Daronzoa Pty Ltd v Bayari Ltd
[2000] VSC 481
•9 November 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 7429 of 2000
| DARONZOA PTY. LTD. AND ANOTHER | Plaintiffs |
| v. | |
| BAYARI LTD. & OTHERS | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 1 and 9 NOVEMBER 2000 | |
DATE OF JUDGMENT: | 9 NOVEMBER 2000 | |
CASE MAY BE CITED AS: | DARONZOA v. BAYARI | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 481 | |
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CATCHWORDS: Practice and Procedure – Application for interlocutory injunction – No serious issue to be tried.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | I. Upjohn | Lewis Walker |
| For the Defendants | D. Baker | Burdon-Smith & Associates |
HIS HONOUR:
Having considered the whole of the affidavit material in this case, I am not persuaded that it is appropriate to grant injunctive relief in the proceeding
At the meeting on 14 July 2000 attended by the second plaintiff, the fourth defendant and the third defendant's accountant, Lindsay Broadway, it was agreed by the second plaintiff and the fourth defendant that they would part company and that it would be the first plaintiff which would sell its shares in the first defendant to an entity controlled by the fourth defendant in accordance with the provisions of the Trust Deed; further, that the second defendant would cease to be a director of the first and third defendants and cease to be an employee of the third defendant.
Clause 7 of the Trust Deed which provides a mechanism for transferring units in the trust reads, so far as is relevant:
1. No units may be transferred without the consent of the Trustee first obtained, which consent may be refused in the Trustee's absolute discretion.
2. No unit may be transferred to any person so long as any unit holder is willing to purchase such unit at its "fair value", other than as provided by sub-clauses (h) and (i).
3. "Fair value" is to be determined by the Trustee's auditors (or if there is no auditors, then the Trustee's accountants), certifying in writing the sum which in their opinion is the fair value of a unit.
4. In order to ascertain whether another unit holder is willing to purchase the units, the proposing transferor shall give notice in writing to the Trustee that he desires to transfer the units at fair value ("the transfer notice"). The transfer notice constitutes the Trustee as agent for the proposing transferor. The transfer notice is not revocable without the sanction of the Trustee.
5. The Trustee is to offer the units specified in the transfer notice to the other unit holders.
6. If the Trustee within 28 days after having been served with the transfer notice finds a purchasing unit holder, then upon payment of the fair value the proposing transferor is bound to transfer the units to the purchasing unit holder.
7. If the proposing transferor then defaults in transferring the units, the Trustee may receive the purchase money and enter the name of the purchasing unit holder in the register of unit holders (in such circumstances the Trustee shall hold the purchase money on trust for the proposing transferor).
In due course the Trustee's accountants valued the units in the trust. The plaintiffs have refused to accept that valuation, arguing that it has not been done in accordance with the provisions of Clause 7. The three matters relied upon by the plaintiffs are the following:
1. The accountants have failed to certify the sum which in their opinion is the fair value of a unit.
2. The valuation of the fixtures and fittings in the premises at Unit 1, 169 Grange Road, Fairfield was not done by the Trustee's accountants themselves but was done by a firm of auctioneers engaged by them.
3. The accountants have used an incorrect method of valuation in arriving at the figure they did as the value of each of the units.
In their letter of 14 August to the Trustee the accountants state at the outset:
"Pursuant to a request by Daronzoa Pty Ltd made under Clause 7 of the Trust Deed of the Petro Monaco Gandolfo Unit Trust, we have calculated a fair value for the units in the trust held by Daronzoa Pty Ltd."
They then set out the methodology they used to arrive at that valuation. At the conclusion of the letter the accountants say:
"This valuation has been prepared at the request of Daronzoa Pty Ltd, a unit holder, pursuant to Clause 7 of the Trust Deed of the Petro Monaco Gandolfo Unit Trust and subject to information provided by the Trustee. The assertions made in this respect should be considered only in the strict context of the requirements of Clause 7 and no reliance should be placed thereon by other parties."
As to the fact that the accountants obtained an independent firm of auctioneers to value the fixtures and fittings at the Fairfield property, the fact is that it would appear that the second-named plaintiff agreed to the valuation of the fixtures and fittings being done by that particular auctioneer at the meeting of 14 July 2000. In that regard I refer to para.13 of the fourth-named defendant's affidavit sworn 3 November 2000. The relevant passages in it read:
"The accountant then explained that it would be necessary to check the Trust Deed for the procedure and that was done immediately. The accountant said he was not happy to audit the company and Mr Gandolfo replied that he would be happy for the accountant to do the valuations and I voiced my approval as well. Mr Broadway asked if either of us knew Michael Bent, as he would probably require him to do a valuation of the chattels. We both said we did not know Mr Bent and Mr Gandolfo said he was happy for Mr Bent to value the chattels."
As to the third point, that is, that an incorrect method of valuation was used by the accountant, I would refer to the observations of McHugh, J.A. (as he then was) in Legal & General Life of Australia Ltd v. A.Hudson Pty Ltd (1985) 1 N.S.W.L.R.315. At p.335, his Honour said:
"While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract."
It would seem to me that if the valuation has been carried out in accordance with the terms of the Trust Deed as the defendants contend it has, the plaintiffs cannot challenge its validity.
As to the allegation of misappropriation of the third defendant's funds, I simply say that that is a serious allegation. It is hotly disputed by the fourth defendant and his wife. On the material presently before the Court I am not satisfied that it is strongly arguable that any misappropriation of funds has occurred.
One further factor which has influenced me in refusing the plaintiffs' application for injunctive relief is the fact that the second-named plaintiff has now incorporated another company and is carrying on business at the present time in competition with the third defendant.
Finally, if contrary to the views I have formed the plaintiffs do establish their case against the defendants or any of them, it is my opinion that they would be adequately compensated by an appropriate award of damages.
I agree with counsel for the plaintiffs that this matter should be brought to trial quickly.
Accordingly, I make the following orders in the proceeding:
The plaintiffs' summons filed in the court on 30 October 2000 is dismissed.
I order that the defendants file their defences and counterclaims, if any, on or before 23 November.
I order that the plaintiffs file their replies and defences to counterclaims, if any, on or before 30 November.
I order that the parties mutually give discovery on or before 7 December and that inspection of discovered documentation take place on or before 14 December.
I refer the proceeding to the Listing Master to enable a date to be fixed for the hearing of the proceeding in the Cause List after 14 December.
I direct that this order be prepared by the solicitors for the plaintiffs and within 48 hours be brought to me for authentication.
I direct that within seven days of its authentication a copy of the order be served on the associate to the Listing Master.
I reserve to the parties liberty to apply.
I authorise any Master of the Court to vary the times specified in any of these orders if he or she is so minded.
I order that the plaintiffs pay the defendants' costs of this application including any reserved costs.
(Discussion ensued re costs.)
In my view the behaviour of the plaintiffs has not been so contumelious or high-handed as to justify the award of costs on a solicitor-own client basis. However, as they have been unsuccessful in what was their principal application, namely, for injunctive relief, I adhere to the order I have already pronounced.
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