IML P/L v International Vineyards P/L

[2005] SASC 396

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

IML P/L & ORS v INTERNATIONAL VINEYARDS P/L & ORS

Judgment of Judge Burley a Master of the Supreme Court

13 October 2005

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - DEFAULT OF PLEADING

Application by plaintiffs for judgment in default of defence against two defendants, in the case of one defendant pursuant to Supreme Court Rule 59.06(1)(b) on basis that defence struck out for failure to give adequate discovery, and judgment in default of filing a notice of address for service against three other defendants - orders made for hearing of the application in open Court by a Master pursuant to SCR 75.19 and 75.01(1)(b) - no requirement to serve application - plaintiffs sought declaratory and injunctive relief only - hearing ex parte - dispute arose out of operation of a joint venture established to develop and manage vineyards - property of joint venture included contracts to supply grapes to several major wine producers - one defendant, either personally or through companies under his control, challenged authority of participants in the joint venture and interfered with the operation of the joint venture through its corporate structure - declarations sought related to questions about identity of participants in joint venture, manner in which property of joint venture held, identity of shareholders, directors and secretaries of companies involved with joint venture, validity of certain purported general meetings of members and general meetings of directors of those companies, and whether certain agreements entered into void - injunctive relief sought to restrain defendants from dealing with assets of joint venture, including drawing cheques on bank account of company trustee of joint venture assets, purporting to act as manager of the joint venture, purporting to terminate existing management agreement, carrying on business of the joint venture or acting in respect of any such business other than on written instructions of Vintners, and in case of one defendant, holding himself out as director of certain companies - declaratory and injunctive relief granted.

Supreme Court Rules 1987 (SA) r 59.06, r 75.01, r 75.19, r 23; Bankruptcy Act 1966 (Cth) s 60; Corporations Act 2001 (Cth) ., referred to.
Stewart Chartering Ltd v S & O Management [1980] 1 All ER 718; Trossman v Trossman (1960) 80 Am LR (2d) 933; The Russian Commercial and Industrial Bank v British Bank for Foreign Trade [1921] 1 AC 438, applied.
Austin v Wildig [1969] 1 All ER 99, considered.

IML P/L & ORS v INTERNATIONAL VINEYARDS P/L & ORS
[2005] SASC 396

1. JUDGE BURLEY:            The plaintiffs seek judgment in default of defence against the defendants, International Vineyards Pty Ltd (“Vineyards”) and Andrew Morton Garrett (“Garrett”) and judgment in default of filing a notice of address for service against the defendants Averil Gay Garrett (“Mrs Garrett”), Garrett International Investments Pty Ltd (“GII”) and Evajade Pty Ltd (“Evajade”).  The hearing of the application for judgment was ordered to be listed in open Court pursuant to SCR 75.19.  A further order was made, pursuant to SCR 75.01(1)(b), that the application be heard by a Master.  I mention that the plaintiffs’ application for judgment against Garrett is based on SCR 59.06(1)(b) because his defence was struck out for failure to give adequate discovery.  The referral into Court pursuant to SCR 75.19 relates to proceedings in default of filing a notice of address for service or defence, but there is no reason why the plaintiffs’ application for judgment against Mr Garrett should not be dealt with at the hearing in open Court.

2. These proceedings are a consolidation of actions numbered 247, 253 and 321 of 2004 in this Court.  When the actions were consolidated leave was given to the plaintiffs to file a consolidated and amended summons and statement of claim (“CASSC’) setting out all of the claims of the plaintiffs contained in the three actions (FDN 54).

3. The application (FDN 94) was called on for hearing before me on 5 September 2005 when Mr Blue QC, with Mr Brohier, appeared for the plaintiffs.  There was no appearance for the defendants.

4. SCR 75.19 is as follows:

   75.19Where a plaintiff seeks relief in default of filing a notice of address for service or pleading under Rules 23.01(d) and 51.05 such application may be listed for hearing in open Court in such manner as the Court may direct.

5. Several alternatives are open to a plaintiff seeking a default judgment.  For the most part, what course is taken is determined largely by the nature of the relief sought.  In this case, the plaintiffs seek declaratory and injunctive relief.  Apart from costs, no monetary judgment is sought.  The practice books contain a number of authorities, both English and Australian, dealing with applications for default judgments where the relief sought is declaratory and injunctive.  One of the alternatives referred to in the English cases is for a plaintiff to proceed to trial as if a notice of address for service or defence (as the case may be) had been filed by the defendant.  This is the nearest equivalent to proceeding pursuant to SCR 75.19.  It is preferable that where declaratory and injunctive relief is sought, both of which are discretionary equitable remedies, the matter should proceed to trial, but the application proceeds on an ex parte basis.  Authority for both of those propositions is to be found in Stewart Chartering Ltd v S & O Management [1980] 1 All ER 718.

6. If the matter is to proceed ex parte, there is no requirement for service of the application on the defendants nor is there any need to notify the defendants of the hearing of the application.  This seems to me to be consistent with the effect of the Rules relating to default judgments generally (eg SCR 23) because, where the judgment sought is for a liquidated sum, for damages to be assessed or for possession of land, it may be obtained without further notice to the defendant:  see also Austin v Wildig [1969] 1 All ER 99.

7. In my view, the applicable principle is that, where a plaintiff proceeds pursuant to SCR 75.19, not only is there no requirement to serve the application for judgment on the defendant, nor is there a requirement that the defendant be notified of the hearing time, but also a defendant would not be able to be heard on questions of liability on such an application in any event.  I am aware that it is the practice of the Civil Courts in this jurisdiction to allow a defendant to be heard on an assessment of damages undertaken pursuant to an interlocutory judgment for damages to be assessed.  That approach only reinforces my view that, on an application for judgment where declaratory and injunctive only is sought, the defendant who has not filed a defence could not be heard on questions of liability.  This is the defendant’s position whatever the nature of the relief sought.  It follows that in this case, all that the plaintiffs must do is establish that the defendants, other than Mr Garrett, have been validly served with the proceedings and that they have either failed to file a notice of address for service or a defence.

8. The application for default judgment in relation to Mr Garrett is different from the others because his defence has been struck out for failure to provide proper discovery.  In such a case, the provisions of SCR 59.06 apply.  That rule provides:

   59.06(1)Any party required by any rule or order to make discovery of, or produce any documents, who fails to comply with that rule or order, shall be liable:

   (a)     …..(immaterial)

   (b)if a defendant, to have the defence struck out and judgment to be entered accordingly.

9. In the circumstances of this case, the plaintiffs must establish that Mr Garrett’s defence has been struck out for failure to provide discovery.  The record of outcome on the Court file for 6 July 2005 establishes that the Court, on that day, dealt with an application on the part of the plaintiffs for an order that the defence of Mr Garrett be struck out for failure to provide discovery.  The Master, in his remarks, described the history of the application and determined that Mr Garrett’s defence should be struck out for failure to provide discovery of documents in accordance with the requirements of the rules.

10. Although it is apparent that Mr Garrett made applications to the Court in relation to a proposed appeal from the order striking out his defence, that appeal has not been instituted.

11. I am satisfied that no notice of address for service was filed by Mrs Garrett, GII or Evajade.  In the case of Vineyards, I am satisfied that a notice of address for service was filed but that no defence has been filed.

12. Both Mr and Mrs Garrett are bankrupt and trustees in bankruptcy have been appointed to their respective bankrupt estates. Both trustees have been given notice of the consolidation of these proceedings by the provision of a copy of the CASSC. Neither of the trustees has participated in these proceedings. In my view, the plaintiffs are able to proceed against Mr and Mrs Garrett, notwithstanding their bankruptcy, because no stay of these proceedings has been obtained pursuant to s 60 of the Bankruptcy Act. In any event, I do not consider that s 60 applies to these proceedings because the ambit of the section is limited to a proceeding in respect of non-payment of a provable debt.

13. I turn now to the question of service of the proceedings on the defendants other than Mr Garrett.  Two types of default are relied upon by the plaintiffs in respect of those defendants:  first, a failure to file a notice of address for service on the part of Mrs Garrett, GII and Evajade;  and second, failure to file a defence on the part of Vineyards.

14. Vineyards has filed a notice of address for service, but not a defence.  In order to proceed in default, the plaintiffs need to prove service of the CASSC.  Proof of such service is contained in the affidavit of Mr Tisato sworn on 3 August 2005 (FDN 102).

15. In the case of Mrs Garrett, the plaintiffs need to prove service of the CASSC.  This has been established by the affidavit of Mr N Wilson, sworn on 17 June 2005 (FDN 88).

16. The question of service on GII and Evajade may be dealt with together.  I am satisfied from the affidavit of Mr Tisato sworn on 17 June 2005 (FDN 85) that GII was served with the CASSC at its registered office (paragraph 3.1) and that Evajade was served with the CASSC at its registered office (paragraph 5).  In each case, service was effected by forwarding the documentation on 10 December 2004 with a covering letter sent by prepaid post (paragraphs 2 and 4).

17. In light of the foregoing, I consider that the plaintiffs have established a right to seek a default judgment against all of the defendants.

18. At the hearing of the application for judgment on 5 September 2005, evidence was adduced in support of the plaintiffs’ claim for relief and submissions were put by Mr Blue on the question of the exercise of the Court’s discretion relating to the granting or withholding of relief.  Draft minutes of order were handed up.  Mr Blue’s submissions were directed to the plaintiffs’ contention that the orders referred to in the draft minutes should be made.  After I reserved my decision, minutes of order in their final form were forwarded to me. It is by reference to this document that I have considered the question of whether or not the orders sought should be made.

19. I state at the outset that the minutes are consistent with and do not go outside the relief sought in the CASSC.  Not all of the relief sought in the CASSC was pursued at the hearing, although I have been asked to make an order granting to the plaintiffs liberty to apply in respect of some of the relief sought referred to in the CASSC which was not pursued at the hearing.

20. In addition to the affidavits referred to above, I admitted into evidence the following affidavits:

Name	Date	FDN
E J Shipley	02/09/05	104
R J D Oliver	02/09/05	111
D T Taylor	04/09/05	109
H Mermelstein	04/09/05	106
K D Foote	04/09/05	105
B W Atkinson	04/09/05	110
A E Talbot	04/09/05	108
R C Hutchinson	04/09/05	107

1. In addition, five tender books were admitted into evidence. They were admitted as a bundle and marked “P1”. The documents referred to by the deponents were contained in one or more of the tender books and were identified by the deponent by reference to the volume number of the tender book and the page number at which the particular document appeared.

2. The two principal affidavits are those of Mr Shipley and Mr Oliver.  Between them they depose to all of the material facts and documentation set out in the statement of claim.  Generally, the other affidavits corroborate much of what is contained in the affidavits of Mr Shipley and Mr Oliver.  All of the affidavits have been meticulously prepared.  I have no hesitation in accepting each of the deponents as accurate and reliable witnesses.

3. The nature and extent of the plaintiffs’ claim is set out in the consolidated statement of claim (part of FDN 54).  I shall refer to that pleading as “the statement of claim”.  I shall adopt the approach taken in the statement of claim of referring to the male parties by their respective surnames.  The facts which underpin the statement of claim are deposed to in the affidavits referred to above.  The following narrative consists of my findings based on those affidavits.

4. The first nine plaintiffs are:

   ·Industrial Mutual Liability Pty Ltd (IML)

   ·FIG Vineyards (Australia/New Zealand) Pty Ltd (FIG)

   ·Donald Thomas Taylor (Taylor)

   ·Luskey Pty Ltd (Luskey)

   ·Robert Charles Hutchinson (Hutchinson)

   ·Keith Donald Foote (Foote)

   ·Alan Edmund Talbot (Talbot)

   ·Carrick Group Pty Ltd (Carrick)

   ·International Vintners Australia Pty Ltd (IVA)

5. These plaintiffs are described as “the joint venturers” in the statement of claim.  They participated in a joint venture established by a joint venture agreement (JVA) entered into on 25 June 1997.  That agreement was varied by Deed of Variation in June 1999.

6. The tenth plaintiff is International Vintners Pty Ltd (“Vintners”).  It is the manager of the joint venture.

7. The property, both real and personal, the subject of the joint venture is held by the first defendant, International Vineyards Pty Ltd.  I shall refer to that company sometimes as “Vineyards” and sometimes as “the bare trustee”. 

8. Garrett is the second defendant.  He was a director of Vineyards before the joint venture was established.

9. The eleventh plaintiff, Mark Douglas Johnson (Johnson) was appointed a director of Vineyards on 12 August 1997.  Johnson was also the controlling mind of FIG.

10. The twelfth plaintiff, Richard John Donald Oliver (Oliver) was appointed a director of Vineyards on 1 September 1997.  Oliver was the controlling mind of IML.

11. Foote was appointed a director of Vineyards on 3 September 1998.

12. Mrs Garrett is the third defendant.  She and her husband each hold one share in Vineyards.  They were also trustees of the Andrew Garrett Family Trust (AGFT) at least until about mid 2004.

13. The statement of claim divides the shareholders of IVA into two categories: first, the majority shareholders being IML, FIG, Taylor, the thirteenth plaintiff, First Wine Fund Limited (FWF), Talbot, Carrick, Hutchinson and Luskey;  and second, AGFT through its trustees from time to time.

14. The following directors were appointed to IVA as follows:

    ·Garrett on 28 October 1996

    ·Oliver on 3 September 1998

    ·Johnson on 22 February 1999

    ·Taylor on 17 April 2001

    ·The fourteenth plaintiff, Jonathon Keith Brett (Brett) on 17 April 2001

    ·The fifteenth plaintiff, Brenton William Atkinson (Atkinson) on 17 April 2001.

15. Garrett was the controlling mind of the fifth defendant, GII, and he and Mrs Garrett were the shareholders of that company.

16. Paragraph 19 of the statement of claim alleges that the sixth defendant, Evajade, has, since about June or July 2004, purported to be a trustee of the AGFT either solely or jointly with Garrett and/or Mrs Garrett.

17. The purpose of the joint venture involved the establishment, development and operation of a vineyard on land held by Vineyards as a bare trustee.

18. Oliver said in his affidavit that the joint venture was an undertaking promoted by Garrett in 1997 when he was seeking investors in vineyards in Yarra Glenn, Victoria and Langhorne Creek, South Australia, established for the purpose of growing and selling quality grapes to winemaking companies.  There were initially six investors, the first six plaintiffs, together with IVA which was then controlled by Garrett.  When the joint venture was entered into, it related only to the establishment and operation of a vineyard on land at Yarra Glenn.

19. A management agreement was entered into at the time the joint venture was established appointing Vintners as manager.  The effect of the management agreement was to commit the entire management of the joint venture to Vintners.

20. Part of the property of the joint venture consisted of agreements referred to in the statement of claim as “the Grape Supply Agreements”.  This property consisted of contracts between the bare trustee and wine producers including Mildara Blass Limited, BRL Hardy Limited, Rothbury Wines Limited and IVA.

21. Clause 8.2 of the JVA provides that the bare trustee agreed to act upon the instructions of the joint venturers (plaintiffs 1-9) and that it would not have any beneficial interest in the assets of the joint venture.

22. In about June 1997 a meeting took place at which Johnson, Taylor, Hutchinson, Foote, Garrett and a Mr Harry Mermelstein (Mermelstein) were present.  Mermelstein is the managing director of Luskey.  I find that at that meeting, the individuals present agreed that each participant in the joint venture would be entitled to have a representative on the board of the bare trustee.  The participants in the joint venture nominated Johnson, Foote and Oliver, who were appointed as directors of Vineyards as follows:

    ·Johnson on 10 August 1997

    ·Oliver on 18 September 1997

    ·Foote on 3 September 1998

23. Immediately prior to the first of these appointments and thereafter Garrett was, and remained until his bankruptcy, a director of the bare trustee.

24. It is evident from the JVA that the first six plaintiffs and IVA were the initial participants.  The affidavits disclose that Carrick became a participant in June 1998 and Talbot did so in 1998: see, for example, Oliver’s affidavit, paragraphs 57-59.

25. From time to time during the operation of the joint venture, the parties or some of them had occasion to enter into further agreements.  In March 2001 an agreement called “the transactions agreement” was entered into between the joint venturers and others for the raising of further capital.  That was followed by a further agreement in November 2001 which provided for the variation of the transactions agreement.

26. In May 2001 an agreement between the shareholders of IVA (the shareholders agreement) was entered into.  This related, in broad terms, to the way in which the company was to be run, including the appointment and removal of directors and to certain types of resolution.  The agreement contained a detailed position relating to the consequences of breach of the shareholders agreement.

27. After further capital had been advanced pursuant to the transactions agreement, disputes arose in relation to representations made by Garrett to potential subscribers to the extent that litigation was threatened.  That dispute was resolved by the execution of an agreement dated 29 October 2002.  In the same month, a deed was entered into varying the shareholders agreement.  This empowered IVA to issue equity securities including convertible notes, warrants and guarantee certificates.  In about October 2002, equity securities were issued to all of the shareholders of IVA except FWF.  These were converted into capital in about June 2003.

1. The default provisions in the shareholders’ agreement were subsequently invoked in relation, firstly, to rent owed by one of Garrett’s companies to IVA and, secondly, to the appointment of an administrator and receiver to other companies which were controlled by Garrett.  As a result, the Board of IVA suspended the shareholding rights of AGFT in IVA and removed Garrett as a director.

2. Later in 2003, IVA demanded repayment of a loan in the sum of $600,000 owed by AGFT to IVA.  IVA had the option of seeking to recover the monetary sum or cancelling 600,000 shares held by AGFT in IVA.  It pursued the latter option.

3. It is against this background that certain events occurred at the instigation of Garrett, either personally or through companies of which he had control, which challenged the authority of the participants in the joint venture and the operations of the joint venture through its corporate structure.  As a result, the plaintiffs have sought declaratory relief deciding the following questions:

   ·Who are the participants in the joint venture?

   ·Who are not the participants in the joint venture?

   ·How is the property comprised in the joint venture held?

   ·Who are the shareholders of IVA and in what proportions?

   ·Who are the directors of IVA?

   ·Who is the secretary of IVA?

   ·The validity of purported general meetings of the members of IVA.

   ·The validity of purported meetings of directors of IVA.

   ·Who are the directors of Vineyards?

   ·Who is the secretary of Vineyards?

   ·The validity of a general meeting of members of Vineyards purportedly held on 25 and 27 February 2004.

   ·Whether a certain agreement between Vineyards and GII is void.

   ·Whether an agreement between Vineyards and GII relating to the receivables under the Grape Sale and Purchase Agreements is void.

4. In the second edition of “Declaratory Orders” by P W Young, the learned author sets out (at page 9) the conditions for declaratory orders.  They are as follows:

   1.     There must exist a controversy between the parties;

   2.     The proceedings must involve the “right”;

   3.Proceedings must be brought by a person who has a proper or tangible interest in obtaining the order …;

   4.The controversy must be subject to court’s jurisdiction …;

   5.The defendant must be a person having a proper or tangible interest in opposing the plaintiff’s claim;

   6.The issue must be ripe.  It must not be merely of academic interest hypothetical or one whose resolution would be of no practical utility.

5. In relation to the first requirement the learned author refers to a number of cases including Trossman v Trossman (1960) 80 Am LR (2d) 933 where “it was held that in an action for a declaratory judgment, no wrong need be proved, but merely an existence of a claim or record which disturbs the title, peace or freedom of the plaintiff; and that jurisdiction is established by any claim which, by casting doubt, insecurity or uncertainty upon the plaintiff’s rights or status, damages his pecuniary or material interest.”  In light of the findings of fact set out below, I have no doubt that the plaintiffs’ various claims for declaratory relief fulfil this requirement.  In addition, because the facts of this case come within the ambit of the decision in Trossman, it also follows that the requirement that the proceedings must involve a right on the part of the plaintiff is also fulfilled.  It is equally clear that the plaintiffs, whose “rights” have been affected by the conduct of Garrett, have the necessary standing to apply for declaratory relief.

6. In my view the determinations sought are clearly within the jurisdiction of this Court and that the questions raised come within the principles stated by Lord Dunedin in The Russian Commercial and Industrial Bank v British Bank for Foreign Trade [1921] 2 AC 438 at 448 where his Lordship said:

   The question must be real and not a theoretical question:  the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.

7. Whether or not the relief sought by the plaintiffs is to be granted depends on the existence of a demonstrated need for such relief.  It is the defendants’ case that the facts contained in the affidavits relied upon establish the need for the relief sought.  In short, it was argued, the conduct of Garrett and others was such that the joint venturers were unable to run the business of a joint venture because of the significant disruption to the business caused by that conduct.

8. The plaintiffs also claim injunctive relief against Mr and Mrs Garrett restraining them from dealing with the assets of the joint venture, drawing cheques on the bank accounts of Vineyards, acting or purporting to act as manager of the joint venture, terminating or purporting to terminate the management agreement or acting in respect of the business of the joint venture other than on the written instructions of Vintners.  They also seek an injunction restraining Garrett from holding himself out as a director of IVA and Vineyards.

9. I consider it appropriate to set out my findings relating to each of the questions in respect of which declaratory relief is sought.  It is by reference cumulatively to those findings that a determination is to be made as to whether some or all of the declaratory relief sought should be granted.

   Who are and who are not the participants in the joint venture?  (paragraphs 1 & 2 of the minutes)

10. The proposed declaration by paragraph 1 of the minutes is that the joint venture participants are the first nine defendants.  Paragraph 2 is a proposed declaration that GII is not a participant in the joint venture.  The request for such relief has come about because the plaintiffs apprehend that GII, through Garrett, has in the past claimed, and may in the future claim, to be a participant in the joint venture.

11. In June 1997 the joint venture was established by the JVA.  The original participants were the first six plaintiffs and IVA.  At the time that the agreement was signed, IVA was known as Andrew Garrett Vineyard Estate Pty Ltd.  The name was later changed to International Vintners Australia Pty Ltd.  By June 1999 there were additional participants, namely Talbot and Carrick.

12. The reason for seeking declarations as to who are and are not participants in the joint venture is because in February 2004 Garrett purported to constitute GII as a participant holding a 94.5% interest in the joint venture.  However, it is clear from the affidavit evidence that none of the other participants agreed to GII becoming a participant in any proportion let alone of such a high proportion.

13. On 4 March 2004 Atkinson, the CEO of IVA, received an email from Garrett which asserted that GII had become a joint venture participant holding a 94.5% share.  Garrett relied upon clause 14.1 of the JVA which is as follows:

    14.1The participants acknowledge and agree to be bound by the terms of the loan agreement and the options provided therein to Garrett International Investments Pty Ltd to convert the loan advanced by it to the trustee into additional joint venture interest.

14. No attempt was made in the email to explain how it was that GII came to hold a 94.5% interest in the joint venture.  It is apparent from Oliver’s affidavit (paragraph 61) that the joint venture contribution by IVA of $1.3 million, by August 1998, amounted to a 32.5% share in the joint venture.  Even if it is assumed that GII had a right to participate in the joint venture, the obtaining of a 94.5% share in that joint venture would have involved a contribution or a payment or other adjustment of capital approaching $100 million.

15. The plaintiffs’ concern is that the loan agreement to which clause 14.1 refers has never been produced by Garrett, nor has he produced any documentation which supports the contention that there existed an indebtedness between GII and “the trustee” (Vineyards) beyond 30 June 1998.

16. The only evidence of a loan from GII to the trustee known to the plaintiffs was a loan in the sum of $800,000 which existed at the time the joint venture was set up and which, according to the financial statements of the joint venture, had been repaid in full by 30 June 1998.  The option purportedly exercised by GII came almost six years later in March 2004.  I accept Mr Blue’s submission that there is no evidence that GII became a participant in the joint venture.

17. Mr Blue also put an argument that, in any event, the participants in the joint venture had not agreed to GII becoming a participant and that such agreement was necessary pursuant to clause 3.9 of the JVA.  In the absence of the production of the loan agreement referred to in paragraph 14.1 of the JVA, it is not possible to adjudicate in respect of this argument because it is based on the contention that clause 3.9 governs clause 14.1.  However, it may be said that GII did not become a participant pursuant to clause 3.9 because none of the other participants consented to such an appointment.

    Declarations relating to Vineyards (paragraphs 3 and 15 of the minutes)

18. The plaintiffs seeks a declaration that Vineyards is a bare trustee in relation to the property of the joint venture, that it has no beneficial interest in the property and that the property includes certain land and monies receivable under the Grape Supply Agreements.  I think it is preferable to alter the proposed paragraph 3 so that it reads as follows:

    3.International Vineyards Pty Ltd (ACN 074 023 671) (“Vineyards”) is a bare trustee in relation to the joint venture and has no beneficial interest in the joint venture and the assets thereof which include:

    3.1     The whole of the land (“the land”) comprised in Victorian Certificates of Title Register Book:

    3.1.1Volume 10288 Folio 345;

    3.1.2Volume 10444 Folio 407;

    3.1.3Volume 10533 Folio 032;

    3.1.4Volume 10579 Folio 755; and

    3.2     Monies receivable under Grape Supply Agreements (“the Grape Supply Agreements”) referred to in the joint venture agreement dated 25 June 1997 (“the JVA”).

19. Paragraph 3 of the minutes refers to two types of property: the real property and the Grape Supply Agreements.  Mr Blue’s submissions were directed primarily to the Grape Supply Agreements.  The only basis upon which the reference to real property in the proposed declaration can be supported is that if, as was contended by the plaintiffs, Garrett either individually or through one of his companies attempted to deal with the Grape Supply Agreements contrary to the terms of the joint venture, it was necessary also to make reference to the real property because it was the source of the grapes which were the subject of the Grape Supply Agreements.

20. Paragraph 3 of the minutes is linked with paragraph 15 of the minutes which seeks a declaration as follows:

    15.Any agreement between Vineyards and GII assigning the receivables under the Grape Supply Agreements referred to in the JVA is void and of no effect.

21. Oliver refers to such a purported agreement at paragraph 174 et seq of his affidavit.  A copy of the agreement is in book 5 of exhibit P1 at pages 359 to 375.  The purported agreement is dated 12 July 2004.  It purports to be between Vineyards as vendor and GII as a purchaser.  The document has been executed by Garrett purportedly as sole director of Vineyards and by Garrett again as sole director of GII.  It is abundantly clear from the affidavit evidence that whatever authority Garrett may have had from GII to enter into such agreement, he had no authority to execute the agreement on behalf of Vineyards.  Although the agreement only relates to the “receivables” (as defined) from the 2004 vintage, a declaration is sought in more general terms both as to the basis upon which Vineyards holds the assets of the joint venture (paragraph 3.2 of the minutes) and also as to the absence of entitlement of GII to such proceeds (paragraph 15 of the minutes).

22. The same approach may be taken to paragraph 14 of the minutes which is as follows:

    14.Any agreement between Vineyards and GII whereby Vineyards has agreed to accept an offer of finance from GII for the purpose of refinancing Vineyards’ finance facility with Ravo Australia Limited is void and of no effect.

23. Again the principal affidavit evidence comes from Oliver at paragraph 165 et seq.  He refers to a document that he describes as “the purported GII facility agreement”.  A copy of the document is at page 275 of book 5 of P1.  It appears from that letter that Garrett, as sole director of GII, has written to himself purportedly as sole director of Vineyards, by letter dated 11 July 2004, which contains an offer of finance on certain terms and conditions and which has been purportedly accepted by Vineyards under the hand of Andrew Garrett as sole director.  It is again abundantly clear from the affidavit evidence that Garrett had no authority to act on behalf of Vineyards in relation to that offer.

24. I have thus far dealt with the facts underlying the plaintiffs’ claim for declaratory relief in paragraphs 1, 2, 3 and 15 of the minutes. These relate to the identity of the participants in the joint venture and to the bare trustee’s holding of the assets of the joint venture and to Garrett’s authority.

25. The declaration sought in paragraph 3 of the minutes touches upon the matters relating to the declaration sought in paragraph 15 of the minutes because the latter declaration specifically deals with a  purported agreement relating to one of the major assets of the joint venture, namely the Grape Supply Agreements.  I have also dealt with paragraph 14 of the minutes (which deals with a purported offer and acceptance relating to the provision of finance) because the conduct of Garrett in relation to the two agreements referred to respectively in paragraphs 14 and 15 of the minutes is similar, namely that he has purported to act on behalf of Vineyards as a sole director in relation to the subject matter of each of the two purported agreements.

    Declarations sought relating to IVA  (paragraphs 4-9 of the minutes)

26. I now turn to the next category of declarations, all of which relate to IVA and are set out in paragraphs 4 to 9 of the minutes of order.  Paragraphs 4 and 5 deal with the shareholders in IVA and the percentage of their respective shareholding.  Paragraphs 6 and 7 deal respectively with the directors and secretary of IVA.  Paragraphs 8 and 9 deal with a purported meeting of the members of IVA and a purported meeting of the directors of IVA.

27. IVA is not to be confused with Vintners which is the manager of the joint venture and Vineyards which is the bare trustee.  As mentioned earlier, IVA was formally known as Andrew Garrett Vineyard Estates Pty Ltd.  IVA has at all material times been a participant in the joint venture.  Prior to becoming a participant, Garrett was the controlling mind of the company and its shareholding was confined to the Garrett family.  After it became a participant, several additional persons became shareholders and directors of the company.  When it first became a participant its share of the joint venture amounted to nearly 44%.  Later as a result of further contributions of capital by others the proportionate share of IVA became 32.5%.

28. Shipley’s affidavit is the primary affidavit relating to the declarations sought in respect of IVA.

29. The ordinary shares issued to Mr and Mrs Garrett were issued to them in their capacity as trustees of the AGFT.

30. On 28 October 1996 Garrett was appointed a director, on 3 September 1998 Oliver was appointed a director and on 22 February 1999 Johnson was appointed a director.  By 9 January 2001 Garrett, Oliver and Johnson were the only directors.  On 17 April 2001 Taylor, Brett and Atkinson were appointed additional directors.

31. As to the shareholding in IVA, the affidavit of Shipley deals with this in some detail up to and including paragraph 153.  In that paragraph he sets out the shareholding from July 2003 onwards.  A total of 24,606,142 shares have been issued in a variety of manners which, for the purposes of these reasons, I need not go into detail.  It is sufficient to say that I accept as both accurate and reliable all of the affidavit evidence of Mr Shipley.  Accordingly, I hold that from July 2003 the shareholding in IVA was and remains as Mr Shipley stated at paragraph 153 of his affidavit.  The plaintiffs seek declarations by paragraphs 4 and 5 of the minutes of order that the shareholders in IVA are as stated in paragraph 153.  By paragraph 5 of the minutes they seek a declaration that the amount and proportions of shareholding are as stated in paragraph 153.

32. The plaintiffs have sought the various declarations relating to IVA because of events which occurred in March 2004.  Those events are described in various affidavits, particularly the affidavits of Mr Shipley and Mr Oliver.  I find that in early March 2004, a Mr Sandow, purportedly acting on behalf of Mr & Mrs Garrett as trustees for the AGFT, directed Mr Shipley as secretary of IVA to give notice of an extraordinary general meeting to be held on 18 March 2004 at 9.00 a.m. in the boardroom of Lancione Partners at Level 2, 60 Waymouth Street Adelaide.  The stated purpose of the meeting was to appoint new directors.

33. Shipley responded to Mr Sandow’s letter by pointing out that Mr & Mrs Garrett did not have authority to convene a general meeting because their shareholder rights had been suspended.  It is apparent from Garrett’s response by letter dated 8 March 2004 to Mr Shipley that he did not accept Shipley’s contentions to Mr Sandow.

34. On 18 March 2004 at 9 a.m. Oliver, as chairman of IVA, attended the offices of Lancione Partners at Level 2, 60 Waymouth Street, Adelaide with Mr Shipley and with the company’s solicitor.  Upon arrival they were informed by Mr Richard Beissel, a partner in the firm of Lancione Partners, that he had previously advised Garrett that the firm’s offices were not to be used for the meeting.  As chairman, Mr Oliver opened the meeting and, there being no business, the meeting was closed.

35. Mr Oliver later discovered that Garrett had purported to conduct a members’ meeting of IVA at 9 a.m. on 18 March 2004 at 249 Flinders Street, Adelaide.  One of the resolutions passed at that purported meeting stated:

    It was resolved that all members of the Board of Directors and secretary of the company noted as per the ASIC search prior to this date be removed from office forthwith.

36. It is clear from the evidence of Mr Oliver that that meeting had not been validly convened. It follows that any resolutions purportedly passed at the meeting were void.

37. Oliver also discovered that Garrett had purposed to conduct a directors’ meeting of IVA at 9.15 a.m. on 18 March 2004 at 249 Flinders Street, Adelaide.  Several versions of the minutes of that purported meeting are contained in book 5 of exhibit P1.  It is again clear from Oliver’s evidence that the directors’ meeting was invalidly convened and it follows that any resolution passed at that meeting was void.

38. Nevertheless, Garrett filed at ASIC on 2 April 2004 notices purporting to notify ASIC of the change in directors of IVA.  These notices were subsequently corrected by the company by the lodging of further notices with ASIC on 7 April 2004.

39. An examination of the minutes of the purported general meeting and directors’ meeting of IVA, copies which are contained in volume 5 of exhibit P1, demonstrate that Garrett has challenged in a fundamental way the existence of the shareholding, directorships and binding agreements between the various parties governing the way in which the joint venture is to be run.  Although I have indicated earlier in these reasons that the underlying facts relied upon by the plaintiffs in support of the declaratory relief claimed should be looked at cumulatively, there is little doubt in my mind that, by reference only to the actions of Garrett in March 2004, there is a demonstrated need on the part of IVA to obtain the declarations as sought in paragraphs 4, 5, 6, 7, 8 and 9 of the minutes so that IVA and the other participants may hold out to those with whom they deal the Court’s determinations as to the structure of the joint venture and Garrett’s lack of authority in relation thereto.

    Declarations sought in relation to Vineyards (paragraphs 10, 11, 12 and 13 of the minutes)

1. As I have mentioned earlier, in 1997 and 1998 Johnson, Oliver and Foote were appointed directors of Vineyards.  Vineyards was the bare trustee holding all of the assets of the joint venture on behalf of the participants.  The reason why the plaintiffs seek the declarations relating to Vineyards is that Garrett purported to change the directors and secretary in February 2004 in much the same way as he purported to do so with IVA in March.

2. As at February 2004 Mr & Mrs Garrett were the only shareholders in Vineyards.  By agreement reached between the individuals in the early stages of the joint venture, the participants were able to nominate directors to the board of Vineyards.  In that way, the participants had control of the way in which the assets of the joint venture were to be dealt with.  It was not necessary for the participants to hold shares in Vineyards because it held no assets in its own right but only as trustee.

3. Paragraph 127 et seq of Oliver’s affidavit refers to a meeting of the members of the Vineyards said to have been held on 27 February 2004.  It is clear that Johnson, Oliver and Foote each received a facsimile transmission from Mr Mike Garrett, Garrett’s brother, who was a chartered accountant with a firm called BDO.  Each of the recipients was informed that they had been removed as directors of Vineyards at a meeting of the members of Vineyards on 27 February 2004.  Part of the facsimile transmission included a letter to the directors of Vineyards whereby each of the recipients individually resigned as a director effective from 27 February 2004.  Mr Mike Garrett requested in his letter that each of the recipients sign that form, presumably to confirm their removal.

4. It is quite clear from the affidavit evidence, particularly that of Oliver and Shipley, that if there had been a purported meeting of Vineyards on 27 February 2004, it had not been validly convened and that consequently any resolution passed at the meeting was void.  A copy of the minutes of that purported meeting is contained in book 5 of exhibit P1.  It contains so called resolutions in relation to Oliver, Foote and Johnson as follows:

   It was resolved that [name of director] has resigned as director to take effect from 27 February 2004.

5. Even if there had been a valid meeting convened, those resolutions are ineffective because they are nonsensical.

6. The affidavit evidence also refers to minutes of a meeting of the members of Vineyards allegedly on 25 February 2004 which, among other things, referred to a resolution that all directors and secretaries of the company be removed from office except Garrett.  Irrespective of whether or not such a meeting actually took place, if it did take place it is clear that no notice of the meeting was given in accordance with the requirements of the articles of the company or of the provisions of the Corporations Act.

7. For the same reasons given in relation to the declarations concerning IVA, the conduct of Garrett has demonstrated a clear need for the plaintiffs to have the court’s determination by way of declaratory relief.

8. Taking the conduct of Garrett as a whole, he has, without justification, challenged the way in which the joint venture is constituted by its participants, the concept that Vineyards holds the joint venture property as a bare trustee, the shareholding and directorships of IVA and Vineyards, and he has purported to hold meetings of members and directors of IVA without complying with the requirements for the convening of such meetings. He has done the same in relation to meetings of members of Vineyards.  He has also challenged the directorships by IVA and Vineyards.  A reading of all of the affidavit evidence and the relevant documentation provides a firm basis for the plaintiffs’ claim that they should be granted the declaratory relief sought in the minutes of order.  For these reasons I intend to make the declarations sought.

9. As referred to earlier, the plaintiffs also seek injunctive relief.  They have obtained interlocutory injunctive relief prior to trial and they now seek perpetual injunctions, the effect of which is to avoid the mischief created by the conduct of Garrett as detailed in the affidavits and as outlined in my reasons.  Given the way in which Garrett has conducted himself, particularly since early 2004, I think it necessary for the proper protection of the legitimate commercial interests of the plaintiffs to grant permanent injunctions in terms of paragraphs 16, 17 and 18 of the minutes.  Paragraph 16 is directed towards Mr & Mrs Garrett and Vineyards.  I have considered whether or not it is necessary to enjoin Mrs Garrett. On balance, I consider that it is appropriate to do so given that she remains a shareholder of Vineyards, but only to that extent.  The other two injunctions relate to Garrett and, in my opinion, the plaintiffs have made out a strong case for the granting of the same.

10. The plaintiffs seek an order for the costs of the action against Mr & Mrs Garrett and Evajade.  In addition, they seek a costs order against GII applying to the costs of and incidental to the relief set out in paragraphs 14 and 15 of the minutes.  I think it is appropriate to make those orders given the conclusions to which I have come in granting the declaratory and injunctive relief sought by the plaintiffs.

11. As to liberty to apply as sought in paragraph 21 of the minutes, I do not think that it is necessary for the parties to have liberty to apply but the plaintiffs should have liberty to apply in relation to paragraphs 8 to 12 of the prayer for relief in the statement of claim.

12. I will hear the plaintiffs on the question of whether or not they should be released from cross-undertakings given when interlocutory injunctive relief was sought.