Gippsland Waste Services Pty Ltd v Webb Strategic Investments Pty Ltd
[2013] VSC 358
•11 July 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 3430 of 2013
| GIPPSLAND WASTE SERVICES PTY LTD (ACN 093 515 032) | Plaintiff |
| v | |
| WEBB STRATEGIC INVESTMENTS PTY LTD As trustee for the M & J Webb Family Trust (ACN 103 561 977) & Anor | Defendants |
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JUDGE: | ELLIOTT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 July 2013 | |
DATE OF JUDGMENT: | 11 July 2013 | |
CASE MAY BE CITED AS: | Gippsland Waste Services Pty Ltd v Webb Strategic Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 358 | |
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Injunctions – interlocutory injunction – applicable legal principles – whether serious question to be tried – balance of convenience – shareholders’ dispute – alleged breach of duty to the company – whether relevant shareholders precluded from participation in management of the company.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Meagher | Conlan Lawyers |
| For the Defendants | Mr M Stirling | Hibbert & Hodges Solicitors |
HIS HONOUR:
A. Introduction
This case concerns a dispute between shareholders to a shareholders’ agreement (“the Shareholders’ Agreement”).
The parties to the Shareholders’ Agreement are Gippsland Waste Services Pty Ltd, the plaintiff (“Gippsland Waste”), Webb Strategic Investments Pty Ltd, the first defendant (“Webb Strategic Investments”), Killarney Pastoral Pty Ltd, the second defendant (“Killarney Pastoral”) and Towards Zero Pty Ltd (“Towards Zero”), the company in which Gippsland Waste and the defendants hold the shares. The case also concerns issues relating to services provided to the Wellington Shire Council (“the Council”) by Towards Zero and Gippsland Waste.
B. Relief sought
By summons dated 3 July 2013, Gippsland Waste seeks injunctive relief on an interlocutory basis. It is not necessary presently to set out the detail of that summons.
There are 2 affidavits in support sworn by Joseph Agostino (“Agostino”), a director of Gippsland Waste. They were sworn on 3 July 2013 and 8 July 2013.
A statement of claim also was filed on 3 July 2013.
The relief sought in the statement of claim, by way of final injunctive relief, mirrors the injunctions sought on an interlocutory basis. Declarations and damages are also sought in the prayer for relief.
During the course of argument yesterday, counsel for Gippsland Waste handed to the court a minute of proposed orders (“the Proposed Orders”). Although the wording is slightly different to the summons and the prayer for relief in the statement of claim, it is, in substance, the same.
The Proposed Orders relevantly read:
1.Until the hearing and determination of the action or until further order, the first defendant and the second defendant be restrained from:
(a)acting on or giving effect to the defendants' notice of breach dated 23 May 2013;
(b)refusing or neglecting to give effect to the Shareholders’ Agreement between Gippsland Waste, Webb Strategic Investments, Killarney Pastoral and Towards Zero;
(c)refusing or neglecting to give effect to or to act pursuant to the dispute resolution procedure in clause 8 of the Shareholders’ Agreement;
(d)prohibiting or preventing Gippsland Waste from continuing to manage or inhibiting Gippsland Waste's involvement in the management of Towards Zero in accordance with the Shareholders’ Agreement;
(e)enforcing and acting or continuing to act pursuant to the deed of variation dated 24 June 2013; and
(f)prohibiting or preventing Gippsland Waste from continuing to perform pursuant to the subcontract agreement between Gippsland Waste and Towards Zero.
C. Concessions made during argument
Before proceeding further, it is necessary to observe the only parties to the proceeding are Gippsland Waste, Webb Strategic Investments and Killarney Pastoral. Notably, there is an absence of the Council and, technically at least, Towards Zero in this proceeding.
During submissions made by counsel for Gippsland Waste, he quite properly acknowledged that the rights of these absent parties may be affected by the orders he proposed in subparagraphs (e) and (f) above.
After some discussion he informed the court that the relief sought in those subparagraphs would no longer be pursued in this application.
In relation to subparagraph (b) of the Proposed Orders, counsel for Gippsland Waste accepted that this subparagraph encompassed the entirety of the subject matter of subparagraph (a), and it was subparagraph (a) which was directed to the specific relief sought. In those circumstances, the court was informed that subparagraph (b) was not pursued.
In relation to subparagraph (c) it was stated that, given the matters that had already transpired, in essence what was sought was a mediation between the parties. I was informed by counsel for the defendants that they were willing to have the matter referred to mediation. In those circumstances, the relief in subparagraph (c) was not necessary.
Accordingly, the issues in contest are those that arise in relation to the relief sought in subparagraphs (a) and (d) of paragraph 1 of the Proposed Orders.
D. Background
It is necessary to set out a brief history of events in order to understand why this matter has come before the court.
On 17 June 2009, a contract was entered into between the Council and Towards Zero. That contract was entitled “Waste Management Services Contract” (“the Council Contract”).
The Council Contract had a commencement date of 1 July 2009 and was for a period of 10 years. It is unnecessary to go into what is a rather complicated and lengthy contract for the purposes of this application. But I do refer to page 74 and schedule 3, which is entitled “Proposed Management Structure for the Contract”. That schedule set out the ownership of Towards Zero, which was recorded as being 50 per cent to Gippsland Waste and 50 per cent to Tambo Waste Pty Ltd (“Tambo Waste”). Tambo Waste is a company associated with the defendants. It is owned in equal shares by 2 persons related to Murray John Webb (“Murray Webb”) and Gregory John Webb (“Gregory Webb”).
Returning to the management structure recorded, in relation to Gippsland Waste, the schedule read, “Supplies Mr John Anton as director of Towards Zero”. John Anton was then a director of Gippsland Waste.
It stated in relation to Tambo Waste, “Supplies Mr Murray Webb as director of Towards Zero”. Towards Zero was also described in the management structure. It stated as follows:
Manages contract: Provides management team, finance and admin controls. Provides labour.
The direct involvement of Gippsland Waste and Tambo Waste was expressly recorded in this schedule. In relation to Gippsland Waste, the following was stated:
Supplies and maintains all equipment associated with landfills and transfer stations. Supplies technical and resource backup as required.
I will refer to these services as “Tip Services”.
In relation to Tambo Waste, the following was stated:
Supplies and maintains all equipment associated with kerbside collections and processes of recyclables and transfer station bin movements. Supplies technical and resource back-up as required.
At this point in time, the directors of Gippsland Waste were not the current directors. The current directors, namely Agostino and Rodney Young (“Young”), only became directors of Gippsland Waste on 8 December 2011. Their appointment as directors occurred around the time that Agostino and Young (or interests associated with them) purchased their shareholdings in Gippsland Waste.
It is accepted by all parties that the Council Contract was of considerable value to Towards Zero.
Although the relevant documents are undated and the evidence is unclear as to precisely when it occurred, further documents were executed as a result of the change of ownership of Gippsland Waste. The provision of services under the Council Contract was formalised by the execution of a subcontract between Towards Zero and Gippsland Waste with respect to the Tip Services (“the Subcontract”). Also the Shareholders’ Agreement was signed.
In relation to the Subcontract, it is unnecessary to go into any real detail. That said, it is important to note that there were only 2 parties to the agreement, namely Towards Zero and Gippsland Waste. I also note that this document recorded the agreement to have commenced in operation from 1 July 2009 and was for a period of 10 years.
The other agreement I have referred to is the Shareholders’ Agreement. As I have already noted, that agreement was between Gippsland Waste, Webb Strategic Investments, Killarney Pastoral and Towards Zero. Recital C recorded the following:
This is an agreement between the Shareholders in the Company. It sets out how the Company is to be administered. This includes the Company's financing and management and how the Business is to be conducted.
“Business” was defined in the Shareholders’ Agreement in clause 13.1 as follows:
Business means the management and operation of the landfill and transfer stations and kerbside collection services as detailed in the Tender.
“Tender” was a defined term. The definition refers back to the tender to the Council in 2009 and the Council Contract.
The Shareholders’ Agreement provided in clause 1.1 that Agostino, Young, Murray Webb and Gregory Webb were to be directors of Towards Zero.
Clause 2.3 provided that, subject to clause 2.4, certain matters could only be done with the unanimous agreement of the board of Towards Zero. Those matters included:
2.3.28The making of an agreement which would bind the Company to a commitment or obligation (which cannot be terminated) which exceeds $15,000 or 3 months;
2.3.29The making of an abnormal or unusual agreement including one that is any of the following:
(a)Outside the normal course of trading
…
(c)Of a long‑term nature
(d)That would have extended payment terms
(e)That would involve a total outlay over the term of the contract in excess of $10,000.
Clause 2.4 provided:
If the Board cannot obtain unanimous agreement, the matter fails.
Clause 7 of the Shareholders’ Agreement set out various covenants. Pursuant to that clause, each shareholder, jointly and severally, covenanted and agreed to various things. They included:
7.1.1Co-operate and use their best endeavours to ensure that the Company successfully conducts its [B]usiness.
…
7.1.3Make approvals or decisions that are required of the Shareholder in good faith and in the best interests of the Company and the conduct of its [B]usiness as a commercial venture.
…
7.1.5Be just and faithful in their activities and dealings with other Shareholders.
7.1.6Give full information and truthful explanations regarding all matters affected the affairs of the Company.
Clause 7.2.3 of the Shareholder’s Agreement required, “No shareholder shall, without the consent of the other shareholders [k]nowingly cause or suffer to the done anything whereby the Company's property may be endangered.”
Clause 8 of the Shareholders’ Agreement dealt with dispute resolution. Clause 8.1 required the procedures set out in the clause to be followed. Clauses 8.2 to 8.4 provided a mechanism whereby a statement could be provided giving notice of the relevant dispute and imposed an obligation on the parties to use, in substance, their best endeavours to resolve the dispute identified.
If the matter were not resolved within 20 business days of the delivery of the statement, there was then a mechanism under clause 8.6 for the parties to go to mediation. It was only after the mediation process had occurred that a party was entitled to commence legal proceedings: clause 8.6.4.
Clause 8.7 is important for the resolution of this dispute. It read as follows:
If a Shareholder is in any capacity in breach of a duty to the Company (whether under this Agreement or otherwise), the other Shareholders must appoint 2 or more directors to act on behalf of the Company. The directors will have full authority to negotiate and settle the claim or to bring legal proceedings in relation to it. The other Shareholders must do everything necessary to give effect to their decisions. The Company must use anything the directors recover for its own use.
(Emphasis added.)
Bank guarantees were provided by both Gippsland Waste and Tambo Waste in favour of the Council in relation to the Council Contract. Bank guarantees were provided in the sum of $232,000 by Gippsland Waste and in the sum of $268,000 by Tambo Waste. The bank guarantee provided by Gippsland Waste was provided on 2 May 2012.
These arrangements having been put in place, Gippsland Waste continued to provide the Tip Services under the Council Contract and pursuant to the Subcontract until May 2013.
On 22 May 2013 a show cause notice (“the Show Cause Notice”) was issued by the Council under the Council Contract. The Show Cause Notice was provided to Gippsland Waste after it had been delivered by the Council to Towards Zero, at least to the extent it was provided to the Webbs. It was provided to Gippsland Waste under cover of a letter from solicitors Hibbert & Hodges, who were acting for Webb Strategic Investments and Killarney Pastoral.
Having identified that Hibbert & Hodges acted for those parties, the letter continued:
[We] attach a copy of the Show Cause Notice dated 22 May 2013 served by [the Council] on [Towards Zero]. We are instructed that the matters of conduct that have caused the issue of the Show Cause Notice are the deliberate alteration and manipulation of data to the financial advantage of [Gippsland Waste]. In accordance with the Shareholders’ Agreement for [Towards Zero] our clients have appointed Murray Webb and Gregory Webb as the Directors to respond to the Show Cause Notice and to act on behalf of [Towards Zero] in seeking to preserve Contract No. 2008/155.
We attach by way of service a Notice pursuant to Clause 8.7 of the Shareholders’ Agreement.
Our clients seek from you a full and detailed response to the allegations raised by the Show Cause Notice and the alleged breaches of the Environment Protection Act and the Crimes Act. Please ensure that these full particulars are provided no later than midday Monday 27 May 2013 in order that your responses can be considered in addressing the Show Cause Notice.
The notice (pursuant to clause 8.7 of the Shareholders’ Agreement) attached to the letter was dated the next day, ie 23 May 2013. It was signed by Murray Webb and Gregory Webb on behalf of Webb Strategic Investments and Killarney Pastoral, respectively. The notice recorded that Webb Strategic Investments, Killarney Pastoral and Gippsland Waste were shareholders in Towards Zero. It also stated that Gippsland Waste had breached its duties to Webb Strategic Investments and Killarney Pastoral.[1] Breaches were alleged in relation to clauses 7.1.1, 7.1.3, 7.1.5, 7.1.6 and 7.2.3 of the Shareholders’ Agreement.[2] The breaches were simply asserted without any particulars of the impugned conduct. The notice concluded with the following:
Accordingly [Webb Strategic Investments] and [Killarney Pastoral] give notice pursuant to Clause 8.7 of the [Shareholders’] Agreement that it (sic) appoints Murray John Webb and Gregory John Webb as the Directors of the Company to act on behalf of the Company [ie Towards Zero].
[1]Clause 8.7 of the Shareholders’ Agreement refers to a breach of a duty to Towards Zero rather than other shareholders the subject of the Shareholders’ Agreement. No point was sought to be made about this aspect of the notice.
[2]See pars 32 and 33 above.
Also on 22 May 2013, the police executed a search warrant. That search warrant was dated 20 May 2013 and authorised the seizure of computer hard drives and documents. The warrant referred to pay load data and monthly returns in relation to waste collection at Baw Baw, East Gippsland and Wellington Shires, weigh-bridge receipts, and vehicle logs and receipts. The warrant also encapsulated a download of all weigh-bridge computer data from January 2011 to the present date. It was addressed to Gippsland Waste at 106 Contour Road, Trafalgar.
The warrant tendered also contains a record of materials and documents seized. It is not necessary to list them here. Suffice to say that the computers and company records of Gippsland Waste were seized on that day.
Also on 22 May 2013, the Council wrote a letter to the ANZ Bank. In that letter they stated that the conduct of Gippsland Waste was such that there was now a major breach of the Council Contract and that they were entitled, in effect, to call upon the security of the bank guarantee. The ANZ Bank has duly paid out funds to the Council pursuant to this demand.
Towards Zero responded to the Show Cause Notice issued by the Council. The response was issued by the Webbs, who were also its authors. No approval was sought from Gippsland Waste in relation to the contents of this notice and, indeed, Gippsland Waste was not aware of its contents until after it was sent.
That response to the Show Cause Notice issued by the Council included the following:
This document demonstrates to the Council that:
A.[Towards Zero] has the power and authority to remove [Gippsland Waste] from participation in the [Council] Contract; and
B.[Towards Zero] will replace the role of [Gippsland Waste] with [Tambo Waste] for the performance of the [Council] Contract and provides Council with an assurance that the [Council] Contract will be completed in accordance with its terms.
On 29 May 2013, another response was provided to the Council from Towards Zero. However, this response to the Show Cause Notice was authored by Agostino. This response purported to set out what had happened in relation to the computers, books and records of Gippsland Waste. Having done that, the response was as follows:
For these reasons it is not possible, at this stage, for [Towards Zero] to provide you with any explanation of the alleged underestimation or misstatement of landfill tonnages, and nor will it be able to do so unless the basis of your calculations is identified.
The response then continued by seeking details of the allegations. It also sought to reinstate the bank guarantee which had been called upon by the Council.
On 31 May 2013, an email was sent by Britt Appleby of the Council to Murray Webb, copied into various other persons. It was entitled “Deed of Variation”. In my view this is a critical document in relation to the resolution of this application.
The email set out 6 conditions. These conditions were said by the Council to be not negotiable in the Council contemplating Towards Zero continuing to perform the Council Contract. The conditions read as follows:
1. Towards Zero administrative officers to be relocated to Sale.
2.The current general manager of [Gippsland Waste] [name omitted] must have nothing to do with this contract.
3.The identity of any contractor or sub-contractor representatives involved with this contract must have prior Council approval.
4.The complete removal of [Gippsland Waste] from the contract to be replaced by Tambo Waste. This would ensure that [Gippsland Waste] would have no ongoing role in relation to the operation of the contract.
5.That any outstanding payment owed to Council be recovered immediately by drawing on the performance guarantee now in Councils (sic) bank account (this relates primarily to the overdue EPA Levy payments but could relate to other due monies).
6.That the Performance Guarantee now in Councils (sic) account be replaced with another Bank Guarantee as per the Contract requirements.
(Original punctuation.)
This email was responded to on 3 June 2013 by Murray Webb. In that email he stated that he would like to confirm that Gregory Webb and Murray Webb, acting as directors in control of Towards Zero, would accept the “non-negotiables” listed as 1, 2, 3, 4 and 6. But the email said that the Webbs did not have authority in relation to item 5. That matter was left for the Council's consideration.
A response to the email of 31 May 2013 was also sent by Agostino and Young. This email was marked without prejudice but no party objected to it being put before the court. That email is dated 6 June 2013, was addressed to Murray Webb but also copied into a Tim Rowe of the Council and Young.
In part, that email read as follows:
On behalf of Rod Young and myself our response to the six conditions listed below are:
We agree with 1, 2, 3 & 6. Please note that this is not in any way an admission of guilt regarding any allegations, it is simply a voluntary action to ensure that the contract remains serviceable and in order.
4.The complete removal of [Gippsland Waste] from the contract to be replaced by Tambo Waste. This would ensure [Gippsland Waste] would have no ongoing role in relation to the operation of the contract.
Number 4 is bit confusing. The contract is with Towards Zero not [Gippsland Waste]/[Tambo Waste]. I (sic) we understand this condition correctly, it would leave us no choices going forward and apparently no role at all within the contract, is this the case? The only choice would be for [Gippsland Waste] to lease the equipment to Towards Zero, if this is acceptable to Council? Does this allow [Gippsland Waste] to have a lease agreement with Towards Zero?
(Original emphasis.)
There were also some comments made in relation to condition 5 but it is not necessary to go into that detail here.
On 10 June 2013, Agostino sent an email to Murray Webb copied into various other persons, including Young. The email commenced with the words, “This email is a formal statement to put all parties on the same page regarding the Towards Zero Contract with Wellington Shire.” Further on in the email the following was stated:
We will voluntarily transition the Contract Administration of the Towards Zero Contract with Wellington Shire to Tambo Waste representatives because Council have requested this happen and we do not wish to create any unnecessary conflict. This is not an admission of guilt, it is the most sensible action to take.
Rod & I have now had several weeks to review the incident that has brought us to the current situation and to receive legal advice. There are a number of boundaries (legal, contractual, ethical) that have been crossed. I can understand wanting to protect the [Towards Zero] business and that is not the issue. There are adequate processes in the Shareholders Agreement that could have been followed which would have got us to where we needed to be in a positive way without damage. You have chosen to act outside the Shareholders Agreement without providing us with the opportunity to communicate or implement a process that would be fair to all [Towards Zero] directors.
(Original emphasis.)
It continued a little further on:
For these reasons we need to stop the scatter gun approach and deal with the process in a sensible and logical manner. Based on Britt Appleby's (Wellington Shire Council) email below [Gippsland Waste] has no real option but to enter into a dry hire arrangement for the plant & equipment with Towards Zero and transition other functions to Tambo Waste.
In response to that email, on 10 June 2013, Murray Webb sent an email to Agostino which included the following:
Its (sic) very disturbing that you have taken this stance, on [Friday] we agreed to get together to put a process in place that would be in [Towards Zero's] best interests. As Directors in control we have limited conversation with Council you have been told and kept informed of the way they want the situation handled, you seem to make out that somehow we are involved in that process, council are the ones telling us in no uncertain terms as to how they want the contract to continue. At no stage did I say that you are not to have any contact with council.
(Original punctuation.)
Finally, in this email chain, Agostino responded on 10 June 2013, addressing an email to Murray Webb, amongst others, which included the following:
Again for the record Rod Young and myself will voluntarily transition the administration of the Contract to Tambo Waste. We will work in accordance with the formal process. I cannot see how a formal process is not acceptable or reasonable. Under the circumstances formality should be necessary for all parties concerned. We will continue with the commitment outlined below. With regards to the MYOB files I will ask Tony Antoletti to provide what Sam Logan needs.
(Emphasis added.)
I now turn to the Towards Zero directors' meeting that was held on 14 June 2013 at 11 am. In my view this meeting is also critical to the outcome of this dispute.
It is of some note that there was an independent chair, namely Darren Jennings, who chaired the meeting. The meeting was also attended by Agostino and the Webbs. Young was an apology.
Given the minutes subsequently were adopted as being accurate and correct, I wish to set out the relevant part of the minutes verbatim. On the subject matter of the directors being in effective control, the minutes record as follows:
With effect 22 May 2013 Murray [Webb] and Greg [Webb] have given notice that pursuant to Clause 8.7 of the [S]hareholders’ [A]greement, that they are the only directors authorised to act on behalf of [Towards Zero].
·It is noted that Joe [Agostino] and Rod [Young] are still listed as directors of the company with ASIC and that Murray and Greg have actioned effective control of [Towards Zero].
·Joe advised on behalf of himself and Rod that they accept this position as they believe it is currently in the best interests of [Towards Zero].
·Joe and Rod have clearly stated that they refute the allegations made against them and that their acceptance of Murray and Greg being directors in effective control of [Towards Zero] is in no way any admission of guilt, and they will be responding to the allegations made by [the Council] in due course.
(Emphasis added.)
For completeness, I note that on 18 June 2013, Gippsland Waste provided a further response to the Show Cause Notice issued by the Council. It is not necessary to go into any great detail about this, but I do note that on page 6 of the document there is a reference to the fact that there was a discrepancy in matters reported to the Council. The discrepancy acknowledged was some 216.35 tonnes over a 10 month period. In relation to that it was stated:
Although this is not acceptable it does not constitute deliberate manipulation of data for financial advantage or any attempt to deny Wellington Shire Council revenue.
It seems, therefore, that Gippsland Waste accept there were some substantial discrepancies in the reporting to the Council.
A further meeting of the directors of Toward Zero was held on 21 June 2013 at 9.30 am. Again this was chaired independently by Darren Jennings. It was attended by Agostino and the Webbs. Again Young was an apology.
The first thing that is noted in the minutes was that the previous minutes of the meeting held 14 June 2013 were tabled and confirmed as a true and accurate record of the meeting. There is no dispute between the parties that this occurred.
The minutes also state as follows:
· Joe [Agostino] is extremely uncomfortable with the process being taken by [the Council] because at this stage there are only unproven allegations forming the basis for their actions, and [the Council] have refused to consider the response to those allegations provided by [Gippsland Waste].
· Murray [Webb] and Greg [Webb] also consider the actions of [the Council] bewildering.
· All parties recognise the importance for [Towards Zero] to act in a manner that protects the contractual arrangements with [the Council].
· Murray and Greg have repeatedly stated their intention to pursue the reinstatement of the original contractual arrangements when the allegations had been disapproved.
· Murray and Greg feel they are being forced by [the Council] to either sign the deed or risk having the [Council Contract] terminated with effect 1 July 2013.
The minutes then record that the proposed deed of variation was tabled and available for perusal by Agostino. It was then put forward for approval in relation to its execution. The minutes record, and the evidence in the affidavits before the court bears out, that the Webbs voted in favour of the motion, whereas Agostino, in his own capacity and also as proxy for Young, voted against the motion.
The minutes then read as follows:
As Murray and Greg are acting as directors in control of [Towards Zero], as previously advised to all directors, they have stated they will act in accordance with what they think is in the best interests of [Towards Zero] in relation to the Deed of Variation.
Based on the evidence before me, it seems that there is no real dispute about the contents of the minutes for the meeting of 21 June 2013. However, I note in relation to that meeting Agostino has sworn as follows:
On or about 21 June 2013 a Towards Zero directors' meeting was held of which minutes were kept. Present were Murray Webb, Gregory Webb and me. At that meeting a Deed of Variation was tabled as drafted by Council. A motion was put at the Directors' Meeting that if required Greg and Murray Webb would sign the Deed of Variation in its tabled format. Murray and Greg Webb voted in favour of the motion. I, and I on behalf of Young (whose proxy I held), voted against the motion. That is reflected in the minutes of meeting. Also recorded is that, regardless of the vote, Murray and Gregory Webb, acting as directors in control of the Towards Zero stated that they would act in accordance with what they think is in the best interests of Towards Zero in relation to the Deed of Variation. I objected at the time although my objection is not recorded in the minutes.
That last sentence of what I have just quoted seems to be the only issue raised in relation to the minutes of 21 June 2013.
I now turn to the deed of variation (“the Deed of Variation”). Although the Deed of Variation is formally dated 1 July 2013, the evidence discloses that it was executed on 24 June 2013.
As is recorded in the recitals, the Deed of Variation purported to amend the Council Contract. The variations to the Council Contract included the following:
3.3. Schedule 3 to the [Council] Contract is amended by:
3.3.1. Deleting the box headed “Gippsland Waste Services Pty Ltd”; and
3.3.2.Adding the following text to the box headed “Tambo Waste Services Pty Ltd”: …
The effect of this amendment was to substitute Tambo Waste for Gippsland Waste in relation to provision of the Tip Services under the Council Contract.
It was recorded in clause 4.1 of the Deed of Variation that Towards Zero was indebted to the Council in the sum of $115,595.15, stated to be arrears for a levy payable under the Environment Protection Act1970. The Deed of Variation then records as follows:
4.2.on 23 May and (sic) accordance with clause 12.22(2) of the [Council] Contract, the [Council] had recourse to the Performance Security by deducting from it, among other sums, a sum sufficient to cover the Outstanding Amount.
The outstanding amount there referred to was well in excess of the $15,000 the subject of clause 2.3 of the Shareholders’ Agreement.[3]
[3]See par 30 above.
Although I have set out the history at some length, I believe it is important because it demonstrates that until recently, there has been cooperation between the parties in relation to the best manner in which to deal with the Council in relation to the issues it raised in the Show Cause Notice on 22 May 2013.
E. Principles in relation to injunctive relief
I now turn to the principles applicable in relation to an interlocutory injunction. They may be summarised as follows:[4]
The granting of injunctive relief is discretionary and the court must be satisfied that:
(1)There is a serious question to be tried in the sense that the plaintiff must show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending trial.
(2)If there is no injunction but the plaintiff’s claim is ultimately vindicated, the plaintiff will have suffered irreparable harm for which damages will not be an adequate remedy.
(3)The balance of convenience must favour the grant of the injunction.
[4]See, for example, Perfection Fresh Australia Ltd v Melbourne Market Authority [2013] VSC 287, [43].
I also add that there is a direct relationship between the issue of whether or not there is a serious question to be tried and the balance of convenience. In short, if Gippsland Waste's case is weak in relation to whether or not there is a serious question to be tried, the balance of convenience must strongly favour Gippsland Waste before injunctive relief is appropriate.[5]
[5]Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 82 [84].
Finally, the court should always bear in mind that it should take whatever course appears to carry the lower risk of injustice if it should turn out to have been wrong in the sense that the granting of the injunction to the party fails to establish its, her or his right at the trial or the failing to grant an injunction to a party who succeeds at trial.[6]
[6]Ibid, 73 [35].
F. Application of relevant principles to the facts
I now return to the relief sought in order to apply these principles to the facts of this case.
As was noted in paragraph 41 above, on 22 May 2013, a notice was provided pursuant to clause 8.7 of the Shareholders’ Agreement. That notice recorded that the Webbs had already been appointed as directors of Towards Zero for the purposes of that clause.
Both the minutes of the directors' meetings referred to above,[7] and the correspondence I have referred to,[8] demonstrate it is clear that both Agostino and Young accepted the position of the Webbs being appointed under clause 8.7 of the Shareholders’ Agreement until quite recently. In other words, there has been a clear and unequivocal ratification of the appropriateness of the conduct of the Webbs in purporting to appoint themselves pursuant to clause 8.7 by reason of the alleged breaches the subject of the Show Cause Notice.
[7]See pars 60-61 and 64-70 above.
[8]See pars 53, 55, 56 and 58 above.
Accordingly, in my view, that position, namely that Murray Webb and Gregory Webb have been appointed pursuant to clause 8.7, represents the status quo. Further, given the ratification, I do not believe there is likely to be a serious question to be tried on this issue. Moreover, given the attitude of the Council, I believe the balance of convenience weighs strongly in favour of keeping the status quo in place. Accordingly, I decline to provide the relief referred to in paragraph 1(a) of the Proposed Orders.
In relation to paragraph 1(c) of the Proposed Orders, I need say very little about this. As I have already indicated, I intend to order a mediation. In those circumstances, the relief sought in paragraph 1(c) is otiose.
In relation to paragraph 1(d), at the moment, in my view, there is no evidence before the court of an ongoing prohibition of prevention of Gippsland Waste in relation to the management of Towards Zero. In those circumstances, the granting of injunctive relief sought would be inappropriate.
Agostino, and Young by proxy, have been able to attend and participate in board meetings held on 14 and 21 June 2013. There is no suggestion that there is an inability to call further directors' meetings in the future at which both Agostino and Young may participate.
Further, the Council have made it clear they will not tolerate any involvement of the Gippsland Waste in relation to the Council Contract. Pursuant to clause 8.7, the Webbs have managed the resolve the dispute with the Council arising out of the Show Cause Notice given 22 May 2013. They have achieved this end by entering into the Deed of Variation.
I find, at least on an interlocutory basis, that the conduct of entering into the Deed of Variation was prima facie in accordance with clause 8.7 of the Shareholders’ Agreement. That conduct was directly related to settling the claim of the Council against Towards Zero.
However, I wish to note clause 8.7 does not entitle the Webbs to ignore clause 2.3 or any other provision of the Shareholders’ Agreement, save that they must be read consistently with clause 8.7.
Clause 8.7 is confined to the appointed directors having, “authority to negotiate and settle the claim or to bring legal proceedings in relation to it”. It does not operate beyond that.
What falls within these words in relation to future conduct and matters is not for me to decide on this application. However, the clause does not shut out Gippsland Waste (or Agostino and Young) from participating in the management of Towards Zero to the extent that that management is outside the scope of clause 8.7.
Accordingly, for the reasons I have given, I will order a mediation to occur as soon as practicable, but otherwise dismiss the summons filed 3 July 2013.
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