Award Holdings Pty Ltd v Fairmont Nominees Pty Ltd - [2001] WASC 215

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: AWARD HOLDINGS PTY LTD & ANOR -v- FAIRMONT NOMINEES PTY LTD & ORS [2001] WASC 215

CORAM: WHITE AUJ

HEARD: 3 AUGUST 2001

DELIVERED : 6 AUGUST 2001

PUBLISHED : 15 AUGUST 2001

FILE NO/S: CIV 1871 of 2001

BETWEEN: AWARD HOLDINGS PTY LTD (ACN 009 230 719)
LETHVEN NOMINEES PTY LTD (ACN 009 181 293)
Plaintiffs
AND
FAIRMONT NOMINEES PTY LTD (ACN 050 161 629)
First Defendant
DONNA JOY MONTEATH
Second Defendant
BRUCE FIELDING
Third Defendant

Catchwords:

Application for injunction - Interlocutory injunction sought to restrain meeting for the purpose of altering Articles of Association of Company - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiffs:     Mr T R Stephenson
First Defendant             :     Mr J C Giles
Second Defendant         :     Mr J C Giles
Third Defendant           :     Mr J C Giles

Solicitors:

Plaintiffs:     Murie & Edward
First Defendant             :     Solomon Brothers
Second Defendant         :     Solomon Brothers
Third Defendant           :     Solomon Brothers

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] 148 CLR 170
Christmas Island Resort Pty Ltd v Casinos Australia International (Christmas Island) Pty Ltd, unreported; FCt SCt of WA; Library No 960641; 8 October 1996
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672
Guerinoni v Argyle Concrete & Quarry Suppliers Pty Ltd (2000) 34 ACSR 469
O'Neill v Phillips [1999] 1 WLR 1092
Stone James v Pioneer Concrete WA Pty Ltd [1985] WAR 233
Temwood Holdings Pty Ltd v Oliver [2001] WASC 131

WHITE AUJ: By a chamber summons filed on 31 July 2001, the plaintiffs apply for an interlocutory injunction restraining the first defendant until the trial of this action from voting in favour of any alteration to Article 22A of the Constitution of Margaret River Vines Pty Ltd ('the company') and for an order giving the plaintiff leave to amend the writ which was issued on 25 June 2001 by adding certain paragraphs to the Indorsement on the writ. No statement of claim has as yet been filed by the plaintiffs and there is no explanation for the failure to file such a statement of claim. The amendment sought is to add the allegations that:
"16A. On or about the 13^th July 2001 the plaintiffs received a notice of an extraordinary general meeting of the company to be held on the 7^th August 2001 at 9 am. The agenda for the said meeting is to alter the company’s constitution by deleting the existing clause 22A and replacing it with a new clause 22A in materially different terms.
16B. Together with the notice of meeting, the plaintiffs received a letter from the third defendant dated 13^th July 2001, in which the intention behind the proposed alterations to clause 22A is stated to be to allow, inter alia, a new notice of sale of the first defendant’s shares in MRV, issued in accordance with the new clause 22A, to be acted upon notwithstanding the interlocutory injunction granted herein by Justice White on the 6^th July 2001."
A further proposed amendment is to claim a permanent injunction in the terms now sought as an interlocutory injunction.
There is no explanation for the delay in bringing this application before the court. The plaintiffs had notice of the meeting on or about 13 July 2001, yet waited until 31 July 2001 before filing the present chamber summons which came before me on Friday 3 August 2001, seeking to restrain an action at a meeting on Tuesday 7 August 2001.
Each of the plaintiffs holds five issued shares in the company. The first defendant, which is the majority shareholder in the company, holding 35 issued shares, does wish to dispose of its shares in the company and has received an offer of purchase which it would like to accept. However, that offer contains conditions and I ruled that the notice given by the first defendant did not comply with the requirements of Article 22A and I restrained the first defendant by itself, its officers servants or agents or otherwise from selling its shares in terms of the notice to shareholders from the first defendant of its intention to sell its shares in the company dated 23 March 2001, until judgment or further order. I granted liberty to the first defendant to apply on 48 hours notice to vary the terms of the injunction and I reserved the costs.
In the present application before me, Mr Stephenson of counsel for the plaintiffs, submitted that I had not decided whether or not the notice to shareholders referred to above was valid. That submission rested upon a misreading of my decision, in which I said:
"In my opinion the transfer notice does not comply with the requirements of Article 22A.
If I am wrong in that view, there is nonetheless a serious question to be tried as to whether it does so comply."
The application for the grant of a further interlocutory injunction is founded on the allegation that the first defendant is guilty of oppressive conduct towards the plaintiffs.
In his affidavit sworn on 25 June 2001, Mr Ian Barrie Murie, the plaintiffs' solicitor, says, inter alia, in par 10(b):
"(b)They [the plaintiffs] were provided with a copy of the Memorandum of Association of MRV and each was satisfied that, by virtue of the provisions then in existence relating to the appointment and removal of directors and the conduct of directors and shareholders meetings that their interests as minority shareholders would be protected against abuse by the majority shareholder FN [the first defendant.]"
However, that statement was corrected by Norbert Radny, a director of the first‑named plaintiff, who says:
"5.In relation to paragraph 10(b) of Mr Murie's affidavit I say that neither myself, nor, I am informed by Keith Huxtable and verily believe, he, on behalf of either of the Plaintiffs was provided with a copy of the Memorandum of Association of MRV prior to investing in MRV. However, there were a number of discussions leading up to the Plaintiffs' agreement to invest in which Mr Monteath and Mr Stewart told us what relevant clauses of the Memorandum and Articles of MRV contained and it was on the basis of that advice that I believed that the Plaintiffs' interests as minority shareholders would be protected against abuse by the proposed majority shareholder FN. I do not recall every detail of which I was told in this respect however I do recall that I was told that the tenure of myself and Mr Huxtable as directors was secure whilst we continued to be shareholders of MRV, and, that at directors' meetings the chairman would not hold a casting vote."
Mr Radny says that, during the prior negotiations before the plaintiffs invested in the company, he told Mr Monteath, a director of the company, that, because of the amount of money which the plaintiffs would be expected to invest in the venture, the plaintiffs wanted to have control of the Board. He says that at a meeting at which both Mr Monteath and a Mr Stewart were present, Mr Stewart said that Mr Monteath was agreeable to that requirement.
As I pointed out in my earlier reasons for judgment, there are problems associated with these allegations. Furthermore, although admitting that the plaintiffs agreed to the appointment of the second defendant as a director of the company, the plaintiffs now seek a declaration that her appointment (as well as the subsequent appointment of the third defendant) was invalid.
The proposal by the first defendant to alter the terms of Article 22A does not involve the deprivation of the plaintiffs' rights of pre‑emption in relation to the shares that the first defendant wishes to dispose of. The existing Article 22A requires, in my opinion, an intending transferor to offer its shares for a price expressed in money terms. The proposed altered Article 22A would require an intending transferor to offer its shares for a consideration including both money and other conditions. The plaintiffs object to this alteration of the terms of Article 22A, as they are unwilling to meet the conditions forming part of the consideration for the sale of the shares. There is nothing to prevent the plaintiffs from making an offer to purchase the shares from the first defendant if they so wish, of course.
I am not persuaded that the plaintiffs have a right to prevent the proper alteration of the Articles of the company. In my opinion, the conduct of the first defendant complained of does not constitute oppressive conduct. The action by the plaintiffs is designed to stultify the right of the first defendant to dispose of its shares in the company upon terms that are acceptable to the first defendant. The actions of the first defendant do not prevent the plaintiffs from disposing of their shares if they so wish. The plaintiffs will continue to enjoy the pre‑emptive rights in accordance with the proposed new Article 22A. There is no question of the plaintiffs being deprived of their right to representation on the Board of the company.
Counsel for the plaintiff submitted that:
"… the actions are an attempt to remove the basis for these proceedings before the serious question identified previously is tried …"
The serious question to be tried was as to whether or not, as I held, the transfer notice given on behalf of the first defendant complied with the provisions of Article 22A as it presently stands. If the article is altered, that question will not need to be further debated.
There is nothing in the evidence of the plaintiffs to establish an undertaking by the first defendant that Article 22A would never be changed.
Insofar as the application to amend the writ is concerned, I refuse that application for two reasons. Firstly, the matters raised occurred after the issue of the writ and constitute, in my opinion, a new cause of action arising after the writ. Secondly, the plaintiffs have failed to file a statement of claim which, in a proper case would operate as an amendment, rendering the application unnecessary. That is not to say that the proposed amendment is competent.
In relation to the application for an interlocutory injunction, I am not persuaded that the plaintiffs have raised a serious question to be tried in relation to the proposed alterations to Article 22A. Even if they had done so, I am satisfied that the balance of convenience favours the refusal of the injunction. Accordingly, I dismiss the application for an injunction.
I think I should remind the first defendant that the terms of the injunction granted by me on 6 July 2001 restrain the first defendant from selling its shares in terms of the notice previously given "until judgment or further order".