Farina & Lofts and Ors
[2018] FamCA 763
•25 September 2018
FAMILY COURT OF AUSTRALIA
| FARINA & LOFTS AND ORS | [2018] FamCA 763 |
| FAMILY LAW – PROPERTY – INJUNCTIONS Whether previous interim injunctions granted by consent should be set aside and replaced with fresh injunctions - What evidence is relevant – Whether serious issue to be tried – balance of convenience. |
| Corporations Act 2001 (Cth) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| ABC v Lenah Game Meats (2001) 208 CLR 199 Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 |
| APPLICANT: | Mr Farina |
| 1st RESPONDENT: | Ms Lofts |
| 2nd RESPONDENT: | C Pty Ltd |
| 3rd RESPONDENT: | D Pty Ltd |
| 4th RESPONDENT: | Mr B |
| 5th RESPONDENT: | V Pty Ltd |
| FILE NUMBER: | BRC | 10102 | of | 2012 |
| DATE DELIVERED: | 25 September 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Carew J |
| HEARING DATE: | 6 & 13 August 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Pyle of Counsel with Mr Lake of Counsel |
| SOLICITOR FOR THE APPLICANT: | Dowd & Company |
| FOR THE 1ST RESPONDENT: | Self-represented |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Looney of Queen's Counsel with Ms FitzGerald of Counsel |
| SOLICITOR FOR THE 2ND RESPONDENT: | Bluewater Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Looney of Queen's Counsel with Ms FitzGerald of Counsel |
| SOLICITOR FOR THE 3RD RESPONDENT: | Bluewater Lawyers |
| COUNSEL FOR THE 4TH RESPONDENT: | Mr Looney of Queen's Counsel with Ms FitzGerald of Counsel |
| SOLICITOR FOR THE 4TH RESPONDENT: | Bluewater Lawyers |
| COUNSEL FOR THE 5TH RESPONDENT: | Mr Pyle of Counsel with Mr Lake of Counsel |
| SOLICITOR FOR THE 5TH RESPONDENT: | Dowd & Company |
Order
Upon the undertaking of Mr Farina to refrain from applying to any court for orders to wind up or liquidate or place into administration the companies that are parties to these proceedings, being:
a)C Pty Ltd;
b)D Pty Ltd; and
c)V Pty Ltd
until further order of this Honourable Court.
it is ordered
The application filed by Ms Lofts on 25 July 2018 be dismissed.
AND UPON the undertaking of Mr B to:
A.Submit to such order (if any) as the Court may consider to be just for the payment of compensation, (to be assessed by the Court or as it may direct), to any person, (whether or not that person is a party), affected by the operation of the order or undertaking or any continuation (with or without variation) of the order or undertaking; and
B.Pay compensation referred to in A. to the person affected by the operation of the order or undertaking.
it is ordered until further order
Paragraphs 3, 4, 5, 6, 7, 8, 9 and 10 of the Order made on 4 June 2018 be vacated.
Paragraph 1 of the Order made on 26 July 2018 be vacated.
Mr Farina (“Mr Farina”) is restrained and an injunction hereby issues restraining him personally, or through his servants or agents without the prior written agreement of Mr B (“Mr B ”) from:
(a) doing any act or thing for or on behalf of C Pty Ltd (“CPL”) including but not limited to making any representation, authorising any act, entering into any agreement, performing or authorising any transaction;
(b) doing any act or thing for or on behalf of D Pty Ltd (“DPL”) including but not limited to making any representation, authorising any act, entering into any agreement, performing or authorising any transaction;
(c) dealing in any way with bank accounts or other financial facilities of CPL;
(d) dealing in any way with bank accounts or other financial facilities of DPL;
(e) attending or entering the premises located at W Street, X Town (the “warehouse”);
(f) instructing or approaching, or causing any approach to be made or instruction to be given to any employee of CPL to do anything whether in the course of their employment or otherwise save that the obligation “or otherwise” does not apply in respect of Ms Y;
(g) causing any products or goods of any kind to be removed from the warehouse;
(h) communicating with any existing supplier of CPL, however it will not be a contravention of this Order if Mr Farina communicates with Z Pty Ltd, AA Pty Ltd, BB Pty Ltd and CC Pty Ltd for the sole purpose of:
(i)selling Z Pty Ltd products to CC Pty Ltd through V Pty Ltd (“VPL”); or
(ii)distributing BB Pty Ltd and AA Pty Ltd products through VPL;
(i) communicating with any existing customer of CPL, however it will not be a contravention of this Order if Mr Farina communicates with CC Pty Ltd for the sole purpose of selling Z Pty Ltd products to CC Pty Ltd through VPL;
(j) doing any act or thing or causing or directing any act or thing to be done by any other person or entity that:
(i)disparages CPL (including Mr B and any CPL employee); or
(ii)could reasonably be expected to entice or encourage an existing supplier or existing customer of CPL:
A. to deal with CPL on a basis that is different from the existing arrangements with those suppliers and customers; or
B. not to deal with CPL at all;
(k) doing any act or thing or causing any act or thing to be done by any other person or entity that could entice an existing supplier or existing customer of CPL to supply to, or purchase from, VPL, or any other entity, instead of CPL.
Mr Farina must by 9.00am on the day after this Order is made deliver to Bluewater Lawyers the keys to any part of the warehouse and any other device which enables him to access the warehouse insofar as they are in his possession at the time of making this Order.
Mr Farina and VPL must by 4.00pm on the day after this Order is made provide a statutory declaration to Bluewater Lawyers which sets out:
(a) the present location of each of the items referred to in paragraph 6(d) to 6(f) herein;
(b) any agreements for the sale, loan, rental or other disposition of each of items referred to in paragraph 6(d) to 6(f) herein;
(c) the details of any payments made by the recipients of each of items referred to in paragraph 6(d) to 6(f) herein to Mr Farina and/or VPL in relation to those items;
in relation to each of the following:
(d) the other goods taken from the warehouse on 18 May 2018 as referred to in the affidavit of Mr B affirmed on 30 May 2018;
(e) the goods removed from the warehouse on 5 June 2018 as referred to in the affidavit of Mr B affirmed on 1 July 2018;
(f) any other goods taken from the warehouse by or at the instruction of Mr Farina and/or VPL since 7.00am on 4 June 2018.
Mr Farina must by 4.00pm on the day after this Order is made:
(a) pay or cause to be paid to CPL in satisfaction of the sale by CPL to VPL of the related stock; or
(b) return to the premises of CPL the related stock in the condition in which they were taken.
Mr Farina shall not make any representation to the effect that the acquisition and sale by CPL of the engraving machines was authorised or approved by Mr B .
If Mr Farina fails to comply with paragraph 7 herein, then each of Mr Farina and VPL:
(a) must provide by 5.00pm on the day after this order is made a statutory declaration to Bluewater Lawyers, an account of profits for the related stock;
(b) is restrained and an injunction issue restraining each of them from dealing with the proceeds received for the related stock.
VPL (whether by its servants, agents or otherwise) is restrained and an injunction hereby issues restraining it from doing any of the following without the prior written consent of Mr B :
(a) instructing or approaching any employee of CPL or causing any approach to be made or instruction to be given to any employee of CPL to do anything whether in the course of their employment or otherwise;
(b) purchasing any products from CPL;
(c) storing or causing to be stored, delivering or causing to be delivered, any products to the warehouse;
(d) subject to paragraph 11 herein, removing or causing to be removed any products from the warehouse;
(e) communicating with any existing or potential supplier of CPL, however it will not be a contravention of this Order if VPL communicates with Z Pty Ltd, AA Pty Ltd, BB Pty Ltd and CC Pty Ltd for the sole purpose of:
(i)selling Z Pty Ltd products to CC Pty Ltd through VPL; or
(ii)distributing BB Pty Ltd and AA Pty Ltd products through VPL;
(f) doing any act or thing or causing any act or thing to be done by any other person or entity that:
(i)disparages CPL (including Mr B and CPL employees); or
(ii)could reasonably be expected to entice or encourage an existing supplier or existing customer of CPL:
A. to deal with CPL on a basis that is different from the existing arrangements with those suppliers and customers; or
B. not to deal with CPL at all;
(g) doing any act or thing or causing any act or thing to be done by any other person or entity that could entice an existing supplier or existing customer of CPL to supply to, or purchase from, VPL, or any other entity, instead of CPL.
VPL is to pay CPL for, and then remove any and all products presently stored by VPL in the warehouse, by 5.00pm on the day after this Order is made.
Until trial or earlier order Mr Farina and VPL must:
(a) facilitate any of Mr B or his accountant or his legal representative having access on premises at CPL and DPL at all reasonable times which permits the accounting and payroll programmes and data of VPL to be viewed both electronically and to avoid any doubt this data is to include any documents containing sales data and pricing information and customer details and invoices and purchase orders;
(b) facilitate any of Mr B or his accountant or his legal representative being able to print any and all reports from the accounting and payroll programmes of VPL;
(c) provide to any of Mr B or his accountant or his legal representative access to any documents requested by any of them relevant to the data contained in accounting and payroll programmes of VPL;
(d) provide to any of Mr B or his accountant or his legal representative an electronic backup files for the accounting and payroll programmes together with whatever necessary licences, passwords and software are required to access the data therein of VPL;
(e) provide to any of Mr B or his accountant or his legal representative by no later than 10.00am on the 7th day of each month an accounting for monies drawn on any bank account conducted by VPL in the previous month together with copies of all source documents including invoices, purchase orders, bank statements.
Pursuant to ss 198F and 290 of the Corporations Act 2001 (Cth), Mr B is to forthwith take all steps which are reasonably necessary to enable Mr Farina to have access to the books and financial records of CPL, including all information systems, with such access to continue until trial or earlier order.
Until trial or earlier order Mr B be restrained and an injunction issue restraining him personally, or through his servants or agents without the prior written agreement of Mr Farina from:
(a) causing or permitting CPL and / or DPL to enter into transactions or pay any money from any account in the name of CPL and / or DPL or enter into any such transaction or pay any such amount:
(i)other than in the ordinary course of the ordinary business of CPL and/or DPL and for the purposes of this Order the following are not within the ordinary course of the ordinary business of CPL and or DPL:
A. entering into any pre-emptive negotiations and/or entering into any contract for the sale of the business of CPL and/or DPL;
B. varying current contracts which result in a direct benefit to Mr B or any entity in which he has any interest whether direct or indirect or which may have a material impact on the future valuation of the business of CPL and/or DPL;
(ii)in any event in an amount greater than the sum of $50,000 in any one transaction;
(b) entering into or causing or permitting anyone else to enter into transactions ordinarily conducted by CPL and/or DPL for his own benefit or monetary gain;
(c) causing or permitting any transactions to be provided through an entity or through the use of a subcontractor, which would otherwise have been provided by CPL and/or DPL.
The costs of and incidental to the interlocutory applications be reserved to trial.
IT IS ORDERED BY CONSENT
Each of the parties has liberty to apply to have the matter relisted on the giving of 3 business days’ written notice to each other party.
The final hearing
The Application in a Case filed by Ms Lofts on 4 May 2018 and amended on 24 May 2018 be adjourned to be heard and determined at trial.
Applicant’s case
Mr Farina is to file and serve any Amended Initiating Application (“Amended Initiating Application”) with such amendments to be limited to relief sought for alleged breaches of director’s duties and oppression by Mr B by 4.00pm on 26 October 2018.
Mr Farina is to file and serve:
(a) a Statement of Facts, Issues and Contentions in relation to issues of liability for alleged breaches of director’s duties and oppression relating to the relief sought in the Amended Initiating Application; and
(b) one affidavit of each witness which is intended to be relied upon at trial in relation to such issues
by 4.00pm on 9 November 2018.
Mr B, CPL and DPL are to file and serve a Statement of Facts, Issues and Contentions in relation to issues of liability for alleged breaches of director’s duties and oppression relating to the relief sought in the Amended Initiating Application together with one affidavit for each witness upon which they intend to rely in relation to such issues by 4.00pm on 30 November 2018.
Mr Farina is to file and serve any Reply and any additional affidavit material in reply by 4.00pm on 14 December 2018.
Second, Third and Fourth Respondents’ case
Mr B, CPL and DPL are to file and serve:
(a) a Reply to the Initiating Application or Amended Initiating Application (the “B Reply”) with such amendments to be limited to relief sought for alleged breaches of director’s duties and oppression by Mr Farina; and
(b) a Statement of Facts, Issues and Contentions in relation to issues of liability for alleged breaches of director’s duties and oppression relating to the relief sought in the B Reply; and
(c) one affidavit of each witness which is intended to be relied upon at trial in relation to such issues
by 4.00pm on 9 November 2018.
Mr Farina and VPL are to file and serve a Statement of Facts, Issues and Contentions in relation to issues of liability for alleged breach of director’s duties and oppression relating to the relief sought in the B Reply together with one affidavit for each witness upon which they intend to rely in relation to such issues by 4.00pm on 30 November 2018.
Mr B, CPL and DPL are to file and serve any Reply and additional affidavit material in reply by 4.00pm on 14 December 2018.
Both cases
Each party is not permitted to read or rely on any affidavit or other evidence of any witness other than the affidavits filed in accordance with paragraphs (18) to (24) herein without leave of the Court.
Each party is to file and serve a list of objections to evidence by 4.00pm on 28 December 2018.
Each party who is served with a list of objections in accordance with the preceding paragraph is to have their Counsel confer and then file and serve a reply to those objections by 4.00pm on 10 January 2019.
Mr B, CPL and DPL are to pay the setting down fee and any applicable hearing fees or make application for waiver or exemption of such fee(s) no less than seven (7) days prior to the final hearing.
All parties are to file and serve an outline of their case which includes:
(a) a summary of argument including any authorities relied upon;
(b) a minute of the final orders sought;
(c) a list of the material relied upon; and
(d) a brief chronology of relevant events
by 4.00pm on 17 January 2019.
The matter is listed for hearing for 9 days commencing 21 January 2019.
The matter be relisted for mention before the Honourable Justice Carew at 9:00am on 17 December 2018 and all parties be granted leave to appear by telephone on that date
The Application – Contravention filed by Mr B on 16 July 2018 be listed for mention before the Honourable Justice Carew at 9:00am on 17 December 2018 and all parties be granted leave to appear by telephone on that date.
The case management hearing listed at 9:30am on 18 October 2018 be vacated.
Leave be granted to all parties to copy documents produced pursuant to subpoena for which leave to inspect was granted by Order dated 13 September 2018.
NOTATION
It is noted that should the Applicant’s case and the Second, Third and Fourth Respondents’ case resolve prior to 14 January 2019, then the time allocated to the final hearing may be used for the hearing of the property dispute as between Ms Lofts and Mr Farina.
It is further noted that formal compliance with r 15.08 of the Family Law Rules 2004 (Cth) is unlikely to be required and an application to that effect will be made on the first day of trial with the purpose being to avoid duplication of material.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Farina & Lofts and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 10102 of 2012
| Mr Farina |
Applicant
And
| Ms Lofts |
First Respondent
And
| C Pty Ltd |
Second Respondent
And
| D Pty Ltd |
Third Respondent
And
| Mr B |
Fourth Respondent
And
| VPL |
Fifth Respondent
REASONS FOR JUDGMENT
Mr Farina and Ms Lofts were in a de facto relationship until their separation in 2012 and they have competing applications for a property settlement before this Court.
Mr Farina and Mr B are for all intents and purposes business partners who have had a major falling out.
Mr B has been joined to the substantive proceedings by Ms Lofts because she seeks orders that will impact on Mr B’s property interests, which are intertwined with Mr Farina’s.
The issue requiring determination at this interlocutory hearing is, effectively, who should operate the business, which, up until recently, has been run jointly by Mr Farina and Mr B.
While Mr Farina is named as the applicant in the Court documents, he and his company VPL, are, in fact, the respondents to this interlocutory application.
Mr B argues that he should operate the business pending trial and Ms Lofts supports Mr B’s position.
background
Mr Farina and Ms Lofts commenced a de facto relationship in 1995 and separated in 2012.
They have two children, N aged 12 and M aged 8.
Mr Farina commenced the substantive proceedings seeking a property settlement order between himself and Ms Lofts. Ms Lofts joined the various other parties who are now named as respondents in the substantive proceedings.
Mr Farina and Mr B have been involved in business together for the past seventeen years. Their business operates through the corporate entity, C Pty Ltd (“CPL”) and the business trades under the name E Pty Ltd or EPL. It is an importing and wholesaling trading business.
CPL is owned by Mr Farina and Mr B in equal shares.[1] They are the only directors.
[1] The interests are held either personally or through their respective family trusts.
D Pty Ltd (“DPL”) was incorporated in 2012 and is solely owned by Mr B. In 2001 Mr B obtained exclusive distribution rights for certain products in Australia. DPL is an authorised distributor as is CPL. CPL pays a licencing fee to DPL.
The EPL business trades out of a warehouse at P Town.
There are about thirty employees including Mr Farina’s de facto partner, Ms Y, who is the national sales manager for the business.
Historically, Mr Farina has managed the day to day warehouse operations of the CPL business including administration and Mr B has managed supplier and customer relationships.
Mr B travels frequently both nationally and internationally to maintain the supplier and customer relationships.
Prior to January 2018 all strategic decisions for the business were made by Mr Farina and Mr B together.
In or about September 2017 an issue arose between Mr B and Mr Farina about Mr B’s access to the operating systems of CPL and DPL and the businesses operated by them.
Mr B contends that his access has been blocked by Mr Farina.
In December 2017, Mr Farina set up another company, V Pty Ltd (VPL). He is the sole director and shareholder. It is the establishment of this company and the business operated by it that has been a catalyst for much of the dispute. It is contended by Ms Lofts and Mr B that the VPL business has been set up in competition with the EPL business and is using the contacts, employees and facilities to further its own interests at the expense of the EPL business.
Mr Farina denies these allegations and contends that he took up an opportunity which Mr B had no interest in. He denies that his new business is in competition with the EPL business.
In March 2018 Mr B was informed of an alleged attempt by Mr Farina and Ms Y to take over Mr B’s exclusive distribution rights of certain products which he has held since 2001, and to have those distribution rights undertaken by Mr Farina’s new company, VPL.
Mr B has outlined a proposed claim against Mr Farina seeking relief for oppression and/or breach of director’s duties. Mr Farina has indicated an intention to bring a similar claim against Mr B. If either claim succeeds it will necessarily affect the value of property available for distribution as between Ms Little and Mr Farina.
A draft valuation for the relevant entities assesses the value of Mr Farina and Mr B’s interests at $5,780,000. Mr B has offered to buy out Mr Farina’s interest for $3,000,000. Ms Lofts wants to accept that offer. Her application for an order to that effect has been adjourned, by consent, to the first day of the trial listed for nine days in January 2019.
On 4 June 2018 the parties consented to an Order that left Mr Farina in control of the EPL business but restrained him from undertaking certain activities and required him to do certain acts by certain times.
Mr B and Ms Lofts allege that Mr Farina has failed to comply with his obligations under that Order and rely upon that failure, in part, to support the order now sought by them.
On 26 July 2018 the matter returned to Court but was unable to be resolved. The parties reached agreement for Mr B to take the reins of the business until the matter could come back before the Court for hearing. It was adjourned to 6 August 2018 without priority. It was further adjourned part heard to 13 August 2018. The understanding of the parties was that by agreeing to the interim Order on 26 July 2018 Mr Farina would not be restricted in his arguments in any way.
issues
The issues argued before me comprise the following:
a)Is there a proper basis for entertaining the application by Mr B and Ms Lofts having regard to the Order made on 4 June 2018 and if so, what evidence is relevant when considering whether the Order should be varied?
b)Is there a serious issue to be tried and does the balance of convenience favour the granting of the injunctions?
Is there a proper basis for entertaining the application by Mr B and Ms Lofts having regard to the order made on 4 June 2018 and if so, what evidence is relevant when considering whether the order should be varied?
On 4 June 2018 the parties compromised their competing applications for, among other things, injunctions, and an interim Order was made by consent. The Order effectively left Mr Farina in control of the business operated through CPL, subject to various obligations and restrictions.
Mr B and Ms Lofts contend that Mr Farina has failed to comply with that Order. Mr Farina concedes that he has not complied with the Order in a timely manner but submits that the only remedy for Mr B and Ms Lofts is one of enforcement.
While rule 17.02 of the Family Law Rules 2004 (Cth) provides that the Court can vary or set aside, at any time, an interlocutory order or an order for an injunction, it is undesirable for parties to return to court seeking to re-litigate matters that have already been determined, even matters determined on an interlocutory basis, and such attempts will be discouraged by courts.[2] In such circumstances a court will generally require evidence of a material change in circumstances or the discovery of new material not reasonably available at the time of the original or previous hearing.[3]
[2]Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44, 46.
[3] Ibid.
However, the Court will be more open to revisiting matters that are interlocutory in nature where there has been no contested hearing i.e. resolved by consent until further order.[4]
[4] Ibid.
There has been no contested hearing in this matter.
In those circumstances I consider it appropriate to entertain the application for injunctive relief and I do not consider that Mr B and Ms Lofts should be restricted to an enforcement application.
I also consider, if appropriate, to have regard to all evidence that may be relevant to the determination of whether or not the injunctions sought should be granted and not just the evidence of events that occurred after the 4 June 2018 Order was made.
Is there a serious issue to be tried and does the balance of convenience favour the granting of the injunctions?
General principles
Under the Family Law Act 1975 (Cth) (“the Act”) the Court has power to grant an injunction in a ‘de facto financial cause’ where it is necessary to do justice or where it appears just and convenient to do so.[5] A de facto financial cause is defined in s 4 of the Act as including proceedings between the parties to a de facto relationship with respect to the distribution of their property upon the breakdown of their relationship or any other proceedings relating to concurrent or pending proceedings of the type just mentioned.
[5] See ss 90SS(1)(k), 90SS(5).
The power invested in the Court to grant an injunction necessary to do justice or where it appears just and convenient to do so attracts the operation of particular principles derived from equity courts,[6] although the term ‘injunction’ “takes its colour from the statutory regime in question”.[7] The term ‘just and convenient’ is not “at large”.[8]
[6]ABC v Lenah Game Meats (2001) 208 CLR 199,[88].
[7] Ibid, [89].
[8] Ibid, [105].
Under the Corporations Act 2001 (Cth) this Court has power to grant an injunction where a person has engaged in or is engaging or proposing to engage in conduct that constituted, constitutes or would constitute, inter alia, a contravention of that Act.[9]
[9] See s 1324 of the Corporations Act 2001 (Cth).
Whether or not an injunction should be granted involves an inquiry as to whether or not there is a serious issue to be tried i.e. whether or not the applicant for the injunction has established a prima facie case for the substantive relief sought. If there is a serious question to be tried the Court must assess where the balance of convenience lies i.e. which of the parties will suffer the most injury/inconvenience if the injunction is granted or not granted. [10]
Application of general principles
[10]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, [65].
Is there a serious issue to be tried?
The substantive proceedings between Mr Farina and Ms Lofts relate to a de facto financial cause for which this Court has original jurisdiction.[11] Section 90SM of the Act empowers this Court to alter the interests of a party in property if it is just and equitable to do so and, having regard to contributions to the acquisition, conservation or improvement of any property and contributions to the welfare of the family, an order should be made.
[11] See s 31(1)(aa) of the Family Law Act 1975 (Cth).
It is not argued by Mr Farina that Ms Lofts did not have a prima facie claim. Indeed it was Mr Farina who commenced substantive proceedings for a property settlement order.
The ascertainment and valuation of Mr Farina’s and Ms Lofts’ respective property interests is a necessary part of the determination of any such case. Ms Lofts contends that Mr Farina’s establishment of a competitive business in December 2017 (VPL) is detrimentally impacting on the value of CPL to her prejudice. As earlier noted Ms Lofts contends that the offer made by Mr B to buy out Mr Farina’s interest in the business should be accepted.
Mr B and the corporate entities have been joined to the proceedings as between Mr Farina and Ms Lofts because the value of the entities is a matter to be determined in the proceedings between Mr Farina and Ms Lofts and, in making a property settlement order, it may be necessary to make an order that impacts directly on Mr B and the corporate entities.
The outlined substantive proceedings by Mr B against Mr Farina[12]concern claims for relief by reason of oppressive conduct[13] and / or breach of director’s duties[14] pursuant to this Court’s original jurisdiction under the Corporations Act 2001 (Cth).[15]
[12] See final order sought in Exhibit 2 HAW2 – HAW7.
[13] See ss 232 and 233 of the Corporations Act 2001 (Cth).
[14] See ss 181, 182, 183 of the Corporations Act 2001 (Cth).
[15] See s 1337C of the Corporations Act 2001 (Cth).
The facts relied upon by Mr B against Mr Farina include the following:
a)That commencing in or about August 2017 Mr Farina interfered with Mr B’s capacity to obtain operational and financial information relevant to CPL and DPL;
b)Without consultation or consent Mr Farina established VPL in December 2017 in competition with CPL;
c)In March 2018 Mr B was informed by a third party of an attempt being made by Mr Farina and Ms Y to undermine his longstanding distribution arrangement with an overseas supplier and direct the business to VPL;
d)Undermining the relationship between CPL and some of its major suppliers and customers;
e)Using the CPL warehouse facilities for the delivery and storage of products for sale by VPL;
f)Refusing to provide information about the newly established business operated by VPL;
g)Using employees of CPL in his newly established business operated by VPL;
h)Undermining the security of employees of CPL;
i)Causing employees of CPL to withhold operational and other information from Mr B ; and
j)Undermining the profit of CPL to the benefit of VPL.
In addition, Mr B and Ms Lofts contend that Mr Farina has breached the Order made on 4 June 2018 that left Mr Farina to continue to manage the day to day operations of the EPL business.
Particulars of the alleged breaches are conveniently set out in the submissions prepared on behalf of Mr B and supplemented by the table setting out the references to the evidence. The submissions were adopted by Ms Lofts.
The alleged breaches of the Order made 4 June 2018 include:
a)Failure to provide timely access to CPL information systems as required by paragraph 1 of the said Order;
b)Entering into transactions to pay money by CPL other than in the ordinary course of business contrary to paragraph 3 of the said Order;
c)Entering into transactions to pay money by CPL that exceeded the limit of $50,000 contrary to paragraph 3 of the said Order;
d)Removing products from the warehouse that did not relate to the sale by CPL to an existing customer contrary to paragraph 4 of the said Order;
e)Communicating with existing suppliers or existing customers other than in relation to the acquisition or sale of products by CPL in the usual course of its business contrary to paragraph 4 of the said Order;
f)Taking a step that disparaged CPL or could reasonably be expected to entice or encourage an existing supplier not to deal with CPL contrary to paragraph 4 of the said Order; and
g)Failing to provide sales information for the VPL business contrary to paragraph 10 of the said Order.
The alleged breaches of the Order made by consent on 26 July 2018 include:
a)Failing to deliver the keys to the warehouse by 9.00am on the day after the said Order but rather posting them contrary to paragraph 2 of the said Order;
b)Continuing to frustrate Mr B’s access to information systems of CPL contrary to paragraph 2 of the said Order;
c)Tampering with computer storage devices contrary to paragraph 2 of the said Order.
Mr Farina seeks to minimise certain breaches suggesting that the matters about which complaint are made are de minimus or technicalities (my words). He otherwise takes issue with the alleged breaches.
Two particular alleged breaches warrant setting out in detail.
They concern the settlement by Mr Farina of a Fair Work Commission claim brought by two employees against CPL.
By way of background, the employees were dismissed by Mr B on 2 May 2018 for alleged serious misconduct. One of the employees was Mr Farina’s de facto, Ms Y. The other was a Mr DD. Both Ms Y and Mr DD commenced proceedings for wrongful dismissal against CPL and Mr B instructed lawyers to defend the claims.
Mr B was noted as the contact for CPL with the Fair Work Commission and was notified of a conciliation conference to occur on 21 June 2018.
Without informing Mr B, Mr Farina requested an earlier conciliation conference and settled the claims on 14 June 2018 on the basis of CPL paying substantial sums to each of Ms Y and Mr DD.
The same lawyers who act for Mr Farina in these proceedings acted for Ms Y and Mr DD in the Fair Work Commission claim. When those lawyers were served with Mr B’s Response to the Fair Work Commission claim on 15 June 2018 they did not inform Mr B that the claim had been settled by Mr Farina the day before but merely said they were no longer acting for Mr DD or Ms Y.
On 15 June 2018 Mr Farina sent Mr B the terms of settlement he had reached with Mr DD and Ms Y in which he said:
Please find attached for your viewing pleasure the Terms of Settlement for both [Ms Y] and [Mr DD]s as per yesterday’s Fairwork (sic) conciliation.
You have a lot of work to do if you believe you are going to GM this business successfully!
The tone of the communication was infelicitous.
The settlement reached with Mr DD required CPL to pay him $53,878.08. The significance of this sum is that one of the restraints imposed on Mr Farina by the 4 June 2018 order was in the following terms (relevantly):
3. Until trial or earlier order [Mr Farina] be restrained and an injunction issue restraining him personally, or through his servants or agents without prior written agreement of [Mr B] from:
3.1 causing or permitting [CPL] … to enter into transactions or pay any money from any account in the name of [CPL] … or enter into any such transaction or pay any such amount:
(i) other than in the ordinary course of the ordinary business of [CPL] …
(ii) in any event in an amount greater than the sum of $50,000 in any one transaction.
Rather unconvincingly, it is submitted by Mr Farina that as the settlement paid to Mr DD was made up of compensation of $43,500 and back pay of $10,373.08 there were two transactions neither of which were for a sum greater than $50,000.
Mr Farina then communicated with numerous suppliers of CPL informing them that CPL admitted treating its employees unfairly and unjustly and had settled their claims for unfair dismissal.
I do not find it necessary to make a finding about each and every alleged breach because the evidence, taken as a whole, both before and after the interlocutory orders, is sufficient to make a finding that there is a serious question to be tried.
Balance of convenience
It is argued that the balance of convenience favours the granting of the injunctions sought by Mr B for the following reasons:
a)Mr B has the necessary skill and experience to operate the EPL business having regard to his involvement in the business for the past seventeen years;
b)Apart from Mr DD (no longer an employee) and Ms Y, Mr B has a good relationship with CPL’s thirty employees;
c)Mr Farina has demonstrated his inability to comply with orders of this Court which were intended to maintain the status quo pending trial;
d)Ms Lofts claims an interest in the business and supports the order sought by Mr B ; and
e)The order is more likely to maintain the status quo pending trial permitting both the EPL business and Mr Farina’s new VPL business to continue operating.
Mr Farina argues that the order made on 4 June 2018 should stand because:
a)The evidence relied upon by Mr B and Ms Lofts does not justify Mr Farina’s exclusion from the operations of the business;
b)Mr Farina is critical to the successful operation of the EPL business;
c)Mr B is incapable of running the business on his own;
d)Mr B is not an independent person;
e)Mr B owes no duty to Ms Lofts;
f)Mr B’s proposed undertaking is meaningless because he is a ‘man of straw’;
g)The interlocutory orders have been substantially complied with and the evidence does not support a finding that the assets are at risk or that Mr Farina will not continue to operate the business profitably as he has done for that past twenty years;
h)The business is best run by both Mr Farina and Mr B as contemplated by the 4 June 2018 Order.
I am of the view that the balance of convenience favours the granting of the injunctions sought by Mr B for the following reasons:
a)Mr B has been involved in the business for over seventeen years and knows it well;
b)Mr B agrees to comply with mirror injunctions as set out in the 4 June 2018 Order requiring him to ensure Mr Farina has access to the books and financial records of CPL and restricting his ability to enter into transactions or pay money;
c)While only in draft form[16] there is evidence before me that Mr B has financial means such that his undertaking as to damages is not meaningless;
d)Ms Lofts supports the granting of the injunctions;
e)The proposed injunctions will permit (as did the earlier injunctions) the continued operation of both the EPL business and the VPL business;
f)As with the 4 June 2018 Order (at paragraph 1.6) the restraint affecting Mr Farina in relation to his de facto, Ms Y, will not apply to the words ‘or otherwise’;
g)Mr Farina has prima facie breached the previous interlocutory orders; and
h)The proposed injunctions are more likely to preserve the status quo pending the trial in January 2019.
[16] Draft single expert report exhibited to Mr B’s affidavit filed 30 May 2018 (exhibit 1)
conclusion
I have found that there are serious issues to be tried and that the balance of convenience favours the granting of the injunctions sought by Mr B and supported by Ms Lofts.
The matter has been listed for trial for nine days commencing 21 January 2019 and trial directions made.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 25 September 2018.
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