Jawhite Pty Ltd v Trabme Pty Ltd - [2018] QSC 174

SUPREME COURT OF QUEENSLAND

CITATION:

Jawhite Pty Ltd v Trabme Pty Ltd & Ors [2018] QSC 174

PARTIES:

JAWHITE PTY LTD
ACN 106 661 287

(Applicant)

v
TRABME PTY LTD
ACN 154 609 159

(First Respondent)

BOEDRY PTY LTD
ACN 154 609 882

(Second Respondent)

TRENT ANDREW RYAN

(Third Respondent)

VESTWELL PTY LTD
ACN 106 478 808

(Fourth Respondent)

ADAM BOLAND

(Fifth Respondent)

MARK EDWARDS

(Sixth Respondent)

FILE NO/S:

S No 2310 of 2014

DIVISION:

Trial

PROCEEDING:

Application and counter-claim

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 August 2018

DELIVERED AT:

Brisbane

HEARING DATE:

20-24 March 2017, 27-30 March 2017, 15 June 2017, 29-31 January 2018, 1-2 February 2018, 5-9 February 2018, 16 March 2018

JUDGE:

Boddice J

ORDER:

I shall hear the parties as to the appropriate orders, and costs.

CATCHWORDS:

CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – OPPRESSIVE OR UNFAIR CONDUCT – WHAT CONSTITUTES – CONDUCT OF OR RELATING TO DIRECTORS – where the Applicant and Third Respondent contracted with the Fourth, Fifth, and Sixth Respondents to merge their respective real estate businesses – where the First and Second Respondents constituted the merged business entities – where the Applicant was a shareholder of the merged business – where the Third Respondent was a shareholder, director, and employee of the merged business – where the Applicant and Third Respondent claimed the conduct of the Fifth and Sixth Respondents, whom were also shareholders and directors of the merged business, was oppressive – where the Fifth and Sixth Respondents had terminated the Third Respondent’s employment as CFO of the merged business – where the Fifth and Sixth Respondents prevented access by the Third Respondent to information relating to the merged business and that business’ premises – where the Fifth Respondents arranged for the relocation of the business premises to a property beneficially owned by the Fifth Respondent – whether that conduct was oppressive – where the Applicant and Third Respondent commenced negotiations to sell their shares in the merged business – where the Fifth and Sixth Respondents required corrections to the recording of assets, namely the rent roll, before providing consent to the sale – where the proposed sale did not proceed – whether the conduct of the Fifth and Sixth Respondents in relation to the sale was oppressive –where the Fifth and Sixth Respondents requested further security and financial contributions by the Applicant and/or Third Respondent – whether these requests were reasonable – where the Fifth and Sixth Respondents’ gave instructions for the use of the Second Respondent’s money to pay for legal costs incurred in defending the interests of the First, Second, Fourth, Fifth, and Sixth Respondent in these proceedings – whether this use of funds was appropriate

CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER – STATUTORY DERIVATIVE ACTION – where payments from the funds of the merged business were made to the Fourth, Fifth, and Sixth Respondents…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] QSC 174
Decision Date: 2 August 2018

CaseChat Overview and Summary

Jawhite Pty Ltd and Trabme Pty Ltd are parties in a case before the Court, which concerns various claims relating to the merger of their respective real estate businesses. The Applicant and Third Respondent contracted with the Fourth, Fifth, and Sixth Respondents to merge their businesses. The First and Second Respondents constituted the merged business entities, and the Applicant was a shareholder of the merged business, while the Third Respondent was a shareholder, director, and employee of the merged business. The Applicant and Third Respondent claimed that the conduct of the Fifth and Sixth Respondents, who were also shareholders and directors of the merged business, was oppressive. This included the Fifth and Sixth Respondents terminating the Third Respondent’s employment as CFO of the merged business, preventing access by the Third Respondent to information relating to the merged business and its premises, arranging for the relocation of the business premises to a property beneficially owned by the Fifth Respondent, and requiring corrections to the recording of assets before providing consent to the sale of shares in the merged business. The Applicant and Third Respondent also sought to determine whether requests for further security and financial contributions by the Fifth and Sixth Respondents were reasonable, and whether the use of the Second Respondent’s money to pay for legal costs was appropriate.

The Court was required to decide whether the conduct of the Fifth and Sixth Respondents was oppressive, whether the requests for further security and financial contributions were reasonable, and whether the use of the Second Respondent’s money to pay for legal costs was appropriate. The Court also needed to determine whether payments from the funds of the merged business were improper, whether the Third Respondent misappropriated the funds of the merged business, whether the Third Respondent breached restraint of trade obligations, and whether loss or damage was suffered when the Applicant and Third Respondent refused to provide further security or capital to renew the finance facilities of the merged business.

The Court found that the conduct of the Fifth and Sixth Respondents was oppressive, as they had terminated the Third Respondent’s employment, prevented access to information and business premises, and required corrections to the recording of assets before providing consent to the sale of shares in the merged business. The Court also found that the requests for further security and financial contributions by the Fifth and Sixth Respondents were reasonable, and that the use of the Second Respondent’s money to pay for legal costs was appropriate. The Court determined that payments from the funds of the merged business were improper, as they included an amount paid in respect of a boat purchase by the Fifth Respondent. The Court found that the Third Respondent misappropriated the funds of the merged business by causing the Applicant and other entities to be paid funds from the merged business and by transferring monies held in trust by the First Respondent to the general account of the Second Respondent. The Court also found that the Third Respondent breached restraint of trade obligations by engaging in transactions to sell properties to potential clients of the merged business. Finally, the Court found that the Applicant and Third Respondent suffered loss or damage when they refused to provide further security or capital to renew the finance facilities of the merged business.

The Court shall hear the parties as to the appropriate orders, and costs.

Orders

Orders of the court

I shall hear the parties as to the appropriate orders, and costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

In reply, the applicant and third respondent denied any misleading and deceptive conduct, breach of duty or breach of contractual obligations, misappropriation of funds or any other unauthorised transactions.EvidenceThird respondent In the latter half of 2011, the third respondent had an informal discussion with the sixth respondent about the market and their businesses in general. They briefly discussed a possible merger of their real estate businesses. The sixth respondent said his business partner, the fifth respondent, was in Redcliffe that day. The sixth respondent returned to the third respondent’s office later that day indicating interest in a merger. The third, fifth and sixth respondents had a number of meetings. It was clear the businesses were similar. An agreement in principle was reached to merge businesses. The merged business would have offices at Redcliffe and Acacia Ridge. Internally, there would be a manager of sales, a manager of property management within Redcliffe and a manager of the Acacia Ridge office. It was agreed the merged business would operate under the Elders franchise. The third respondent scheduled a meeting with his solicitor, Rod Holloway and his accountant, Peter Di Tommaso. Holloway suggested a separation between the licensed entity and the operating entity in order to keep assets away from liabilities. The licensed entity would hold the corporate license and be the franchisee. That entity was the first respondent. The operating entity was the second respondent. The third, fifth and sixth respondents agreed that for the first three months, the merged business would employ all employees of the previous businesses, to ensure continuity of staff, particularly in property management. The third respondent’s wife, would continue to do some work in the merged businesses. The third respondent’s salary would be split between the third respondent and his wife, for taxation purposes. The third respondent said this arrangement was beneficial to the merged business. His wife was undertaking 15 to 20 hours work, particularly in relation to family properties owned by the third respondent’s wife and members of her family, without receiving any additional wages. . Both the fifth and sixth respondents agreed that arrangement was fine.[1][1] T1-67/24. The third, fifth and sixth respondents agreed the merged business would take on the liabilities of the previous businesses for equipment to be used in the merged business. The fourth respondent owned all of the possessions in its office. The applicant owned all of its possessions, apart from a photocopier. The third respondent did not believe the merged business would therefore need finance requirements for office equipment or fit out. There was a discussion about vehicles. Both the fifth and sixth respondents were leasing their vehicles. It was agreed the merged business would pay for fuel, insurance and servicing of the vehicles, but not leasing requirements.[2][2] T1-70/15.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

SUPREME COURT OF QUEENSLAND
CITATION:	Jawhite Pty Ltd v Trabme Pty Ltd & Ors [2018] QSC 174
PARTIES:	JAWHITE PTY LTD ACN 106 661 287 (Applicant) v TRABME PTY LTD ACN 154 609 159 (First Respondent) BOEDRY PTY LTD ACN 154 609 882 (Second Respondent) TRENT ANDREW RYAN (Third Respondent) VESTWELL PTY LTD ACN 106 478 808 (Fourth Respondent) ADAM BOLAND (Fifth Respondent) MARK EDWARDS (Sixth Respondent)
FILE NO/S:	S No 2310 of 2014
DIVISION:	Trial
PROCEEDING:	Application and counter-claim
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	2 August 2018
DELIVERED AT:	Brisbane
HEARING DATE:	20-24 March 2017, 27-30 March 2017, 15 June 2017, 29-31 January 2018, 1-2 February 2018, 5-9 February 2018, 16 March 2018
JUDGE:	Boddice J
ORDER:	I shall hear the parties as to the appropriate orders, and costs.
CATCHWORDS:	CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – OPPRESSIVE OR UNFAIR CONDUCT – WHAT CONSTITUTES – CONDUCT OF OR RELATING TO DIRECTORS – where the Applicant and Third Respondent contracted with the Fourth, Fifth, and Sixth Respondents to merge their respective real estate businesses – where the First and Second Respondents constituted the merged business entities – where the Applicant was a shareholder of the merged business – where the Third Respondent was a shareholder, director, and employee of the merged business – where the Applicant and Third Respondent claimed the conduct of the Fifth and Sixth Respondents, whom were also shareholders and directors of the merged business, was oppressive – where the Fifth and Sixth Respondents had terminated the Third Respondent’s employment as CFO of the merged business – where the Fifth and Sixth Respondents prevented access by the Third Respondent to information relating to the merged business and that business’ premises – where the Fifth Respondents arranged for the relocation of the business premises to a property beneficially owned by the Fifth Respondent – whether that conduct was oppressive – where the Applicant and Third Respondent commenced negotiations to sell their shares in the merged business – where the Fifth and Sixth Respondents required corrections to the recording of assets, namely the rent roll, before providing consent to the sale – where the proposed sale did not proceed – whether the conduct of the Fifth and Sixth Respondents in relation to the sale was oppressive –where the Fifth and Sixth Respondents requested further security and financial contributions by the Applicant and/or Third Respondent – whether these requests were reasonable – where the Fifth and Sixth Respondents’ gave instructions for the use of the Second Respondent’s money to pay for legal costs incurred in defending the interests of the First, Second, Fourth, Fifth, and Sixth Respondent in these proceedings – whether this use of funds was appropriate CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS' REMEDIES AND INTERNAL DISPUTES – PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER – STATUTORY DERIVATIVE ACTION – where payments from the funds of the merged business were made to the Fourth, Fifth, and Sixth Respondents…