Cannon Street P/L v Karedis - [2004] QSC 104

SUPREME COURT OF QUEENSLAND

CITATION:

Cannon Street P/L & Ors v Karedis & Ors [2004] QSC 104

PARTIES:

CANNON STREET PTY LIMITED
(ACN 001 302 085)
(first plaintiff)
MARGARET ELIZABETH KELLY
(second plaintiff)
TIMOTHY CHRISTOPHER KELLY
(third plaintiff)
v
THEO KAREDIS
(first defendant)
GREGORY KAREDIS
(second defendant)
PESUTU PTY LTD
(ACN 002 276 208)
(third defendant)
GTK RETAILING PTY LTD
(ACN 002 031 414)
(fourth defendant)

FILE NO:

BS11302/03

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

30 April 2004

DELIVERED AT:

Brisbane

HEARING DATE:

29, 30, 31 March and 1, 2, and 14 April 2004

JUDGE:

Muir J

ORDER:

That the defendants have judgment in the action with costs, including reserved costs to be assessed on the standard basis.

CATCHWORDS:

CONTRACT – GENERAL CONTRACTUAL PRINCIPLES – MATTERS NOT GIVING RISE TO BINDING CONTRACT– STATEMENTS OF INTENTION, NEGOTIATIONS – CONSIDERATION – NECESSITY FOR CONSIDERATION – where discussions took place between the parties concerning an option for the plaintiff director to increase his shareholding in the company and also concerning a requirement that there be unanimity on all board decisions – whether there was a binding option agreement – whether there was a binding agreement requiring unanimity on all board decisions - whether the parties intended to be bound – whether there was valuable consideration to support these agreements – whether any option agreement was discharged or terminated by a later inconsistent agreement

CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DIRECTORS - FIDUCIARY POSITION – (CTH) CORPORATIONS ACT 2001 s 201 – where the defendant directors had been negotiating the sale of the company – whether the defendant directors breached their fiduciary duties

DERIVATIVE ACTION – LEAVE TO COMMENCE – GOOD FAITH – BEST INTERESTS OF THE COMPANY– (CTH) CORPORATIONS ACT 2001 s 237 – where the plaintiff director pursuant to s 237(2) of the Corporations Act 2001 sought to bring proceedings on behalf of the company under s 236 – whether the plaintiff was acting in good faith and in the best interests of the company – meaning of good faith – considerations applicable to a determination of good faith

Corporations Act 2001, s 102(1)(a), s 237

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd [1988] 18 NSWLR 40

B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147

Bellamy v Debenham (1890) 45 Ch D 481

Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666

Cannock Chase DC v Kelly [1978] 1 WLR 1
Central Estates (Belgravia) Ltd v Woolgar [1971] 3 All ER 647

GR Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631,

Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1967-1968) 121 CLR 483

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326,

J J Savage & Sons Pty Ltd v Blakeney (1969-1970) 119 CLR 345
Masters v Cameron (1954) 91 CLR 353,

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] QSC 104
Decision Date: 30 April 2004

CaseChat Overview and Summary

The matter before the court involved a dispute between Cannon Street P/L, represented by its director, and Karedis, who was also a director of the company. The plaintiff sought to enforce certain agreements made with the defendant directors regarding an option to increase his shareholding and a requirement for unanimity in board decisions. Additionally, the plaintiff sought to bring a derivative action on behalf of the company against the defendant directors for allegedly breaching their fiduciary duties in negotiating the sale of the company.

The court was required to determine whether the discussions between the parties constituted binding agreements. This included examining whether the parties intended to be legally bound and if there was sufficient consideration for these agreements. The court also had to consider whether any such agreements were discharged or terminated by a subsequent inconsistent agreement. Furthermore, the court needed to assess whether the defendant directors breached their fiduciary duties under the Corporations Act 2001 by negotiating the sale of the company. Finally, the court had to determine if the plaintiff's application to bring a derivative action was made in good faith and in the best interests of the company.

The court found that there was no binding option agreement or requirement for unanimity in board decisions because the parties had not intended to be legally bound and there was no valuable consideration. The discussions were considered to be preliminary negotiations without the requisite formalities of a binding contract. The court also found that the plaintiff had not demonstrated that he was acting in good faith and in the best interests of the company, as required by the Corporations Act 2001, and thus denied leave to bring the derivative action. The court concluded that the defendant directors did not breach their fiduciary duties in negotiating the sale of the company.

The court ordered that the defendants have judgment in the action with costs, including reserved costs to be assessed on the standard basis.

Orders

Orders of the court

That the defendants have judgment in the action with costs, including reserved costs to be assessed on the standard basis.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	Cannon Street P/L & Ors v Karedis & Ors [2004] QSC 104
PARTIES:	CANNON STREET PTY LIMITED (ACN 001 302 085) (first plaintiff) MARGARET ELIZABETH KELLY (second plaintiff) TIMOTHY CHRISTOPHER KELLY (third plaintiff) v THEO KAREDIS (first defendant) GREGORY KAREDIS (second defendant) PESUTU PTY LTD (ACN 002 276 208) (third defendant) GTK RETAILING PTY LTD (ACN 002 031 414) (fourth defendant)
FILE NO:	BS11302/03
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court
DELIVERED ON:	30 April 2004
DELIVERED AT:	Brisbane
HEARING DATE:	29, 30, 31 March and 1, 2, and 14 April 2004
JUDGE:	Muir J
ORDER:	That the defendants have judgment in the action with costs, including reserved costs to be assessed on the standard basis.
CATCHWORDS:	CONTRACT – GENERAL CONTRACTUAL PRINCIPLES – MATTERS NOT GIVING RISE TO BINDING CONTRACT– STATEMENTS OF INTENTION, NEGOTIATIONS – CONSIDERATION – NECESSITY FOR CONSIDERATION – where discussions took place between the parties concerning an option for the plaintiff director to increase his shareholding in the company and also concerning a requirement that there be unanimity on all board decisions – whether there was a binding option agreement – whether there was a binding agreement requiring unanimity on all board decisions - whether the parties intended to be bound – whether there was valuable consideration to support these agreements – whether any option agreement was discharged or terminated by a later inconsistent agreement CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DIRECTORS - FIDUCIARY POSITION – (CTH) CORPORATIONS ACT 2001 s 201 – where the defendant directors had been negotiating the sale of the company – whether the defendant directors breached their fiduciary duties DERIVATIVE ACTION – LEAVE TO COMMENCE – GOOD FAITH – BEST INTERESTS OF THE COMPANY– (CTH) CORPORATIONS ACT 2001 s 237 – where the plaintiff director pursuant to s 237(2) of the Corporations Act 2001 sought to bring proceedings on behalf of the company under s 236 – whether the plaintiff was acting in good faith and in the best interests of the company – meaning of good faith – considerations applicable to a determination of good faith Corporations Act 2001, s 102(1)(a), s 237 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd [1988] 18 NSWLR 40 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Bellamy v Debenham (1890) 45 Ch D 481 Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 Cannock Chase DC v Kelly [1978] 1 WLR 1 Central Estates (Belgravia) Ltd v Woolgar [1971] 3 All ER 647 GR Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1967-1968) 121 CLR 483 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326, J J Savage & Sons Pty Ltd v Blakeney (1969-1970) 119 CLR 345 Masters v Cameron (1954) 91 CLR 353,