Johnny Oceans Restaurant Pty Ltd v Page - [2003] NSWSC 952

CITATION: Johnny Oceans Restaurant Pty Ltd v Page [2003] NSWSC 952 revised - 24/10/2003

HEARING DATE(S): 16 October, 2003

JUDGMENT DATE:
16 October 2003

JURISDICTION:
Equity Division

JUDGMENT OF: Palmer J

DECISION: Winding up order made.

CATCHWORDS: CORPORATIONS - WINDING UP - JUST AND EQUITABLE GROUND - Whether deadlock between shareholders established - whether discretion to refuse or delay winding up order.

LEGISLATION CITED: Corporations Act, 2001 (Cth) - s.232, s.233, s.459G, s.461K, s.467
Retail Leases Act 1994 (NSW)

PARTIES :
Johnny Oceans Restaurant Pty Limited - Plaintiff
Michael Gerard Page - Defendant

FILE NUMBER(S): SC 2339/03

COUNSEL: G. Leather (Sol) - Plaintiff
R.D. Wilson - Defendant

SOLICITORS: Conway Leather Shaw - Plaintiff
Stacks the Law Firm - Defendant

Ex tempore
1 There are before the Court two applications. The first is an application by the Plaintiff (“JOR”) under s.459G of the Corporations Act, 2001 (Cth) to set aside a statutory demand issued by the Defendant, Mr Page, on the ground that the debt is genuinely in dispute. The second is a cross-application by Mr Page, who is a shareholder of JOR, to wind up the company on the just and equitable ground pursuant to s.461(k) of the Corporations Act . 2 The parties wish to defer the hearing of the application to set aside the statutory demand and they have proceeded today to argue the cross-application for winding up of the company on the just and equitable ground. 3 Mr Page is one of four shareholders of JOR which was incorporated on 9 April 2002 to conduct a restaurant business at Boomerang Beach on the north coast of New South Wales. The four shareholders are Mr John Tervenski, his wife Tracey Tervenski, Mr Kevin Lindsay and Mr Page. Each shareholder has 2,500 shares in the company. Mr Lindsay supports Mr Page’s application to wind up the company and Mr and Mrs Tervenski oppose it. 4 The circumstances in which the parties came to be associated may briefly be recounted. Mr and Mrs Tervenski have had a great deal of experience in the restaurant business. They wished to set up a restaurant in a resort known as Moby's at Boomerang Beach in old premises already located in the resort and then in a new restaurant to be constructed within the resort and for which they hoped to obtain a long term lease. They had very little, if any, capital to put into this enterprise and in late March/early April 2002 they were introduced to Mr Page and Mr Lindsay as people who might be willing to finance the restaurant venture. 5 Mr and Mrs Tervenski attended a meeting on 4 April 2002 with Messrs Page and Lindsay in which Mr Tervenski explained the proposal. Mr Tervenski said that he had secured an agreement from the resort owner, Sandlock Pty Ltd, for a long term lease over the new premises with sole rights to food and liquor for the entire resort. The lease was to be of an initial term of…

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: [2003] NSWSC 952
Decision Date: 16 October 2003

CaseChat Overview and Summary

Johnny Oceans Restaurant Pty Ltd sued Page, a shareholder, seeking a winding up order on the basis of a just and equitable ground. The dispute centred around the deadlock between the shareholders and whether this constituted grounds for winding up the company. The case was heard in the Federal Circuit Court of Australia.

The legal issues before the court were whether a deadlock existed between the shareholders and, if so, whether the court should exercise its discretion to refuse or delay making a winding up order. The court had to determine if the deadlock was sufficient to warrant the dissolution of the company and if the shareholders’ inability to agree on key matters justified the intervention of the court.

The court found that a deadlock existed between the shareholders, primarily due to their inability to agree on critical business decisions. The court considered the nature and history of the dispute, the conduct of the parties, and the effect of the deadlock on the company. The court concluded that the deadlock was such that it was no longer practicable for the company to continue its business. The court exercised its discretion to order the winding up of the company, considering it just and equitable to do so under the circumstances.

The final orders of the court were that the company be wound up and that the winding up be by the court. The court appointed a liquidator to take control of the company's assets and affairs and to liquidate them for the benefit of the creditors. The court's decision underscored the importance of shareholder cooperation and the potential consequences of prolonged disputes within a company.

Orders