Baker v Essendon Tyre Service Pty Ltd
[2000] VSC 44
•3 February 2000
| Do not Send for Reporting | |
| Not Restricted | |
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | |
No. 8053 of 1999
| KERRIE ANN BAKER | Applicant |
| v. | |
| ESSENDON TYRE SERVICE PTY. LTD. AND ANOTHER | Respondents |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 3 FERUARY 2000 | |
DATE OF JUDGMENT: | 3 FEBRUARY 2000 | |
CASE MAY BE CITED AS: | BAKER v. ESSENDON TYRE SERVICE | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 44 | |
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CATCHWORDS: Application for interlocutory injunction – Applicant's prospects of success in proceeding not such as to justify grant of injunctive relief.
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APPEARANCES: | Counsel | Solicitors |
For the Applicant | M. McNamara | Kempsons |
| For the Respondents | P. Crutchfield | Trumble Szanto |
HIS HONOUR:
This is the return of a summons filed in the court on behalf of the applicant, Kerrie Ann Baker, whereby the applicant seeks an order that until the trial of the proceeding or further order, the respondents, who are Essendon Tyre Service Pty. Ltd. And Paul Reichardt, be restrained "from considering and passing a resolution at the meeting of members of the company in terms that, or to the effect that, the applicant be removed as a director of the company and that Zina Reichardt (or any other person) be appointed as a director of the company".
The background to the application can be summarized as follows. Between March 1994 and July 1999, the applicant and the second respondent, Paul Reichardt, lived in a de facto relationship. For some fifteen years prior to 1995 the second respondent had operated a tyre business in Essendon through a company called Utuado Pty. Ltd. That business was sold in 1993, but the purchaser only conducted the business for some two years, then defaulted in payment of instalments of purchase money due under the sale agreement and ceased to have any further conduct of the business.
In 1995 the applicant and the second respondent determined to incorporate a fresh company to run a new business to be called Essendon Tyre Service Pty. Ltd. In June of that year the second respondent instructed his accountant, Peter John Siggins, to incorporate such a company and that occurred on 23 June 1995. The case for the plaintiff applicant is that at that time it was agreed that she and the second respondent would hold an equal number of shares in the company and that they would both become directors of the company.
Whilst the fact is that the applicant did become a director of the company, it is denied by both the second respondent and Siggins that it was ever intended that the applicant would have an equal holding of shares in the company with the second respondent. Their evidence is to the effect that the arrangement between the parties was that the second respondent would hold eleven of the twelve shares to be issued in the company, whilst the applicant would hold one share in trust for the second respondent. Siggins's evidence in relation to that appears in the affidavit he swore on 1 February, 2000, the relevant paragraphs of which read:
"2.I took instructions from Mr Reichardt for the incorporation of a company and advised both of them of the requirements for there to be a minimum of two directors, two shareholders, a company secretary, a public officer and a place for the registered office. I told both of them that Ms Baker would be issued with one share, and that share would be held in trust for Mr Reichardt. No objections were raised by Ms Baker to these arrangements.
3.I can assert positively that it was not intended by either party that Ms Baker would have any equity in the company whatsoever. There was certainly no intention that Ms Baker would have an equal number of shares to that allotted to Mr Reichardt in the company."
The fact is that at that time eleven shares in the company were issued to the second respondent and one was issued to the applicant. It is not without significance that the share certificates issued at that time were actually signed by the applicant in her capacity as a director of the company. It is difficult, therefore, to accept the applicant's testimony in relation to the share she says she was to have in the business in preference to that of the second respondent and Siggins.
At all events, following their separation and on 1 December 1999 the applicant filed a proceeding in this court seeking relief from the second respondent pursuant to the provisions of Part 9 of the Property Law Act 1958.
On 9 December 1999, the second respondent called a general meeting of the members of the company for 12 January 2000. The purpose of the meeting was to consider a resolution to remove the applicant as a director of the company and to appoint Zina Reichardt a director in her place. Zina Reichardt is the sister of the second respondent.
On 24 December 1999, the applicant filed an originating motion in the court whereby she seeks an order restraining the respondents from considering and passing the resolution in question and orders for regulating the conduct of the affairs of the company. The grounds upon which she seeks those orders read:
"1.The affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member (being the applicant) or in a manner that is contrary to the interests of the members as a whole.
2.A proposed resolution of the second respondent would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member (being the applicant) or would be contrary to the interests of the members as a whole."
After the applicant was appointed a director of the company, she worked in the business full-time until towards the end of August of 1999. Since then the business has been in the hands of the second respondent.
There are allegations on both sides relating to the mishandling of funds of the company. In so far as the second-named respondent is concerned, the complaint relates to his behaviour in that regard since the applicant ceased to take any active part in the running of the company. In so far as the applicant is concerned, the respondent alleges that she has been guilty of such conduct in the months leading up to her ceasing to work in the business and since that time. In particular, the applicant alleges that in November of 1999 the second respondent drew a cheque on the company bank account for a sum of $20,000 and paid it into his own bank account.
The applicant has sworn that when she questioned the second respondent about the matter, he told her that he drew the cheque on the advice of his solicitors for his living expenses. The second-named respondent, however, says that he drew the cheque for $20,000 on the advice of his solicitors and paid it into his own account to prevent the applicant from doing that very thing herself and he has sworn that the proceeds of the cheque are in fact to be used for the business of the company.
In so far as the second respondent's allegation is concerned, he says that the applicant has wrongly removed from the National Mastercard business account sums totalling over $50,000. The details of those amounts appear in paragraphs 9(g) and (h) of the second respondent's affidavit sworn 25 January, 2000, and the exhibits to that affidavit.
For her part, the applicant denies that she withdrew the amounts referred to in Paragraph 9(g) of the second respondent's affidavit. However, she does admit that on 2 December 1999 she did withdraw a sum of $5,000 from the bank account for living expenses.
It must be remembered that the application before me is an interlocutory application, it is not the trial of the proceeding. It is simply not possible for me to determine where the truth of such matters lie. That must await the hearing and determination of both this proceeding and the associated proceeding that the applicant has brought against the second respondent pursuant to the provisions of Part 9 of the Property Law Act.
It is clear from the affidavit material filed in the court on behalf of the applicant and the exhibits to that material that the applicant's real fears in the matter relate to a proposed sale of the business of the company by the second respondent, for it is now clear that for some months the second respondent has been seeking to sell the business and at the present time is negotiating a sale of it. The applicant fears that if a sale is effected it may not be for the true value of the business.
I find that proposition difficult to accept for this reason. If the second respondent did behave in such a fashion, that fact would surely become apparent to the court during the course of the Part 9 proceedings and in my opinion would be a factor to be taken into account in that proceeding in determining what award, if any, should be made to the applicant pursuant to Part 9.
It is clear that the Articles of Association of the company enable the second respondent to use his voting power to remove the applicant as a director of the company. Article 76 reads:
"The company in general meeting by resolution or any member or members holding a majority of the issued shares of the company by writing delivered to the company may at any time and from time to time remove any director from office and if thought fit appoint another person in his stead."
The question I must determine in so far as this application is concerned is whether or not the second respondent should be restrained from doing that very thing.
I am not persuaded that it is appropriate to restrain him. It is clear that the applicant and the second respondent are at loggerheads with each other. I doubt that they would ever be able to reach agreement concerning a sale of the business. As I earlier observed, if the applicant subsequently establishes that she has suffered loss by reason of any actions of the second respondent in relation to the sale of the business, in my opinion she would be adequately compensated by an appropriate award of damages.
In that situation, the summons filed in the court on 24 December 1999 will be dismissed with costs to be paid by the applicant. The costs will include any reserved costs.
(Discussion ensued.)
HIS HONOUR: I will qualify the orders as to costs by adding apart from the costs reserved on 18 January.
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