Esteem Holdings Pty Ltd v Starbrake Pty Ltd
[2011] WASC 204
•17 AUGUST 2011
ESTEEM HOLDINGS PTY LTD -v- STARBRAKE PTY LTD [2011] WASC 204
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 204 | |
| 17/08/2011 | |||
| Case No: | CIV:2367/2011 | 27 JULY 2011 | |
| Coram: | EM HEENAN J | 27/07/11 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Injunction refused | ||
| B | |||
| PDF Version |
| Parties: | ESTEEM HOLDINGS PTY LTD STARBRAKE PTY LTD REGISTRAR OF TITLES |
Catchwords: | Injunction Interlocutory injunction To restrain distribution of proceeds of sale of lands Applicants claiming entitlement to participate in joint venture denied Proposed joint venture between parent companies of land owner vendor No direct interest in proceeds of sale |
Legislation: | Corporations Act 2001 (Cth) Transfer of Land Act 1893 (WA) |
Case References: | Charles v Federation Commissioner of Taxation (1954) 90 CLR 598 Commissioner of Stamp Duties (NSW) v Millar (1932) 48 CLR 618 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
STARBRAKE PTY LTD
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Injunction - Interlocutory injunction - To restrain distribution of proceeds of sale of lands - Applicants claiming entitlement to participate in joint venture denied - Proposed joint venture between parent companies of land owner vendor - No direct interest in proceeds of sale
Legislation:
Corporations Act 2001 (Cth)
Transfer of Land Act 1893 (WA)
(Page 2)
Result:
Injunction refused
Category: B
Representation:
Counsel:
Plaintiff : Mr G Douglas
First Defendant : Mr D Solomon
Second Defendant : No appearance
Solicitors:
Plaintiff : Hotchkin Hanly
First Defendant : Solomon Brothers
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Charles v Federation Commissioner of Taxation (1954) 90 CLR 598
Commissioner of Stamp Duties (NSW) v Millar (1932) 48 CLR 618
(Page 3)
1 EM HEENAN J: The court is sitting to hear and determine an urgent application for an interlocutory injunction brought by Esteem Holdings Pty Ltd against another corporation, Starbrake Pty Ltd. The application is pursuant to a chamber summons issued this morning, 27 July 2011, in this action, CIV 2367 of 2011, which was itself commenced this morning.
2 In support of the application there has been read an affidavit of Mr Guy J Douglas sworn 27 July 2011 which annexes a draft affidavit to be sworn by Mr Kevin Pollock in the belated proceedings which I will describe more fully in a moment, the explanation being that the urgency of the matter has so far prevented an opportunity for such an affidavit to be settled, sworn, filed and served by Mr Pollock in these fresh proceedings. The plaintiff has offered an undertaking as to damages in conventional terms.
3 The current application is further supported by: an affidavit of a Mr Christopher P Stokes sworn 26 July 2011 also annexing a copy of the draft affidavit of Mr Pollock, this time with copies of proposed annexures; an affidavit of a Mr Jamie Kevin Pollock sworn 26 July; minutes of proposed interim orders; a minute of unsuccessful conferral; and a certificate of urgency.
4 This action and the application is a sequel to another proceeding between the same parties and a second defendant, the Registrar of Titles, which had also been before me earlier this morning and which has a longer history. That proceeding is CIV 2279 of 2011 in which Starbrake, the defendant in the present action, is the plaintiff and Esteem, the plaintiff in the present action, is the first defendant and the Registrar of Titles is the second defendant. In that action, Starbrake seeks an order for removal of a caveat, pursuant to s 138 of the Transfer of Land Act 1893 (WA). It was commenced by originating summons issued on 15 July 2011 and has accumulated a formidable list of affidavits in support and in opposition. That application for the removal of the caveat resulted in consent orders made this morning for the removal of the caveat.
5 The new action just commenced is the next step in the dispute in which the subject matter is the net proceeds of sale emerging from the completion of various contracts for the sale of the land which was the subject of the caveat action. These events will be explained more fully later in these reasons.
6 Because of the urgency and the lack of the opportunity to put on affidavits by Starbrake in the action commenced this morning, it was
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- agreed, and leave was given, that all the affidavits filed in the caveat proceedings (CIV 2279 of 2011) could be, and were, read in support of, or in opposition to, the application for the injunction which is the subject of the matter before me.
7 It is necessary to set out some of the history leading to these transactions. There was some broadacre land on the outskirts of Perth which many years ago was identified as ripe for subdivisional development and eventual sale. A series of companies identified this opportunity, secured interests in the land, and proposed undertaking and implementing the subdivision. The control and ownership of those companies was, in turn, held by other companies and individuals but essentially the principal interests come down to shareholdings owned or controlled by Mr Allen Caratti, who is presently in control of Starbrake, and Mr Kevin Pollock and other members of his family and associated companies who are presently in control of Esteem.
8 As I say, the vicissitudes of the changing economic circumstances and particularly troubles of companies in the Pollock Group necessitated many changes in the corporate structures by which the subdivision was to be implemented and the profits distributed.
9 The situation at the end of those many changes is described by Mr Pollock, or would be so described were he able to swear his affidavit in time, in par 39 of the proposed affidavit where Mr Pollock would say:
Allen Caratti had originally purchased Starbrake as a single shareholder company. On 2 September 2004 he organised for selection of companies to issue a second share in the company to himself. Allen Caratti and I had made a verbal agreement that he would cause the second share to be issued and that after the settlement of the sale of Lot 3, he would transfer one of the 2 issued shares to Esteem. This couldn't be done prior to settlement because of the receiver's refusal to deal with any Pollock related company.
10 That reference to a receiver's refusal is explained by a long previous history set out in the proposed affidavit concerning the economic difficulties experienced by the Pollock Group to that date. The proposed affidavit goes on:
41. Shortly after the settlement of Lot 3 to Starbrake I met Allen Caratti to finalise the shareholding. My son Jamie prepared the form 484, and the share transfer and one of the issued shares in Starbrake from Allen Caratti to Esteem.
…
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- 43. Allen Caratti signed the share transfer and I had a copy made. I left the original of the form 484 and the share transfer …
44. On 19 January 2005 carried out a company search of Starbrake. I saw that the share transfer had not been registered and I rang Allen Caratti. He said he had given the form 484 and share transfer to share selection of companies and that he was sure it was being processed. I had no reason to follow this up again as I trusted him and we were doing a number of joint-venture projects together.
11 Again, simplifying matters very considerably and shortening the long history of the development, it became apparent that lot 3, the land which was to be the subject of the subdivision, was acquired by and registered in the name of Starbrake. As registered proprietor, Starbrake entered into a number of mortgages to secure finance for the development from a series of third party lenders and, perhaps additionally, from some companies associated with the two principal interests likely to profit from the transaction.
12 The implementation and readiness for sale of the proposed subdivision was a long, difficult and expensive process, but it has eventually come to fruition. Starbrake, as registered proprietor, and as the company owning the land and implementing the subdivisional project, is at the point where it has entered into a series of executory contracts for the sale of various lots emerging from the subdivision to various purchasers.
13 Those contracts are about to be completed; settlement is due in the next few days in respect of some of them and they are for large considerations. If and when those contracts are completed, the purchase prices will be paid to the vendor, Starbrake, and used, in part, to defray or discharge mortgages which have been obtained over the subject land or the issuing blocks as part of the measures to finance the subdivision activities. It is accepted that those secured creditors should be paid from the sale proceeds. The balance of the proceeds will be retained by Starbrake and in the ordinary course of events would be revenue in its hands for use in accordance with the decision of its directors which, it may be inferred, will reflect the policies and purposes which the original subdivision or venture was designed to achieve.
14 It can be assumed that there will be a number of creditors, trade creditors and other expenses which would need to be discharged and it can be expected that a surplus, representing a profit on the overall transaction, will then be money in the hands of Starbrake. That will be the profit from the venture and it will be for the directors to decide in what manner it should be dealt with. An obvious, but by no means sole,
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- possibility is for it to be distributed to the shareholders by way of dividends or in some other means. In that case the payment of dividends or other distribution can be inferred to be undertaken, on a basis of pro rata entitlement and equally, for all of the various shareholders of Starbrake. So much is obvious and is not a matter of contest in any of the submissions which have been put today.
15 Having disposed, however, of the caveat proceedings in which Esteem was seeking orders to retain a caveat which would have the effect of forbidding registration of the transfers to the purchasers of these emerging blocks, the consent orders which I have already described have had the effect that those transactions may be completed and that the proceeds of several sales will be available for disbursement or distribution in the various ways I have outlined. No exception is taken by Esteem to the discharge of secured creditors but by this application Esteem is seeking relief requiring that the balance of the purchase price, after discharge of secured creditors, be the subject of an injunction and be retained by Starbrake's solicitors pending further progress of this action. It is necessary to consider the basis upon which it is asserted that Esteem is entitled to that, or any comparable, relief.
16 Arriving at this point shows a departure from the basis for the relief claimed by Esteem in the new writ, by argument advanced by Esteem this morning, and by the accompanying chamber summons which I have already mentioned. By the indorsement of claim on that writ, Esteem asserts that certain properties are held on trust for Esteem and Starbrake in equal shares pursuant to a joint venture between the plaintiff and the defendant. There are then listed a series of lots and certificates of title which are the lots and titles emerging from the implementation of the subdivision which I have already described. The indorsement of claim goes on to seek a declaration that the properties so identified are beneficially owned by the plaintiff and the defendant in equal shares; secondly an order that the proceeds of the sale of all the properties be distributed to the plaintiff and the defendant in equal shares after the payment of costs necessary to give effect to settlement of the sale of the properties; then damages, costs, and such other relief as the court thinks fit.
17 The departure which I have mentioned between that formulation of the plaintiff's claim in the writ and in the chamber summons, and the only basis for an entitlement for relief that can be identified in the affidavits, and which has been the subject of submissions, amounts to this: by the writ and chamber summons Starbrake is asserting that it is a beneficial
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- owner in an estate in fee simple in a half interest in the subject lands and, as such, is entitled to a half interest in the proceeds of the sales in its own right. This assertion, however, is quite inconsistent with the proposed affidavit of Mr Pollock which makes it clear that Starbrake was to be, and is, the sole proprietor of the subject land, the emerging lots, and the company which implemented the proposed subdivision. As such, Starbrake claims to be the sole entity entitled, at least in law, to the whole of the proceeds of the sale and the emerging profit.
18 The case on the affidavits, or the unverified draft affidavit as propounded by Mr Pollock, is that either Esteem or interests associated with Esteem were to have a 50% shareholding in Starbrake along with the Caratti interests which meant that the implementation of the subdivision project, in the manner which I have now repeatedly described, would mean that Esteem as a 50% shareholder would be entitled to 50% of the dividends, or 50% of the distributions on a winding up or other distribution of capital, of the assets of Starbrake.
19 In the course of submissions it has been made clear by counsel for Esteem that it is on this last basis that Esteem asserts that it is entitled to relief. Where does that leave us? It means that Esteem's claim to a beneficial interest in the subject lands or in the proceeds of the sale has no hope of success whatever and is misplaced. It also means that Starbrake is entitled to receive, and to deal with according to law, the proceeds of the sale of the various lots in the subdivision and other revenues coming to its hands. It also means that if Esteem, either as a shareholder of Starbrake or as an entity claiming to be entitled to be registered as a shareholder of Starbrake, has any grievance about the manner in which the implementation of the subdivision has been carried out, the manner in which the proceeds of the sale are distributed or any other financial administration of Starbrake, it will, if it is a shareholder, at the most, be entitled to bring proceedings under the Corporations Act 2001 (Cth) for oppression or similar relief under s 233 of that Act, or to seek relief by way of an injunction under s 1324 of the Corporations Act if it can allege and establish that there is any breach of that legislation.
20 As pointed out by counsel for Starbrake, alleged oppression under s 233 is not necessarily a breach of the Corporations Act, although it may provide grounds for intervention under that section and for associated relief to be granted. Accordingly, the submission on behalf of Esteem that it has a beneficial interest in the assets of Starbrake, whether the lands which are in the process of subdivision, the emerging lots or the proceeds of sale, amounts to a fallacy. It is a common fallacy but a serious one
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- nonetheless. It ignores the fact that a shareholder in any corporation has no proprietary interest in any of the assets of the company of which he is a shareholder. They are owned exclusively and entirely by the corporation itself: Commissioner of Stamp Duties (NSW) v Millar (1932) 48 CLR 618 and Charles v Federation Commissioner of Taxation (1954) 90 CLR 598, 609. A shareholder, if aggrieved with the management of a corporation, has rights to seek relief under the Corporations Act under various alternative remedies, some of which I have mentioned, and on occasion to seek to bring a derivative action in the name of the corporation in the event that it is controlled by interests which are not responsive to the interests of the person alleged to have been suffering oppression. Relief of that kind has not been sought by Esteem in the present proceedings, and the present proceedings cannot be adapted to contemplate or allow a court to consider relief of that kind.
21 There are, however, other obstacles in this situation to the claim by Esteem, even if one were to accept the allegations of fact contained in the proposed affidavit of Mr Pollock, which I am informed would be put in issue and a different version of events advanced by or on behalf of Starbrake if there had been more opportunity and time to put on evidence in that regard. Counsel for Starbrake accepts, and in my view, with respect, correctly accepts, that today's proceedings should be conducted on the footing that the allegations of Esteem so far as they are matters of fact which have not been expressly contradicted by other evidence, should be treated as at least plausible and that Esteem's version of events should be treated as the version of events for consideration when it comes to the grant or refusal of any injunction. I have proceeded, and will proceed, on that basis.
22 Even so, the situation is that Esteem is not, and never has been, a shareholder of Starbrake. I refer to the earlier passages from the proposed affidavit of Mr Pollock in which it was asserted that there was an agreement between him and Mr Caratti that shares in Starbrake be issued to Esteem. Likewise, annexed to the version of the proposed Pollock affidavit annexed to the affidavit of Mr Stokes of 26 July 2011 there is what purports to be a standard transfer form of one share (50% of the issued capital) in Starbrake from a shareholder, Mr Allen Bruce Caratti, to Esteem dated 4 January 2005 and apparent signatures of Mr Caratti and some person on behalf of Esteem. I am told by counsel for Starbrake that the validity of that instrument and its authenticity would be contested and that there are reasons to suspect its authenticity but nevertheless I will treat it at the moment as if it were an effective transfer of one share in Starbrake to Esteem.
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23 Also accompanying the document is a form 484, under the Australian Securities and Investments Commission (ASIC) forms, with details of changes to the company particulars of Starbrake which has been partially completed, but which has not been signed by a director or secretary of Starbrake, nor registered in the registry of that company or on the ASIC database. The form and its annexures and schedules refer to the issue of two fully paid ordinary shares in the company which would take the issued capital from two to four shares. It records the shareholding then being four shares and it proposes to record Esteem as holding two of those four shares. The form is dated 4 January 2005. Again the document is not signed or authenticated by any officer of Starbrake and it is not part of the record of shareholdings of Starbrake. It purports to show Esteem as having two of four shares whereas the transfer refers to one of two shares and the proposed Pollock affidavit refers to one of two shares being issued. So there is some inconsistency in those documents.
24 Be that as it may, the fact is that Esteem is not a shareholder of Starbrake and as such is not eligible to claim relief under s 233 of the Corporations Act or to seek leave to bring derivative proceedings in the company's name. That is sufficient to disentitle Esteem to the relief which is sought but there is one further matter. It is this: in substance the relief which Esteem is pursuing, namely an injunction to prevent distribution of the net surplus of the proceeds of the various contracts of sale soon to be completed of lots emerging from the subdivision, is an attempt to freeze the whole of those proceeds on the basis that there is reason to believe that the money or assets of the company may be jeopardised and that Esteem's claim for relief may be defeated unless an injunction in the form of a Mareva-type order is granted to protect it.
25 There are several things to be said about that. The first is that, even on its own case, Esteem has no more than a claim to 50% of the emerging profits from the transaction and then only if it is decided by the directors of Starbrake to distribute those profits by way of dividends or otherwise to the shareholders. No account of that limitation of the interest has been formally recognised by Esteem in the present proceedings.
26 Secondly, for relief of the Mareva genus to be available it is necessary for the applicant to show that the assets are in jeopardy or that there is a risk that, if successful in the proceedings, the plaintiff may not be able to recover moneys because assets had been dissipated or sequested in the interim. There is simply no evidence of that kind before the court.
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27 Mr Douglas for Esteem acknowledged this and explained that because of the urgency of the matter he had been unable to obtain any evidence from Mr Pollock, or elsewhere, which could be put before the court on this issue. In response to that, I can only say that any supposed risk or jeopardy to the assets of Starbrake would seem to have been a factor relevant for consideration in the caveat proceedings, at least in relation to terms which might be proposed if the caveat were to be removed. Despite this, no attempt was made in the caveat proceedings to advance evidence of this kind. This present application is an urgent application brought before me as duty judge and directed by Kenneth Martin J to be heard today because of the need to deal with the situation of these impending completions under the various contracts of sale. The onus therefore was on Esteem to put forward all relevant and pertinent evidence.
28 Mr Douglas for Esteem indicated that he had received instructions from Mr Pollock to the effect that Mr Pollock suspected, as a result of examination of undisclosed accounts, that there was a large value of assets of Starbrake which had not been adequately accounted for in the course of the implementation of the subdivision, so far - a value which he put as high as $10 million - and that suspicions were held that those moneys had been misapplied and distributed otherwise than in accordance with the alleged terms of the joint venture, the term 'joint venture' being used improperly as I have already indicated in the sense employed by those associated with Esteem.
29 There is simply no basis upon which I could accept that that allegation has been made out. There has been no opportunity for it to be answered. Even if it had been made out, it would not follow that there would be reason to believe that the proceeds of these settlements of the various contracts of sale are in jeopardy. More to the point, the same obstacle would be present to Esteem that, not being a shareholder of Starbrake, it would not be in a position to seek leave under the Corporations Act or otherwise for alleged malfeasance or breach of duty by the directors or officers of Starbrake in the administration of its affairs. That being the case I refuse the application for the injunction.
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