Ellis v Electric Lady Land Bar Pty Ltd

[2012] VSC 12

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST

S CI 2011 05893

JOSHUA ELLIS	Plaintiff
v
ELECTRIC LADY LAND BAR PTY LTD (ACN 131 125 749)	First Defendant
KERI TAIAROA	Second Defendant

JUDGE:	Efthim AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	19 December 2011
DATE OF JUDGMENT:	31 January 2012
CASE MAY BE CITED AS:	Ellis v Electric Lady Land Bar Pty Ltd and anor
MEDIUM NEUTRAL CITATION:	[2012] VSC 12

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CORPORATIONS ACT – Section 247A – Application for inspection of books of a company– Standing to bring application – Section 236(1) – Requirement that plaintiff be eligible to be registered as a member of a company.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S. Pitt	Mills Oakley
For the Defendant	Mr G. Parncutt	Urban Law Group

HIS HONOUR:

1. The plaintiff, Joshua Ellis, applied pursuant to s. 247A of the Corporations Act 2001 (Cth) (“the Act”) seeking inspection of books and records of the first defendant, Electric Lady Land Bar Pty Ltd and Lady Land Property Trust.

1. Orders were made by Associate Justice Gardiner on 2 December 2011 that there be inspection of the books of the first defendant.  The plaintiff also sought access to the books of a further company, Chapel Street Nominees Pty Ltd, and an adjournment was granted to enable the defendants to file and serve an amended originating process and further affidavits addressing the plaintiff’s application to inspect the books of that company.

1. His Honour ordered that any affidavit of the defendants in opposition to the originating process, as amended, be filed by 4pm on Monday, 12 December 2011, and that any further affidavit of the plaintiff be filed and served on or before 4pm on Wednesday, 14 December 2011.

1. The application came on for hearing before me on 16 December 2011 and was adjourned to 19 December 2011.  The plaintiff had filed and served an amended originating process, and no longer seeks documents of the Lady Land Property Trust.  An unsworn affidavit had also been served on the plaintiff.  That affidavit was sworn on 19 December and filed with the Court.  Counsel for the defendants sought a further adjournment but that was refused.

1. Section 247A(1) of the Act provides:

“On application by a member of a company or registered managed investment scheme, the Court may make an order:

(a)authorising the applicant to inspect books of the company or scheme;  or

(b)authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant’s behalf.

The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.”

1. Section 247A(3) refers to who may apply for an order for the inspection of books under this section. It provides:

“A person who:

(a)     is granted leave under section 237;  or

(b)     applies for leave under that section;  or

(c)     is eligible to apply for leave under this section

may apply to the Court for an order under this section.”

1. Section 237 enables a plaintiff to make a derivative claim and s. 236(1) states who can bring an action under s. 237.  It provides:

“A person may bring proceedings on behalf of a company, or intervene in any proceedings in which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a)     the person is:

(i)a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate;  or

(ii)an officer or former officer of the company;  and

(b)     the person is acting with leave granted under section 237.”

1. Section 231 of the Act defines a member of a company. It provides:

“A person is a member of a company if they:

(a)     are a member of the company on its registration;  or

(b)agree to become a member of the company after its registration and their name is entered on the register of members;  or

(c)become a member of the company under section 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares).”

1. The plaintiff, in support of his application, has sworn that in or about August 2007 he was approached by the second defendant, Keri Taiaroa, to purchase a share of a bar to be known as “Electric Lady Land” located at 1/265 Chapel Street, Prahran.  He had known the second defendant for approximately six years and was aware that the second defendant has operated and continues to operate a number of licensed premises on Chapel Street, Prahran. 

1. During initial discussions with the second defendant, the second defendant told the plaintiff that the premises would be an ideal location for the bar and he was able to secure a lease of the premises for approximately $70,000 per year. 

1. In or about August 2007, the second defendant approached the plaintiff and a number of other potential investors, including John Curtin and Anthony Gadsden, who he believed may be interested in becoming involved in the ownership of the bar.  The second defendant advised the plaintiff that he had approached him and the other two investors because they could contribute to the bar’s success through means other than just an initial financial contribution including promoting the bar through their social networks, assisting with décor and fit-out, gaining favourable media exposure and the like. 

1. A written proposal contained in an email dated 17 August 2007 was given to the plaintiff which provided:

-the company (which the plaintiff took to mean Electric Lady Land Bar Pty Ltd) would be worth $1,000,000 plus based solely on turnover

-the plaintiff was chosen by the second defendant as an individual to invest because he could add value to the project

-for a purchase price of $48,000 each investor would obtain a 10% shareholding

-all investors would be issued with share certificates reflecting their shareholding

-the shareholders would all share the profits of the business.

1. On 14 September 2007, the plaintiff paid a cheque to the second defendant made out to Chapel Street Nominees Pty Ltd.  In exchange for his cheque he was issued with 100 shares in Electric Lady Land Bar Pty Ltd. 

1. The plaintiff was advised by the second defendant that profits from the bar would be used to invest in property by way of formation of a property trust and that the plaintiff as a shareholder in Electric Lady Land Bar Pty Ltd would be allotted units in the trust reflecting of his shareholdings.  The plaintiff executed the trust deed of the trust known as the Lady Land Property Unit Trust in or about May 2008.  He has not received a trust deed despite numerous requests. 

1. Since being issued with the shares in the company he has discovered that a separate company called Chapel Street Nominees Pty Ltd, controlled by the second defendant, holds the liquor licence or the premises at 1/265 Chapel Street where Electric Lady Land Bar is situated. 

1. Its two investors, Anthony John Gadsden and John Curtin, have both sworn affidavits in support of the plaintiff’s application.  Both investors depose that they paid $48,000 to the second defendant.  Both investors state they were of the view that they were purchasing the Electric Lady Land Bar. 

1. The second defendant deposes that he formed Chapel Street Pty Ltd which is the owner and operator of the business of the Electric Lady Land Bar.  He denies approaching the plaintiff to buy into the bar and recalls that Mr Curtin and Mr Gadsden approached him about an interest in the bar.  He states that he was not seeking investors and had no need for capital.  The bar project was fully funded by himself.  After discussion with the plaintiff and several others, including Mr Curtin and Mr Gadsden, he decided that they could be involved in a promotional company to be known as Electric Lady Land Bar Pty Ltd which was set up to provide promotional services to Chapel Street Nominees Pty Ltd. 

1. Those allegations has been denied by Mr Gadsden and the plaintiff.

1. In order for the plaintiff to have standing in this application the plaintiff must be a member, or eligible to be registered as a member, of  Chapel Street Nominees Pty Ltd.

1. The issue in this proceeding is whether access to documents should be should be given to a person who is a member or eligible to be registered as a member of a company.     If the plaintiff’s evidence is accepted, the plaintiff may be able to bring a proceeding under the Competition and Consumer Act 2010 (Cth). The plaintiff’s eligibility to be registered as a shareholder in Chapel Street Nominees Pty Ltd should be determined in a separate proceeding. It should not be determined in an application made under s 247A of the Corporations Act where there is no cross‑examination or discovery. It is for the plaintiff to establish his entitlement to be a member of Chapel Street Nominees Pty Ltd and he should do so in a properly constituted proceeding and seek the requisite equitable relief. 

1. The plaintiff does not have the standing to bring an application for the books of records of Chapel Street Nominees Pty Ltd and his application will be dismissed.   

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