Application of Valad Commercial Management Limited and Ors

[2010] NSWSC 646

CITATION:	Application of Valad Commercial Management Limited & Ors [2010] NSWSC 646
HEARING DATE(S):	11 June 2010
JUDGMENT DATE :	15 June 2010
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	15 June 2010
DECISION:	Order that the second to fifth defendants' interlocutory process filed on 8 June 2010 be dismissed with costs.
CATCHWORDS:	CORPORATIONS – application for summary dismissal of winding-up application – where deadlock in joint venture operated by trustee – where disputes and oppressive conduct alleged to arise from defendant’s breach of contract - CORPORATIONS – whether winding-up application is abuse of process by re-litigating issue already decided – whether abuse of process because another more suitable remedy exists – whether instituting winding-up proceedings breaches contractual dispute resolution clause and contractual term not to sell assets – whether winding-up application misconceived because winding-up trustee will not result in winding-up of trust – whether winding-up proceedings commenced for improper collateral purpose to cause defendant to commit event of default – question for final hearing whether parties entitled to invoke contractual dispute resolution clause in answer to winding-up application – question for final hearing whether defendant breached contractual obligation to act in good faith – question for final hearing whether grounds of oppression made out
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83 Charles Forte Investments Ltd v Amanda [1964] Ch 240 Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
PARTIES:	Applicants: Valad Commercial Management Limited (2nd defendant) Valad Funds Management Limited (3rd defendant) Gareth James Price (4th defendant) Peter Edmund Hurley (5th defendant) Respondents: Trust Company Limited (1st plaintiff) Ashington Capital Pty Ltd (2nd plaintiff)
FILE NUMBER(S):	SC 2010/136187
COUNSEL:	Applicants: A J Sullivan QC with S Free Respondents: D J Fagan SC with A P Cheshire
SOLICITORS:	Applicants: Blake Dawson Lawyers Respondents: McLachlan Thorpe Partners

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Tuesday, 15 June 2010

Trust Company Limited & Anor
v
Noosa Venture 1 Pty Ltd & Ors

JUDGMENT

1 HIS HONOUR: This is an application for summary dismissal of the plaintiff's claim in paragraph 1 of the originating process that the first defendant be wound up. The application is urgent because, at least prima facie, it is an event of default of the first defendant's agreement with its lender if a winding-up application is brought against the first defendant and not dismissed within ten business days. The originating process was filed on 1 June 2010 and it is arguable that the period of ten business days expires tomorrow.

2 The application to wind up the first defendant is brought, partly, under s 461(1)(k) of the Corporations Act 2001 (Cth), namely, on the just and equitable ground, and partly pursuant to s 233(1)(a) as relief against oppression. There is no appearance for the first defendant. It is deadlocked. Indeed, the deadlock is one of the grounds on which the first plaintiff seeks an order that the first defendant be wound up, that is, that it be wound up on the just and equitable ground.

3 The grounds upon which summary dismissal of the winding-up application is sought are as follows. First, the second to fifth defendants contend that the winding-up application is an abuse of process being an attempt to re-litigate an issue decided adversely to the plaintiffs by Brereton J on 28 May 2010.

4 Secondly, the second to fifth defendants contend that the making of the winding-up application is a breach of implied or express terms of a Unitholders Agreement to which the plaintiffs and the first, second and third defendants are parties.

5 Thirdly, those defendants contend that the winding-up application is misconceived because the parties' relationship is governed by a unit trust of which the first defendant is trustee. Winding-up of the trustee would not result in the winding-up of the trust.

6 Fourthly, those defendants contend that the application is brought for an improper collateral purpose.

7 Fifthly, those defendants contend that in the light of a contractual provision providing machinery for breaking a deadlock, being machinery the second defendant has purportedly invoked, those defendants contend that the application to wind up the first defendant is manifestly hopeless.

8 Sixthly, those defendants contend that in any event, it is an abuse of process to seek a winding-up order which could cause irreparable damage to the parties because there is another and more suitable remedy available to the plaintiffs, namely, seeking the determination by the court of the issue of whether the second defendant has validly invoked the provisions in the Unitholders Agreement for resolving the deadlock.

9 Some background is necessary to understand these issues. The shares in the first defendant are held equally by the first plaintiff, Trust Company Limited (“TCL”), and the second defendant, Valad Commercial Management Limited (“VCML”). The first defendant is the trustee of the Noosa Venture Trust (“Trust”). It was established as a vehicle for the operation of a joint venture for the acquisition and development of a property known as the Sheraton Hotel in Hastings Street, Noosa.

10 The Noosa Venture Trust is a unit trust. The units are held equally by TCL and VCML. TCL holds its shares in the first defendant and its units in the trust as custodian for the second plaintiff, Ashington Capital Pty Ltd or ACPL. Both ACPL and VCML hold their interest in the shares in the first defendant and the units in the Trust on subtrusts, but that is not of present relevance.

11 There are four directors of the first defendant being two nominees of VCML, namely, Messrs Price and Hurley, the fourth and fifth defendants, and two nominees of ACPL. Pursuant to clause 5.7(c) of the Unitholders' Agreement all decisions of the Board of the first defendant must be unanimous.

12 The parties to the Unitholders' Agreement are the first defendant, VCML; ACPL, then called Ashington Capital Ltd; TCL; and the fourth defendant, Valad Funds Management Ltd (“VFML”). VFML's role is as funds manager. It controls payments and expenditure in respect of the project and keeps the books.

13 The Unitholders' Agreement is dated 5 May 2008. Clause 2.2 describes the objectives of the Project. The first defendant, in the agreement called “the Trustee”, was to acquire the Development Site on the exercise of put and call options. I assume that this is the site of the existing Sheraton Hotel in Noosa. The first defendant purchased the Sheraton Noosa for about $93 million. The purchase was funded by equity contributions from VCML and ACPL, and by a loan from Suncorp. Clause 2.2(a) of the Unitholders' Agreement describes the objectives of the project as follows:

“ 2.2 Carrying out the Project - Objectives
(a) The Unitholders shall procure that the Trustee shall cause the Project to be carried out upon the exercise of the put option or the call option under the Put and Call Option Agreement, which shall principally involve:
(i) the purchase of the Development Site by the Trustee;
(ii) the obtaining of all necessary approvals to enable the development of the Development Site by the construction of the Works thereon;
(iii) the construction of the Works on the Development Site;
(iv) the carrying on of Operations;
(v) the sale of the Development Site as and when the Works have been completed; and
(vi) such other acts or activities as are incidental to effect the carrying out of the foregoing activities or as are agreed upon by the Unitholders. ”

14 The Works to be constructed on the site were defined as follows:

“ ’Works’ means the work to be carried out on the Development Site as envisaged by the Concept Plans, the Feasibility Study and the Plans and Specifications and as determined by the Board from time to time. ”

15 Clause 2.2(b) provides:

“ (b) From the date of this Agreement the First Unitholder and Second Unitholder must (and must use all reasonable endeavours to procure its employees, consultants and contractors (except Cornerstone Noosa Pty Limited) to):
(i) co-operate with the other Parties in relation to the performance of its and the other Parties’, and the exercise of its and the other Parties’ rights, under this Agreement; and
(ii) act in good faith towards each other in relation to all matters under this Agreement and unless the contrary intention appears, this obligation to act in good faith does not require the First Unitholder or the Second Unitholder to act materially contrary to its commercial objectives or in any way waives diminishes or prejudices any rights a non-defaulting Unitholder would otherwise have but for this clause under this Agreement as a result of a Unitholder Default; and
(iii) promptly disclose to the other, any material information regarding the Project which comes into the possession of one but not both of them; and
(iv) take all reasonable steps (including execution of documents) and do everything reasonably required to give effect to the transactions contemplated by this Agreement. ”

16 Clause 2.4 provides that funding for the Project is to be made through the Trustee. Clause 3.1(a) provides:

“ 3.1 Project funding
(a) The Project shall be funded by equity contributions, such borrowings or the procuring of such other financial accommodation and secured over such of the assets of the Trust as the Unitholders may from time to time determine, subject to the provisions in this Agreement. ”

17 Clause 5.10 provides:

“ 5.10 Deadlock
(a) If there is a deadlock between the Directors of the Board in relation to any decision of the Board that decision shall be immediately referred to the Chairman of each Unitholder for resolution.
(b) If the Chairman of each Unitholder are not able to agree on the relevant proposed decision within 10 Business Days of its referral to each of those Chairmans, either Unitholder will be entitled:
(i) in relation to a dispute where the matter the subject of that dispute is material to the Project, refer the dispute for resolution under the provisions of clause 22; and
(ii) in relation to any dispute to which clause 5.10(b)(i) does not apply, the Unitholders agree that the provision of clause 23.2(e), (f) and (g), 23.3, 23.4 and 23.5 apply to that dispute. ”

18 Clause 18 deals with defaults by a unitholder. Clause 18.1(a) and clauses 18.2, 18.3, 18.4 and 18.5 provide:

“ 18.1 Default events
Specified default events by or in relation to any Unitholder (unless otherwise stated in this clause 18.1) for the purposes of this Agreement comprise:
(a) ( Performance default ): any material breach of or default under this Agreement resulting from failure by that Unitholder to perform any provision of, or liability under, this Agreement, except for a rectificable breach or default, which is rectified within 20 Business Days following written notice from any other Party requiring rectification [or] if the breach is not capable of rectification and the non-defaulting Unitholder can be compensated by payment of money, the Defaulting Unitholder fails to pay reasonable compensation specified in the non-defaulting Unitholders notice within 20 Business Days of the Defaulting Unitholder’s receipt of that notice;
...
18.2 Default notification
Any Defaulting Unitholder must notify each other Party of any Unitholder Default by or in relation to that Defaulting Unitholder promptly following receipt of actual notice by that Defaulting Unitholder of that Unitholder Default.
18.3 Unitholder default notice
Any Complying Party may at any time during any Continuing Default give a Unitholder Default Notice to any Defaulting Unitholder.
18.4 Unitholder default enforcement
If the Unitholder Default remains unrectified upon the expiration of any grace or cure period specified in clause 18.1 stated in the relevant Unitholder Default Notice, any Defaulting Unitholder is, following receipt of a Unitholder Default Notice, liable to:
(a) ( Rights suspension ): if the breach relates to a failure to comply with a funding obligation in respect of the Project under this Agreement, suspension whilst the default continues of all rights attaching to its Interest (including without limitation, the loss of voting power at the Board, Unitholders and Shareholders meetings and of the right to sell its Interest to third parties and that the presence of such Defaulting Unitholder will not be required to make up any quorum for any such meetings); and
(b) ( Compulsory transfer ): the application of clause 14 in relation to its Interest or the Project.
18.5 Unitholder remedies
Any Complying Party, following any Unitholder Default Notice under clause 18.3, retains any right under this Agreement against any Defaulting Unitholder in relation to any breach or default by that Defaulting Unitholder, in addition to any other right provided by law, except to the extent that the liability of that Defaulting Unitholder is excluded or limited under any provision of this Agreement. ”

19 If a breach is not rectified as required by default notice under clause 18, the non-defaulting Unitholder can require the Trustee to sell the Project or sell the Defaulting Unitholders Interest in the Project at an independent valuation. The sale of a Defaulting Unitholders Interest in the Project can be to the continuing Unitholder or to an external party (clause 14).

20 Clause 22 is of particular significance, it provides:

“ 22. Dispute Resolution - Deadlock
22.1 Deadlock
If there is a deadlock between the Unitholders (or their representatives) in relation to any matter specified in clause 5.10(b)(i) then the Unitholders (or their representatives) must negotiate to resolve the dispute withing 20 Business Days of one of those parties notifying the other of the existence of the dispute.
22.2 Transfer Notice
If a deadlock is not resolved within the period of 20 Business Days referred to in clause 22.1, then either Unitholder may serve on the other of them (‘ Recipient ’) a written notice (‘ Transfer Notice ’) signed by or on behalf of that Unitholder (‘ Offeror ’) containing an offer to, either:
(a) purchase the whole, but not part, of the Recipient’s Interest in the Project; or
(b) sell the whole, but not part, of its Interest in the Project to the Recipient,
in either case for the Transfer Price, and on the same Transfer Terms subject to clause 22.8.
22.3 Recipient’s Notice
Within 10 days after the date of service of a Transfer Notice (‘ Recipient’s Period ’), the Recipient may serve a written notice (‘ Recipient’s Notice ’) on the Offeror accepting one of the offers contained in the Transfer Notice.
22.4 [Offeror’s] Notice
If no Recipient’s Notice is served during the Recipient’s Period, the Offeror may by written notice (‘ Offeror’s Notice ’) served on the Recipient within 5 Business Days after the expiry of the Recipient’s Period require that the Recipient accept such of the offers contained in the Transfer Notice as shall be specified in the Offeror’s Notice. Upon service of the Offeror’s Notice, the Recipient shall be conclusively deemed to have accepted the said offer.
22.5 Acceptance
An offer contained in the Transfer Notice shall not be capable of acceptance except by virtue of the operation of clauses 22.3 and 22.4.
22.6 No withdrawal of notice
Except as otherwise stated, once a notice has been given pursuant to this clause 22 it may not be withdrawn except with the written consent of the Recipient.
22.7 Completion
Completion of the transfer of the Interest the subject of the accepted offer (‘ Transfer ’) will take place 40 Business Days after acceptance of the relevant offer.
22.8 Fee and additional funding to be paid
Notwithstanding anything in this clause 22, if a transfer is implemented pursuant to this clause 22:
(a) the Fee and (all interest accrued thereon) must be paid by the Second Unitholder to VFML on completion of the Transfer; and
(b) all additional funding made available pursuant to clause 3.4 must be repaid on completion of the Transfer.
22.9 Intentions
The Unitholders agree that it is their overriding intention that:
(a) only those disputes which are material to the Project are to be referred to resolution under this clause 22; and
(b) the Unitholders and their Chairman, officers and representatives act in good faith for the purposes of resolving any disputed matter before it is referred for resolution under clause 22.2 to 22.8 inclusive.
22.10 Definitions
In this clause 22:
‘ Transfer Notice ‘ means a notice duly served under clause 22.2.
‘ Transfer Price ’ means the price specified in the Transfer Notice.
‘ Transfer Terms ’ means the relevant parties’ Interest in the Project is to be sold or purchased (as the case may be) free from any Encumbrances and together with all rights attaching thereto as at the date of service of the Transfer Notice (other than rights to receive distributions which shall have been paid prior thereto) or at any time thereafter and that the consideration for the relevant Unitholders Interest in the Project is to be the Transfer Price. ”

21 The fee referred to in clause 22.8 is a fee of $20 million. Also, on 5 May 2008 ACPL and VFML agreed that in consideration of VFML introducing ACPL to the Project by arranging the issue of units in the Trust and shares in the Trustee, ACPL agreed to pay $20 million to VFML. This agreement is called the Fee Agreement. Under the Fee Agreement the fee of $20 million is payable within five years of the acquisition of the property by the Trustee.

22 Clause 23 deals with disputes other than those where a deadlock arises which is to be dealt with by clause 22. It appears from clause 5.10(b) that such disputes to be dealt with under clause 23 would be disputes that are not material to the Project. Clause 23 provides:

“ 23. Dispute resolution
23.1 Disputes
This clause 23 applies to any dispute or difference (‘ dispute ’) arising between the parties in relation to:
(a) ( Interpretation ): this Agreement or its interpretation;
(b) ( Rights ): any right or liability of any Party under this Agreement; or
(c) ( Action ): the performance of any action by any Party under or arising out of this Agreement, whether before or after its termination,
except where a deadlock arises between the Directors of the Board or the Unitholders which deadlock will be dealt with in accordance with clause 22.
23.2 Dispute negotiation
(a) ( Restriction ): Where this clause 23 applies, a Party must not take court proceedings under this Agreement, unless that Party has complied with this clause 23.2.
(b) ( Dispute notification ): A Party claiming that a dispute has arisen must notify the other Party specifying details of the dispute.
(c) ( Negotiation ): Each Party must refer a dispute to an authorised officer for consideration and use its best efforts to resolve the dispute through negotiation within 7 days following the dispute notification or longer period agreed between the parties.

(d) ( Referral ): Each Party must refer the dispute to its chief executive officer, in the event that the authorised officers of the parties fail to resolve the dispute within the specified period.
(e) ( Mediation ): Each Party must following reference to its chief executive officer use its best efforts to resolve the dispute by agreement or through an agreed mediation procedure.
(f) ( Process termination ): A Party in compliance with this clause 23.2 may terminate the dispute resolution process by notice to the other Party at any time after 7 days following reference of the dispute to its chief executive officer.
(g) ( Restriction release ): A Party is not required to comply with this clause 23.2 in relation to any dispute where the other Party is in breach of or default under this clause 23.2 in relation to that dispute.
23.3 Court Proceedings
Each Party may apply to a court of competent jurisdiction to determine a dispute which remains unresolved following the negotiation process specified in clause 23.2.

A Party may at any time apply to a court of competent jurisdiction for any equitable or other remedy for reasons of urgency, despite anything contained in this clause 23.
23.5 Continued performance
Any Party must continue to perform any liability of that Party in compliance with this Agreement relating to any issue in dispute, despite and during any dispute negotiation or court proceedings being conducted under this clause 23. ”

23 Finally, clause 27.10 provides:

“ 27.10 No termination of Trust
Each of the parties agrees with each other that none of them will take any steps prior to the sale of the Development Site or the sale of the Interest to terminate or vest the Trust or procure any distribution of the capital or assets other than profits of the Trust or in the case of the Unitholders apply for redemption of any part of its Interest in all cases without the previous written consent of all Unitholders or in accordance with this Agreement. ”

24 Ashington Management Pty Limited (“AMPL”), entered into a Services Agreement with the Trustee and with VFML for it to provide project management services to the Trustee. These services included coordinating necessary approvals for the Project, planning the design and development of the Project, and other aspects of project management. For these services AMPL was to be provided a services fee by monthly instalments as a percentage of the Project Cost (see clause 5 of the Services Agreement).

25 On 27 February 2009 Valad Property Group released half yearly results showing a loss of $821 million. It announced its intention to sell down its position in Noosa over time. ACPL contends that VCML has refused to agree to progress the proposed development. ACPL says that VCML has rather determined on a strategy of obtaining development approval for the Project and then seeking to sell the site. There is, prima facie, evidence that this has been VCML's strategy. ACPL says that VCML has refused to cooperate in the taking of necessary measures to progress the redevelopment by not only obtaining necessary approvals for the development of the site and the construction of the Works, but also carrying out the construction of the Works, managing improvements to be constructed on the site as contemplated by a feasibility study, and by the sale of the site when the Works have been completed. ACPL considers that a greater profit is likely to be obtained by redeveloping the site as initially planned than by seeking to sell the site after the obtaining of development approval.

26 There is, prima facie, evidence that VCML has not been prepared to agree to measures that would be necessary for the parties to move towards the third and subsequent objectives listed in clause 2.2(a) of the Unitholders' Agreement. The parties were unable to agree upon a project plan and budget for the 2009/2010 financial year. According to Mr Craig Anderson, the Managing Director of Ashington Group Limited, the parent of ACPL, VCML refuses to make an explicit statement of its plans and intentions with respect to the Noosa joint venture. According to the plaintiffs' evidence on the application, VCML's representatives have stated that the joint venturers should pursue an alternative project strategy without stating what that strategy is. According to the plaintiffs, VCML has then stated that until a clear project strategy is agreed and adopted, further development work should be suspended.

27 On 13 April 2010 VCML advised that there was a deadlock between the directors of the board of the Trustee on three proposed decisions, namely:

“ 1. confirmation of the amount of equity contributions due and payable by each joint venture partner under the Unitholders Agreement, including each Unitholder’s contribution of $2.5 million ( June 09 Equity Contribution ) as set out in clause 3.2(a)(iv) of the Unitholders Agreement;
2. renegotiation of the Services Fee payable to Ashington Management Pty Limited ( AMPL ) under the Services Agreement between NV1, VFML and AMPL dated 5 May 2008 ( Services Agreement ) and the Asset Management Fee payable to VFML under the Unitholders Agreement; and
3. approving and adopting an updated Project Plan and FY09/10 Budget that addresses the issues arising from the meetings and discussions held since mid-2009.
(together Proposed Decisions ).”

28 VCML advised that:

“ By this letter, we now refer each Proposed Decision to the Chairman of VCML and the Chairman of ACL for resolution in accordance with clauses 5.10 and 22 of the Unitholders Agreement ".

This invoked clause 22.1.

29 On 20 April 2010 ACPL wrote to VCML as follows:

“ We refer to your letter of 13 April 2010. We also refer to the Unitholders Agreement dated 5 May 2008 between Valad Commercial Management Ltd (VCML) and Ashington Capital Ltd (ACL) amongst others. Any terms capitalised in this letter and not defined have the same meaning as in the Unitholders Agreement.
We note that we do not believe there is a deadlock between the Directors of the Noosa Venture 1. Pty Ltd Board in relation to the three proposed decisions stated in your letter of 13 April as no resolutions have been voted upon by the Board in relation to any of these matters.
Despite this, we are willing to enter into the Dispute Resolution Deadlock process in relation to the matters set out in your 13 April letter but do so on the basis that we reserve all of our rights.
ACL proposes that the Chairman of VCML and ACL meet to discuss the proposed decisions. Can VCML confirm details of their Chairman and suggest an appropriate time, date and place for the meeting to occur. ”

30 Notwithstanding this letter, on 29 April 2010 ACPL wrote to Messrs Hurley and Price at VCML stating that Mr Hurley had been unavailable to attend a meeting and that clause 5.10(b)(i) had not been complied with. ACPL then said:

" Pursuant to Clause 5.10(b)(i) of the Unitholders Agreement we refer the matters set out in your letter of 13 April to the Dispute Resolution - Deadlock process as set out in Clause 22 of the Unitholders Agreement. "

31 Prima facie

, ACPL thereby required VCML to negotiate with it to attempt to resolve the dispute within 20 business days. In the event of the dispute not being resolved, either party could serve a Transfer Notice under clause 22.2. The plaintiffs say that VCML did not negotiate in good faith as required by clause 22.9(b) to attempt to resolve the dispute and that, accordingly, VCML was not entitled to serve a Transfer Notice under clause 22.2.

32 On 5 May 2010 a meeting was held between representatives of the two unitholders. The three issues of disagreement were discussed. On 10 April 2010 VCML submitted an "alternative business case" for the payment of fees to AMPL. VCML proposed a revised and lower fee structure for the development services being provided by AMPL based on the assumption that the Project would be sold after development approval was obtained. ACPL did not agree to the proposal.

33 The plaintiffs did not clearly particularise the basis for contending that the negotiations envisaged by clause 22.1 were not carried out by VCML in good faith, except by submitting that the dispute in relation to the three issues had only arisen because of VCML's breach of its obligation to pursue the objectives of the Project in good faith as those objectives were set out in clause 2.2. The plaintiffs say, as I understand it, that for VCML to adhere in negotiations to a position taken in breach of contract was not to negotiate for the resolution of the disputed issues in good faith.

34 VCML has taken the position that the dispute about the three issues, namely, equity contributions, the scope of the Project to be reflected in a project plan and budget, and the amount of fees payable to AMPL, was not resolved by 27 May 2010, being 20 business days after ACPL's notification of the dispute for resolution under clause 22.

35 Later on 27 May 2010, VCML served a purported Transfer Notice pursuant to clause 22.2 of the Unitholders' Agreement offering to either purchase the whole of ACPL's Interest in the Project for $20 million, or to sell the whole of its Interest in the Project to VCML for $20 million. Counsel for ACPL said that it could not raise $20 million to buy VCML's share of the project, although there was no evidence about that. If ACPL is required to sell its Interest to VCML for $20 million, it will still be required by clause 22.8 to pay VFML the introduction fee of $20 million. The plaintiffs submit that this would be unfair. The plaintiffs' counsel submit that the parties expected that the introduction fee would be paid from the profits on completion of the development, and although the Unitholders' Agreement provides for the fee to be payable earlier in the event of a transfer under the deadlock provisions in clause 22, it would be unfair if the payment were accelerated because of VCML's alleged breach of the agreement where, so it is said, that breach led to the deadlock to which clause 22 applied. By contrast, if ACPL had sought to invoke clause 14, and to have required VCML to transfer its Interest in the Project to ACPL at valuation, the fee would not be accelerated (clause 14.10).

36 ACPL did not serve a Recipient's Notice under clause 22.3 electing to accept either offer.

37 On 8 June 2010 VCML served an Offeror’s Notice purportedly pursuant to clause 22.4. This required ACPL to sell its Interest to VCML for $20 million. VCML contends that on 4 August 2010 ACPL will be required to transfer its shares in the Trustee and its units in the Trust to VCML. ACPL denies that it is so obliged. It contends that VCML is not entitled to rely on clause 22 because VCML has breached the Unitholders' Agreement by failing to comply with clause 2.2 and has breached the agreement by failing to comply with cl 22.9(b). ACPL also says that VCML is not entitled to rely on clause 22 where to do so would be "part of a regime of oppressive conduct of VCML against [ACP] and TCL". It also contends that clause 22 is void for uncertainty.

38 On 19 May 2010 ACPL filed an originating process seeking an order that the first defendant be wound up on the just and equitable ground. ACPL is not the shareholder in the Trustee. TCL holds the shares on its behalf. ACPL lacked standing to bring that application. After this was pointed out by VCML's solicitors, ACPL filed an interlocutory process seeking orders that TCL be joined as an additional plaintiff or be substituted as plaintiff. VCML filed an interlocutory process seeking summary dismissal of the originating process. Those applications were all brought in proceedings 2010/124642.

39 On 28 May 2010 both applications were heard by Brereton J. At that time TCL and ACPL also sought leave to file an amended originating process claiming further relief, including orders in respect of alleged oppression and declarations in respect of the parties' contractual position. The orders sought in the proposed amended originating process are the same as those sought in the originating process in the current proceedings filed on 1 June 2010.

40 On 28 May 2010 Brereton J refused leave to the plaintiffs to file an amended originating process and dismissed the originating process. His Honour's reasons are not yet available. The parties were at issue as to the grounds of his Honour's decision. The notes of the solicitor for VCML of his Honour's reasons, relevantly, read as follows:

“ HIS HONOUR : Because the proceedings require urgent resolution, I will give some reasons now.
As presently constituted, the proceedings are doomed to fail as the plaintiff has no standing. The relevant party is the shareholder who is trustee. The proceedings are amenable to summary dismissal.
The question is whether the amendment to substitute should be given. I am entitled to approach this, on view of the court by application to prevent a winding up. It is uncontroversial that the new plaintiff has standing. I also assume that, but for clauses 22 and 23, it would have a seriously arguable case for winding up. Typically, injunctions for restraining are granted on two grounds:
(1) Abuse of process (e.g. Byanston v Devries 2 (1976) 1 All ER 25; Charles Forte Investments v Amand [sic] (1963) 2 All ER 940; Fortuna Holdings (1978) VR 83); and as the developments in anti-suit injunctions progressed;
(2) Breach of contract ((2009) NSWSC 724).
In my view, there is a seriously arguable case that in view of clauses 22 and 23, institution of these proceedings would be in breach of the express or implied terms in the Unitholders Agreement. Alternatively, in light of clauses 22 and 23, it is at least seriously arguable that for a party to proceed to litigation in face may be an abuse of process (Branabelle 54 NSWLR 503-517; Dirty Dancing at [52]-[53]).
On the balance of convenience, it is plain that serious jeopardy to defendant if leave to amend granted to keep proceedings on foot, the event of default. I am entirely unconvinced by [exhibit] DX 03 that Suncorp could be relied on to not, and there is no other reason.
There is no prejudice to the plaintiff to not proceed at this moment.
As at the date of the proceeding (today), winding up proceedings would not and could not succeed as the dispute resolution procedure could resolve any question of deadlock or failure of substratum. It may be that at a later time, once followed or the court ... then it may become apparent that winding up may succeed. But no court would at the date of application or today, [make an order to] wind up. Maybe post the dispute resolution procedure.
Leave to amend to substitute (TCL) should not be granted. So constituted, the proceedings are doomed to fail. Dismissed with costs. ”

41 On 1 June 2010 TCL and ACPL filed a new originating process in these proceedings. They seek the following relief:

“ 1. An order that the first defendant be wound up.
2. Further or other orders for oppression, including:
a. an order that the fourth and fifth defendants be removed as directors of the first defendant and not be replaced;
b. an order that the fourth and fifth defendants (and any replacement directors appointed by the second defendant) take all necessary steps to progress and complete the redevelopment of the Project in accordance with the terms of the Unitholders Agreement dated 5 May 2008 between the Plaintiffs and the first, second and third defendants (‘Unitholders Agreement’);
c. a declaration that the second defendant is not entitled to rely on the transfer provisions in clause 22 of the Unitholders Agreement;
d. an order that the Fee under the Fee Agreement dated 5 May 2008 between the second plaintiff and the third defendant (‘Fee Agreement’) is not payable by the Second plaintiff;
e. an order that the second defendant purchase the shareholding and unitholding of the first plaintiff.
and the plaintiffs claim:
3. A declaration that the fourth and fifth defendants have engaged, are engaging or are proposing to engage, in conduct that constituted, constitutes or would constitute a contravention or an attempted contravention of sections 181 and 182 of the Corporations Act 2001 (Cth).
4. An order that the fourth and fifth defendants take all necessary steps to progress and complete the redevelopment of the project in accordance with the provisions of the Unitholders Agreement.
5. A declaration that the second and third defendants have engaged, are engaging or are proposing to engage, in conduct that constituted, constitutes or would constitute aiding, abetting, counselling or procuring the fourth and fifth defendants to contravene sections 181 and 182 of the Corporations Act 2001 (Cth).
6. An order that the second and third defendants take all necessary steps to ensure that the fourth and fifth defendants (and any replacement directors appointed by the second defendant) take all necessary steps to progress and complete the redevelopment of the project in accordance with the provisions of the Unitholders Agreement.
7. A declaration that the fourth and fifth defendants owed fiduciary duties to the plaintiffs.
8. A declaration that the fourth and fifth defendants have breached their fiduciary duties to the plaintiffs.
9. A declaration or order that the third defendant is not entitled to seek recovery of the Fee under the Fee Agreement.
10. A declaration that clause 22 of the Unitholders Agreement is void for uncertainty.
11. A declaration that the second defendant is not entitled to rely upon the provisions of clauses 22.2 to 22.8 of the Unitholders Agreement.
12. A declaration that the second and third defendants are in breach of the Unitholders Agreement.
13. Specific performance of the Unitholders Agreement.
14. Equitable compensation.
15. Damages.
16. Interest.
17. An order that the defendants pay the plaintiffs’ costs.
18. Such further or other order as the Court thinks fit. ”

42 The relief is stated to be claimed "On the facts stated in the supporting affidavit of Craig Anthony Anderson affirmed 18 May 2010". The application for winding up is expressly put on both the just and equitable ground and on the ground of oppression.

43 I turn to the first ground upon which the second to fifth defendants seek an order for summary dismissal of the winding-up application, namely, that that claim seeks to re-agitate a matter Brereton J had decided. Mr Sullivan QC, who appears with Mr Free for the second to fifth defendants, submitted that his Honour had decided that a claim instituted at that stage by TCL for the winding-up of the first defendant before the dispute resolution procedure was exhausted, or the Court decided that it did not bind ACPL, was doomed to fail. Mr Fagan SC, who appeared with Mr Cheshire for the plaintiffs, submitted that his Honour simply decided that the application by ACPL was doomed to fail as it lacked standing and decided that the application to amend to join TCL as plaintiff was dismissed on discretionary grounds.

44 I would not conclude from the abbreviated note of his Honour's reasons that his Honour found that a claim by TCL to wind up the first defendant was doomed to fail. According to the solicitor's note, his Honour had earlier stated that it was seriously arguable that the institution of winding-up proceedings was a breach of clauses 22 and 23 of the Unitholders' Agreement and that the balance of convenience did not favour the grant of leave to amend. That language does not suggest a decision that a winding-up application brought by TCL would be doomed to fail. The reference to "so constituted" suggests that his Honour decided that as the proceedings were then constituted, that is to say with ACPL as plaintiff, they were doomed to fail.

45 His Honour is also reported to have said that at the date of hearing a winding-up order would not be made as the dispute resolution procedure might resolve any question of deadlock or failure of substratum. That appears to be a ground for refusing the amendment to join TCL as a plaintiff. At the date of the hearing VCML had served its Transfer Notice the previous day. It was not known whether ACPL would accept either offer. Understandably, according to the note, his Honour did not deal with the arguments raised before me that VCML was not entitled to serve a Transfer Notice or an Offeror’s Notice, and that even if it were entitled to do so as a matter of contractual right, the exercise of that right was an instance of oppressive conduct for which relief by way of winding-up of the first defendant was available under s 233 of the Corporations Act because the disputes which triggered the right arose from VCML's breach of contract.

46 I am not satisfied that the current application is an abuse of process because it seeks to re-litigate an issue already decided by Brereton J.

47 The second ground on which the second to fifth defendants seek summary dismissal of the winding-up application is that the institution of the proceedings for a winding-up order is a breach of the contractual dispute resolution clause. To this ground those defendants add that the resolution of the dispute under that clause is imminent.

48 Unlike clause 23, clause 22 makes no provision that proceedings in relation to a matter giving rise to the dispute will not be brought if the mechanism in clause 22 is invoked or is in train. I do not think that there is an implication to that effect.

49 Clause 23 deals with disputes about matters that are not material to the Project. It is entirely understandable that in respect of such immaterial disputes there should be a restraint on a party's right to institute litigation whilst negotiations are being carried out. However, a dispute about a matter material to the Project might require urgent resolution, or the matter giving rise to the dispute might not be capable of being resolved by one or other party buying the other out.

50 In this case ACPL contends that VCML has breached the Unitholders' Agreement in a fundamental way. It claims that it is VCML's breach that has given rise to the disputes which triggered clause 22. If, as a result of clause 22 being triggered it is compelled to sell its Interest in the Project to VCML, it is by no means apparent that ACPL would not be entitled to sue for damages. There is no express term which would bar such a claim and I doubt that such a term could be implied on Codelfa principles (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 345-347).

51 I do not consider that instituting proceedings for winding-up is a breach of a term implied from the express provision in clause 22. It is, of course, a different question whether the clause 22 procedure is an answer to the winding-up application.

52 Of more difficulty is whether the institution of winding-up proceedings is a breach of clause 27.10. By that clause, and subject to immaterial exceptions, ACPL and TCL agreed not to take any step prior to the sale of the Development Site or the sale of their Interest in the Project to procure any distribution of the capital or assets other than profits of the Trust. Counsel for the plaintiffs said that the purpose of the application for the winding-up of the first defendant was to bring about a sale of the underlying assets to the market, rather than ACPL's being compelled to sell its interest under the provisions of clause 22. At one point counsel submitted that the effect of the first defendant's being liquidated would be "to collapse the trust". By this, counsel did not mean that an order for the winding-up of the Trustee would require a winding-up of the Trust. There is no provision to that effect in the trust deed. Nor is there a provision in the trust deed for the automatic vacation by the first defendant from the office of trustee if it is wound up. Therefore, if the Trustee were wound up and a liquidator appointed, then, unless the Trustee were removed, it would be a matter for the liquidator to decide how the trust assets should be dealt with. Assuming the secured creditor does not step in, then unless both unitholders agreed to provide funding for the development, the prospects would be high that the liquidator would sell the site. If the site were sold it is likely that any capital remaining after payment of liabilities and expenses, would be distributed to unitholders. The Trustee has power under clause 11.32 of the trust deed to make distributions of capital. It has power under clause 22.2(c) of the trust deed to terminate the Trust.

53 Clause 27.10 precludes any party, prior to the sale of the Development Site or of its Interest, taking any step to terminate or "vest" the Trust. Applying for a winding-up of the Trustee is not the taking of a step to terminate or vest the Trust. Nor, in my view, is the making of the winding-up application the taking of a step to "procure any distribution of the capital or assets ... of the Trust". Rather, such an application is a step preparatory to the unitholder’s seeking to persuade the Trustee to distribute the capital or assets of the Trust or otherwise to terminate the Trust. But even if that view is wrong, it does not follow that making the winding-up application for the purpose stated by counsel for the plaintiffs was a breach of clause 27.10. In the scenario outlined above, prima facie at least, any distribution to unitholders of capital or assets of the Trust would be made after expenses and liabilities had been paid or provided for, and any such distribution would, at least prima facie, properly be characterised as a distribution of profits of the Trust. Taking a step for the purpose of achieving a distribution of profits of the Trust is not a breach of clause 27.10. For these reasons, I do not think that the bringing of the winding-up application is a step taken in breach of contract.

54 The third ground for the application as identified in counsel's opening - although there numbered the fourth ground - is that the application is misconceived because a winding-up of the Trustee would not be a winding-up of the Trust. At one point the second to fifth defendants submitted that if the Trustee were wound up there would be no trustee, but that submission was, rightly, not persisted with. Whilst it is correct that an order winding up the Trustee would not ipso facto result in a winding-up of the Trust, that is not a basis for summarily dismissing the winding-up application. The winding-up order would place control of the Trustee in the hands of a third party. That may be a desirable and necessary means of breaking a deadlock.

55 The fourth ground, and the last ground on which the case was opened, was that the application was brought for a collateral purpose, namely, to engineer a situation where the Trustee committed an event of default under its facility agreement with Suncorp. I do not accept that ground. It does appear that it is in neither party's interest for Suncorp to exercise its powers on the occurrence of an event of default. It is clear that in bringing the present application for seeking a winding-up order, the plaintiffs recognise that potential risk. It does not follow that the plaintiffs are motivated by a desire to cause Suncorp to exercise its powers as mortgagee. That would make no apparent sense, as it would appear to be detrimental to the plaintiffs as well as to the first to third defendants.

56 There is no evidence that it is the plaintiffs' purpose in bringing the winding-up application that it engineer a situation where the first defendant has committed an event of default. Mr Anderson swore an affidavit which was read. He was not cross-examined. I reject this ground of the application.

57 During the course of argument two further grounds for summary dismissal were raised. First, it was said that clause 22 provides an unarguable answer to the plaintiffs' claim to wind up the first defendant. No doubt if the deadlock mechanism in clause 22 has been properly invoked it provides an answer to the winding-up application on just and equitable grounds based on the existence of a deadlock. However, I cannot decide on this application for summary dismissal that clause 22 is an answer to the winding-up claim. Before reaching that conclusion I would have to be able to decide that the plaintiffs' claim that VCML is not entitled to invoke clause 22 could not possibly succeed or is manifestly groundless. I would also have to be able to decide that the plaintiffs' claim to be entitled to a winding-up order on grounds of oppression could not possibly succeed or is manifestly groundless.

58 There is a serious question to be tried that each of the three grounds of dispute identified by VCML arises from a desire on the part of VCML not to proceed with the full redevelopment as envisaged by clause 2.2 of the Unitholders' Agreement. That is clear in the case of the dispute as to the 2009/2010 business plan and budget. It is also arguably so in relation to the other two identified disputes. The failure to agree on what service fee should continue to be payable to AMPL arguably arises from VCML's contention that service fees should be appropriate to the services that will be required only to obtain a development approval so that the site could then be sold. The dispute about equity contributions is wider. ACPL says that it was agreed that having regard to the level of debt finance obtained, the parties' equity contributions, as provided for in the Unitholders' Agreement, could be reduced. VCML says otherwise. On the face of it, that dispute does not arise from the asserted breach by VCML of its obligations to further the objectives in clause 2.2. But ACPL also says that it is reluctant to agree to VCML's demand for equity contributions where VCML has withdrawn its commitment to the development as originally agreed on. It is thus arguable that that dispute also arises from the alleged breach of the Unitholders' Agreement by VCML.

59 If, as ACPL submits, the disputes have arisen because VCML repudiated its obligations to carry out the objectives in clause 2.2 of the Unitholders' Agreement, then it is a question for final hearing whether in negotiations about the disputes VCML could insist on a position taken in breach of contract consistently with observing the good faith required by clause 22.9. Such questions are not capable of being resolved on a summary judgment application when the facts are not known or have not been found.

60 The law in relation to obligations of good faith is far from settled and the questions to which the argument gives rise were touched on only lightly in submissions. The resolution of such questions seems to me to depend upon the ultimate findings of fact. I do not consider that the plaintiffs' arguments on these questions have been shown at this stage to be manifestly groundless or untenable.

61 In any event, TCL also seeks a winding-up order pursuant to s 233(1)(a) of the Corporations Act on the grounds that the first defendant's affairs have been and are being conducted in a manner contrary to the interests of the members as a whole, or in a way which is oppressive to or unfairly prejudicial to TCL. In the oppression action it is arguably open to TCL to contend that even if VCML is contractually entitled to acquire its Interest in the Project under clause 22, the conduct of VCML's nominees as directors of the first defendant, which it claims brought about the situation that triggered the rights under clause 22, was conduct unfairly prejudicial to TCL and orders should be made under s 233 which would have the effect of reversing the exercise of VCML's contractual rights and would lead to the appointment of a liquidator to break the deadlock. No submission was made that such orders would be beyond the scope of the powers under s 233 and I do not think that such arguments are manifestly hopeless or obviously untenable. I would not summarily dismiss the application on those grounds.

62 The final ground which was raised in the course of oral submissions concerns the concept of abuse of process in the context of a winding-up. In Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83, McGarvie J described two branches of the principles upon which a party may be restrained from presenting a winding-up petition on the ground of abuse of process. The first is where the winding-up application cannot possibly succeed. For the reasons I have given this is not such a case. The second was described by his Honour as follows (at 93):

“ The second branch applies to cases where there is a more suitable alternative means of resolving the dispute involved in a disputed claim against the company. They are not necessarily cases in which, as a matter of law or through absence of evidence, there is an inherent incapacity of success. They may be cases where the petitioner is entitled to present the petition, the ground is sufficient in law and there is evidence to support the ground. They are cases, though, where, due to the availability of the more suitable alternative remedy, the Court hearing the petition would in the circumstances, in the exercise of its discretion, decline to make a winding up order, at least while the circumstances remain as they are at the time of the application for an injunction. Thus the second branch applies where, because of the availability of a suitable alternative procedure, the petition is unlikely to succeed in the circumstances existing at the time. "

63 In the note of Brereton J's reasons it appears that his Honour referred to this case and to Charles Forte Investments Ltd v Amanda [1964] Ch 240, which is an illustration of this second branch. The continued application of this second branch of principles concerning abuse of process in winding-up applications was confirmed by the Court of Appeal in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 at [52]-[57]. In Charles Forte Investments Ltd v Amanda the petitioner sought the winding-up of the company because the directors had refused to register a transfer of shares. One ground for summary dismissal of the petition was that the petitioner could have sought what he was really seeking to obtain from the litigation by bringing a claim for rectification of the register, which would not potentially cause irreparable damage to the company.

64 If only the claim for winding-up on the just and equitable ground were in issue, it would be appropriate summarily to dismiss these proceedings as an abuse of process because there is a more suitable remedy available to the plaintiffs, namely, the determination of whether VCML is contractually entitled to acquire ACPL's shares. If it were held in proceedings which litigated that contractual right that VCML was entitled to acquire ACPL's shares, there would be no basis for TCL to rely upon the deadlock as the ground for winding-up on just and equitable grounds. Moreover, as Brereton J apparently said, no winding-up order could be made at this stage when that contractual claim is unresolved.

65 However, in the application now before me TCL also relies upon ss 232 and 233 of the Corporations Act. As I have said, I cannot exclude the possibility that even if VCML is contractually entitled to acquire ACPL's Interest (held through TCL) in the Project, thus breaking the deadlock, TCL may nonetheless be entitled to relief against that consequence under s 233 of the Corporations Act and may be entitled to an order for the winding-up of the first defendant.

66 The fact that there may be serious adverse consequences to both parties if the proceedings are not summarily dismissed because Suncorp may be able to exercise its rights as a secured creditor is a reason for considering, carefully, whether the proceedings should be dealt with summarily on the second branch of the principle concerning abuse of process in the area of winding-up, but that consideration does not warrant applying a different test from the principles compendiously known as those in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 in determining whether the plaintiffs' claim could not possibly succeed.

67 For the reasons I have given, I do not consider that either branch of the principle on which a winding-up application may be dismissed as an abuse of process has been made out.

68 For these reasons I order that the second to fifth defendants' interlocutory process filed on 8 June 2010 be dismissed with costs.

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