming it was an unpaid builders margin: [1]
The Ds sought security for their costs: [2]
In 2018 P worked on 2 projects for some Ds, with the Ds’ Dir expressing interest in buying shares in P despite a dropping margin: [7]
Later in 2018 some of the Ds entered into the shareholders deed. One of the Ds became a 50% shareholder in P and P was entitled to charge an 8% margin on costs for construction work done for the Ds: [8] - [10]
In 2019 P began construction work and issued D invoices for costs plus 8%: [12]
The Dirs of P and the Ds incorporated NewCo to do building work. There was some complexity as to whether NewCo charged a margin or was entitled to: [13] - [18]
The Dirs of P and the Ds incorporated NewerCo which, in a complicated arrangement, also purported to do building work for the Ds: [22] - [25]
In 2022, the Dirs of P and the Ds agreed to part ways: [26] - [30]
P then rendered an invoice to the Ds for 8% of the cost of works performed by P, NewCo, NewerCo and related entities: [31]
After settlement negotiations failed, and the making of SOPA payment claims, P commenced proceedings in August 2022: [32] - [39]
The Ds sought financial information from P: [44]
P provided a P and L and said on the assumption its invoices were paid, it was profitable: [44]
P represented that it had tendered successfully for a $20m job, but it appeared that may have been a party related to the P: [45]
The Ds sought security for their costs: [46]
P resisted the application. It said its prospects were strong based on credit findings it said would be made about the Ds’ business practices at final hearing: [50]
P said the Ds’ Dir sent emails requesting invoices be re-issued to refer to other developments, and that contracts were backdated: [51], [52]
The Court said these issues were peripheral to P’s central claim that came from the “complex and changeable” contractual environment: [53]
The Court found that even if the credit finding contended for were made, it was not clear how that would affect the parties’ contractual relationship: [54]
Regarding finances, P said it was $1.4m in deficit. If the $4m claimed was paid its position would stabilise: [56]
The Ds said the claims were claims of other entities related to P, and not P themselves. That meant that P’s prospects were not as strong as claimed and, even if the claims succeeded, the money would not necessarily revert to the P: [57] - [61]
The Court considered whether an order for security for costs would stifle the proceedings.
To prove this, P had to prove neither it, nor those who stood to benefit from the litigation, could provide security. Including due to insufficient evidence about the beneficiaries of a relevant trust, P failed to meet this test: [63] - [71]
The Court ordered that P should provide D with $250K security for their costs, and for it to have its costs of this application: [79]

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“Nope! The injunction stays and you’re still restrained.”
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P was a member of an international group of leasing businesses. D was a former employee of P’s.
Commencing in 2016, over time D had been promoted, signing a number of new employment agreements: [4]
The most recent contract included a 3 month notice period and an extended restraint. D gave evidence they did not read the agreement before signing, instead relying on emails exchanged at the time: [7], [8]
In Feb 2023, D resigned purporting to give 4 weeks notice: [9]
After D left employment, P was granted an injunction restraining D from competing with P for a period: [2]
D entered into an employment agreement with a competing property business purporting to commence in March 2023: [12]
D’s resignation was a repudiation that P could accept and terminate, or otherwise keep on foot. P kept the contract on foot: [13]
The “garden leave” requirements that P said remained on foot were indeed restraints of trade: [13]
In early March P got an injunction preventing D from working for their new employer: [15]
D sought to discharge the injunction: [16]
P had to show the restraint was reasonably necessary to protect its legitimate interests, and otherwise compliant with the NSW legislation: [20] - [22]
D said they were not bound by the 3 month notice period as they had not read the document (legally immaterial where a person has signed a document known by them to include contractual terms): [25]
P said D had developed personal relationships, had access to confidential information like tenders and pricing, and may take 12 months to properly replace: [28]
D said head hunting was common among the small industry and the restraint was unnecessary: [30]
P established a serious question to be tried due to (i) D’s senior status and personal relationships, (ii) that (at least) 3 months might be needed to onboard a replacement for D, and (iii) P had a legitimate interest in protecting the confidential information D was aware of: [31] - [33]
Noting D’s role with P there was a risk damages were not an appropriate remedy: [35]
While D might face some financial risk, P undertook to continue paying their salary, nor was there evidence that D’s signon bonus was at risk: [36], [37]
That protected D’s position: [42]
D “was the author of (their) own misfortunes” by entering into an arrangement with a new employer in breach of their previous obligations: [40]
The balance of convenience favoured the maintenance of the injunction: [43]
The application to dismiss the injunction failed. D remained bound by it: [45]

“But our relationship hasn’t broken down!”
___
C1 and C2 did development work together.
Two natural persons, P and D, were inter alia (i) equal shareholders in C1 and C2, and (ii) dirs of C2. D was the sole dir of C1: [1] 
P brought an application pursuant to s233 and s461 to wind up C1 and C2: [2]
Originally, D had borrowed money from P’s parent for the venture. P’s parent only agreed so P could learn the property development business in a quasi-partnership venture, built on trust: [4], [54]
Various loans between the entities, and P’s parent, were made for C2 to purchase properties for development: [9]
Over time, P’s spouse became involved: [11] - [15]
P took a passive role in the venture: [53]
P alleged D caused over $3m in improper transfers from C1’s accounts: [59] - [61]
D returned a significant amount of that sum: [62] - [64]
Evidence suggested D “parked” some of C1’s money in D’s own offset accounts to reduce D’s interest payments, and bought a car without permission: [66], [67], [70], [81]
D diverted funds of C1 that could have been used to pay its debts and made other payments with a lack of transparency; apparently a breach fo DDs, as well as sufficient to enliven both s461 and s232: [75]
The breakdown in relations was shown by increasingly toxic WeChat exchanges: [90] - [93]
The lack of trust stymied further development opportunities, but D said suggestions of a breakdown in relations were exaggerated: [98], [99]
C1 and C2 had not prepared financial statements from 2018 with no explanation: [107]
D blamed P’s spouse for not providing the supporting documents needed: [101] - [104]
Breaches of DDs and inadequate accounts can be sufficient to wind up a Co on the just and equitable basis: [109]
C1 and C2 also failed to comply with their tax obligations or pay their debts; likely a breach of D’s DDs and sufficient to ground an s461 order: [110], [116], [122]
The failure by C2 to resist a VCAT claim against it is further evidence of deadlock between the parties: [128]
The lack of records made it difficult for the Court to understand the Cos’ position. It appeared at least one insolvency test might be met: [129], [133]
To the extent that D raised transactions P engaged in that might have been improper, the Court considered a liquidator would be well placed to pursue these: [154]
The erosion of trust and confidence meant it would be just and equitable to wind the Cos up (s461) and that the Cos’ conduct was relevantly unfair (s232): [159] - [161]
The status quo was “wholly unsatisfactory” and the existing problems - tax debt, poor record keeping and governance - were likely to worsen. Independent liquidation was therefore attractive: [166]
There was no alternative remedy and so the Court ordered that C1 and C2 be liquidated: [167] - [177]

James had the chance to sit down with the wonderful Rose Inglis for her Rose Tinted Law podcast the other week!

James (me - I am just writing this and pretending we are a big team) probably revealed more personal stuff, and more TikTok beef stuff, here than ever before.

Enjoy!

And catch Rose here: https://rosetintedlaw.com.au/rtl-the-podcast

“Nope. You can’t stand in the company’s shoes.”

___

In a family dispute, P wanted the Court’s leave to pursue a $10m claim on behalf of Co. P said the $10m was owed by D1, trustee of a family trust, as a loan to be repaid: [2], [17]

P also sought leave to proceed against D2 and D3 for breaching their duties to Co: [3]

P said the loans were made where D1 had doubtful capacity to repay, and where interest was not charged: [4], [5]

At a 2021 meeting, the Co’s dirs (including an independent dir) considered the loan from D1 and resolved not to seek repayment at that time: [10], [21]

P gave an undertaking to pay Co’s costs if leave was granted, despite not having much money: [11]

A dispute regarding D3’s removal as trustee of a family trust lead to a far reaching settlement deed being entered into in 2019. That established Co’s corporate governance structure, including the independent director: [18]

There are a number of related pieces of litigation on foot between the parties: [24]

It was accepted by all that Co was not going to bring proceedings seeking repayment, or alleging breaches of duty: [27]

Whether P was acting in good faith in pressing a claim against D1 was considered in the context of P being a shareholder in Co, there being inconsistencies in P’s claim, and P’s offering of an indemnity of dubious value: [33], [34]

Whether P was acting in food faith in pressing the claims against D2 and D3 was assumed to be so but, later, found to be irrelevant as the claims raised no serious question to be tried: [39]

The Court was not satisfied that the claim was in the Co’s best interests. No financial evidence comparing alternatives was tendered, and the Court was reluctant to disturb the commercial judgement of the Co’s directors: [46], [47]

The Court noted the established corporate governance principle that directors could legitimately make decisions against the wishes of a majority of shareholders: [50]

It was found to be contrary to the Co’s best interests to “sidestep” or “outflank” the decision of Co’s board not to pursue the debt now, especially as no challenge was raised to the decision making process used: [53], [54]

Was it in the best interests of the Co *for P* to bring the claim? No, due to the existing family tensions and possible inability of P to separate P’s interests from his own, and the fact P did not propose instructing independent lawyers if leave was granted: [56]

As the claim was not brought in good faith or in the Co’s best interests, P was not granted leave to pursue Co’s claim against D1: [63]

Nor were the claims against D2 and D3 seriously arguable. P’s claim was poorly pleaded and contradictory in part - whether the loan would or would not be repaid, whether it was currently statute-barred or not: [64], [65], [71], [72]

P’s application was dismissed: [83]

"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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“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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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.

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“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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