In the matter of Qatar No.2 Pty Ltd ACN 001184407 and Qatar No.3 Pty Ltd ACN 001184416

[2015] NSWSC 2088

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Qatar No.2 Pty Ltd ACN 001184407 and Qatar No.3 Pty Ltd ACN 001184416 [2015] NSWSC 2088

Hearing dates:

27 July 2015

Date of orders:

27 July 2015

Decision date:

27 July 2015

Jurisdiction:

Equity - Corporations List

Before:

Brereton J

Decision:

Plaintiff’s notice of motion dismissed; defendants released from undertaking.

Catchwords:

EQUITY – equitable remedies – interim injunction to prevent sale of company’s property as part of liquidation – where alleged that company agreed to sell property to party – where alleged agreement derived from resolution of shareholders – whether resolution required 75% majority – construction of Articles of Association; EQUITY – relief against forfeiture – whether relief against forfeiture available in respect of option granted by shareholders’ resolution –– whether agreement to sell property reached – uncertainty – where option never exercised so as to give rise to contractual rights capable of being subject of relief; EQUITY – equitable remedies – interim injunctions – variation – whether undertaking given not to sell property should be released – whether relevant change of circumstances – where no seriously arguable case for relief.

Legislation Cited:

(CTH) Corporations Act 2001
(NSW) Companies Act 1961

Cases Cited:

Aquatic Air Pty Limited v Siewert & anor [2015] NSWSC 928
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Tanwar Enterprises Pty Limited v Cauchi [2003] HCA 57; (2003) 217 CLR 315

Category:

Procedural and other rulings

Parties:

In proceedings 2013/220403:
Alfonso Messina (plaintiff)
Qatar No 2 Pty Ltd (ACN 001 184 407) (first defendant)
Qatar No 3 Pty Ltd (ACN 001 184 416) (second defendant)

  In proceedings 2015/183589:
Vincenzo Messina (plaintiff)
Qatar No 2 Pty Ltd (ACN 001 184 407) (first defendant)
Qatar No 3 Pty Ltd (ACN 001 184 416) (second defendant)

Representation:

Counsel:

 

In proceedings 2013/220403:
E White (plaintiff)
B DeBuse (defendants)

 

In proceedings 2015/183589:
J D Little (plaintiff/respondent)
B Debuse (defendants/applicants)

 

Solicitors:

 

In proceedings 2013/220403:
Coleman Greig Lawyers (plaintiff)
Marsdens Law Group (defendants)

  In proceedings 2015/183589:
Carrolls Lawyers (plaintiff)
Marsdens Law Group (defendants)

File Number(s):

2013/220403; 2015/183589

Judgment (ex tempore)

1. HIS HONOUR: The companies Qatar No 2 Pty Ltd and Qatar No 3 Pty Ltd are each held as to one-third by Alfonso Messina, as to one-third by Vincent Messina, and as to one-third by six children of a third sibling of Alfonso and Vincent. Their assets comprised three pieces of real property, respectively at Annangrove, Freemans Reach and Wilberforce.

2. On 19 June 2013, Alfonso Messina, as plaintiff, instituted proceedings 2013/220403 for the winding up of Qatar 2 and Qatar 3 on the just and equitable ground, asserting that their substratum had failed and that there was a state of deadlock. To date, those proceedings have been adjourned and have not proceeded to determination because the shareholders have endeavoured to effect a distribution of the company's assets amongst them without incurring the costs of an insolvency administration. In the course of those endeavours, the Wilberforce and Annangrove properties have been sold, leaving only the Freemans Reach property.

3. On 29 September 2014, extraordinary meetings of shareholders of both companies resolved in the following terms:

Vincent Messina, within four weeks of settlement of both the Rouse Hill and Wilberforce properties, to pay any shortfall to the Qatar company or any other shareholders in order to pay out all other shareholders on the basis that the Freemans Reach property has an agreed value of $3,200,000, and if not paid within four weeks by Vincent Messina, the Freemans Reach property be listed immediately.

4. The resolution was adopted unanimously, and Vincent Messina was one of those who voted in favour of it.

5. In April 2015, the companies obtained advice from William Buck as to tax implications of the distributions and how they might be implemented. William Buck proposed a number of solutions, one being a selective share buyback, which would involve buybacks by the companies of the shares held by Alfonso and the other shareholders, excluding Vincent, leaving Vincent as the sole shareholder and thus conferring on him indirect ownership of the Freemans Reach property. A second option was liquidation, with a transfer of the property to Vincent in specie, but noting that this would require him to provide an additional amount to purchase the property. The third option was liquidation and an interposed entity, which it is not necessary to explore further.

6. On the present state of the evidence, one would not think that the resolution of 29 September was one for a share buyback; moreover, a share buyback would have required various approvals under the (CTH) Corporations Act 2001, to which there appears to have been no advertence at that stage. It appears more likely that the concept of a share buyback emerged from the William Buck report.

7. In any event, on 28 April 2015, extraordinary meetings of the shareholders of both companies, at which Vincent was present, resolved, first (and unanimously), that Vincent be given until 31 May 2015 to comply with the resolution of 29 September. Effectively, that extended the time for Vincent to make the top-up payment referred to in the earlier resolution.

8. A further resolution of the shareholders of both companies on 13 May 2015 purported to adopt option 2 of the William Buck report, being the liquidation option. However, a resolution was also proposed "[t]hat the Freemans Reach property be put on the market." Following a discussion of the resolution:

It was decided that the property be put up for auction with Michael Bennet, but if an offer comes in of $3.5 million or above, that the offer be accepted prior to auction. Resolution 1 in the minutes dated 28/4/2015 is to remain.

9. The minutes record that Vincent Messina requested a poll, but that request was rejected (on a ground which no party appears to support was available). However, it is plainly identifiable how the participants voted, and the taking of a poll would have made no difference at all to the outcome.

10. The importance of the provision that “resolution 1 in the minutes of 28 April is to remain” is that despite the resolution to place the Freemans Reach property on the market, the offer to sell to Vincent if he made the relevant payment was preserved, until 31 May 2015. Vincent did not make any such payment by 31 May 2015. On 2 June 2015, the property was listed for sale with the agent Bennet Property at Richmond.

11. Meanwhile, on 22 May 2015, Vincent sent Alfonso a facsimile letter which referred to resolution 1 of 28 April (being the resolution that purported to adopt "Option 2"), as indicating that there would be a share sale back by the Qatar companies to all the shareholders except Vincent of their shares, with Vincent to pay the shortfall. He pointed out that he had not received notice of a meeting for 31 May, and that certain formalities were required to be attended to before any meeting involving a share buyback, and that if those formalities had not been attended to "then the share transaction cannot take place on 31 May, and in which case I cannot pay the shortfall".

12. On 4 June, Vincent sent a facsimile letter to the solicitors for the companies purporting to instruct that the properties not be listed for sale, as he did not approve the motion for the listing of the properties. On 15 June, his lawyers wrote to the directors of the companies, objecting that there had been no basis for the refusal of a poll vote, and that for that reason the sale had not been authorised and must be withdrawn from the market, and foreshadowed the institution of proceedings.

13. On 22 June, Vincent instituted these proceedings by summons, filed by leave granted by Bergin CJ in Eq sitting as duty judge, which was made returnable on 24 June. The defendant companies were represented when the summons returned before Rein J sitting as duty judge on 24 June. On that occasion, the Court noted the undertaking of the plaintiff as to damages, and the undertaking of the defendants, through their solicitor, that they would take no steps to deal with the Freemans Reach property until any further order of the Court, and stood the proceedings over to 26 June before the Corporations List registrar, with a view to the matter and the winding up proceedings being referred to the Corporations List judge on Monday 29 June. On 26 June, the registrar adjourned the matter to 29 June for referral to the duty judge. On 29 June, the registrar referred the matter to the duty judge "for hearing date", with the winding up proceedings.

14. Meanwhile, immediately following the appearance before Rein J on 24 June, the parties' representatives had some without prejudice discussions. Following those discussions, on 25 June, Vincent's solicitors sent to the solicitors for the companies and the solicitors for Alfonso an email which referred to the without prejudice discussions, indicating that in accordance with them an accountant had been engaged to provide a report on Vincent's practical financial options to secure the Freemans Reach property, and concluded:

On the basis that an amicable resolution can be reached, all parties will benefit from the avoidance of anticipated significant liquidation fees and agent commission.

As indicated to you, we will require a period of two weeks in order to submit this proposal to you, say by close of business on Friday 10 July 2015.

Would you kindly confirm that this timeframe is acceptable to you.

15. There does not appear to have been a response to the request for confirmation, but nor does there appear to have been any suggestion that it would be too long.

16. When the proceedings came before Black J as duty judge pursuant to the referral which I have mentioned on 29 June, his Honour adjourned both proceedings to 10 August "with a view to hearing on that day, if the list permits, with an estimate of two to three hours". No directions in respect of evidence were made.

17. On about 3 July, the solicitor for Vincent had a conversation with the real estate agent, one outcome of which was that he became aware that the property was listed for auction on 4 August 2015. It is a reasonable inference from the evidence as it presently stands that the listing for that date was made after the undertaking had been given on 24 June. Following correspondence between the parties, in which the companies asserted that the marketing of the property for sale was not precluded by the undertaking because it did not constitute a dealing with a property but merely a preparatory step, the undertaking was redrafted, and on 7 July, by consent, the Court made an order varying the undertaking to read:

The defendants undertake, through their legal representative, that the defendants will not enter into a contract for the sale of the property the subject of the summons until further order of the Court.

18. No proposal such as had been foreshadowed in Vincent's solicitor's letter of 25 June 2015 was submitted by 10 July 2015. On 13 July, the solicitors for Alfonso wrote to Vincent's solicitors, pointing out that no such proposal had been received, and that if not received by 15 July, the matter would be brought back before the duty judge to vacate the undertaking in respect of the sale of the property. There was no response to that letter, and a further letter of 16 July set out the history of the matter, including the failure to provide any such proposal as had been envisaged, the fact that there appeared to be considerable interest in the purchase of the property at a price significantly higher than that at which the proposed transaction with Vincent would take place, and that unless an adequate response was received by 17 July, the matter would be listed before the Duty Judge.

19. On 16 July, the solicitors for the companies wrote to Vincent's solicitors, noting that no such proposal as had been envisaged by 10 July had yet been received and that if the undertaking remained on foot, losses would potentially be incurred, as an auction had been set down for 4 August, and advised that they were instructed to apply to have the undertaking released if it were not consented to.

20. On 17 July, the solicitors for Vincent responded. Although the response sets out a number of matters, it says absolutely nothing as to why the proposal had not yet been produced, nor whether there was any prospect of any such proposal being produced. On the same day, the solicitors for Alfonso responded to the effect that unless a proposal could be put on the table that met the stated objectives – the equalising of the shareholder’s interests as previously discussed – the Duty Judge would be approached for the release of the undertaking.

21. So far as the evidence shows, no such proposal has been forthcoming, and there is no offer or promise of any such proposal.

22. In his affidavit sworn in support of his original application, Vincent deposed that he wished, if possible, to keep the property in the family. He referred to the fact that the poll requested by him had been refused – implicitly wrongly – and that he had, and as at 31 May had had, available funds to permit the buyback scheme to proceed. However, in a facsimile letter he sent to Alfonso on or about 22 June 2015, he said that while he would be interested in doing a share purchase, it would be necessary to borrow the money from the companies, and that that might be achieved by the companies taking a mortgage over his Wellington property. This is not redolent of an ability to complete the purchase.

23. For reasons I have mentioned, it seems to me that the failure, incorrect as it was, to take a poll was an irregularity which has occasioned injustice to no one and is of the type that could be relieved against under the relevant provisions of the Corporations Act.

24. It was also argued for Vincent that the resolution in question required a 75% majority, which Vincent's vote would have precluded; but that depends on a construction of clause 46 of the Articles of Association, which are in the form of table A in the Fourth Schedule to the (NSW) Companies Act 1961. In my view, the purpose of clause 46 is to define what is “special business”, for the purposes of clause 45, so as to require "the general nature of that business" to be given to such persons as are entitled to receive notices from the company. It is clear that the concept of "special business" in the penultimate line of article 45 is a different concept from that of "special resolutions" referred to in the first line of that article. The circumstance that business is "special" within that meaning does not mean that it requires a special resolution for its carriage.

25. In those circumstances, there appeared to be no seriously arguable case for final relief on the summons as it stood. Today, however, Vincent sought and obtained leave to file in Court a notice of motion for leave to amend the summons in the form of a draft summons, which was provided. For the record, upon the undertaking of Michael Paul Carol, solicitor, to pay the appropriate filing fees, I grant leave to the plaintiff Vincent to file a notice of motion, in the form initialled by me, dated this day and placed with the papers. I direct that the motion be returnable instanter, and dispense with further service of the motion.

26. The proposed amended summons adds to the relief sought a claim for relief against forfeiture of "the option granted to the plaintiff by the defendants on 29 September 2014", and consequential orders. While I accept that the rights in respect of which relief against forfeiture may be granted are not limited to rights in real property and can extend, for example, to shares or rights in other personal property – and that, as Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, and more recent cases such as Tanwar Enterprises Pty Limited v Cauchi [2003] HCA 57; (2003) 217 CLR 315 make clear, the jurisdiction can extend to the rights of a purchaser under a contract, even where time has been made essential – counsel was not, despite a number of requests on my part, able to identify any authority for the proposition that relief could be, or had ever been granted, in respect of an option. As it seems to me, one reason for that is that it has always been held that options must be strictly complied with, because an option gives rise to a contract if and only if the conditions set out in the option are satisfied. So much was held by me as recently as this morning in Aquatic Air Pty Limited v Siewert & anor [2015] NSWSC 928, in which the relevant authorities were referred to and it was held that the service of a notice exercising the option purporting to attach a cheque for the deposit, where no cheque is attached, amounted to a failure to exercise the option, so that the contract never came into existence.

27. If what happened on 29 September 2014 is properly characterised as a grant of an option, then the simple position is that the option has never been exercised, and there is no contractual right in respect of which relief against forfeiture could be granted.

28. It is, for reasons I have already mentioned, difficult to conceive from the resolution of 29 September that it was an agreement to enter into a share buyback arrangement. If it was, if could not be enforceable because the requisite preconditions referred to in the Corporations Act have not been satisfied. Yet, Vincent seems to contend that that is what was intended, although one might have thought it more likely to be some kind of offer to buy the company or to sell the land, rather than a share buyback.

29. All of that points to the conclusion that the resolution of 29 September lacked sufficient certainty to be a binding contract creating contractual rights. That is not to say that if Vincent had been able to and did stump up the money by 31 May, the company would not have been estopped from dealing with the property otherwise than in a way which resulted in its transfer to him; but that did not happen, and there is no evidence of any detrimental reliance on the part of Vincent.

30. I have gone into this in some little detail, because refusing an application for leave to amend on the basis that the relief claimed is hopeless is not a course lightly to be undertaken. But it seems to me that all that has been proffered in this case is the prospect that some evidence may be forthcoming in the future to make good a proposition that the company – or the other shareholders – have frustrated Vincent's effort to acquire the property. At this stage, Vincent cannot point to any evidentiary material upon which it would appear that the proposed additional claims for relief have any prospects of success. In those circumstances, leave to amend the summons should be refused.

31. That then leaves on foot a summons claiming relief for which I can identify no tenable basis. Ordinarily, if this were an application for an interlocutory injunction, that would result in the application failing. The question is whether any different result should pertain in circumstances where undertakings have clearly been proffered and accepted, and the hearing is intended to take place on 10 August.

32. The circumstance that the undertaking was first proffered before the arrangement made in the without prejudice discussions was reached and was then expressed to be “until further order”, and was again expressed to be until further order in its amended form, casts upon the defendants at least the forensic burden of showing that it should now be released. Ordinarily, that involves showing that there has been a relevant change of circumstances. That change of circumstance can be simply that it has taken longer than anticipated for the proceedings to come on for hearing. Where there has been either a contested interlocutory hearing, or an agreed interlocutory regime to avoid an interlocutory hearing, the burden is not inconceivable. Less may be required where the undertaking has been proffered only on an interim basis in order to avoid the need for an immediate interim hearing, while the interlocutory arrangements are subject to further consideration.

18. It is difficult to say in precisely which of those categories this undertaking falls, and it is probable that the parties had different perspectives when it was given; they certainly have different perspectives in that respect now. So far as the plaintiff was concerned, the undertaking preserved the position until the final hearing. So far as the defendants were concerned, it merely held the position on an interim basis.

19. However, one should not be excessively preoccupied with trying to pigeonhole the undertaking in that way. It is better to focus on the substantive merits of the application. Although the defendants are protected by the plaintiff's undertaking as to damages, the fact is that, on the one hand, there is potential for the property to sell at auction on 4 August for what may be regarded as a very good price – certainly substantially more than that contemplated when sale to the plaintiff was discussed. In combination with the circumstance that the plaintiff can demonstrate no seriously arguable case for final relief, that provides strong ground for dissolving the injunction.

20. Against that, it might reasonably be said that this crisis has been self-inflicted by the defendant, by allowing the auction to be fixed for a date before the contemplated hearing on 10 August, after it had given the undertaking. But for one matter, I would have regarded that as sufficient to outweigh the other considerations to which I have referred; but that in turn is to be weighed against the plaintiff's failure to produce any proposal of the kind envisaged by the parties contemporaneously with the undertaking being given, and absent which the defendants might well have applied to be released from the undertaking at a much earlier date.

21. Weighing all of those matters, and in particular the absence of any seriously arguable case for final relief, on balance least injustice will be risked if the undertaking is released.

22. The Court orders that:

1. The plaintiff's notice of motion filed 27 July 2015 be dismissed.

2. On the defendants' motion filed 24 July 2015, the defendants be released from the undertaking contained in the amended undertaking given in the proceedings and referred to in the orders of 7 July 2015.

3. The plaintiff pay the defendants’ costs of the motion.

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Decision last updated: 19 August 2016