In the matter of Gearhouse BSI Pty Ltd

[2021] NSWSC 98

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Gearhouse BSI Pty Ltd [2021] NSWSC 98

Hearing dates:

11 February 2021, further submissions received on 12 and 15 February 2021

Date of orders:

17 February 2021

Decision date:

17 February 2021

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

Application for stay of winding up application refused. Winding up order made. Declaration made as to termination of Shareholders Agreement on making of winding up order.

Catchwords:

CORPORATIONS – winding up – Corporations Act 2001 (Cth) s 461(1)(k) – application by plaintiff shareholder for winding up on just and equitable ground – company is solvent – company’s business comprised provision of equipment and services under contract with third party – contract expired – deadlock between shareholders about whether to enter into new contract with third party – deadlock not capable of resolution due to breakdown in co‑operation, trust and confidence – defendant shareholder’s unauthorised use of company’s available equipment – plaintiff shareholder’s loss of trust and confidence in defendant shareholder justified – winding up order made

Legislation Cited:

Corporations Act 2001 (Cth) ss 233, 461, 466, 467 and 556

Cases Cited:

Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] 3 Qd R 520; (2018) 125 ACSR 227; [2018] QCA 048

Byrne v A J Byrne Pty Ltd [2012] NSWSC 667

Host-Plus Pty Ltd v Australian Hotels Association [2003] VSC 145

In the matter of Amazon Pest Control Pty Ltd [2012] NSWSC 1568

In the matter of Austral Alloys Pty Ltd [2017] NSWSC 1833

In the matter of Catombal Investments Pty Ltd [2012] NSWSC 775

In the matter of CNPR Ltd [2018] NSWSC 989

In the matter of Pure Nature Sydney Pty Ltd [2018] NSWSC 914

Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (2020) 19 BPR 40; [2020] NSWCA 161

May Harlow Pty Ltd v Winten (No. 48) Pty Ltd [2020] NSWSC 1011

Re Austral Alloys Pty Ltd [2017] NSWSC 1833

Wilkie v Gordian Ru noff Ltd (200 5) 221 CLR 522; [2005] HCA 17

Category:

Principal judgment

Parties:

Broadcast Sports International, LLC (Plaintiff)
Gearhouse BSI Pty Ltd (ACN 610 164 102) (First Defendant)
Gravity Media (Australia) Pty Ltd (Second Defendant)

Representation:

Counsel:
Mr L Chapman (Plaintiff)
Mr M Stevens (Solicitor) (First Defendant)
Mr S Golledge SC (Second Defendant)

Solicitors:
Norton Rose Fulbright (Plaintiff)
SRM Lawyers (First Defendant)
Watson Magioni Lawyers Pty Limited (Second Defendant)

File Number(s):

2021/33167

Publication restriction:

N/A

Judgment

A.   Introduction

1. The plaintiff in these proceedings, Broadcast Sports International, LLC (BSI), is a company incorporated in the United States of America that designs and manufactures audio, video and communication systems for the broadcasting industry, including systems known as in-car camera systems. Since about December 2018, BSI has been a subsidiary of NEP Group, Inc. NEP Group conducts business in Australia, either directly or through a subsidiary, under the name NEP Australia.

2. The second defendant in these proceedings, Gravity Media (Australia) Pty Ltd (formerly Gearhouse Broadcast Pty Ltd) is in the business of providing live broadcast facilities and production services. The second defendant is referred to in the evidence as “Gravity” or “GMA”. In these reasons, I will refer to the second defendant as GMA.

3. In January 2016, BSI and GMA established the first defendant, Gearhouse BSI Pty Limited (GBSI), as an incorporated joint venture between them.

4. According to the recitals to the Shareholders Agreement entered into by BSI, GMA and GBSI on 26 February 2016, the purpose of the joint venture was to deliver in-car camera systems for the V8 Supercars Race Series (or successor series) under a Television Production Services (In-Car Camera Systems) Agreement (the TPSA).

5. GBSI and V8 Supercars Australia Pty Limited (as trustee for the AVESCO Unit Trust) (V8 Supercars) entered into the TPSA on the same date that BSI, GMA and GBSI entered into the Shareholders Agreement. V8 Supercars is responsible for producing the television production of the motor racing series known as the V8 Supercars Race Series, which is broadcast nationally and internationally. V8 Supercars has contractual arrangements with third parties, including Seven Network (Operations) Limited (Seven) in respect of the broadcast.

6. Under the TPSA, V8 Supercars exclusively appointed GBSI to provide in-car camera systems equipment and services in relation to those systems at events conducted as part of the V8 Supercars Race Series for a fixed term of five years expiring on 31 December 2020.

7. Each of BSI and GMA held (and continue to hold) 50 per cent of the shares in GBSI.

8. With the exception of their joint interest in GBSI, BSI and GMA are competitors in the Australian market for sports broadcasting services.

9. Each of BSI and GMA transferred certain equipment to GBSI at the outset of the Shareholders Agreement which GBSI required in order to perform its obligations under the TPSA. It will be necessary to refer to that equipment, and the terms on which it was transferred, in more detail later in these reasons.

10. Although the TPSA had a fixed term of five years, the Shareholders Agreement remains on foot unless and until it is terminated pursuant to clause 23.

11. Clause 23.1 of the Shareholders Agreement provides for termination in circumstances that are not presently relevant.

12. Clause 23.2 provides that the Shareholders Agreement “will terminate automatically”:

1. by agreement of all parties (that is, BSI, GMA and GBSI);

2. upon there being only one Shareholder; or

3. when GBSI is wound up by an order of a court.

13. Clause 23.3 provides:

“In the event that the TPSA is terminated by any party to that agreement during its current term or the TPSA is not renewed beyond the end of its current term (with an expiry date of 31 December 2020), the Shareholders will meet to discuss whether or not the terminate this Agreement, and how the assets and liabilities of GBSI should be treated upon such termination.”

14. The term of the TPSA expired on 31 December 2020, and it has not been renewed.

15. BSI wishes to terminate the Shareholders Agreement and GMA wishes to continue the Shareholders Agreement and enter into a new arrangement with V8 Supercars for the provision of in-car camera systems. The two shareholders differ in their views about the meaning and effect of key provisions of the Shareholders Agreement. In short, they have not reached an agreement to terminate, nor has any other event occurred to trigger termination under clause 23.2.

16. If the Shareholders Agreement is terminated, the consequences include that each of BSI and GMA will have the right (but not the obligation) under clause 5.9 of the Shareholders Agreement to purchase from GBSI at fair market value the equipment that it transferred to GBSI at the commencement of the Shareholders Agreement and TPSA.

17. BSI commenced these proceedings by Originating Process filed in Court on 5 February 2021, claiming certain interim relief and the following final relief:

1. orders winding up GBSI pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) and appointing a liquidator to the company (prayers 3 and 4 of the Originating Process);

2. a declaration that, by reason of the appointment of the liquidator, the Shareholders Agreement was terminated within the meaning of clause 5.9 of that agreement and BSI may exercise the option in clause 5.9(a) of that agreement to purchase the BSI Equipment as defined in that agreement (prayer 5 of the Originating Process); and

3. a declaration that GBSI holds the BSI Equipment as defined in the Shareholders Agreement on trust for the benefit of BSI (prayer 6 of the Originating Process).

18. On 5 February 2021, Black J heard and dismissed BSI’s claims for interim relief, ordered that BSI’s claims for final relief in prayers 3 to 5 of the Originating Process be heard and determined separately from and prior to the claim in prayer 6, and listed the claims in prayers 3 to 5 for final hearing before me on 11 February 2021.

19. On the evening of 9 February 2021, GMA filed an Interlocutory Process claiming the following final relief:

1. a declaration that BSI has committed a material breach of clause 19 of the Shareholders Agreement and, as a result, is deemed to have given a Transfer Notice in favour of GMA in respect of BSI’s shares in GBSI in accordance with clause 15 of the Shareholders Agreement (prayer 1 of the Interlocutory Process);

2. alternatively, a declaration that the affairs of GBSI have been conducted in a manner which is oppressive to, unfairly prejudicial to or unfairly discriminatory against GMA (prayer 3 of the Interlocutory Process); and

3. in the alternative to the claim in prayer 1, an order pursuant to s 233(1)(e) of the Corporations Act that BSI be required to sell its shares in GBSI to GMA at a price to be determined by the Court and taking into account the conduct of BSI and its impact on the financial position of GBSI (prayer 4 of the Interlocutory Process).

20. The Interlocutory Process also included the following claims for interim relief:

1. in prayer 5, an order that the hearing of the claims in prayers 3 to 5 of the Originating Process be stayed until after the later of:

1. the conclusion of the dispute resolution procedures provided for by clause 22 of the Shareholders Agreement; and

2. the hearing and determination of GMA’s claims for final relief in prayers 1, 3 and 4 of the Interlocutory Process

2. in prayer 6, an order that, pending the hearing of GMA’s claims for final relief, Alan Hayes be appointed as receiver of:

“(a)   such of the items listed in Schedule 2, Part B of the Shareholders Agreement [the equipment listed in that schedule is defined in the Shareholders Agreement as the ‘BSI Equipment’] as remain extant and any items substituted for these;

(b)   (if these do not form part of the items referred to in (a), which is not admitted) the ten BSI Decoder units referred to in prayer 1(b) of the Originating Process [being units that were provided by way of long term loan by BSI to GBSI in or about July 2017],

with such powers as the Court considers appropriate so that such assets are preserved pending final determination of these proceedings.”

21. On 10 February 2021, GBSI filed a notice of appearance stating that it would appear and oppose the claims for relief in BSI’s Originating Process and submit to the orders of the Court in relation to GMA’s Interlocutory Process (save as to costs).

22. At the hearing on 11 February 2021, BSI moved on prayers 3 to 5 of its Originating Process and GMA moved on prayers 5 and 6 of its Interlocutory Process. There appeared to me to be considerable overlap in the parties’ evidence relevant to GMA’s claims for interim relief and BSI’s claims in prayers 3 to 5 of the Originating Process. Senior counsel for GMA (Mr Golledge SC) and counsel for BSI (Mr Chapman) proposed that I should hear all of the parties’ evidence and submissions concerning both sets of claims before determining GMA’s claims for a stay and the appointment of a receiver. In the event that those claims were dismissed, I would then be in a position to immediately determine BSI’s claims in prayers 3 to 5 of the Originating Process. Mr Stevens, solicitor, who appeared for GBSI, did not oppose this course. I was content to adopt this approach.

23. For the reasons that follow, I have determined that:

1. GMA’s application for stay, and for the appointment of a receiver for the duration of any stay, should be dismissed;

2. it is just and equitable that GBSI be wound up; and

3. it is appropriate to make a declaration in substantially the same terms as prayer 5 of the Originating Process

24. My reasons are structured as follows.

25. In Section B, I set out the relevant provisions of the Shareholders Agreement.

26. In Section C, I summarise the evidence concerning events in the period leading up to and subsequent to the expiry of the TPSA on 31 December 2020 that are relevant to the determination of GMA’s application for a stay of the winding up application and the appointment of a receiver and/or relevant to the winding up application.

27. In Section D, I address the parties’ submissions concerning GMA’s application for a stay of the winding up application and the appointment of a receiver and set out my reasons for dismissing those applications.

28. In Section E, I address the parties’ submissions concerning the winding up application and BSI’s claim for a declaration in terms of prayer 5 of the Originating Process and set out my reasons for concluding that it is just and equitable to wind up GBSI and that a declaration in terms of prayer 5 of the Originating Process should be made.

29. Sections D and E refer to submissions of BSI and submissions of GMA. GBSI adopted the submissions of GMA and relied on the evidence adduced by GMA.

B.   Relevant provisions of the Shareholders Agreement

30. The Shareholders Agreement was entered into on 26 February 2016 and “Completion” occurred when the following transactions required by clauses 4 and 5 of the Shareholders Agreement were completed:

1. each of BSI and GMA subscribing for shares in GBSI, and GBSI allotting shares to each of them, with the result that BSI and GMA would each have 50 per cent of the shares and voting rights in GBSI;

2. each of BSI and GMA performing their obligations (as lenders) under a Loan Agreement with GBSI (as borrower) so as to ensure that GBSI had sufficient cash to enable it to acquire “the BSI Equipment” and “the Gearhouse Equipment”;

3. GMA transferring all of its rights title and interest in “the Gearhouse Equipment” to GBSI “for the exclusive purpose of use with the Business” and GBSI paying the agreed “Gearhouse Equipment Value” of AUD$14,572 to GMA;

4. BSI transferring (or causing a related body corporate to transfer) “all its rights title and interest in the BSI Equipment to GBSI in accordance with the BSI Equipment Transfer Terms for the exclusive purpose of use with the Business”; and GBSI paying the initial instalment of “the BSI Equipment Price” of US$2,014,167 to BSI, less a “Withheld Amount” of US$165,620 to be held on trust for BSI until such time as it is required to be paid pursuant to Schedule 3 to the Shareholders’ Agreement; and

5. each of BSI and GMA agreeing in principle to providing “the BSI Services” and “the Gearhouse Services” (respectively) to GBSI.

31. It is not clear from the evidence when “Completion” occurred, but the precise date is not relevant for present purposes.

32. Clause 1.1 of the Shareholders Agreement defines “Gearhouse Equipment” and “BSI Equipment” as the assets and equipment in Part A and Part B (respectively) of Schedule 2 to the Shareholders Agreement.

33. The items comprising the BSI Equipment are the components of the in-car camera systems that GBSI was obliged to provide under the TPSA. Mr Dean Coughlan, BSI’s Director of Engineering and Technical Operations and a director of GBSI, described these systems as follows:

“15    The Camera Systems comprise audio-visual hardware (e.g. multiple different models of cameras, transmitters, data receivers and computers) and software that was designed, developed and manufactured by BSI to facilitate the delivery of television broadcasting services from inside and around racing vehicles during races.

16    The Camera Systems have four major elements, being:

(a)    the In-Car System;    

(b)    Ground-Based Receive/Fibre Transmit Infrastructure;    

(c)    Trailer Fibre Receive and Decode infrastructure; and    

(d)    Ultra High Frequency (UHF) Telemetry, General User Interface (GUI), and Camera control.

17    The In-Car System has three main components:

(a)    the In-Car Transmitter, which is custom designed by BSI to allow for the selection of up to four video sources, and which can be controlled seamlessly, remotely, and in real-time;    

(b)    In-Car Cameras, which are designed and manufactured by BSI, with colour and iris control, a proprietary tape-clear mechanism and some have robotic capability. They are attached to the roof, bumper and interior of the car. Each In-Car System normally contains multiple In-Car Cameras; and    

(c)    the In-Car UHF Data Receiver, which receives BSI proprietary command and control data required to support the real-time controls in the transmitter.

18    The Ground-Based Receive/Fibre Transmit are BSI designed and manufactured Microwave Receive and RF-Over-Fibre field boxes, which are deposited throughout a venue in order to receive video transmissions from cars.

19    The Trailer Fibre Receive and Decode infrastructure involves BSI designed and manufactured receivers, racks and rack-mounted video decoders, which typically sit within a production trailer to receive video transmissions from cars.

20    The UHF Telemetry, GUI, and Camera control involves a combination of BSI designed and developed software and hardware that allows for full remote control of the in-car systems from the production trailer. Real-time control of the following is enabled by BSI's custom solution:

(i)    selection of up to 1 of 4 cameras;    

(ii)    picture colour control/correction;    

(iii)    iris control of cameras;    

(iv)    robotic control of Cameras; and    

(v)    "Tape-clear" mechanisms, which are attached to the lenses of the external cameras, and which enables self-cleaning.

21    The real value of the BSI Camera Systems, and why they are considered internationally market-leading, is that the Camera Systems enable broadcast-quality audio-visual signals to be sent and received wirelessly, in real-time and in the most challenging sporting environments.

22    The intellectual property contained in the software used in the Camera Systems, which enables this wireless transmission of image and sound and seamless control of multiple cameras across multiple vehicles, has been developed by BSI over decades.

23    The features of the Camera Systems which are unique to these particular systems include:

(a)    the ability of the cameras to pan and tilt over 360 degrees;

(b)    the ‘tape-clear' mechanism;    

(c)   remote colour correction; and    

(d)    data and telemetry are gathered wirelessly over the radio frequency (RF) system.

24    Globally, there are only a handful of providers of similar services. In that sense, the Camera Systems are unique, not widely available and in demand for use internationally. To date, BSI alone (and not GBSI or Gravity) has been engaged to provide services making use of this system at over 500 unique venues, including more than 200 golf courses and 100 auto-racing venues internationally. BSI's next engagement is to provide these services at a golf tournament in the United States which commences on 3 May 2021.

…”

34. Mr Coughlan also gave evidence that:

“25    On all projects in which BSI is engaged, including in connection with GBSI, BSI takes steps to safeguard the intellectual property it has in the Camera Systems. Accordingly:

(a)    BSI typically insists on BSI employed technicians installing, servicing and/or supervising the Camera Systems, and that was certainly insisted upon in connection with GBSI and providing services under the TPSA;    

(b)    the software used to control the Camera Systems is password-protected and the passwords are strictly controlled. The passwords were not disclosed to Gravity staff; and    

(c)    BSI only entered into the Shareholders Agreement on the condition that BSI be entitled to buy-back the Camera Systems at the conclusion of the JV.

…”

35. Mr Coughlan was not cross-examined.

36. There is no dispute that BSI did transfer the BSI Equipment to GBSI as required by the Shareholders Agreement. BSI delivered 50 camera systems, consisting of 143 individual cameras and associated componentry, to GBSI. GMA provided only a small portion of the technology to GBSI to integrate the BSI Equipment into the broader broadcast/production apparatus required for V8 Supercars. When not deployed, the BSI Equipment has been stored at GMA’s warehouse in Mascot. Mr John Newton, Chief Executive Officer and Chairman of GMA and a GMA-appointed director of GBSI, gave evidence that, since delivery of the BSI Equipment to GBSI “GMA has exercised practical custody and control over these items”.

35. As I have referred to above, both the Gearhouse Equipment and the BSI Equipment were transferred to GBSI “for the exclusive purpose of use with the Business”.

36. Clause 1.1 of the Shareholders Agreement defines “Business” as:

“the business of providing the In Car Camera System for the V8 Supercars Race Series (or successor series) under the terms of the TPSA in the Territory”

39. The term “TPSA” is defined as:

“the Television Production Services (In Car Camera Systems) Agreement between GBSI and V8 Supercars Australia Pty Limited as trustee for the AVESCO Unit Trust in relation to the In Car Camera Systems in substantially the form set out in Schedule 1”

40. The term “Territory” is defined as:

“Australia, New Zealand and any other country or territory in which a V8 Supercar Race Series event is held under the TPSA and any other country or territory that the Shareholders agree by Unanimous Resolution from time to time.”

41. Clause 18.1 of the Shareholders Agreement provides:

“18.   Intellectual Property

18.1. Intellectual Property owned prior to Agreement

Each of Gearhouse and BSI retain ownership of Intellectual Property owned by it prior to the Completion Date and made available by it to GSBI for the purposes of the activities contemplated by this Agreement.”

42. Clause 2.1 of the Shareholders Agreement provides:

“2.   Objectives and Business

2.1.   Objectives

(a) At the Completion Date, the objectives of GBSI are to:

(i) carry on the Business; and

(ii) maximise the value of GBSI.

(b)    The Shareholders agree to discuss opportunities that arise from time to time for GBSI to pursue activities outside the scope of the Business at the Completion Date, provided that the business of GBSI will be limited to the Business in accordance with the Business Plan unless the Shareholders otherwise agree by Unanimous Resolution.”

43. Clause 2.2 relevantly provides:

“2.2.   General obligations of each Shareholder

Each Shareholder undertakes to the other Shareholder to:

…

(b)    cooperate and use their best endeavours to ensure that GBSI successfully performs its obligations under the TPSA and use their reasonable commercial efforts to develop and grow the Business in the Territory;

(c)    be just and faithful to, and co-operate with, each other in relation to all matters concerning the affairs and activities of GBSI, and not do anything that is, or is likely to be, damaging or harmful to the reputation or interests of the other Shareholder;

(d)    keep each other informed of any information or opportunity which comes to its attention which is or may be relevant to the Business;

(e)    not use Confidential Information in a way which damages or is reasonably likely to damage GBSI or any of the other Shareholders, for its own advantage, or to the competitive disadvantage of GBSI or the other Shareholder;

(f)    do and cause to be done all acts necessary or desirable for the implementation of this Agreement including, without limitation, casting their votes as Shareholders and causing their nominees to the Board to cast their votes as Directors to implement this Agreement and, if necessary, replacing their nominees to the Board;

…”

44. Clause 5.7 of the Shareholders Agreement provides:

“5.7.    Undertakings as to use of Equipment

(a)    Each Party acknowledges and agrees that Gearhouse has contributed the Gearhouse Equipment, and BSI has contributed the BSI Equipment, to GBSI for the purpose of the conduct of the Business by GBSI.

(b)    GBSI must not, without the prior written consent of BSI, use the BSI Equipment or any parts of the BSI Equipment or any Intellectual Property embodied in the BSI Equipment, for a purpose other than the Business or otherwise outside of the Territory.

(c)    Gearhouse undertakes and agrees that GBSI will at all times be permitted to use the Gearhouse Equipment and BSI undertakes and agrees that GBSI will at all times be permitted to use the BSI Equipment, at any location within the Territory (as expanded by Unanimous Resolution of the Shareholders from time to time) where the V8 Supercars Race Series is being conducted for the purposes of that V8 Supercars Race Series; provided, however that neither party represents nor warrants as to the suitability of the equipment to perform in any jurisdiction other than Australia or New Zealand.

(d)    Gearhouse undertakes not to use any BSI Equipment for a purpose other than in connection with the Business or the operations of GBSI, unless otherwise expressly agreed in writing by BSI and GBSI.

(e)    BSI undertakes not to use any Gearhouse Equipment for a purpose other than in connection with the Business or the operations of GBSI, unless otherwise expressly agreed in writing by Gearhouse and GBSI.”

45. Clause 5.9 of the Shareholders Agreement provides:

“5.9. Equipment

(a)    In the event of termination of this Agreement pursuant to clause 23.2 or clause 23.3, BSI shall have the option, but not the obligation, to purchase the BSI Equipment for its fair market value exercisable at any time by written notice from BSI to GBSI within 30 days of the date of termination.

(b)    In the event of termination pursuant to clause 23.2 or clause 23.3, Gearhouse shall have the option, but not the obligation, to purchase the Gearhouse Equipment for its fair market value exercisable at any time by written notice from Gearhouse to GBSI within 30 days of the date of termination.

(c)    The fair market value will be:

(i)    the fair market value agreed between GBSI and BSI (in the case of clause 5.9(a)) or GBSI and Gearhouse (in the case of clause 5.9(b)) within 14 days of written notice of exercise of the option; or

(ii)    failing such agreement, the fair market value as determined by an Expert who is independent of all parties to this agreement.

(d)   If an Expert is appointed in accordance with clause 5.9(c) then:

(i)    the Expert will certify in writing the sum that in his or her opinion is the fair market value of the relevant equipment;

(ii)    GBSI will use its best endeavours to procure that the Expert determines the fair market value of the relevant equipment within 20 Business Days of being requested to do so; and

(iii)    the costs and expenses of the Expert in determining the fair market value will be borne as to one half by GBSI and as to the other half by the Shareholder who exercised its option to purchase the relevant equipment.”

46. Under clause 7 of the Shareholders Agreement, each of BSI and GMA agreed to provide certain services to GBSI to facilitate GBSI’s performance of its obligations under the TPSA.

47. The services that GMA agreed to provide (referred to as the “Gearhouse Services”) included logistics, frequency management and administrative services.

48. The services that BSI agreed to provide (referred to as the “BSI Services”) included services for the delivery and installation of the BSI Equipment and technical services required for the use, installation and operation of the in-car camera systems to be supplied by GBSI to V8 Supercars under the TPSA. Mr Coughlan gave evidence that, by providing these services and password protecting the software used to control the in-car camera systems, BSI safeguards the intellectual property that it retained in the BSI Equipment pursuant to clause 18 of the Shareholders Agreement: see [34] and [41] above. However, Mr Ben Madgwick (GMA’s Director – Media Services and Facilities) gave evidence that, by 2020, there was little delineation or segregation between work performed by Mr Matt Newland (BSI’s Engineer‑In‑Charge of the GBSI V8 Supercars Project) and the work performed by engineers employed by GMA. According to Mr Madgwick the GMA engineers “were very familiar with the in-car camera systems and had access to all the passwords and other credentials required to operate these.” Mr Madgwick gave evidence that Mr Newland and his wife, Ms Amanda Newland, comprised BSI’s team on the ground for V8 Supercars events, whilst GMA employed multiple Broadcast Engineers and Radio Frequency Engineers. Mr Coughlan affirmed an affidavit in reply, disputing that GMA employees had been provided with the passwords. Neither Mr Coughlan nor Mr Madgwick were cross-examined. I have not found it necessary to resolve this factual dispute between BSI and GMA in order to determine GMA’s application for a stay and the appointment of a receiver and BSI’s application for winding up on the just and equitable ground.

49. Pursuant to clause 8.2 of the Shareholders’ Agreement, each of BSI and GMA was entitled to appoint two directors of GBSI. Clause 13.1(a) provides that the board of directors has the exclusive right to manage the TPSA and to direct the affairs of GBSI, subject to clause 12. Clause 12 relevantly provides:

“12.1. Special Decisions

The following matters may only be undertaken by GBSI following the approval by the Shareholders by way of a Unanimous Resolution:

…

(b)   GBSI entering into a contract that creates a liability of, or rights having a value in excess of, AUD$15,000;

…

(e)   the adoption of a business plan or budget for GBSI, and any material change to the TPSA or the Objectives or to any such business plan or budget previously approved;

…

(i)   any amendment, modification or variation to the TPSA;

…”

50. Clause 14 of the Shareholders’ Agreement restricts the transfer of shares. Relevantly, there is no restriction on a shareholder transferring shares to a related body corporate.

51. Clause 15.1 of the Shareholders Agreement provides:

“15.1. Deemed Transfer Notice

Upon the happening of a Relevant Event, the Shareholder in question is deemed to propose to Transfer all Shares held by it and deemed to have immediately given a Transfer Notice in respect of all its Shares.”

52. Clause 1.1. defines “Relevant Event” as including:

“Relevant Event means in relation to a Party:

...

(b)    that Party committing a material breach of any provision of this agreement and failing to remedy that breach within 30 days after written notice of that breach from another Party requesting that the breach be remedied.”

53. The deemed Transfer Notice under clause 15.1 takes effect as an offer to sell all of the shareholder’s shares at a price agreed in writing between all shareholders or, in the absence of such agreement, as determined by an expert. The offer remains open for acceptance for 15 days.

54. Clause 19 of the Shareholders Agreement provides:

“19. Confidentiality

19.1. Confidentiality Obligation

Subject to clause 19.2, each Shareholder undertakes that it will treat as confidential all Confidential Information and will not disclose any such information to any person (other than to its professional advisers on a need to know basis and subject to confidentiality obligations such as under a confidentiality deed), and will not use any such information other than for the purposes of this Agreement (and any other matters contemplated by this Agreement), subject always to any approval by the Shareholders to such disclosure or use

19.2. Limitations

The provisions of clause 19.1 do not apply to any Confidential Information which:

(a)    is in the public domain other than by default of the recipient Shareholder;

(b)    is obtained by the recipient Shareholder from a bona fide Third Party having the right to disseminate such information without any obligations of confidentiality; or

(c)    is required to be disclosed by law.”

55. Clause 1.1 of the Shareholders Agreement defines “Confidential Information” as including:

“… information concerning the agreements, assets, equipment, methods, systems, programs, business transactions, clients, price structures, marketing strategies, operations, finances or affairs of GBSI, its Business or any of its clients and includes the terms, conditions and existence of this Agreement.”

56. Clause 17 of the Shareholders Agreement provides:

“17.   General Deadlock

17.1. Event of Deadlock

A deadlock (Deadlock) is reached in respect of any decision if the Directors or the Shareholders cannot resolve or settle a matter on the basis required under this Agreement or under applicable law, and the resolution is not passed or withdrawn within 10 Business Days after the date on which the resolution was first proposed, and any Shareholder gives a written notice to the other Shareholder that a Deadlock has been reached in relation to that matter (Deadlock Notice).

17.2. Negotiation

If a Deadlock is reached, each Shareholder must negotiate reasonably and in good faith to resolve the Deadlock in the best interests of GBSI as a whole.

17.3. Escalation

If a Deadlock cannot be resolved by the Shareholders within 10 Business Days of the Deadlock Notice being given, any Shareholder may give a notice to the other Shareholder, identifying that the matter remains deadlocked and requiring that matter to be referred to the chief executive officer of each Shareholder for determination in the manner set out in clause 17.4 (CEO Notice).

17.4. Nature of Shareholders Decision

The chief executive officers of the Shareholders will seek to determine what course of action, in all the circumstances, is appropriate for GBSI to take, having regard to the best interests of GBSI as a whole. In reaching that decision, the chief executive officers of the Shareholders shall, so far as possible, balance the interests of each Shareholder fairly, but may not put the interests of any Shareholder before those of GBSI as a whole. If the chief executive officers of the Shareholders cannot within 10 Business Days of the date of the CEO Notice agree on what course of action in all the circumstances they believe it would be appropriate for GBSI to take, the Shareholders shall be deemed to have provided a Dispute Notice (on the Business Day following the end of the 5 Business Days), and the matter will be determined under clause 22.”

57. Clause 22 of the Shareholders Agreement provides:

“22. Dispute Resolution

22.1. Dispute and Dispute Meeting

(a)   In the event of any dispute between the Shareholders arising out of or in relation to this Agreement, prior to commencing any litigation proceedings in respect of the dispute, the representatives of the Shareholders must within 10 Business Days of service of a written notice from a Shareholder to the other Shareholder (Dispute Notice) or the deemed service of any Dispute Notice under clause 17, hold a meeting (Dispute Meeting). Any such Dispute Meeting may be held in person, teleconference, video conference or any other electronic means in an effort to resolve the dispute and also comply with this clause 22.

(b)   Each Shareholder must use all reasonable endeavours to have a representative who has authority to settle the dispute participating in the Dispute Meeting.”

22.2. Mediation

Any dispute arising which is not resolved within 20 Business Days after the service of a Dispute Notice, whether or not a Dispute Meeting has been held, may be referred to mediation by either Shareholder. A mediator shall be appointed by agreement between the Chief Executive Officers of the Shareholders, or in the event of their failure to agree upon a mediator within 2 Business Days after referral of the dispute to mediation, by the President of the Law Society of New South Wales. The mediator's role will be to seek to facilitate constructive discussion between the Parties on the cause of the dispute and to seek to assist the Parties in reaching a settlement on the Dispute. All discussions in the mediation will be without prejudice and will not be referred to in any later proceedings. The Parties will bear their own costs in the mediation and will share equally the mediator's costs.

22.3. Arbitration

(a)   Any dispute which is not resolved within 20 Business Days after the service or deemed service of a Dispute Notice and which has not been made the subject of a mediation under clause 22.2, whether or not a Dispute Meeting has been held, must be referred to a legally binding arbitration to be conducted in New South Wales, Australia by the Australian Commercial Disputes Centre (ACDC) in accordance with the ACDC Rules for Arbitration (Rules) which are operating at the time the matter is referred to the ACDC. The terms of the Rules are hereby deemed incorporated into this Agreement.

(b)   Any arbitrator appointed to determine a dispute under this clause 22.3 must be a legal practitioner with not less than 10 years post qualification experience who also has experience in relation to broadcast and production arrangements for major sporting events.

(c)   Nothing in this clause 22.3 prohibits:

(i)   a Party to this Agreement seeking urgent interlocutory relief from a court of competent jurisdiction in respect of a dispute which arises between the Parties in connection with this Agreement; or

(ii)   a Party to this Agreement commencing proceedings before a Court of competent jurisdiction to appeal any decision or ruling made at an arbitration held under this clause 22.3, following the discharge of any and all obligations by the Party arising by reason of the arbitral decision or ruling.

(d)   This clause 22.3 shall survive termination of this Agreement.

22.4. Continuing Obligation

The obligations contained in this clause 20 [sic] survive the termination of this Agreement.”

58. Clauses 23.2 and 23.3 of the Shareholders Agreement provide:

“23.2. Termination automatic upon certain events

This agreement will terminate automatically:

(a)    by agreement of all Parties;

(b)    upon there being only one Shareholder; or

(c)    when GBSI is wound up by an order of a court.

23.3. Termination upon non-renewal or termination of TPSA

In the event that the TPSA is terminated by any party to that agreement during its current term or the TPSA is not renewed beyond the end of its current term (with an expiry date of 31 December 2020) the Shareholders will meet to discuss whether or not to terminate this Agreement, and how the assets and liabilities of GBSI should treated upon such termination.”

59. Clause 23.4 provides:

“23.4. Effect of termination

(a)    Subject to clause 23.4(b), upon termination of this Agreement each party is released from its obligations and liabilities under or in connection with this Agreement and this Agreement has no further effect, other than under clauses 1, 19, 22, 23, and 26.

(b)    Termination of this Agreement will be without prejudice to any accrued rights of any of the Parties.”

C.   Relevant events during and after the term of the TPSA

60. Following the transfer of the BSI Equipment to GBSI, GBSI installed and operated the in-car camera systems for the broadcast of multiple V8 Supercars race series in the period up to 31 December 2020. This was the only business conducted by GBSI.

61. In July 2017, there was a software issue with the in-car camera systems that affected video decoding. BSI loaned to GBSI ten SOC Decoder Cards to provide alternative decoder capability while the software issue was corrected, on the basis that these ten Decoder Cards would stay with the V8 Supercar series indefinitely but would be phased out once BSI was satisfied that the software issue had been corrected.

62. In about August 2019, a specific component comprising part of the BSI Equipment (referred to as a “PCB”) was replaced with other parts provided by BSI, on the basis that the replaced parts were to be returned to BSI and the substituted parts would be treated as part of the BSI Equipment contributed by BSI under the Shareholders Agreement. Mr Newton’s evidence suggested that these substituted items may be the same as the SOC Decoder Cards that had been loaned by BSI in July 2017, but Mr Newton acknowledged that he was uncertain about this. In his affidavit in reply, Mr Coughlan confirmed that the specific part numbers that were replaced in August 2019 are DVB T2 UHF Assembly RX Cards and not the SOC Decoder Cards that BSI lent to GBSI in July 2017. Mr Coughlan was not cross-examined and so I accept his evidence concerning the specific parts that were the subject of the substitution arrangement in August 2019. It follows that the SOC Decoder Cards provided by BSI in July 2017 and currently remaining in the possession of GBSI remain BSI’s property on loan to GBSI and do not form part of the BSI Equipment under the Shareholders Agreement.

60. In December 2019, V8 Supercars issued a Request for Pricing for the various contracts that it would require for the 2021-2026 period, including:

1. Outside Broadcast – LIVE Television Production Facilities;

2. Post Production; and

3. In-Car Cameras.

64. GBSI did not submit a response to V8 Supercars’ Request for Pricing for In‑Car Cameras.

65. GMA submitted a response to V8 Supercars’ Request for Pricing for Outside Broadcast. It appears that GMA also submitted a response in relation to Post Production, as they were ultimately awarded that contract. GMA did not submit a response in relation to In-Car Cameras.

66. NEP Australia submitted a response to V8 Supercars’ Request for Pricing for Outside Broadcast, Post Production and In-Car Camera Systems. BSI did not inform GMA or GBSI about NEP Australia’s tender for the In-Car Camera Systems. NEP Australia’s tender was ultimately unsuccessful.

67. The V8 Supercars tender process stalled after January 2020 and was resumed in about mid-September 2020, with the results being announced in October 2020 as I will refer to below.

68. In the meantime, and in circumstances where GBSI had not submitted a response to V8 Supercars’ Request for Pricing in relation to In-Car Cameras for the 2021 to 2026 period, Mr Coughlan sent an email to Mr Madgwick and Mr Fraser McWilliam on 19 August 2020. At that time, Mr McWilliam was one of two GMA-appointed directors of GBSI (the other being Mr Newton, as I have referred to earlier). Mr Coughlan’s email stated:

“With the series and the JV contract set to end with the last race in Sydney on December 13^th, has Gravity given any thought to how a 2021+ season plays out? I am in process of preparing my 2021 budget and I will need to include an allocation for exercising BSI’s First Right of Refusal to purchase the BSI contributed equipment, per Shareholder Agreement, Paragraph 5.9(a).

I do not want to wait until the last minute to organize and have a cooperative effort as we close out the contract. Let me know how Gravity intends to proceed as there will be a significant effort to agree upon value/pricing, sort and pack all the equipment, and subsequently return to the US.”

69. Mr Madgwick replied by email on 23 August 2020. After explaining that the 2020 V8 Supercars Race Series would now finish no later than 18 October 2020, Mr Madgwick referred to the V8 Supercars Race Series tendering process having stalled due to V8 Supercars still being in the process of signing up to a new broadcasting rights deal. Mr Madgwick said: “… we do need to discover the options for the JV delivering a solution for 2021 +, when Supercars comes calling after the broadcast rights deal has ‘ink dry on paper’.” He then outlined challenges that GBSI would face in continuing to provide services to V8 Supercars in 2021, including that there were an unknown number of rounds and it must be assumed that there would be fewer rounds than in previous years due to pandemic-related travel restrictions, with this being likely to have a direct adverse effect on revenue for GBSI. The email concluded with Mr Madgwick proposing a call “to discuss the merits of renewal” and any other issues that each shareholder wished to raise.

70. On 3 September 2020, there was a meeting between Mr Coughlan, Mr Dan Grainge and Mr Fraser McWilliam. As I have mentioned earlier, Mr Coughlan is a director of GBSI and is also BSI’s Director of Engineering and Technical Operations. Mr Grainge is a senior executive within the NEP Group of companies. The President of BSI, Mr Peter Larsson, reports to Mr Grainge. During the course of the meeting, there was an exchange to the following effect:

“McWilliam: ‘Gravity has no alternative solutions for the [Camera Systems] other than BSI's’

Grainge: ‘BSI has alternative uses for the [Camera Systems] following the end of the GBSI joint venture when the Supercars season concludes in October. BSI does not intend to continue with the JV’

McWilliam: ‘There is no need to dissolve the JV.’

Grainge: ‘NEP needs to plan for BSI's future and BSI intends to exercise its option to re-purchase the [Camera Systems]’

McWilliam: ‘As a member of the Board of GBSI, I would vote against allowing BSI to buy-back the [Camera Systems]. GBSI would not give up the [Camera Systems] until mid-2021 so that Gravity can find an alternative.’”

71. On 2 October 2020, BSI wrote to GMA and GBSI notifying them of:

“… our decision to cease to provide the BSI Services (as described in the Shareholders’ Agreement) following the expiry of the TPSA’s term on 31 December 2020 (at which point they will no longer be required)

…”

72. The letter continued:

“…
BSI and its nominee directors do not support GBSI seeking to extend or renew the TPSA beyond its current term.

Given our decision, we understand that the terms of clause 23.3 of the Shareholders’ Agreement will be triggered which requires GBSI’s shareholders (i.e. Gravity and BSI) to meet to discuss whether to terminate the Shareholders’ Agreement and how the assets and liabilities of GBSI should be treated upon such termination.

On this basis, we would like to invite you to enter discussions with us with a view to concluding a viable path forward to amicably end our joint venture relationship.

At GBSI board level, Dean Coughlan, [the sole nominee director for BSI] will take these discussions forward with GBSI’s Gravity nominee director[s].

For the avoidance of any doubt, we intend to continue to work collaboratively with Gravity and to support the performance by GBSI of its contractual obligations to provide the services under the TPSA to V8 Supercars until its expiry on 31 December 2020.”

73. According to Mr Newton’s evidence, GMA considered that it was premature to discuss any renewed TPSA as at 2 October 2020, because the 2020 season had not yet finished and V8 Supercars was yet to award any contracts in respect of its television broadcast beyond the 2020 season.

74. During the period August to October 2020, Mr Fraser McWilliam, Mr Newton and Mr Madgwick of GMA appear to have been assuming that there was some prospect of GBSI being offered a TPSA for In-Car Camera Systems by V8 Supercars for the period commencing 1 January 2021, notwithstanding that V8 Supercars had issued a Request for Pricing for In-Car Camera Systems for the 2021-2026 series and GBSI had not submitted any response to that Request. The evidence does not reveal any basis for that assumption at that time. In my opinion, BSI’s invitation to commence discussions on 2 October 2020 was not premature. Rather, it was a sensible, commercial approach designed to facilitate the orderly conduct of the affairs of BSI, GMA and GBSI in relation to the joint venture that they had been conducting through GBSI for the previous five years. In circumstances where the TPSA, which had been the sole subject of that business was about to expire.

75. In other developments on 2 October 2020, Mr Manny Papas of NEP Australia sent an email to Mr Nathan Prendergast of V8 Supercars in connection with NEP Australia’s tender to V8 Supercars for the provision of Outside Broadcast, Post Production and In-Car Camera Systems. The tender process that had stalled following January 2020 had been resumed, and NEP Australia had emailed a further submission to V8 Supercars in support of its tender on 18 September 2020. Mr Prendergast’s role is the General Manager Television and Content Supercars Media – Supercars Australia. The email attached a copy of BSI’s letter to GMA and GBSI, to which I have referred immediately above, and set out in full the terms of clause 5.9 of the Shareholders Agreement and stated that it was BSI’s intention to purchase the in-car camera systems back from GBSI. The stated purpose of the email was to provide V8 Supercars with “a full understanding and clear view of the situation in relation to In-car camera services”.

76. In cross-examination, Mr Larsson gave evidence that, in so far as NEP Australia’s tender concerned In-Car Cameras, NEP Australia was tendering to provide the same services that were provided by GBSI during the 2016-2020 period under the TPSA and that, if NEP Australia’s tender for the 2021-2026 period was successful, the best available option for NEP Australia as at October 2020 would have been to use the same equipment that had been used by GBSI to provide the in-car camera systems under the TPSA.

77. It was put to Mr Larsson in cross-examination, and he accepted, that NEP Australia’s tender and its intention to use that equipment if its tender for In-Car Cameras was successful, “had potential to impact gravely on the interests both of GBSI and of [GMA]”. However, the question of how this would impact on the interests of GBSI in circumstances where it had not submitted its own tender to provide in-car camera systems beyond the expiry of the TPSA on 31 December 2020, and it had no business other than the provision of in-car camera systems under the TPSA, was not explored. Nor did the cross‑examiner explore how GMA’s interests would be adversely affected by NEP Australia’s tender, save that GMA and NEP were competing for the Outside Broadcast and Post Production contracts and success by one of them would inevitably mean a lost opportunity for the other. GMA had not tendered for the In-Car Cameras contract and, if GMA was assuming that GBSI would continue to provide in-car camera systems to complement any services to be provided by GMA if it succeeding in winning the Outside Broadcast and Post Production contracts, there was no basis for that assumption in circumstances where V8 Supercars had put the In-Car Camera Systems out to tender and GBSI had not submitted a tender.

78. It was also put to Mr Larsson in cross-examination, and he accepted, that “the undoubted effect or very likely effect” of Mr Papas’ 2 October 2020 email was “to undermine any attempt by GBSI to secure renewal of the TPSA by demonstrating to the operator that the equipment might not be able to be delivered.” However, the GBSI had not submitted any tender for the provision of In-Car Camera Systems for the period after 31 December 2020 and there is no evidence of any other attempts having been made by GBSI to enter into any such arrangements with V8 Supercars. Any such arrangements would have required a Unanimous Resolution of BSI and GMA pursuant to sub-clauses (b), (e) and/or (i) of clause 12.1 of the Shareholders Agreement. There is no evidence of the two shareholders having discussed or approved in principle GBSI entering into any such arrangements or sanctioning any approach to V8 Supercars with a view to negotiating such arrangements. Nor is there any evidence that the arrangement subsequently proposed by V8 Supercars to GBSI on 19 November 2020 to which I refer below was the product of any attempt by GBSI to negotiate for the provision of in-car camera systems in the period after 31 December 2020. In cross-examination of Mr Larsson, senior counsel for GMA described this proposal as has having been “simply unilaterally put” by V8 Supercars.

79. At some time in October 2020, V8 Supercars awarded the Outside Broadcast and Post Production Contracts to GMA. The tender submitted by NEP Australia for provision of those facilities and services to V8 Supercars was unsuccessful.

80. As I understand the evidence, V8 Supercars has not yet awarded any contract for the 2021 to 2026 period for In-Car Cameras.

81. The 2020 V8 Supercars race series concluded on 18 October 2020. On that day, GMA prevented BSI’s Mr Newland from accessing or removing some of the SOC Decoder Cards that were on loan from BSI as referred to at [61]-[62] above. Mr Newton regarded this as an attempt to disable the in-car camera systems without permission from GBSI and determined that he was “not comfortable with BSI having access to the equipment at this stage”. Mr Newland maintained that the Decoder Cards were the property of BSI and he was entitled to access or remove them on behalf of BSI. Mr Coughlan had instructed him to do so at the conclusion of the final event of the 2020 V8 Supercars Race Series. Mr Coughlan denied that this would have had the effect of disabling the in-car camera systems, because the SOC Decoder Cards that BSI had transferred to GBSI as part of the BSI Equipment under the Shareholders Agreement remained available to GBSI for use. Mr Coughlan was not cross-examined. Accordingly, I accept his evidence that the in-car camera systems could have continued to be operated using those original SOC Decoder Cards.

82. Mr Ben Madgwick, GMA’s Director – Media Services and Facilities, sent an email to Mr Coughlan concerning this incident on 19 October 2020. The email stated:

“… Gravity Media Australia feels that given Matt Newland’s actions at Bathurst to remove items of equipment from Gravity Media facilities without prior written consent from Gravity Media Australia management – and while I’ll keep an open mind as to his / BSI motives in attempting to remove these items, Gravity Media Australia will not allow Matt / BSI staff onto Gravity Media Australia premises – Gravity Media Australia will arrange detailed stock take of all GBSI inventory and circulate once complete.

…”

83. Mr Newton’s evidence in these proceedings confirmed that GMA had denied BSI access to the stocktake because GMA deemed this to be the best approach.

84. The practical effect of this stance taken by GMA was that GMA had exclusive physical possession and control of the BSI Equipment and BSI was entirely reliant on GMA to conduct an accurate audit or stocktake of the BSI Equipment.

85. In early November 2020, Mr Newland reported to Mr Coughlan that he had heard from BSI’s former Australian crew members that GMA had contacted them and asked them to set up and test the GBSI camera systems at GMA’s facility in Mascot. Mr Newland reported to Mr Coughlan that GMA had been attempting to “hack the system passwords”. According to Mr Coughlan, these passwords were one of the means used by BSI to protect the intellectual property that it retained in the BSI Equipment pursuant to clause 18 of the Shareholders Agreement. However, BSI did not call evidence from Mr Newland. GMA’s Mr Newton gave evidence that GMA engineers have had access to these passwords since 2015 as they are required for set up, maintenance, and use of the BSI Equipment in the ordinary course. Mr Madgwick also deposed that the GMA engineers have access to the passwords and are very familiar with the in-car camera systems and their operation. Mr Coughlan swore an affidavit in reply disputing that GMA employees had been provided with access to the passwords. Mr Newton was not cross-examined about this aspect of his evidence, and there was no cross-examination of Mr Madgwick or Mr Coughlan at all. I have not found it necessary to resolve this factual dispute between BSI and GMA in order to determine GMA’s application for a stay and the appointment of a receiver, and BSI’s application for winding up on the just and equitable ground.

86. On 12 November 2020, BSI wrote to GMA and GBSI, referring to its letter of 2 October 2020 and stating:

“… We note that you have not responded to our letter dated 2 October 2020 and we understand that Gravity has won the contract to provide the services currently envisaged by the TPSA to V8 Supercars on and from 1 January 2021. Given this news means that the TPSA will not be renewed by GBSI beyond the end of its current term, the terms of clause 23.3 of the Shareholders' Agreement require Gravity and BSI to meet to discuss whether or not to terminate the Shareholders' Agreement, and how the assets and liabilities of GBSI should be treated upon such termination.

Given the early conclusion of the 2020 V8 Supercars series last month, GBSI has no further business to conduct Accordingly, we believe it would be in the best interests of each of GBSI, Gravity and BSI to terminate the Shareholders' Agreement in accordance with clauses 23.2 or 23.3 of the Shareholders' Agreement and dissolve the GBSI joint venture as soon as possible. This would allow both parties to plan ahead for their respective commitments in the future and have the option to buy back equipment at fair market value in accordance with clause 5.9 of the Shareholders Agreement …

We would also like to take this opportunity to remind GBSI and Gravity of their respective undertakings as to the use of the BSI Equipment, more particularly as set out in clause 5.7 of the Shareholders' Agreement. Any use of the BSI Equipment after 18 October 2020 (the conclusion of the 2020 V8 Supercars season) would be in breach of these undertakings and is not consented to by BSI.

Dean Coughlan, the sole nominee director for BSI, will take these discussions forward with GBSI's Gravity nominee directors.

We invite you to enter discussions with us at the earliest opportunity, with a view to concluding a viable path forward to amicably terminate the joint venture and we request that you provide a substantive response to this letter on or before Wednesday 18 November 2020, and advise your availability for a discussion between Dean Coughlan and the Gravity nominee directors on or before Friday 20 November 2020.   
…”

87. BSI’s statement in that letter that GMA had “won the contract to provide the services currently envisaged by the TPSA to V8 Supercars on and from 1 January 2021” was incorrect. As I have already referred to, GMA had won the contract for the provision of Outside Broadcast (and Possibly Post Production), but had not tendered for or been awarded any contract for In-Car Camera Systems.

88. On 19 November 2020, Mr Coughlan sent an email to Mr Newton and Mr McWilliam. As I have already mentioned Mr Newton is the Chief Executive Officer and Chairman of GMA and also a director of GBSI. Mr McWilliam had also been a GMA-appointed director of GBSI until 30 September 2020. The email stated:

“… I'm reaching out to inquire whether Gravity can acknowledge receipt of Peter Larsson's letter emailed on November 12^th? The goal is to jointly agree upon a path forward and BSI's thoughts were to initiate the process and get us all thinking and planning for dissolution of the JV SHA. Please let me know your thoughts and plans If you'd like, I'm available to discuss on a call Please propose a time that would work for the two of you.

Additionally, BSI is interested in the results of the postseason GBSI kit inventory/asset count held after the conclusion of the Bathurst round. As we know, there has been some loss of GBSI items due to theft and normal wear and tear. Without the audit list, BSI would need to rely upon the original shipping list in our attempt to determine a valuation of the GBSI assets. Can you please provide the detailed results of the count?   
…”

89. Also on 19 November 2020, V8 Supercars wrote to Mr Newton of GBSI noting that the TPSA would expire at the end of December 2020 and stating:

“… Supercars wishes to extend the agreement (on terms to be agreed but which are i) substantially similar to, and ii) no less favorable to Supercars than, those agreed for the 2020 Supercars Championship season) for your supply of live onboard camera systems until at least the end of the 2021 Supercars Championship season.

…”

I shall refer to this as the V8 Supercars offer, although it is doubtful in my view that it was an offer capable of forming a binding contract upon acceptance as opposed to an agreement to agree.

90. On 22 November 2020, GMA notified BSI that Mr McWilliam had retired and that Mr Scott Kinlyside had been appointed to replace Mr McWilliam as a director of GBSI.

91. On 23 November 2020, Mr Kinylside wrote to BSI and Mr Coughlan in the following terms:

“… I am pleased to be able to report, that John Newton, in his capacity as a director of GBSI, has received a letter from V8 Supercars Australia Pty Ltd (‘V8 Supercars’) confirming that V8 Supercars wishes to extend the term of the Television Production Services (In Car Camera Systems) Agreement 2016 - 2020 between V8 Supercars as trustee for the AVESCO Unit Trust and GBSI dated 26 February 2016 (‘TPSA') in relation to the In Car Camera Systems until at least the end of the 2021 Supercars Championship season.

For many reasons John Newton and I believe that it is clearly in the best interests of GBSI as a whole to accept the offer of an extension and consistent with our obligations as directors to do so. Accordingly , the nominee directors of Gravity intend to convene a meeting of the board of GBSI as soon as possible for the directors to discuss the merits of the extension offer that has been made by V8 Supercars to renew the TPSA. Following on from this board meeting we would envisage as a board to be in a position to make a recommendation to the shareholders of GBSI to approve the extension to the TPSA.   
…”

92. On the same day, GMA wrote to BSI, responding to BSI’s letter of 12 November 2020 in the following terms:

You will have received the letter dated 23 November 2020 from Scott Kinlyside, sent in his capacity as a director of GBSI, informing you of the offer received from V8 Supercars to extend the TPSA (‘V8 Supercars Offer’) beyond the end of its current term (which expires on 31 December 2020) until at least the end of the 2021 Supercars Championship season.

Gravity is firmly of the view that it is in the best interests of GBSI as a whole to accept the V8 Supercars Offer to renew the term of the TPSA. To do so will ensure that the incorporated joint venture continues to achieve its objectives of carrying on the Business of providing the In Car Camera System for the V8 Supercars Race Series under the terms of the TPSA, to maximise the value of GBSI and enable the shareholders to comply with their obligations under clause 2.2 of the Shareholders Agreement.

There is no fixed term of the Shareholders Agreement or the business of GBSI. Contrary to the claims in your Letter, it is clear from the language in clause 23.3 of the Shareholders Agreement that the parties contemplated when entering the Shareholders Agreement that the TPSA may be renewed beyond the end of its current term on 31 December 2020. If the TPSA is renewed or is capable of being renewed (which it is by accepting the V8 Supercars Offer), Gravity and BSI are not required to meet to discuss whether or not to terminate the Shareholders Agreement under clause 23.3.

In any case, in circumstances where V8 Supercars wishes to extend the TPSA, we do not consider that it would be in the best interests of GBSI, BSI or Gravity to terminate the Shareholders Agreement under clauses 23.2 or 23.2 [sic] of the Shareholders Agreement, as asserted in your Letter.

Having regard to the terms of the Shareholders Agreement, it seems clear that to comply with these terms we should resolve to accept the V8 Supercars Offer.

For these reasons, the nominee directors of Gravity will convene a meeting of the board of GBSI as soon as possible to discuss the merits of the V8 Supercars Offer. We expect that at that meeting the directors would resolve to accept the V8 Supercars Offer, following which, logically, the shareholders will also approve the offer.

As you know, BSI and Gravity are required by the terms of the Shareholders Agreement to use their best endeavours to ensure that GBSI successfully performs its obligations under the TPSA and to do all acts necessary to implement the Shareholders Agreement, including to cast their votes as shareholders, and cause their nominee directors to cast their votes as directors, to implement the Shareholders Agreement, as set out in clause 2.2.

Whilst they are no longer relevant, we do not agree with the following matters raised in your Letter:

…

2.    In light of the V8 Supercars Offer to renew the TPSA, we do not consider that any use of the BSI Equipment by GBSI or Gravity beyond 18 October 2020 in connection with the Business or the operations of GBSI is a breach of any undertakings in clause 5.7 of the Shareholders Agreement or would require the prior consent of BSI.

We look forward to the directors of GBSI taking this matter forward at the proposed board meeting and to the shareholders then resolving to accept the renewal of the TPSA such that Gravity and BSI may continue to comply with their obligations as shareholders under the terms of the Shareholders Agreement until at least the end of the 2021 Supercars Championship season.

…”

93. On 30 November 2020, BSI responded to GMA’s letter of 23 November 2020 in the following terms:

“…

1.3.    We are writing to you to notify you that our decision to cease to provide the BSI Services following the expiry of the TPSA's term on 31 December 2020 remains unchanged.

1.4.    As you will be aware, in conjunction with the terms of clause 12.1(i) of the Shareholders' Agreement, any amendment, modification or variation to the TPSA is a matter which may only be undertaken by GBSI by unanimous shareholder approval, and is not a matter for resolution by GBSI's Board or by GBSI unilaterally. As previously stated, BSI (in its capacity as a shareholder of GBSI) does not support GBSI seeking to extend or renew the TPSA beyond its current term.

1.5.    BSI therefore again requests that Gravity enter into discussions with it in order to conclude a viable path forward to amicably end the GBSI joint venture

…”

94. The letter then set out specific requests that GMA grant BSI possession or access to the BSI Equipment for the purpose of an end of year audit, provide BSI with a copy of GMA’s own audit that it had said would be undertaken in October 2020, attend a meeting in accordance with clause 23.3 of the Shareholders Agreement on or before 18 December 2020, and facilitate the process of BSI buying the BSI Equipment for fair market value under clause 5.9 of the Shareholders Agreement after 31 December 2020 and before 15 January 2020.

95. On 8 December 2020, GMA replied to BSI’s letter of 30 November 2020 in the following terms:

“… The correspondence between us to date suggests that BSI and GMA are taking rather divergent approaches as to what the Shareholders Agreement relevantly provides in the current circumstances.

GMA's position on the points most presently material is in summary as follows:

(a)    a "renewed" TPSA extending beyond 31 December 2020 was clearly in the common contemplation of GMA, BSI and GBSI in entering into the Shareholders Agreement: see cl. 23.3;

(b)    in circumstances where (as was also commonly known to the parties in entering into the Shareholders Agreement) the TPSA confers no unilateral right or 'option' to renew on any party, the Shareholders Agreement provisions around a "renewed' TPSA should be taken to refer to a process culminating in mutual assent between GBSI and V8 Supercars Australia Pty Limited (V8 Supercars) in relation to the terms of a new or extended TPSA;

(c)    V8 Supercars has proposed or initiated such a renewal process, and it is this matter that presently, and most immediately, falls for consideration by GBSI, its directors, GMA and BSI;

(d)    regardless of whether the organ undertaking such consideration transpires to be the GBSI board, the GBSI shareholders or any of those special combinations contemplated by the General Deadlock (and related Dispute Resolution) provisions in the Shareholders Agreement, a common threshold requirement in each instance on those considering GBSI's 'next move' will be to act ‘in the interests of GBSI as a whole": see e.g. cls. 17.2 and 17.4;

(e)    GMA considers it to be in the interests of GBSI as a whole (given the financial prospects that are expected to ensue) for GBSI to seek to bring a formal agreement to fruition with V8 Supercars for the renewed provision of in-car camera systems beyond 31 December 2020 for further events such as those set out in Schedule 1 of the TPSA;

(f)    indeed, GMA considers that it would be contrary to the interests of the members of GBSI as a whole (within the meaning of sub‑s 232(d) of the Corporations Act 2001 (Cth)) for GBSI to proceed at this point in any other manner.

BSI appears to take a different view of these matters, but has not in terms addressed these in your letters

To be clear, it follows from GMA's view that:

1.    It is (at the least) premature for BSI to be putting forward statements about the continuation of services under the Shareholders Agreement on the assumption that the TPSA is not renewed or will not be renewed. If BSI seeks to act in accordance with the tenor of the terms of the Shareholders Agreement, then a natural consequence of any renewed TPSA (beyond 31 December 2020) will be the maintenance of those related obligations applicable to BSI and GMA under the Shareholders Agreement, including as to the provision of services.

2.    If BSI's current opposition (as a shareholder) to any renewal or extension of the TPSA beyond 31 December 2020 were to be carried into a Deadlock negotiation under cl. 17.2, or (beyond that) into an escalated CEO determination under cl. 17.4, then BSI's stance will need to be justified in terms of ‘the best interests of GBSI as a whole’.

Accordingly, if BSI maintains the attitude to renewal of the TPSA reflected in your letters then GMA invites it to come to the point and address this key matter – namely, how BSI contends that any course other than further pursuit by GBSI of the renewal process embarked upon by V8 Supercars is ‘in the best interests of GBSI as a whole' I note that, to date, BSI has proposed ‘dissolution’ of GBSI as an alternative to renewal or extension of the TPSA This can hardly be considered a satisfactory alternative ‘in the best interests of GBSI as a whole’ in circumstances where there clearly exists a tangible prospect of a renewed TPSA.   
…”

96. The letter then stated that GMA would address BSI’s requests concerning the end of year audit on a “‘business as usual’ basis”, but not within the timeframes requested by BSI. GMA declined to meet for the purpose of clause 23.3 of the Shareholders Agreement or facilitate BSI’s purchase of the BSI Equipment on the basis that it was premature to do so. Mr Newton and Mr Madgwick have given evidence that a stocktake was in fact performed in about November 2020. Yet GMA did not disclose this in its 8 December 2020 letter. Indeed, there is no evidence that GMA apprised BSI or the BSI-appointed director of GBSI of the outcome of the stocktake at any time before serving Mr Madgwick’s affidavit in these proceedings on 9 February 2021.

97. On 18 December 2020, Mr Newton (on behalf of GMA) wrote to BSI in the following terms:

“As you know, BSI and GMA have had (including through GBSI over the last 5 years) a relatively long, profitable and harmonious relationship in providing services and equipment to V8 Supercars I acknowledge that BSI's ownership structure has changed in the last two years, with the result that BSI is nowadays owned by NEP Group Inc (NEP).

While it was somewhat surprising to GMA that NEP's Australian subsidiary tendered in competition with GMA to provide broadcast services for V8 Supercars in the tender process that concluded in the latter part of 2020, GMA raised no objection to this at the time and ultimately, of course, went on to win this broader tender process.

GMA had assumed that, regardless of who happened to win the tender process, GBSI (and GMA and BSI, as parties interested in GBSI) would in any case approach any follow-on opportunity for GBSI to provide in-car camera systems or services to V8 Supercars with a focus squarely on the commercial best interests of GBSI. As I see the situation, such an opportunity does clearly exist, and GBSI's best interests would be well-served by pursuing it. Among other reasons, this is because:

(a)    the opportunity represents an extension of arrangements that GBSI has already been profitably pursuing for the last 5 years;

(b)    GBSI (and therefore GMA and BSI) stands to gain substantial further profit from the opportunity; and

(c)    GMA, as the provider of general broadcast services (in the same manner in which this has occurred over approximately the last 5 years), welcomes GBSI's involvement.

Given the importance of the current opportunity for GBSI, I intend to write shortly to V8 Supercars as a director of GBSI attaching a draft of a renewed TPSA for their comments. I confirm that I will make it clear to V8 Supercars that I write to them as an individual director only, in a preliminary manner, and that I am not authorised to make any offer by GBSI capable of acceptance.
…”

98. The letter enclosed a draft TPSA between V8 Supercars and GBSI commencing on 1 January 2021 and terminable by either party on 2 months notice at the end of any calendar year. Under clauses 4 of the draft TPSA, the fees payable to GBSI are set out in Schedule 2, but Schedule 2 is blank.

99. On 22 December 2020, BSI wrote to Mr Newton and GMA reiterating the following matters:

“…

(1)    BSI's decision to cease to provide the BSI Services following the expiry of the TPSA's term on 31 December 2020 remains unchanged;

(2)   Unanimous shareholder approval is required to extend the TPSA (clause 12.1(i) of the Shareholders' Agreement). Although shareholder approval has not been sought you are on notice that BSI does not support the extension of the TPSA;

(3)   GBSI does not have the corporate authority to extend the TPSA, and any action along such a path is on an unauthorised basis;

(4)   BSI considers that termination of the joint venture and non-renewal of the TPSA is in the best interests of GBSI for reasons including that the return on deployed capital and management time is not sufficient to justify the continuation of the joint venture in circumstances where the growth prospects of GBSI are limited. It is in the best interests of GBSI and its shareholders as a whole to return the invested capital and assets to enable them to be more profitably deployed in alternative opportunities;

(5)   GBSI has no valid business to conduct following the expiry of the TPSA on 31 December 2020;

(6)   BSI again requests that on expiry of the TPSA on 31 December 2020 that the termination process in the Shareholders' Agreement be undertaken. In the interim, BSI reiterates its prior request that an audit be undertaken of the BSI Equipment.

(7)   BSI intends to exercise its option to acquire the BSI Equipment for fair market value at the termination of the Shareholders’ Agreement (clause 5.9(a) of the Shareholders' Agreement).

(8)   In the interim, given that there is no business to be conducted by GBSI following the expiry of the TPSA, GBSI may not use the BSI Equipment to conduct any business after expiry of the current TPSA (clause 5.8(a) of the Shareholders Agreement).

…”

100. The letter requested confirmation that GBSI would not utilise the BSI Equipment for any purpose, including for the 2021 Repco Supercars Championship series (the re-branded name of the V8 Supercars Championship from 2021) and any Touring Car Race Series in 2021, and that GMA and GBSI would “proceed to implement the process for the termination of the Shareholders’ Agreement and the repurchase by BSI of the BSI Equipment”.

101. In a further letter from BSI to GMA and GBSI on 22 December 2020, BSI stated:

“...

1.3   Any decision to renew the TPSA requires unanimous shareholder approval (clause 12.1(i) of the Shareholders' Agreement). BSI has clearly indicated that it does not support the renewal. Any action taken by GBSI to advance the renewal of the TPSA is on an unauthorised basis and risks misleading V8 Supercars Australia Pty Ltd and damaging the reputations of GBSI, its directors, and its shareholders. This includes the renewal actions that you stated in your letter of 21 December 2020 that you support.

1.4   BSI has indicated that its view is that it is in the interests of GBSI as a whole to terminate the joint venture following the expiry of the TPSA on 31 December 2020. For the avoidance of doubt, I am aware of my obligations as a director and will continue to act in the interests of GBSI as a whole.

1.5   Please advise a suitable date, after 31 December 2020, for a board meeting to discuss the process for termination of the Shareholders' Agreement and the repurchase of the BSI Equipment, as indicated in BSI's letter to Gravity and GBSI of today's date.   

…”

102. GMA responded by letter dated 24 December 2020, stating:

“… Your letter dated 22 December 2020 amounts to confirmation that BSI will not, effectively under any circumstances (and notwithstanding the information about the V8 Supercars Offer set out in our letter dated 23 November 2020), support a renewed TPSA. GMA, on the other hand, remains supportive of GBSI taking steps to bring the V8 Supercars Offer to fruition in the form of a renewed TPSA.

In short, BSI and GMA are now in a practical situation of deadlock, which either has, or shortly will crystallise as a Deadlock within the meaning of cl.17.1 of the Shareholders Agreement. To address any point of form that BSI may take in this regard, I attach a proposed circular resolution of GMA and GBSI. I invite BSI to sign and return this within 10 business days.

I am more than happy to discuss with BSI’s representatives anything they may wish to explore as to the terms of a renewed TPSA. BSI should also take this letter as a Deadlock Notice pursuant to cl 17.1 of the Shareholders Agreement, in the event that BSI declines to sign a counterpart of the circular resolution and return this to GMA before the end of the period stipulated.

Looking ahead, I also welcome the opportunity to negotiate reasonably and good faith with BSI in an attempt to resolve the relevant Deadlock in the best interests of GBSI as a whole (as we are required to do under cl 17 of the Shareholders Agreement).

As matters stand, GMA considers it likely that any failure by GBSI to renew the TPSA with V8 Supercars will have a materially detrimental effect on V8 Supercars and in particular, its commercial arrangements with its broadcast partners. This, in turn, is likely to lead to reputational damage falling upon whichever party or parties V8 Supercars perceives to be putting them in this position. In order to mitigate the impact of the current impasse between BSI and GMA, GMA proposes that, pending resolution of the Deadlock, GBSI enter into an interim arrangement with V8 Supercars, terminable on short notice, to allow the Deadlock process to be exhausted in good faith. This will also provide V8 Supercars with time, should it require this, to look to potential suppliers other than GBSI.   
…”

103. The enclosed circular resolution was a resolution of the shareholders of GBSI approving GBSI accepting the V8 Supercars offer and the appointment of Messrs Newton and Kinylside (the two GMA-appointed directors of GBSI) to conclude the formal documentation of a renewed TPSA and to attend to GBSI’s execution of the renewed TPSA. I interpolate to note that the V8 Supercars offer had not specified the terms of a renewed TPSA, save for the statements that the terms were to be agreed but would be “substantially similar to” and “no less favourable to Supercars” than the terms under the then current TPSA: see [89].

104. GMA’s letter concluded by stating that GMA had acted in the interests of GBSI and questioned BSI’s motives in declining to agree to the renewal of the TPSA. GMA also sought an assurance that neither BSI nor any company within the NEP Group has approached, or will approach, V8 Supercars with a view to making the supplies that GBSI would otherwise make under a renewed TPSA. The letter stated that such an assurance would “assist GMA’s understanding of the position”.

105. During the period 8 to 14 January 2021, Messrs Larsson (in the United States) and Newton (in Sydney) made arrangements to speak in light of “the impasse we have reached with the Joint venture.” That conversation occurred on 15 January 2021. During the conversation, Mr Larsson asked whether, “would it perhaps just make sense for BSI to consent to GBSI selling the equipment to [GMA]”. Mr Newton expressed surprise that BSI was raising this, but expressed interest and said he would have to give some thought to valuation. Mr Larsson asked whether GMA “would welcome something like US$1M or below” and Mr Newton said that was “probably right” and that it “maybe more beneficial to structure any deal as a sale of BSI’s shares in the joint venture”. Mr Larsson said that he would “take that away and revert in a couple of days”. The conversation continued:

200. As at August 2020, the term of the TPSA was rapidly coming to an end, V8 Supercars had issued a request for pricing for the provision of In-Car Camera Systems for the period after 31 December 2020, GBSI had not submitted any tender to V8 Supercars in response that request and there is no evidence that GBSI had entered into any other discussions or negotiations with V8 Supercars concerning the provision of those systems from 2021 or that it had any basis to assume that V8 Supercars would approach GBSI to provide those services (see [63]-[74] above). GMA’s submissions denied that it or GBSI had any discussions with V8 Supercars in relation to the provision of in-car camera systems after 31 December 2020. GMA’s submissions described the V8 Supercars offer as “a unilateral approach by the customer, not a result of any ‘offer’ or tender by GBSI or GMA.”

201. It was in those circumstances that BSI signalled to GMA in August 2020 its intention to purchase the BSI Equipment pursuant to clause 5.9 of the Shareholders Agreement at the end of the 2020 race season. It is clear from the substance and tone of correspondence that BSI assumed it would be common ground that the Shareholders Agreement should be terminated on the expiry of the TPSA (see [68] above). The conversation between Mr Coughlan, Mr Grainge and Mr McWilliam that followed on 3 September 2020 revealed GMA’s commercial objective of precluding BSI from buying back the BSI Equipment until mid-2021 so that GMA could find an alternative in-car camera system for use in GMA’s broadcasting activities (see [70] above).

202. BSI then wrote to GMA on 2 October 2020 advising of BSI’s decision to cease providing the “BSI Services” under the Shareholders’ Agreement after the expiry of the TPSA on 31 December 2020 (at which point the services would no longer be required by GBSI), stating that BSI did not support GBSI seeking to extend or renew the TPSA beyond 31 December 2020 and inviting GMA to meet for the purpose of clause 23.3 of the Shareholders’ Agreement (see [70]-[72] above.

203. GMA submitted that clause 23.3 did not strictly require GMA to meet with BSI until after the expiry of the TPSA on 31 December 2020. However, I prefer the view that clause 23.3 required that meeting to occur within a reasonable period after it became apparent that the TPSA would not be renewed. It seems to me that this position had been reached as at 2 October 2020. Even if I am wrong about this construction of clause 23.3, BSI’s proposal to meet in October 2020 was a sensible commercial approach as I have said at [74] above. By ignoring that approach, GMA constructively refused to meet with BSI.

204. GMA’s next step after BSI’s request to meet was to prevent BSI’s representative from taking custody of equipment that BSI had loaned to GBSI in mid-2017, notwithstanding that the 2020 race series had concluded and that GBSI had no arrangements to provide in-car camera systems in the future and was taking no steps at that time to secure such arrangements (see [81] above).

205. GMA went further and decided to exclude BSI’s representative from the annual audit or stocktake of the BSI Equipment and Gearhouse Equipment. In doing so, GMA unilaterally converted its long standing “practical custody and control” of the equipment into exclusive possession and control of the equipment (see [82]-[84] above). BSI’s subsequent requests for information about the results of the equipment stocktake/audit, was met with no response from GMA (see, for example, [88] and [96] above).

206. From 23 November 2020, GMA’s communications with BSI were focussed on GMA’s insistence that it was in GBSI’s best interests to accept the V8 Supercars offer, notwithstanding the uncertainty surrounding the financial terms of that offer. The offer involved a guaranteed extension only until the end of 2021, with either GBSI or V8 Supercars having the right to terminate without cause at the end of each calendar year. It was not put to Mr Newton in cross-examination that he or GMA did not genuinely believe that acceptance of the offer was in GBSI’s best interests. Assuming that GMA did hold that belief in November 2020, it is readily apparent that acceptance of the extension until the end of 2021 with the ability to terminate thereafter would also align with GMA’s objective that it had disclosed in the 3 September 2020 discussion referred to at [70] above.

207. Consistently with a theme that played strongly in GMA’s cross-examination of Mr Larsson and in its submissions, GMA complained in its correspondence with BSI that BSI’s view that it did not wish to accept the V8 Supercars offer deprived GMA of the benefit of an assumption that it had made that GBSI would take up any opportunity to provide in-car camera systems to V8 Supercars in the period after 31 December 2020 (see [97] above). However, the evidence does not reveal any reasonable basis for believing that such an opportunity might arise, in circumstances where V8 Supercars had issued a request for pricing for the in‑car camera systems for the 2021-2026 race series, GBSI had not submitted any response to that request, and GBSI insists that it had not entered into discussions with V8 Supercars to provide those systems for the period following 31 December 2020 until it received the V8 Supercars offer on 19 November 2020.

208. In December 2020, BSI requested confirmation that GBSI would not use the BSI Equipment (see [99]-[100] above). That confirmation was not forthcoming, and GMA caused the BSI Equipment to be distributed to V8 race teams in about mid-January 2021 without informing BSI that it was doing so, much less seeking the consent of BSI to do so (see [105]-[112] above). Mr Newton attributed his decision to cause or allow Mr Madgwick to distribute the BSI Equipment to a “logistics exercise” pending an agreement that he expected to be reached between GMA and BSI following his conversation with Mr Larsson on 15 January 2021. I assume that, immediately after that conversation, Mr Newton genuinely believed that BSI would have no objection to the deployment of the equipment in light of the proposed solution he had discussed with Mr Larsson, even though he had not specifically discussed the proposed deployment with Mr Larsson. No contrary proposition was put to Mr Newton in cross-examination. However, that assumption cannot have survived GMA’s receipt of BSI’s 20 January 2021 letter. Neither Mr Newton nor GMA took any steps to retrieve the BSI Equipment at any time after they received that letter. On the contrary, GMA dug its heels in and refused to disclose to BSI what it had done with the BSI Equipment.

209. GMA did not respond to BSI’s request on 20 January 2021 for confirmation that GMA and GBSI would not make use of the BSI Equipment. Nor did GMA respond to a follow up request on 27 January 2021, except by causing its solicitors to send a letter asserting that the Shareholders Agreement entitled GMA, or Messrs Newton and Kinylside as the GMA-appointed directors of GBSI, to use the BMI Equipment at locations within the Territory where the V8 Supercars Race Series is being conducted, for the purpose of the V8 Supercars Race Series (see [114]-[121] above). It was not until the hearing on 5 February 2021 that GMA revealed that the BSI Equipment had in fact been deployed to race teams around Australia and remains with those teams.

210. GMA’s submissions criticised the last two paragraphs of BSI’s 20 January 2021 letter as a threat to commence legal action “designed to impose its view that Termination of the [Shareholders Agreement] was the only option”. It was submitted that BSI should have instead invoked the Deadlock process under clause 17 of the Shareholders Agreement. It is difficult to comprehend this submission. There would have been little utility in BSI invoking the Deadlock process in circumstances where GMA had already done so with effect from 12 January 2021 (see [143]-[146] above). In any event, in the context of the events that had happened as at 20 January 2021 – namely, GMA’s unilateral decision to preclude BSI from accessing the BSI Equipment, its failure to inform BSI of the results of the stocktake/audit and its failure to respond to BSI’s earlier request for confirmation that GBSI would not use the BSI Equipment - I regard those final two paragraphs of the letter to be foreshadowing urgent interlocutory relief that may be sought in order to safeguard the BSI Equipment. Interlocutory relief would be inapt to “impose BSI’s view” that the Shareholders Agreement should be terminated.

211. At the hearing on 11 February 2021, GMA maintained the position that the deployment of the BSI Equipment to race teams in preparation for the commencement of the 2021 race series was permitted by clause 5.7(c) and/or clause 5.7(d) of the Shareholders Agreement.

212. Those clauses are set out in full at [44] above.

213. I reject GMA’s submission that the deployment of the BSI Equipment was permitted by clause 5.7(c). For the reasons I have already explained at [184]-[186] above, clause 5.7(c) permitted use of the equipment by GBSI for the V8 Supercars Race Series at locations within the Territory only in the course of the “Business”. As from 1 January 2021, any use of the BSI Equipment for the V8 Supercars Race Series or the successor Repco Supercars Race Series was not in the course of the “Business” because the TPSA had expired and had not been renewed.

214. Moreover, the evidence does not establish that the deployment of the BSI Equipment in January 2021 was a use of that equipment by GBSI as opposed to GMA. The deployment had not been approved by GBSI’s board of directors, which had the exclusive right to direct the affairs of GBSI under clause 13.1 of the Shareholders Agreement (save in respect of matters requiring unanimous shareholder resolution under clause 12), and there is no evidence that the board had delegated to either Mr Newton or Mr Madgwick any aspect of the management of GBSI on terms that would have authorised them to deploy the BSI Equipment in circumstances where the TPSA had expired. I note that the letter sent by Watson Mangioni on behalf of GMA on 3 February 2021 referred to the alleged entitlement of GMA and the GMA-appointed directors of GBSI to use the BSI Equipment, and was silent in relation to GBSI (see [114] above). Any use permitted by clause 5.7(c) is use by GBSI, not by GMA or particular directors of GBSI.

215. Clause 5.7(d) did permit use of the BSI Equipment by GMA “for a purpose … in connection with the Business or the operations of GBSI”, but I reject GMA’s submission that clause 5.7(d) permitted the deployment of the BSI Equipment in January 2021. As at January 2021, the Shareholders Agreement remained of foot but there was no “Business” within the meaning of the Shareholders Agreement unless and until the TPSA was extended or renewed, for the reasons that I have already explained. For those same reasons, the “operations of GBSI” did not involve the 2021 race series and the evidence does not establish that the deployment of the equipment was a decision or operation of GBSI as I have said immediately above.

216. In summary, GMA had been entrusted with practical custody of the BSI Equipment for purpose of parties working together to jointly deliver the in-car camera systems to V8 Supercars for the 2016-2020 race series in accordance with the Shareholders Agreement. GMA took advantage of this by taking matters into its own hands and deploying that equipment to race teams for the 2021 series, without authority to do so under the Shareholders Agreement or otherwise. GMA refused to disclose to BSI the whereabouts of the BSI Equipment, until effectively forced to do so at the first hearing in these proceedings. GMA now presents the use of the BSI Equipment for at least the first event of the 2021 race season as, in effect, a fait accompli because the equipment has been or is in the process of being installed in cars and by reason of the adverse consequences that it submits will be visited on V8 Supercars and Seven if the equipment is recalled. It seems to me that any such adverse consequences flow from V8 Supercars’ own failure to accept any of the tenders it received in response to its Request for Pricing In-Car Camera Systems in early 2020 or to take other steps toward putting in place contractual arrangements for in-car camera systems for the 2021 season prior to 19 November 2020.

217. This is a complete breakdown in cooperation between GMA and BSI, and BSI is justified in having lost trust in GMA and lost confidence in the management of GBSI where one shareholder is unilaterally controlling the use of GBSI’s property contrary to the Shareholders Agreement (see the evidence of Messrs Coughlan and Larsson to which I have referred at [124]-[125] above). In these circumstances, the prospect of the shareholders resolving their present deadlock through the dispute resolution mechanisms of the Shareholders Agreement is fanciful as I have said above. The continuing deadlock and conduct of GMA is frustrating the commercially viable and sensible operations of GBSI in accordance with the shareholders’ expectations as recorded in the Shareholders Agreement.

218. GMA submitted that it had acted and is continuing to act in GBSI’s best interests by pressing for GBSI to accept the V8 Supercars offer, by seeking to invoke the dispute resolution procedures under the Shareholders Agreement to achieve a unanimous resolution to accept that offer and by deploying the BSI Equipment to V8 race teams in anticipation of such a resolution.

219. I reject those submissions. In my opinion, it cannot be said to have been in GBSI’s best interests, considered objectively, to accept an offer the financial terms of which were unspecified. Even if the financial terms had been specified, it would not now be in GBSI’s best interests to enter into an agreement that would require the continued cooperation of its shareholders in providing the equipment and services necessary for GBSI to comply with its obligations under that agreement, in circumstances where their relationship and cooperation has irreparably broken down. Nor is it in GBSI’s best interests for GMA to deploy GBSI’s valuable equipment (including the BSI Equipment) to V8 race teams without authority and without any financial reward for GBSI, in anticipation of such an agreement being entered into.

220. At the hearing on 11 February 2021, GMA made submissions to the effect that BSI was the party responsible for the deadlock and the breakdown in the relationship between the shareholders.

221. Specifically, GMA submitted that by submitting its in-car camera systems tender to V8 Supercars in January 2020 for the 2021-2026 race season, NEP Australia was seeking to “take this business from GBSI” and to take the benefit of the business from GMA as a shareholder of GBSI, without telling GMA. GMA submitted that, if it had been informed by BSI of NEP Australia’s tender in January 2020, as BSI ought to have done under clause 2.2(c) of the Shareholders Agreement, GMA could have made alternative arrangements “to service the TPSA by sourcing equipment”. It was submitted that GMA had been deprived of that opportunity by BSI’s silence.

222. I reject these submissions for two reasons.

223. First, V8 Supercars had put the provision of in-car camera systems for the 2021-2026 season out to tender. As I have already referred to, GBSI did not submit a tender. This must have been known to both GMA and BSI as the shareholders of GBSI, and to the directors they had each appointed to GBSI. NEP Australia’s tender was seeking to win work commencing in 2021, for which GBSI was not competing. It was not attempting to take anything from GBSI, or from GMA as a shareholder of GBSI. In those circumstances, I do not consider that clause 2.2(c) of the Shareholders Agreement required BSI to disclose NEP Australia’s tender to GMA or GBSI, or to prevent NEP Australia from submitting the tender.

224. Second, the evidence does not establish that GMA or GBSI had any need to make alternative arrangements “to service the TPSA” prior to 19 November 2020. The TPSA was due to expire on 31 December 2020 and GBSI had taken no steps to win work providing in-car camera systems to V8 Supercars for the 2021-2026 season, whether in response to V8 Supercars’ request for pricing or otherwise. The evidence simply does not establish that GMA or GBSI had reason to be making any assumptions about the provision of in-car camera systems for the 2021-2026 season or the availability of the BSI Equipment for that purpose.

225. GMA’s submissions also directed blame towards BSI seeking to invoke clause 23.3 of the Shareholders’ Agreement at a time when GMA considered that it was premature to do so and failing to invoke the Deadlock procedure on 20 January 2021. I have dealt with these matters at [203] and [210] above.

226. Finally, GMA submitted that, in seeking an order for the winding up of GBSI, BSI is “seeking … to secure for itself an additional advantage namely the triggering of the buy-back clause [clause 5.9 of the Shareholders Agreement] notwithstanding there remains a business to be conducted by [GBSI].” For the reasons I have explained at [192]-[196] above, the practical reality is that there does not remain a business to be conducted by GBSI. The rights under clause 5.9 of the Shareholders Agreement are not an “additional advantage”. The rights are one of the consequences that the parties bargained for in the event that the Shareholders Agreement was terminated automatically pursuant to clause 23.2, including by reason of GBSI being wound up by order of the Court.

227. In my opinion, BSI should have entered into discussions with GMA in the second half of November 2020 with an open mind as to the possibility of GBSI negotiating a further agreement with V8 Supercars following receipt of the offer on 19 November 2020 and recognising that BSI’s own commercial interests were not the sole relevant consideration once the V8 Supercars offer was on the table. BSI instead steadfastly maintained its decision made before either BSI or GMA was aware of the V8 Supercars offer. However, this occurred in circumstances where cooperation was been breaking down from the time GMA Refused to permit BSI to have any access to the BSI Equipment in October 2020 and BSI’s trust in GMA must have been diminished by December 2020 due to GMA’s refusal to disclose information about the equipment stocktake/audit and its failure to confirm that it would not use the BSI Equipment. It is GMA’s conduct from mid-January 2021 that has rendered a negotiated resolution of the deadlock and a continuation of business by GBSI impossible for the reasons I have already explained above.

228. As GMA submitted, GBSI is solvent and there is no suggestion of any likelihood that it may become insolvent. Winding up is an extreme step, but the evidence in this case does not suggest that winding up GBSI would have far reaching effects on third party interests. There is no evidence that GBSI has any employees. As I understand the evidence, the personnel undertaking the activities required for GBSI’s operations were employees of BSI or GMA. Creditors will not be adversely impacted because, according to Mr Newton’s evidence referred to at [139] above, there are no debts overdue and GBSI will have surplus net assets on winding up. Any prejudice to V8 Supercars or Seven will be a consequence of V8 Supercars not awarding a contract for the provision of in-car camera systems for the 2021-2026 season to any of the tenderers who submitted a response to the request for pricing, and failing to take even the first step towards entering into a contract with GBSI for the provision of those systems until 19 November 2020. I do not regard this prejudice as a matter that weighs against making an order for the winding up of GBSI.

229. Winding up will result in GMA being deprived of its investment in GBSI, but that is a consequence of the irreparable breakdown of trust and cooperation and BSI’s justified loss of confidence in the management of GBSI as a result of GMA’s conduct. The asserted consequences to GMA of the BSI Equipment not being available through GBSI to provide in-car camera systems for the 2012-2026 series are not clear, in circumstances where GMA is not contracted to provide those systems. To the extent that there are any consequences adverse to GMA, this is attributable to GMA’s unwarranted assumption that GBSI would provide in-car camera systems for 2021-2026 despite GBSI not having tendered for this work, and that the Shareholders Agreement would continue even though GBSI had taken no steps to seek renewal of the TPSA prior to 19 November 2020.

200. Winding up will deprive GMA of the ability to pursue its claims for final relief in prayers 1, 3 and 4 of the Interlocutory Process set out at [19] above. For the reasons I have explained at [161] above, there is presently no basis for the declaration sought in prayer 1 of the Interlocutory Process and that basis may or may not materialise in the future if GBSI is not wound up. In relation to the relief claimed in respect of alleged oppression in prayers 3 and 4 of the Interlocutory Process, I am mindful that GMA did not move on those prayers at the hearing on 11 February 2021 and therefore did not adduce the evidence on which it would rely at any final hearing of those claims for relief. However, in light of my findings about GMA’s conduct based on the evidence that was adduced at the hearing of the winding up application, I do not regard the existence of GMA’s unparticularised and untried oppression claim as matter that weighs against the making of a winding up order in all the circumstances of this case.

201. Similarly, I do not regard any prejudice that BSI would suffer if it is unable to meet its commitments for the Tony Stewart Racing Series as carrying any weight in determining whether it is just and equitable to wind up GBSI. BSI bears responsibility for the commercial decisions that it has made concerning that contract, which were apparently based on assumptions about the timeframe within which steps could be taken towards termination of the Shareholders Agreement and exercise of BSI’s rights under clause 5.9. Those assumed timeframes must have allowed very little margin for error, and have turned out to be unrealistic.

202. Having regard to the breakdown in cooperation and trust between the shareholders, BSI’s justified loss of confidence in the management of GBSI, GMA’s conduct in deploying GBSI’s valuable equipment without authority and refusing to retrieve it, the deadlock that is incapable of resolution as a result of the loss of trust and confidence and the practical reality that these matters have brought about a failure of the substratum of GBSI, I am of the opinion that it would be just and equitable to wind up GBSI in the absence of any other remedy.

203. I do not consider that there is any alternative remedy that is capable of redressing the consequences of BSI being deadlocked into a continuing investment in GBSI in circumstances where GMA is using its practical custody and control of GBSI’s valuable equipment in the manner that GMA thinks fit, which is both unauthorised and contrary to the best interests of GBSI for the reasons I have explained above.

204. I have already rejected the alternative courses of waiting for dispute resolution procedures under the Shareholders Agreement to be completed, waiting to see whether BSI’s alleged material breach of clause 19 of the Shareholders Agreement gives rise to a deemed Transfer Notice in favour of GMA and leaving the current management of GBSI in place while GMA moves towards a hearing of its oppression claims.

205. A further alternative put forward by GMA was its open offer made on 10 February 2021. It is plain that the object of that offer was to bring the relationship between GMA and BSI to an end in circumstances that would not enliven BSI’s right to purchase to BSI Equipment under clause 5.9(a) of the Shareholders Agreement. At the hearing on 11 February 2021, BSI pointed out that if the offer were to be accepted there would only be one shareholder of GBSI, triggering automatic termination of the Shareholders Agreement under clause 23.2 and enlivening BSI’s rights under clause 5.9(a). GMA immediately retorted that it would avoid that outcome by transferring part of its existing shareholding to one of its related companies.

206. Having regard to GMA’s conduct in the period since September 2020 that I have referred to in detail above, I do not consider that BSI is acting unreasonably in pursuing winding up rather than choosing to sell its shares under a transaction that would allow BSI to extract its financial capital from GBSI but would preclude it from exercising the rights that it will otherwise have under clause 5.9(a) of the Shareholders Agreement. BSI’s rights under clause 5.9(b) are part of the basis on which they agreed to ender into the incorporated venture and to contribute their equipment and services to the joint venture vehicle GBSI

207. The only other alternative put forward by GMA was the appointment of a receiver with the following powers and duties:

“(i)   the duty to ascertain and confirm the present whereabouts of the BSI Equipment include as to who has present custody of that Equipment and prepare a Report to be provided to the Court, and to the Plaintiff, as to those matters; and

(ii)   the power to cause GBSI to enter into an agreement with the V8 Supercars Operator for the use of the BSI Equipment for the purpose only of the Supercar Race to be conducted at Bathurst in February 2021.”

238. The appointment of a receiver with these powers and duties would add nothing material to the evidence that GMA has (belatedly) provided at the hearings in these proceedings on 5 and 11 February 2021 as to the whereabouts of the BSI Equipment, and would merely perpetuate the unauthorised use of GBSI’s equipment instigated by GMA.

239. Having regard to absence of alternative appropriate remedies, I do not consider that BSI is acting unreasonably in seeking to have GBSI wound up.

240. For all of those reasons, I am of the opinion that it is just and equitable in all the circumstances of this case that GBSI be wound up. BSI tendered a consent of Mr Henry McKenna, registered liquidator, to be appointed by the Court and to act as liquidator of GBSI. The instrument of consent states that Mr McKenna is not aware of any conflict of interest or duty that would make it improper for him to act as liquidator, and he is not aware of any relevant relationship mentioned in s 60(2) of the Corporations Act. GMA did not raise any objection to Mr McKenna’s appointment as liquidator in the event that the Court determined to wind up GBSI. Orders will be made for the winding up of GBSI under s 461(1)(k) of the Corporations Act and the appointment of Mr McKenna as liquidator.

241. GMA did not dispute that, in the event of a winding up order being made by the Court, the Shareholders Agreement would automatically terminate pursuant to clause 23.2(c) and BSI would then have the option provided for in clause 5.9(a) of the Shareholders Agreement. The terms of the declaration sought by BSI in prayer 5 of the Interlocutory Process were:

“A declaration that by reason of the appointment of Henry McKenna as liquidator of the First Defendant, the Shareholders Agreement has terminated, within the meaning of cl 5.9, and the Plaintiff may exercise the option in cl 5.9(a) to purchase the BSI Equipment.”

242. Strictly speaking, it is the winding up order, and not the appointment of Mr McKenna as liquidator, that has the consequence of automatic termination under clause 23.2 and, in turn, enlivens clause 5.9. The declaration that I will make will reflect that. To avoiding putting a gloss on the terms of clause 5.9, the declaration will state that BSI has the option provided for in clause 5.9(a) which may be exercised in accordance with the terms of the Shareholders Agreement.

243. The normal order would be that BSI’s costs of the winding up application (including BSI’s application for the related declaratory relief in prayer 5 of the Originating Process and GMA’s unsuccessful application for a stay) be paid out of the assets of GBSI: Corporations Act, ss 466(2) and 556(1)(b). However, that necessarily diminishes the pool available for distribution amongst contributories in the winding up. I will therefore make directions to facilitate a determination of costs on the papers after considering written submissions from the parties. The costs of BSI’s unsuccessful application for interim relief heard were reserved on 5 February 2021, and those costs may conveniently be dealt with at the same time as the costs of the applications that are the subject of this judgment.

Conclusion and orders

244. For all of the reasons above, I make the following orders and directions:

1. Dismiss prayers 5 and 6 of the Interlocutory Process filed on 9 February 2021.

2. Order pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) that the First Defendant, Gearhouse BSI Pty Limited (ACN 610 164 102), be wound up.

3. Order that Henry McKenna, registered liquidator, be appointed as liquidator of Gearhouse BSI Pty Limited (ACN 610 164 102).

4. Declare that, by reason of Order 2, the Shareholders Agreement entered into by First Defendant, the Plaintiff and the Second Defendant on or about 26 February 2016 (the Agreement) has terminated pursuant to clause 23.2(c) of the Agreement and the Plaintiff has the option provided for in clause 5.9(a) of the Agreement which may be exercised in accordance with the terms of the Agreement.

5. Direct that each party wishing to be heard in relation to the costs of prayers 5 and 6 of the Interlocutory Process filed on 9 February 2021 and prayers 1 to 5 of the Originating Process filed on 5 February 2021 file and serve written submissions of no more than three pages in length by 5pm on 19 February 2021.

6. Direct that any party wishing to reply to submissions filed and served in accordance with the above direction file and serve written submissions in reply of no more than two pages in length by 5pm on 22 February 2021.

7. Direct that the costs of prayers 5 and 6 of the Interlocutory Process filed on 9 February 2021 and prayers 1 to 5 of the Originating Process filed on 5 February 2021 be determined on the papers after consideration of the submissions filed and served in accordance with the above directions.

8. Stand the proceedings over to the Corporations List for directions on 22 February 2021.

9. Grant liberty to apply of 48 hours’ notice.

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Decision last updated: 17 February 2021