Asia Infotech Pte Ltd v Advanced Communications Technologies (Australia) Pty Ltd
[2003] VSC 131
•2 May 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4542 of 2003
| ASIA INFOTECH PTE LTD | Plaintiff |
| v | |
| ADVANCED COMMUNICATIONS TECHNOLOGIES (AUSTRALIA) PTY LTD (ACN 086 856 616) (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) | Defendant |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 and 28 March 2003 | |
DATE OF JUDGMENT: | 2 May 2003 | |
CASE MAY BE CITED AS: | Asia Infotech Pte Ltd v Advanced Communications Technologies (Australia) Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 131 | |
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Practice and procedure – Interlocutory injunction – Serious issue to be tried – Balance of convenience.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Anthony Rodbard-Bean | Middletons |
| For the Defendant and the First Defendant by Counterclaim | Mr I.D. Martindale (26/3/03) Mr P.R. Hayes QC and Mr I.D. Martindale (28/3/03) | Madgwicks |
| For the Second Defendant by Counterclaim | Mr Mark Moshinsky | Allens Arthur Robinson & Co. |
| For the Fourth Defendant by Counterclaim | Mr L. Glick SC (26/3/03) Mr P.R. Hayes QC and Mr I.D. Martindale (28/3/03) | Madgwicks |
HIS HONOUR:
In this proceeding the plaintiff, Asia Infotech Pte Ltd ("Asia Infotech"), sues the defendant, Advanced Communications Technologies (Australia) Pty Ltd ("ACTA"). Its claim against a second defendant, Australon Enterprises Pty Ltd ("Australon") has been discontinued. The claim arises out of a share sale agreement made between Asia Infotech and ACTA whereby ACTA agreed to sell to Asia Infotech all 1,150 shares held by ACTA in Australon for $6,000,000. The sale was subject to a number of conditions precedent. It is alleged that Asia Infotech made payments under the share sale agreement totalling $3,000,000.
The dispute between the parties arises from the contention of ACTA that the share sale agreement was terminated for non-fulfilment of the conditions precedent or that ACTA had lawfully terminated it by breach by Asia Infotech. The contention of Asia Infotech was that the agreement remained on foot or that it should relieved of any forfeiture by ACTA.
In the course of the early interlocutory stages of the litigation, and at a time when only Asia Infotech, ACTA and Australon Enterprises were parties and before the counterclaim was brought, ACTA, its directors and its receivers and managers gave to the Court on 20 February 2003 an undertaking that they would not until the hearing and determination of the proceeding:
"(a)register or cause to be registered any transfer of the [Australon] shares;
(b)sell, transfer, encumber or otherwise deal with the [Australon] shares or any shares held by [Australon] in Intermoco Ltd (save that the voting rights attached to the [Australon] shares may be exercised generally in accordance with the Corporations Act 2001 and/or in accordance with the shareholders agreement dated 3 December 2001)."
I should add that Australon was not a trading company. Its only function was to hold shares in Intermoco Ltd (“Intermoco”).
On 28 March 2003 I granted an interlocutory injunction on the application of the second defendant by counterclaim, Newpage Pty Ltd, in effect restraining ACTA from disposing of its shares in Australon and from restraining Australon from disposing of its shares in Intermoco. On 10 April 2003 I was requested on behalf of ACTA to provide reasons. These are my reasons.
In February 2003 Asia Infotech formally abandoned its contention that the share sale agreement had become unconditional. It was thereafter common ground that the Australon shares were held beneficially by ACTA so that the claim of Asia Infotech became one simply for repayment of the $3,000,000 which it had paid.
There was also a counterclaim in this proceeding brought by ACTA against Asia Infotech, Newpage, Springwell Australia Pty Ltd (“Springwell”) and Australon. This counterclaim makes reference to the shareholders' agreement dated 3 December 2001 between the shareholders in Australon. These shareholders were ACTA, Newpage and Springwell. By the shareholders' agreement the shareholders imposed on each other, inter alia, restrictions upon the constitution of meetings of directors of Australon, upon the power of Australon to dispose of its principal assets and upon the power of each shareholder to dispose of its shares in Australon. On 8 March 2002 Asia Infotech became a shareholder in Australon. In the counterclaim, ACTA contends that the shareholders agreement has been terminated, that the other shareholders and Australon are estopped from relying upon its terms and, further, that ACTA is at liberty to sell its shares in Australon without restriction and without first having obtained the consent of the other shareholders. I am not concerned here with the legal or factual bases for these contentions.
The proceeding is fixed for trial to commence on 6 May 2003.
The case was listed for mention before me on 21 March 2003. Among the matters then raised by the parties was an application on behalf of ACTA that it be released from the undertaking given on 20 February 2003. The basis for this application was that the foundation for the undertaking, the claim of Asia Infotech to the Australon shares, had disappeared. The application was opposed on behalf of Newpage and Springwell. It was put on their behalf that a fresh foundation for the undertaking had arisen, namely their contention that the disposal of the shares would be in breach of the shareholders agreement which is the subject of the counterclaim.
It seemed to me that counsel for ACTA was correct, so that the undertaking should be discharged. The issue became, therefore, whether some fresh restraint in similar terms should be imposed and upon what terms. In response to my inquiry, counsel for Newpage informed me that his client had given instructions to bring an application for a similar interlocutory injunction and that this would be filed the following Monday 24 March. I was, however, persuaded that nothing prejudicial to its position might be done in the meantime. Accordingly, I did not impose a fresh restraint in place of the undertaking of 20 February 2003, which I thereupon discharged late in the day of 21 March.
Against this background, on 25 March, Newpage filed a summons seeking interlocutory orders in effect restraining Australon from holding certain general meetings of which notices had been given and from disposing of any of its Intermoco shares. The summons also sought an interlocutory order restraining ACTA from disposing of its shares in Australon. The application came on for argument before me on 26 March and again on 28 March. It was opposed by ACTA and Australon.
It appeared from the affidavits filed, that the apprehensions of Newpage were real indeed. At 9.30 a.m. on 21 March, whilst the undertaking of 20 February was still in place, the directors of Australon authorised the chairman on its behalf to sell up to 15 million of its Intermoco shares. There is serious doubt that the meeting and the resolution were effective, given the terms of the shareholders agreement, assuming it still to be on foot. Furthermore, the solicitors for ACTA wrote a letter dated 24 March in which they said "We are instructed that on 21 March 2003 our client transacted the sale of approximately 15 million shares". Mr May, a director of Australon and of ACTA, swore an affidavit saying that he was innocent of any intentional breach of undertaking since he believed that the undertaking had been discharged on 5 February 2003. Counsel for ACTA assured me that on 21 March 2003 they were unaware of these resolutions and transactions. I, of course, accepted their assurance.
The material before me and the arguments of counsel showed that there was a serious issue to be tried whether the proposed board meetings of Australon were valid, whether ACTA might lawfully cause Australon to dispose of its Intermoco shares and whether ACTA might lawfully dispose of its shares in Australon. It was arguable, assuming the shareholders agreement remained on foot, that each of these would offend its provisions.
The focus of argument then shifted to the balance of convenience. On behalf of ACTA I was told that it had an urgent need for funds to meet pressing creditors, including the Australian Tax Office. If it was unable to lay its hands on the proceeds of the sale of some of the Intermoco shares, its deed of company arrangement was likely to fail and liquidation would be the result. This would have further adverse consequence upon the financial position of other companies in the group, and the potential losses would be very substantial. Furthermore, it was suggested that this application was no more than a tactical ploy orchestrated by one Martin Yong Heng Yii, who had interests in this litigation hostile to ACTA and whose interests would be served if it were to be wound up.
Against this, it was pointed out that the conduct which was sought to be enjoined, on the face of it, involved a breach of the shareholders agreement which was not readily compensible by an order for damages. Mr Yii deposed that the threatened conduct by ACTA and Australon would cause irreparable damage to Newpage inasmuch as its representation on the board of Australon will have been removed and the business of Australon will have been fundamentally altered.
I concluded that on the balance of convenience I should grant the injunctions, albeit not in the terms sought in the summons. I was concerned to protect the interests of ACTA in the event that it might call upon Newpage's undertaking as to damages. Accordingly, I exacted from Newpage an undertaking to prevent it from disposing of its shares in Australon or Intermoco thereby preserving a substantial asset to meet any order for damages. The interlocutory injunctive order was then made.
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