Gumala Investments Pty Ltd v Lethbridge

[2007] FCA 934

FEDERAL COURT OF AUSTRALIA

Gumala Investments Pty Ltd v Lethbridge [2007] FCA 934

INJUNCTION – duties of members of governing committee of association incorporated under the Aboriginal Councils and Associations Act 1976 (Cth) – whether serious issue to be tried that members of governing committee acted for an improper purpose – whether the manager of the trust breached its fiduciary duties to the beneficiaries

Aboriginal Councils and Associations Act 1976 (Cth) Pt 4, s 49C
Corporations Act 2001 (Cth) ss 180, 181, 249D(1), 505(1)

Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Town and Country Sports Resort v Partnership Pacific (1998) 20 FCR 540
Walter Rau Neusser Oel Und Fett v Cross Pacific Trading Ltd [2005] FCA 955

GUMALA INVESTMENTS PTY LTD (ACN 077 593 581) and JULIE WALKER v KEITH LETHBRIDGE, STUART INJIE, DARREN INJIE, GLADYS WALKER, MARJORIE PARKER, GORDON YULINE, DAVID STOCK, NATALIE PARKER, ARCHIE TUCKER, MAY BYRNE, PETER DERSCHOW, SUSAN BUNG, CHURCHILL JONES, BETTY PETERSEN, CAROL ALLEN, ANGUS SMITH, ALI PARKER, KAREN TOMMY and GUMALA ABORIGINAL CORPORATION
WAD 101 OF 2007

SIOPIS J
14 JUNE 2007
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 101 OF 2007

BETWEEN:

GUMALA INVESTMENTS PTY LTD (ACN 077 593 581)
First Applicant

JULIE WALKER
Second Applicant

AND:

KEITH LETHBRIDGE
STUART INJIE
DARREN INJIE
GLADYS WALKER
MARJORIE PARKER
GORDON YULINE
DAVID STOCK
NATALIE PARKER
ARCHIE TUCKER
MAY BYRNE
PETER DERSCHOW
SUSAN BUNG
CHURCHILL JONES
BETTY PETERSEN
CAROL ALLEN
ANGUS SMITH
ALI PARKER
KAREN TOMMY
First Respondents

GUMALA ABORIGINAL CORPORATION
Second Respondent

JUDGE:	SIOPIS J
DATE OF ORDER:	14 JUNE 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.Upon the applicants’ undertaking to pay to any party adversely affected by this interlocutory injunction such compensation as the Court thinks just, in such manner as the Court directs, until after judgment in this action or until further order, the first and second respondents, whether by themselves or by their officers, servants, agents or otherwise, be restrained from proposing, dealing with, passing or voting in favour of any resolution to wind‑up the first applicant.

2.The applicants’ costs of the applicants’ motion for interim interlocutory relief dated 18 May 2007, including any reserved costs, be the applicants’ costs in the cause.

3.The applicants’ costs of the applicants’ application for interlocutory relief, including the costs of the hearing of that application on 11 June 2007, be the applicants’ costs in the cause.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 101 OF 2007

BETWEEN:

GUMALA INVESTMENTS PTY LTD (ACN 077 593 581)
First Applicant

JULIE WALKER
Second Applicant

AND:

KEITH LETHBRIDGE
STUART INJIE
DARREN INJIE
GLADYS WALKER
MARJORIE PARKER
GORDON YULINE
DAVID STOCK
NATALIE PARKER
ARCHIE TUCKER
MAY BYRNE
PETER DERSCHOW
SUSAN BUNG
CHURCHILL JONES
BETTY PETERSEN
CAROL ALLEN
ANGUS SMITH
ALI PARKER
KAREN TOMMY
First Respondents

GUMALA ABORIGINAL CORPORATION
Second Respondent

JUDGE:	SIOPIS J
DATE:	14 JUNE 2007
PLACE:	PERTH

REASONS FOR JUDGMENT

1. This is an application for the extension of an interim injunction which was granted on 18 May 2007 in effect preventing the holding of an extraordinary general meeting of the first applicant (the trustee), which was scheduled for Monday, 21 May 2007, and enjoining the respondents from proposing, and voting in favour of, a resolution to wind‑up voluntarily the trustee.  The trustee is a company and was appointed as the trustee of a trust known as the Gumala Foundation Trust, which was established pursuant to a trust deed made in 1997.  The trustee has no purpose other than to act as the trustee of the trust.  The trust has charitable status.

2. The trust deed was entered into in accordance with the provisions of the Yandi Land Use Agreement (the land use agreement).  Pursuant to the land use agreement, certain members of the Hamersley Iron Group of Companies agreed to place substantial funds on trust for the beneficiaries of the trust in accordance with the trust deed.  The evidence is that the trustee holds approximately $20 million at this time.  The trust is established for the benefit of the Gumala people who are comprised of the following three language groups ‑ the Bunjima people, the Niapiali people and the Innawonga people.  The trust is intended to benefit the traditional owners who are referred to loosely in this judgment as “the trust beneficiaries”.

3. The second respondent, is an association, and a body corporate incorporated pursuant to Pt 4 of the Aboriginal Councils and Associations Act 1976 (Cth) (the ACAA). The members of the second respondent are, to a large extent, the same people as comprise the trust beneficiaries, but there is some variation in the composition of both groups. The second respondent is a party to the trust deed, and accepted appointment as the manager thereunder. I will refer, henceforth, to the second respondent as “the manager”. The manager is also the registered holder of the single share in the trustee.

4. The second applicant is a beneficiary of the trust as well as being a member of the manager.

5. The first respondents are members of the governing committee of the manager.

6. The manager’s role under the trust deed is to consult the traditional owners, to develop proposals for the trustee to consider and to assist in the implementation of the proposals as required by the trustee.  The manager is to act under the direction, supervision and control of the trustee.

7. Among the trustee’s duties are the duties to act consistently with the objects of the trust, to consult with the traditional owners in a liaison committee, to determine the membership of, and maintain the register of the traditional owners, and to assist the manager to gain experience in management.  The trustee is also to fund the manager appropriately.

8. The primary benefits to be provided by the trust are the funding and implementation of community projects; and not by way of significant distribution of cash to the trust beneficiaries.

9. The trust deed has provisions dealing with general meetings of the trust beneficiaries, and the passing of special resolutions at general meetings.  The provisions dealing with special resolutions include a process whereby a special resolution can only be passed where it is passed by 75% of each of the three language groups of people.  Clause 26 deals with variations to the trust deed.  It provides that the terms of the trust deed may be varied only with the consent of the manager and the trustee and by special resolution of the trust beneficiaries.

10. Clause 27 deals extensively with the procedures for the removal of the trustee.  The clause provides:

    27.1Subject to clauses 27.6 and 27.7 the appointment of the Trustee will be for the Minimum Term.  At the expiration of the Minimum Term or within 90 days thereafter the General Meeting may by Special Resolution remove the Trustee and appoint a new Trustee selected by the Appointing Committee in its place in which case the new Trustee will be appointed for the Minimum Term.  The encumbent Trustee will continue in the office of the Trustee until so removed.

    27.2If the Trustee is not removed within 90 days of the expiry of the Minimum Term, the Trustee will be deemed to have been reappointed for a further Minimum Term commencing at the expiry of the previous Minimum Term.

    …

    27.4The Trustee must be given at least 10 days advance notice of any intention to move a resolution to remove the Trustee as trustee.  The Trustee will be entitled to attend the General Meeting and must be given reasonable opportunity to address the General Meeting before the resolution is moved.

    …

    27.7The General Meeting may at any time by Special Resolution remove the Trustee if the Trustee is subject to an Insolvency Event in which case the Appointing Committee will as soon as practicable appoint a new Trustee for the Minimum Term commencing on the date of appointment.

    27.8In the event that the Trustee breaches any material provision of this Deed, then the Manager may give written notice to the Trustee specifying the breach and calling upon the Trustee to remedy the breach.  In the event that the Trustee does not remedy such breach within 60 days of receipt of such notice then the Manager may, with the sanction of the General Meeting, remove the Trustee in which case the Appointing Committee will as soon as practicable appoint a new Trustee for the Minimum Term commencing on the date of appointment.

11. The “Insolvency Event” in cl 27.7 of the trust deed is defined to include a liquidation.

12. The trust deed and the constitution of the trustee each require that half of the board of the trustee ‑ that is, three out of the six directors ‑ are to be independent of the traditional owners.  The other three directors of the trustee must be independent of the manager, that is, they must not be on the governing committee of the manager, or be involved in the day‑to‑day management of the manager.

13. The trust deed also provides that if the trustee does not have the requisite degree of independence, the only alternative entity eligible for the appointment is a professional trustee company, such as Perpetual Trustees Limited.

14. Independence of the trustee and its supervisory role in relation to the manager is a fundamental tenet of the trust deed.  This is recognised particularly in cl 6 of the trust deed which provides as follows:

    6            TRUSTEE INDEPENDENCE

    6.1Notwithstanding any other provision herein, the Trustee, in exercising its powers herein and in decision making in relation to the Foundation is not bound to implement:‑

    (1)any General Meeting Directives; or

    (2)the strict terms of any Guiding Principles; or

    (3)any views expressed by Traditional Owners or the Manager in consultations; or

    (4)any advice or recommendation of any Advisory Trustee;

    and the Trustee may ultimately after all such consultations in considering the matters the Trustee is required to consider, make such decisions and exercise its powers in such manner as the Trustee considers to be in the best interests of the Foundation and the Beneficiaries within the Objects of the Foundation.

    6.2The Trustee is intended to be independent of the Traditional Owners and the Manager in the performance of the Trustee’s functions and the Trustee may regulate its affairs in such manner as it thinks fit to preserve its independence.

    6.3The Trustee has the ultimate decision making power in all matters relating to the Foundation.

15. Mr Softly is the chief executive officer of the manager.  He gave evidence on affidavit.  He said that in or about August 2006, three members of the Niapiali people signed a document called a notice of intent, to the effect that the Niapiali people intended to move a motion that the trustee be removed at the next annual general meeting of the trust.  That document was faxed to the trustee.  On 14 October 2006, the manager held its annual general meeting.  Mr Softly said that from what people were saying he believed most of them wanted the directors of the trustee to resign.  However, no resolution was proposed calling upon the directors of the trustee to resign, nor calling for the removal of the first applicant as trustee, nor supporting the winding‑up of the first applicant.

16. By letter dated 21 November 2006, the trustee raised with the manager its concerns about various issues in connection with the manager’s performance of its duties under the trust deed.  The concerns related to the manner in which financial controls were exercised, and to the lack of proposals for projects being put forward by the manager.

17. Mr Softly says he obtained legal advice in November 2006 on how to remove the directors of the first applicant, or the first applicant as trustee.

18. The annual general meeting of the beneficiaries of the trust was held on 16 December 2006.  No resolution for the removal of the trustee was moved by the three members of the Niapiali people who signed the notice of intent, nor by anybody else.

19. In February 2007 Mr Softly says that acting at the direction of the first respondents, he requested the manager’s solicitor to travel from Perth to Tom Price to address the first respondents on the question of removing the trustee.

20. On 23 February 2007 the solicitor provided the first respondents with a memorandum of written advice.  That advice identified a stratagem to eliminate any scrutiny of the manager by an independent trustee.  The stratagem comprised the following steps:  first, use the power of the manager as sole shareholder of the trustee to vote to wind‑up the trustee, then remove the trustee in liquidation at a general meeting, and install a new trustee company with sympathetic directors who would agree to vary the trust so as to eliminate the requirement for an independent trustee, and then install the manager as the trustee.

21. In early March 2007 the trustee sent the first respondents a letter dated 1 March 2007 which again expressed criticism of the manager’s performance of its duties under the trust.  These concerns again included the lack of proposals for projects being put forward by the manager and the concerns regarding the exercise of financial controls.

22. The first respondents held a meeting on 9 March 2007.  Mr Softly invited the same solicitor who had given the advice referred to above, to attend the meeting.  At the meeting the first respondents passed a resolution to requisition a meeting of the trustee for the purposes of winding it up.  Further, they decided to respond to the letter of 1 March 2007 from the trustee by writing a letter requesting further particulars.

23. By letter dated 13 March 2007 the manager requested particulars of the trustee’s letter of 1 March 2007. By letter dated 14 March 2007 the chief executive officer of the manager called upon the trustee, under section 249D(1) of the Corporations Act 2001 (Cth) (the Corporations Act), to convene an extraordinary general meeting of the trustee for the purpose of considering, and if thought fit, passing a motion resolving to voluntarily wind‑up the trustee.  By letter dated 8 April 2007 the trustee supplied the particulars which had been requested by the first respondents.

24. On 11 April 2007 the manager’s solicitors wrote to the trustee’s solicitors.  In that letter, the solicitors stated that the manager declined to accept an invitation from the trustee to mediate the issues raised in the trustee’s letter of 1 March 2007.  The solicitors’ letter also stated that the manager would nominate a date for the meeting at which the resolution would be moved to wind‑up the trustee, because it had received no response from the trustee.  The letter also alleged that the trustee was in breach of its obligations under the trust deed.  The breaches alleged were that the trustee had not sufficiently resourced the manager to enable it effectively and efficiently to perform its functions, or properly funded it to operate the manager’s office.  It also alleged that the trustee had failed to pay seven invoices submitted by the manager for approved projects and for funding the manager’s office.  The letter attached the invoices, and called upon the trustee to pay the invoices immediately.  It also alleged that the trustee had allowed the foundation’s charitable status to elapse.

25. On 15 May 2007 a meeting of the beneficiaries of the trust were held.  The status of this meeting is challenged by the witnesses, including by Mr Lethbridge, one of the respondents’ witnesses.  However, there is evidence that at that meeting an attempt to halt the winding‑up process failed.

26. The general meeting of the trustee, at which the winding‑up resolution was to be considered, was due to be held on 21 May 2007.  The interim injunction was granted after business hours on Friday, 18 May 2007.

    Serious question to be tried

27. I will now consider whether there was a serious question to be tried in relation to the three bases upon which the applicants say that there is a claim.  The three bases are:  firstly, that the first respondents acted for an improper purpose in resolving to requisition a meeting of the trustee for the purpose of winding it up so as to avoid the independent trustee’s scrutiny; secondly, that such an action would be in breach of the manager’s fiduciary duty, and thirdly, such an action would be a breach of the manager’s duties under the trust deed.

    Improper purpose

28. I accept that there is a serious question to be tried that the first respondents have as officers of the manager, the duties which arise under s 180 and s 181 of the Corporations Act, in addition to the duties which are imposed upon them under s 49C of the ACAA or the general law. Section 49C of the ACAA requires the members of the governing committee of a corporation incorporated under that Act to act honestly and diligently in the exercise of their powers.

29. Accordingly, I accept that there is a triable issue that the first respondents are under a duty to act bona fide in the interests of the manager as a whole, and that there is a fundamental duty on them to exercise their powers bona fide for the purpose for which they are conferred.  Whether the first respondents acted bona fide, or not, is to be gathered from an examination of all the circumstances (Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 301).

30. I now deal with the evidence in relation to the question of whether there was a triable issue that the first respondents have acted for an improper purpose, namely, seeking to avoid scrutiny of their actions by an independent trustee.  As to the evidence, I note that some of the first respondents have deposed on affidavit that they deny that they acted for an improper purpose alleged by the applicants.

31. In my view, the inferences arising from the following facts and matters are sufficient to support a finding that there is a serious question to be tried that, in deciding to requisition a meeting of the trustee, the first respondents acted for the impugned purpose:

    (1)The fact that the trustee’s letter of 21 November 2007 was impliedly critical of the manner in which the first respondents were carrying out their duties and called upon them to account to the trustee in respect of alleged defaults in their performance.

    (2)The fact that by 23 February 2007 the first respondents had obtained legal advice as to a stratagem to remove an independent trustee so that the manager could act both as manager and trustee, and the fact that implementation of that stratagem involved, firstly, a voluntary winding‑up of the trustee, and then the replacement of the trustee with a compliant trustee who would then amend the rules for the trust, so as to permit the manager to become the trustee.

    (3)The fact that the letter of complaint dated 1 March 2007 was again impliedly critical of the performance of the first respondents and again called upon them to account to the trustee in respect of the alleged defaults in their performance.

    (4)The fact that the first respondents on 9 March 2007 called for the solicitor who gave the advice referred to above, to attend the meeting and resolved to commence the process for the voluntary winding‑up of the trustee.

    (5)The fact that the first respondents did not, before resolving to take steps to wind‑up the trustee, first resolve to make full disclosure to the members of the manager, of the criticisms made of them by the trustee in its letter of 1 March 2007, and of their intention to adopt a stratagem to eliminate the independent scrutiny of them by an independent trustee, and to seek the approval of the members for the implementation of the proposed stratagem;

    (6)The fact that the first respondents did not seek to rely upon any of the other means provided for in the trust deed for the removal of the trustee, such as a vote in a general meeting to remove the trustee under cl 27.1 of the trust deed, or on the basis of an allegation of a breach of duty by the trustee.  Each of those means would have provided the trustee with an opportunity to oppose the proposed action and to defend itself.

    (7)The fact that by the date of the hearing of the application for the interim injunction, which was after the close of business on the last business day before the proposed meeting of the trustee, there had been no substantive response by the first respondents to concerns expressed in the trustee’s letter of 1 March 2007 and the trustee’s further letter supplying particulars.

    (8)The evidence of Mr Won Bon that Mrs Parker, one of the first respondents, had said at a meeting of the trust beneficiaries, that the first respondents had requisitioned the meeting in response to the so‑called breach letter from the trustee of 1 March 2007.  In this regard, I note that Mrs Parker has in her affidavit denied that she said words to that effect.

1. None of the evidence relied on by the respondents of informal expressions of dissatisfaction with the trustee, nor the allegations that the trustee had acted in breach of trust in the ways identified in the solicitors’ letter of 11 April 2007, nor the proceedings at the meeting of beneficiaries on 15 May 2007, undermines the effect of the evidence referred to above as being sufficient to give rise to a serious issue to be tried that the first respondents acted for the impugned purpose.

2. The meeting of 15 May 2007 was not a general meeting of the manager, and the status of that meeting is not clear on the evidence.  In any event, the evidence does not reveal that the trust beneficiaries were appraised prior to the meeting of the criticisms made of the first respondents in the trustee’s letter of 1 March 2007, nor of the overall stratagem of the first respondents to eliminate independent scrutiny through the abolition of the office of an independent trustee.

3. Accordingly, in my view, the evidence demonstrates that there is a serious question to be tried as to whether the officers of the first respondents acted for an improper purpose in exercising their powers to requisition the meeting.

   Breach of fiduciary duty

4. The second cause of action relied upon is that the proposed action to wind‑up the trustee would be a breach of the manager’s fiduciary duties.  I accept the submission of senior counsel for the applicants that by reason of the nature of its obligations under the trust deed, there is a serious question to be tried that the manager has a fiduciary duty towards the beneficiaries of the trust.  This arises from the fact that the trust deed requires the manager to act for and in the interests of the trust beneficiaries in order to give full effect to the terms of the trust.

5. I also accept that there is a serious issue to be tried that, as a consequence of the arguable fiduciary relationship already referred to, the manager does not have unfettered property rights in the share in the trustee of which it is the registered holder and that it may not exercise those rights to prefer its own interests, and to act in a manner inconsistent with its fiduciary obligations.

6. I, therefore, find there is a serious question to be tried that in exercising its voting powers in support of a motion for the voluntary winding‑up of the trustee, the manager would be acting in breach of its fiduciary duty.

   Breach of trust deed

7. The third cause of action is that, through the first respondents, the manager would be acting in breach of the express and implied terms of the trust deed if it moved for the voluntary wind‑up of the trustee.  I accept the submission of the applicants set out in paras 3.19, 3.20, 3.21 and 8 of their submissions, that there is a triable issue, the managers is under an implied obligation under the trust deed not to move for the voluntary winding‑up of the trustee for the purposes of triggering an insolvency event, and thereby prevent the trustee from exercising its function as an independent entity responsible for performing for the trust in accordance with the trust deed and as contemplated by the land use agreement.

   Balance of convenience

8. The respondents say that the balance of convenience favours the lifting of an injunction because if a liquidator were to be appointed to the trustee, the trust would be better administered.  It would be likely, say the respondents, that the liquidator would pay some of the outstanding invoices issued by the manager which were not the subject of dispute, and would investigate the disputes in relation to the other invoices.  Also it was said that the liquidator would develop a new investment policy and invest the funds of the trust more profitably.

9. In my view, the balance of convenience favours the retention of the injunction.  Firstly, if the meeting of the trustee is held it is inevitable that the manager, acting through the first respondents, would vote in favour of the resolution to wind‑up the trustee, with the consequence that a liquidator would be appointed.

10. Secondly, it is inevitable that if a liquidator is appointed it would be necessary for the liquidator to become familiar with the affairs of the trustee and the trust.  The liquidator would have to engage in a considerable amount of investigative work.  The liquidator has agreed to act on the basis that it is the trustee that will be responsible for her costs.  Thus, there would be an incurring of costs which may prove unnecessary in the event that the applicants were ultimately to succeed at trial.

11. Thirdly, there is a serious issue as to whether, in light of this proceeding, which in effect challenges the validity of the liquidator’s appointment, the liquidator would on appointment engage in any activity because of the risk that her actions, if this application were to succeed, would be regarded as invalid.  In this case, the liquidator would be appointed with notice of this proceeding which challenges the validity of her appointment (s 505(1) of the Corporations Act).  There is a further unsatisfactory element because the liquidator, if appointed, would have to consider whether to continue a proceeding which challenges the validity of her appointment.  It may well be that the Court would then have to appoint a different person to decide whether to continue this proceeding because of the first liquidator’s conflict, with attendant further expense to the trustee.

12. Fourthly, it is also possible that whilst the matter is awaiting trial, the general meeting of the trust would be held whereby the first applicant in liquidation, would be removed as trustee and replaced by a replacement trustee.  The consequence may be that by the time the matter came to trial, the first applicant may have been deregistered and would have to be reinstated.  Again, this would involve additional costs which would ultimately have to be borne by the trust beneficiaries.

13. In my view, the second respondent would not be unduly disadvantaged by the continuance of the injunction, because it would always be open to it to commence any action in the courts in order to enforce any payment of the invoices which it claims that the trustee in breach of its duty is refusing to pay.

    Non‑disclosure

14. The respondents have alleged that there has been material non‑disclosure by the applicants at the ex parte hearing.  They rely particularly upon the case of Town and Country Sports Resort v Partnership Pacific (1998) 20 FCR 540 and Walter Rau Neusser Oel Und Fett v Cross Pacific Trading Ltd [2005] FCA 955.

15. For the non‑disclosure to be a material non-disclosure in the relevant sense, the non‑disclosed information or evidence would have to be such that it could possibly have led to a finding that there was no serious issue to be tried in respect of this question.  This is illustrated by each of the Town and Country and Rau cases where the non‑disclosure at the ex parte hearing led to a very different position emerging at the contested hearing.

16. The question of whether there was a material non‑disclosure will vary from case to case and will be assessed by reference to the matters in issue at the hearing for the ex parte relief.  The question that was in issue in this case was whether there was a serious question to be tried, that in resolving, as they did, the first respondents acted for an improper purpose, namely, to avoid having to account to the trustee, particularly in respect of the alleged criticisms of their performance identified in the trustee’s letter of 1 March 2007.

17. In the context of this case, in light of the nature of the evidence relied upon by the applicants to which I have referred above, for the non‑disclosure to have been material in the relevant sense, the non‑disclosed evidence or material would have to be of a kind which showed that following full disclosure by the first respondents of the criticisms in the 1 March 2007 letter and of their stratagem of using liquidation as the first step to varying the trust deed so as to eliminate the scrutiny of an independent trustee, a fully informed general meeting of the manager unequivocally approved of the proposals to wind‑up the trustee and to implement the stratagem proposed by the first respondents.

18. None of the matters referred to in paras 13(a), (b), (c), (d), (e), (h), (i) or (j) of the respondents’ submissions are matters comprising evidence of the nature referred to in the preceding paragraph.  There was no evidence that the first respondents had ever disclosed to a general meeting of the members of the manager either the trustee’s breach letter or its ultimate stratagem.  Nor was there evidence of the members of the manager in general meeting, whether fully informed or not, demonstrating unequivocal approval of the first respondents’ proposals to wind‑up the first applicant and their ultimate stratagem of eliminating the scrutiny of a an independent trustee.

19. There is also duty upon an applicant in an ex parte application, to refer to the case which it is anticipated would be made by the absent party.  In my view, it is not reasonable to have expected the applicants to have put forward at the ex parte hearing a case for the respondents founded on the disparate matters referred to in the nominated subparagraphs of para 13 of the respondents’ submissions, none of which either individually or collectively demonstrate evidence in support of a case which could possibly have caused the Court to come to a view that there was no question to be tried as to whether the first respondents had acted for the impugned purpose.

20. As already mentioned, matters referred to in the respondents’ submissions do not go to demonstrating an informed consent or approval by an unequivocal majority of the manager’s members in a duly constituted general meeting for the voluntary winding up of the trustee or the implementation of the first respondents’ stratagem.  Nor do those matters provide any grounds upon which the first respondents could legitimately believe that the members in general meeting had given a fully informed consent to the adoption of the stratagem which involved, as its first step, the winding‑up of the trustee.

21. In any event, the affidavit of Mr Won Bon, which was before the Court at the ex parte hearing, refers to and exhibits, the solicitors’ letter written on 11 April 2007 which alleges that the trustee had committed breaches of the trust deed.  This letter referred specifically to the outstanding invoices ‑ which are characterised amongst the non‑disclosed matters by the respondents in their submissions.  Secondly, the affidavit also referred at some length to a meeting held on 15 May 2007, not of the members of the manager, but of the general beneficiaries of the trust.  As already mentioned, the status and significance of this meeting appears to be the subject of conjecture and disagreement by witnesses, but in any event, there was before the Court evidence that an attempt to pass a resolution seeking to halt the proceedings at that meeting failed.

22. It is also said that senior counsel for the applicants at the ex parte application failed to direct the Court to the fact that the trustee’s letter of 1 March 2007 had not been delivered until 7 March 2007.  It is also said that the Court was not directed to the solicitors’ letter of 11 April 2007 which alleged the breaches by the trustee.  In my view, the fact that there was no express reference by senior counsel in his address to these matters did not amount to material non‑disclosure.

23. Even if there had been express reference to these matters, there is no possibility that the Court would have come to a decision that there was no serious question to be tried in relation to which a purpose for which the first respondents acted in requisitioning the meeting.  This is because, regardless of when the breach letter of 1 March 2007 was delivered, it is common cause that the letter was delivered prior to 9 March 2007, the date of the first respondents’ meeting at which the resolution was passed.

24. As to the letter of 11 April 2007 alleging breaches by the trustee, the relevance of that letter is diminished by the fact that the resolution passed on 9 March 2007 by the first respondents was for the voluntary winding‑up of the trustee.  It was not a resolution for the initiation of a process for the removal of the trustee under cl 27.8 of the trust deed, premised on any allegation of breach of the trust deed.  Further, the letter of 11 April 2007 was written more than a month after the first respondents had resolved to requisition the meeting with the trustee for the purpose of winding it up.  However, the letter is further evidence of the fact implicit in their resolution of 9 March 2007, namely, that the first respondents were very unhappy with the trustee.

25. It was also said that there was no reference to the meeting of 15 May 2007 and that an attempt to halt the winding‑up process had failed.  That meeting was mentioned by counsel at the ex parte hearing.  However, in any event, in light of the fact that the meeting was not, as I have previously said, a meeting of members of the manager held after full disclosure, and also, because of its indeterminate status, this evidence could never trump all the other evidence giving rise to inferences as to the first respondents’ purpose, so as to result in a finding that there was no serious question to be tried.

26. The respondents also submitted that senior counsel for the applicants had misrepresented the position before the Court on the ex parte application.  It is quite possible for misrepresentations to occur innocently.  An example occurred at the hearing where counsel for the respondents innocently misstated the evidence in relation to the source of the funding of the proposed liquidation.  It had no consequence because it was corrected by senior counsel for the applicants.  In assessing whether there has been a misrepresentation of a case such as would constitute a material non‑disclosure, the circumstances in which it is made, the seriousness of the misrepresentation and its consequence, must be taken into account.

27. In my view, the alleged misstatements by senior counsel for the applicants at the ex parte hearing, referred to in the respondents’ submissions, were either statements or submissions based fairly on the evidence, or in the case of the statement referred to in para 14(j) of the submissions, an innocent and inconsequential overstatement.

28. The position in this case is clearly distinguishable from the position in Rau where the misstatements which occurred at the ex parte hearing went to the very heart of the case which was founded upon the serious allegation of fraud.  In Rau the information which emerged at the contested hearing revealed that the material had been presented to Allsop J at the ex parte hearing, in a misleading and oblique manner, so as to obscure the true factual position relating to a material matter.  In this case, however, the evidence at the hearing, particularly of the advice by the manager’s solicitors prior to the meeting of 9 March 2007, has strengthened, rather than undermined, the case presented at the ex parte hearing in support of the contention that there is a serious question to be tried.

    Delay

29. There is much to be said for the criticism made by counsel for the respondents, that the last minute application for the interim injunction, created a self‑induced urgency for the applicants.  Senior counsel for the applicants sought to explain the delay by reference to the fact that the applicants were hoping that there might be a resolution of the issue at the meeting on 15 May 2007.  I also take into account the fact that notice of the ex parte hearing was given to the solicitors for the respondents but they advised that they did not have instructions to accept service.  In my view, the delay factor does not warrant setting aside the injunction because the respondents have not demonstrated any prejudice by reason of the delay.

30. For the reasons which I have set out above, I, accordingly, extend the injunction until further order.

I certify that the preceding sixty‑one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Associate:

Dated:        20 June 2007

Counsel for the Applicants:	Mr G Murphy SC and Mr M Pendlebury
Solicitor for the Applicants:	Murfett Legal
Counsel for the Respondents:	Dr J O’Donovan and Ms J Kenny
Solicitor for the Respondents:	Dwyer Durack
Date of Hearing:	11 June 2007
Date of Judgment:	14 June 2007