JTA Le Roux Pty Ltd v Lawson [No 2]

[2013] WASC 373

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   JTA LE ROUX PTY LTD as trustee for the FLR FAMILY TRUST -v- LAWSON [No 2] [2013] WASC 373

CORAM:   EDELMAN J

HEARD:   8 OCTOBER 2013

DELIVERED          :   9 OCTOBER 2013

FILE NO/S:   CIV 1055 of 2013

BETWEEN:   JTA LE ROUX PTY LTD as trustee for the FLR FAMILY TRUST

Plaintiff

AND

STEVEN JOHN LAWSON
KYLIE DOREEN LAWSON as trustees for THE LAWSON FAMILY TRUST
Defendants

(BY ORIGINAL ACTION)

STEVEN JOHN LAWSON
KYLIE DOREEN LAWSON as trustees for THE LAWSON FAMILY TRUST
Plaintiff

AND

JTA LE ROUX PTY LTD as trustee for the FLR FAMILY TRUST
First Defendant

AND

FRANCOIS LE ROUX
Second Defendant

AND

LAWSONS COMMERCIAL FLOORING PTY LTD
Third Defendant

(BY COUNTERCLAIM)
 

Catchwords:

Injunctions - Mandatory interlocutory injunction - Test to be applied for mandatory interlocutory injunction - Unusual circumstances of this case which permit the test for whether the orders should be made to be solely based on the better construction of the relevant clause

Legislation:

Nil

Result:

Injunction granted

Category:    A

Representation:

Original Action

Counsel:

Plaintiff:     Mr P McGowan

Defendants:     Mr M Bruce

Solicitors:

Plaintiff:     Cornerstone Legal

Defendants:     Bennett & Co

Counterclaim

Counsel:

Plaintiff:     Mr M Bruce

First Defendant             :     Mr P McGowan

Second Defendant         :     Mr P McGowan

Third Defendant           :     No appearance

Solicitors:

Plaintiff:     Bennett & Co

First Defendant             :     Cornerstone Legal

Second Defendant         :     Cornerstone Legal

Third Defendant           :     No appearance

Cases referred to in judgment:

ACCC v Allphones Retail Pty Ltd (No2) [2009] FCA 17; (2009) 253 ALR 324

Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd [1991] 1 Qd R 301

ADI v Aerospace Systems Management Pty Ltd [2003] NSWSC 758

Australian Airlines Commission v Commonwealth (1986) 17 FCR 445

Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618

BGC Construction Pty Ltd v Minister for Works [2009] WASC 398

Bingham v 7‑Eleven Stores Pty Ltd [2003] QCA 402

Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65

Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499

Chen v Chen [2003] VSC 479

Conquo v Jackson [2009] FCA 45

Construction, Forestry, Mining and Energy Union v Caelli Constructions (Vic) Pty Ltd [2009] FCA 655; (2009) 183 IR 435

Elan Trading Corporation Pty Ltd v Clarence Street Freeholds Pty Ltd [2001] VSC 339

Fegan v Jackson [2009] FCA 338; (2009) 183 IR 306

Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49

Hi‑Struct Constructions Pty Ltd v ACN 064 828 520 Pty Ltd (unreported, VSC, 18 June 1996)

Instyle Contract Textiles Pty Ltd v Good Environmental Services Pty Ltd (No 2) [2010] FCA 38

JTA Le Roux Pty Ltd v Lawson [2013] WASC 293

Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533

Madafferi v Minister for Immigration and Multicultural Affairs [2001] FCA 788

Mayo Group International Pty Ltd v Hudson Respiratory Care [2005] NSWSC 445

McDermott v BP Australia Ltd (1997) ATPR 41 - 547

Midland Milk Pty Ltd v Victorian Dairy Industry Authority (1987) 82 ALR 279

NA Retail Solutions Pty Ltd v St George Bank Ltd [2010] FCA 259

NA Retail Solutions Pty Ltd v St George Bank Ltd [2010] FCA 290; (2010) 267 ALR 599

Neoinvent v National Broadband [2005] NSWSC 1162

NWL Ltd v Woods [1979] 1 WLR 1294

Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318

Parmalat Australia Pty Ltd v VIP Plastic Packaging Pty Ltd [2013] FCA 119; (2013) 210 FCR 1

Racecourse Totalitzators Pty Ltd v Totalisator Administration Board of Queensland (1995) 58 FCR 119

Redland Bricks Ltd v Morris [1970] AC 652

Ryan v Electricity Networks Corporation [2009] FCA 734; (2009) 185 IR 201

Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 286 ALR 257

Shepherd Homes Ltd v Sandham [1971] 1 Ch 340

Storm Financial Ltd v Commonwealth Bank of Australia [2008] FCA 1991

The State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243

Todd v Novotny [2001] WASC 171

Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110

Yara Australia Pty Ltd v Burrup Holdings Ltd [2010] FCA 1273; (2010) 80 ACSR 641

Text cited:

Brooks R, Landeo C & Spier K, 'Trigger Happy or Gun Shy? Dissolving Common-Value Partnerships with Texas Shootouts' (2010) 41(4) Rand Journal of Economics 649

EDELMAN J: 

Introduction

1. The Lawsons and JTA Le Roux Pty Ltd each hold half of the shares in the company at the centre of these proceedings, Lawsons Commercial Flooring.  Their relationship has broken down.  They have commenced a myriad of litigation.  In the meantime, the company is paralysed.

2. A Shareholders' Agreement between the parties provides for a fourfold dispute resolution procedure which must be complied with by the parties before court proceedings are commenced, other than urgent interlocutory proceedings:

   (i)informal discussion;

   (ii)mediation;

   (iii)the possibility of a Texas Shootout with reconsideration of the deadlock issue between the parties immediately beforehand; and

   (iv)the possibility of a compulsory winding up if a Party (or parties as the case may be) defaults on an acquisition of Shares under the Texas Shootout.

3. On 6 August 2013, I heard an application by the Lawsons to strike out a statement of claim in proceedings commenced by JTA Le Roux.  Those proceedings had not complied with the dispute resolution clause.  The statement of claim was struck out:  JTA Le Roux Pty Ltd v Lawson.[1] 

   [1] JTA Le Roux Pty Ltd v Lawson [2013] WASC 293.

4. On Friday 30 August 2013,[2] 22 days after my decision on the strike out application, the Lawsons made a Texas Shootout offer to JTA Le Roux.  The literal terms of clause 13.10 of the Shareholders' Agreement required JTA Le Roux, within seven days, either (i) to acquire the Lawsons' shares on the offer terms, or (ii) to give a Counter Notice requiring the Lawsons to purchase all of JTA Le Roux's Shares within 14 days on the same offer terms.

   [2] Affidavit of Mr Lawson (26 September 2013) [9] – [10].

5. JTA Le Roux did not respond to the offer notice.  The Lawsons have brought a counterclaim in the proceedings to enforce the Texas Shootout.  JTA Le Roux, Mr Le Roux and Lawsons Commercial Flooring are defendants to the counterclaim.

6. On Monday 2 September 2013, JTA Le Roux and Mr Le Roux served six notices of default and two writs of summons on the Lawsons.[3]

   [3] Affidavit of Mr Lawson (26 September 2013) [41], [52].

7. The following Friday, 11 September 2013, JTA Le Roux made a demand of the Lawsons for payment of $2.46 million.  This is said to be due under one of the loan agreements.  JTA Le Roux asserts that this demand has placed Lawsons Commercial Flooring into a position of insolvency.  It has sought agreement from the Lawsons for the company to be wound up voluntarily.[4]

   [4] Affidavit of Mr Lawson (26 September 2013) [61].

8. The Lawsons dispute the statutory demand.  They do not want the company to be wound up.  They rely on the Texas Shootout offer.  They say that JTA Le Roux is required to buy their shares for the offer amount of $100 (taking over the full ownership of the company) or, alternatively, that JTA Le Roux must sell its shares to the Lawsons for $100.

9. This application concerns the clause of the Shareholders' Agreement dealing with the Texas Shootout.  The application raised controversial issues about the approach to be taken to an application for a mandatory interlocutory injunction.  Ultimately, in the unique circumstances of this case, the only question is whether, as a matter of construction, JTA Le Roux's failure to respond to the Texas Shootout offer was a 'default on an acquisition of Shares' which triggers a compulsory winding up under clause 13.12 of the Shareholders' Agreement, precluding the operation of the Texas Shootout.

10. The proper construction of clause 13.12 of the Shareholders' Agreement is that a failure to communicate an intention to purchase shares is not a 'default on an acquisition of Shares' triggering a compulsory winding up.  It is appropriate for a mandatory interlocutory injunction to issue to compel compliance by JTA Le Roux with a preliminary obligation in the Texas Shootout procedure, namely communication of its intention.

The relevant part of the dispute resolution clause

1. The relevant parts of the dispute resolution clause for this application are as follows.

   13.DISPUTE RESOLUTION

   13.1Not to Commence Court Proceedings

   If any dispute arises out of this Agreement (Dispute) a party to this Agreement must not commence any court proceedings unless the parties to the Dispute have complied with the following paragraphs of this clause, except where a party seeks urgent interlocutory relief.

   ...

   13.8Dispute still Unresolved

   If the Dispute is still unresolved 60 days after the appointment of a Mediator, then any Shareholder (the Offeror) may offer by notice in writing (the Offer Notice) to the other Shareholder (the Offeree) to sell all of the Offeror's shares to the Offeree:

   (a)for a price nominated in the Offer Notice (the Share Offer Price); and

   (b)on the terms and conditions, set out in the Offer Notice.

   13.9Reconsideration of Deadlock Issue

   On receipt of the Offer Notice the Receiving Parties and the Directors nominated by the Receiving Parties may reconsider their position on the relevant issue causing the deadlock.

   13.10Acquisition of Shares

   (a)If the deadlock is not resolved within fourteen (14) days of the date of receipt of the Offer Notice, the Offeree must, within the further seven (7) days either:

   (i)acquire the Offeror's shares for the Share Offer Price and on the terms specified in the Offer Notice; or

   (ii)give notice in writing (the Counter Notice) to the Offeror stating that the Offeree:

   (A)does not intend to purchase the Offeror's Shares; and

   (B)instead requires that the Offeror purchases all of the Offeree's Shares within fourteen (14) days of the date of receipt of the Counter Notice at the price per Share and upon the other terms set out in the Offer Notice.

   (b)Not later that fourteen (14) days after the date of receipt of the Counter Notice, the Offeror must purchase the Offeree's Shares upon the terms set out in the Offer Notice.

   13.11Conditions of Purchase

   A purchase under cl 13.10 will take place by the purchaser, within the time specified, contemporaneously:

   (a)delivering a cheque to the vendor for the purchase price;

   (b)receiving from the vendor the share certificates for the relevant shares together with an executed transfer of those shares in favour of the purchaser;

   (c)ensuring that the Company repays all amounts then owing by the Company to the vendor; and

   (d)discharge or [sic] cross indemnity for guarantees provided by the vendor or its nominee director on behalf of the Company.

   13.12Compulsory Winding Up

   If a Party (or parties as the case may be) defaults on an acquisition of Shares pursuant to this clause then:

   (a)the Shareholders must convene a general meeting of the Shareholders of the Company for the purpose of appointing a liquidator to wind up the affairs of the Company and at such meeting must cast such number of votes as is necessary to resolve that a liquidator be appointed and the affairs of the Company be would up; and

   (b)the party (or parties as the case may be) shall not otherwise be deemed to be in default under cl 12 by virtue of the default in acquisition of shares under this cl 13.

   13.13Survival of Clause

   This clause will survive termination of this Agreement.

The mandatory interlocutory injunction sought by the Lawsons

1. JTA Le Roux and Mr Le Roux accept that:[5]

   (1)The Lawsons have engaged clause 13.8 of the Shareholders' Agreement;

   (2)The deadlock was not resolved within 14 days of receipt of the offer notice; and

   (3)JTA Le Roux has not made an election to take or put the Lawsons' shares in the company under clause 13.10 of the Shareholders' Agreement.

   [5] JTA Le Roux submissions, 8 October 2013 [5].

2. After a lengthy exchange in oral submissions, counsel for the Lawsons, whose submissions were of great assistance, amended the terms of the proposed mandatory interlocutory injunction.  The amended terms narrowed the mandatory interlocutory injunction substantially.   The amended terms were as follows:

   JTA Le Roux Pty Ltd do forthwith either notify the Lawsons that

   1.it intends to acquire all of the shares owned by Steven John Lawson and Kylie Doreen Lawson (the Shares) in Lawsons Commercial Flooring Pty Ltd for the sum of $100, on the terms set out in clause 13.11 of the Shareholders Agreement; or

   2.give a notice in writing (Notice) stating that it:

   2.1does not intend to purchase the Shares; and

   2.2requires that Steven Lawson and Kylie Lawson as trustees for the Lawson Family Trust within 14 days of the date of the Notice purchase, for the sum of $100 on the terms set out in clause 13.11 of the Shareholders Agreement, all of the shares owned by JTA Le Roux Pty Ltd in Lawsons Commercial Flooring Pty Ltd.

3. After further oral submissions, and in light of the amendment to the orders sought by the Lawsons, the issue between the parties narrowed to the sole question of construction which both counsel agreed is as follows:[6]

   Do the words 'default[ed] on an acquisition of Shares pursuant to this clause [13.12]' include a default which involves failing to communicate an intention to acquire Shares?

   [6] ts 85 (9 October 2013).

The test for whether a mandatory interlocutory injunction should issue

1. There is a conflict in the authorities concerning the test to be applied to a case involving a mandatory interlocutory injunction.  This conflict was the subject of detailed written submissions before me.  I explain below my conclusion on this issue, and why, in the very unusual circumstances of this case, I consider that the approach ultimately accepted by both counsel is correct.  That approach is for the availability of the mandatory interlocutory injunction in this case to be determined simply by an assessment of which of the competing constructions is the better construction of the relevant clause.  

2. On one side of the conflict in the authorities concerning the test for a mandatory interlocutory injunction is those authorities which insist on a 'high degree of assurance' that following a final contested hearing the result would be no different to the result if the injunction were issued.[7]  Perhaps the zenith point of these authorities is the comments of Gibbs CJ sitting at first instance in the High Court of Australia, quoting from Halsbury's Laws of England and from Megarry J. 

   It is a very nice question where the balance of convenience lies in the present case but in the end two considerations have inclined me in favour of the view that I ought not to grant an interlocutory injunction at the present stage.  The first of those considerations is that what is sought is a mandatory injunction.  In Redland Bricks Ltd v Morris,[8] the House of Lords held that the grant of a mandatory injunction is never made as of course and that a factor to be taken into consideration is that the defendant has not behaved unreasonably but only wrongly.  According to Halsbury's Laws of England vol 24 para 948, the position regarding the grant of a mandatory injunction on an interlocutory application is as follows:

   A mandatory injunction can be granted on an interlocutory application as well as at the hearing, but, in the absence of special circumstances, it will not normally be granted.  However, if the case is clear and one which the court thinks ought to be decided at once, or if the act done is a simple and summary one which can be easily remedied, or if the defendant attempts to steal a march on the plaintiff, such as where, on receipt of notice that an injunction is about to be applied for, the defendant hurries on the work in respect of which complaint is made so that when he receives notice of an interim injunction it is completed, a mandatory injunction will be granted on an interlocutory application.

   Megarry J stated the principle in Shepherd Homes Ltd v Sandham,[9] in the following words:

   ... on motion, as contrasted with the trial, the court is far more reluctant to grant a mandatory injunction than it would be to grant a comparable prohibitory injunction. In a normal case the court must, inter alia, feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted; and this is a higher standard than is required for a prohibitory injunction.

   [7] The State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243, 245 (Gibbs CJ); Australian Airlines Commission v Commonwealth (1986) 17 FCR 445, 451 - 452 (Northrop J); Midland Milk Pty Ltd v Victorian Dairy Industry Authority (1987) 82 ALR 279, 291 (Foster J); Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd [1991] 1 Qd R 301, 304 (Shepherdson J); 314 - 315 (Cooper J); Storm Financial Ltd v Commonwealth Bank of Australia [2008] FCA 1991 [5] (Greenwood J); Ryan v Electricity Networks Corporation[2009] FCA 734; (2009) 185 IR 201 [7] (Siopis J); BGC Construction Pty Ltd v Minister for Works [2009] WASC 398 [19] (K Martin J); Parmalat Australia Pty Ltd v VIP Plastic Packaging Pty Ltd [2013] FCA 119; (2013) 210 FCR 1, 11 [17] (Collier J).

   [8] Redland Bricks Ltd v Morris [1970] AC 652.

   [9] Shepherd Homes Ltd v Sandham [1971] 1 Ch 340, 351.

3. On the other side of the conflict in the authorities, it has been held that the test to be met in applications for mandatory interlocutory injunctions is no different from the standard to be met in applications for prohibitory interlocutory injunctions.  This is now, by far, the dominant view.  Although the test for a mandatory interlocutory injunction is no different from a prohibitory interlocutory injunction, an important question in assessing the balance of convenience is the risk of injustice to the party to whom the injunction issues.  This risk is usually, but not always, high in cases involving mandatory interlocutory injunctions.[10]

   [10] Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 502 (Gummow J); Racecourse Totalitzators Pty Ltd v Totalisator Administration Board of Queensland (1995) 58 FCR 119, 123 (Kiefel J); Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318, 335 (Charles & Ormiston JJA); McDermott v BP Australia Ltd (1997) ATPR 41 - 547, 43 - 602 (Drummond J); Madafferi v Minister for Immigration and Multicultural Affairs [2001] FCA 788 [16] - [17] (Goldberg J); ADI v Aerospace Systems Management Pty Ltd [2003] NSWSC 758 [31] (Austin J); Mayo Group International Pty Ltd v Hudson Respiratory Care [2005] NSWSC 445 [59] (Young CJ); Neoinvent v National Broadband [2005] NSWSC 1162 [13] (Young CJ in Eq); Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65, 73 [33] (Maxwell P and Charles JA); Conquo v Jackson [2009] FCA 45 [30] (Sundberg J); Fegan v Jackson [2009] FCA 338; (2009) 183 IR 306 [35] (Kenny J); Construction, Forestry, Mining and Energy Union v Caelli Constructions (Vic) Pty Ltd [2009] FCA 655; (2009) 183 IR 435 [26] (Ryan J); Bingham v 7‑Eleven Stores Pty Ltd [2003] QCA 402 [106] (Williams, Jerrard JJA & Muir J); Instyle Contract Textiles Pty Ltd v Good Environmental Services Pty Ltd (No 2) [2010] FCA 38 [81] (Yates J); NA Retail Solutions Pty Ltd v St George Bank Ltd [2010] FCA 259 [17] (Flick J); NA Retail Solutions Pty Ltd v St George Bank Ltd [2010] FCA 290; (2010) 267 ALR 599, 612 [80] (Cowdroy J).

4. In some instances Courts have referred to both approaches considered above in order to resolve applications for mandatory interlocutory injunctions.[11]

   [11] Hi‑Struct Constructions Pty Ltd v ACN 064 828 520 Pty Ltd (unreported, VSC, 18 June 1996) 17 (McDonald J); Elan Trading Corporation Pty Ltd v Clarence Street Freeholds Pty Ltd [2001] VSC 339 [16] (Warren J); Chen v Chen [2003] VSC 479 [39] (Habersberger J).

1. In my opinion, the approach proposed by Gibbs CJ at first instance should no longer be followed.  Many authorities have now declined to follow it.  His Honour's remarks are not binding.  The contrary approach also does not appear to have been the subject of argument before him in that case.  

2. We should no longer chase this hare. 

3. As Kiefel J explained in 1995,[12] the classification of an injunction as 'mandatory' should not automatically attract a requirement that the Court should have further confidence in the correctness of the order.  The line between an order which requires something to be done and an order which prohibits something from being done can sometimes be fine. Gummow J further explained in Businessworld Computers Pty Ltd v Australian Telecommunications Commission[13] that mandatory interlocutory injunctions are more likely to issue when the order requires a defendant to revert to a course of conduct which was pursued before the occurrence of the acts or omissions which provoked the litigation, such that the risk of injustice is diminished.

   [12] Racecourse Totalitzators Pty Ltd v Totalisator Administration Board of Queensland (1995) 58 FCR 119, 123.

   [13] Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 503.

4. A second reason supporting a unitary test for interlocutory injunctions is that the strength of a case which a Court considers necessary to justify the grant of an interlocutory injunction is not a static matter even in a case of a 'prohibitory' interlocutory injunction.  It is affected by the balance of convenience.  In Beecham Group Ltd v Bristol Laboratories Pty Ltd[14] the High Court stated that '[h]ow strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks'.[15]  As Beech J said in Twinside Pty Ltd v Venetian Nominees Pty Ltd,[16] 'as the apparent strength of the applicant's case diminishes, the balance of convenience moves against the making of an order'.

   [14] Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 (Kitto, Taylor, Menzies & Owen JJ).

   [15] See also Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 82 [65] (Gummow & Hayne JJ); Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 286 ALR 257, 273 [55] (Dowsett, Foster & Yates JJ); Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [9] ‑ [11] (Beech J).

   [16] Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [11], citing Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 54 - 55 (Young CJ); Todd v Novotny [2001] WASC 171 [9] (Parker J).

5. In some, perhaps many, cases where an interlocutory mandatory order is sought, considerations involving the balance of convenience will include the extent to which the order intrudes upon the liberty of the respondent.  Another relevant consideration may be whether a defendant who has raised a triable issue will be deprived, by a mandatory order, of a full hearing of the issue if the effect of that mandatory order is final determination of the proceedings.[17]  But these matters can, and should, be assessed as part of the balance of convenience.

   [17] NWL Ltd v Woods [1979] 1 WLR 1294, 1305 (Lord Diplock); Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J); Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 84 [57] (Gummow & Hayne JJ); Yara Australia Pty Ltd v Burrup Holdings Ltd [2010] FCA 1273; (2010) 80 ACSR 641 [79] – [85] (Barker J); ACCC v Allphones Retail Pty Ltd (No2) [2009] FCA 17; (2009) 253 ALR 324, 329 [27] – [31] (Foster J).

The unique application of the standard approach in this case

1. As I have explained, the appropriate approach to take to a mandatory interlocutory injunction should be the standard approach which includes considering whether there is a prima facie case and the balance of convenience.

2. But it emerged in oral submissions from counsel for the Le Roux parties that there were no relevant matters weighing in the balance of convenience against the grant of the mandatory interlocutory injunction.  Counsel for the Le Roux parties also proceeded on the basis that damages would not be an adequate remedy for the Lawsons.  I accept that this is the case in circumstances in which compliance with the dispute resolution clause can affect the ownership of shares in a private company. 

3. The only remaining question is then whether the prima facie case is of sufficient strength to justify a mandatory interlocutory injunction in this case.  Counsel for the Lawsons accepted that the effect of a grant of a mandatory interlocutory injunction in this case would be to give the Lawsons the relief which they might seek in an amended counterclaim without a full trial of the issue.  For that reason, counsel submitted that the Lawsons had an onus of showing not merely a prima facie case that their construction of clause 13.10 was correct, but that the Court should be satisfied that a finding can be made that this construction was correct.  This was not the subject of dispute and I proceed on this basis.

4. Counsel for the Le Roux parties accepted that there is no relevant evidence which might be led at a trial of the issue now agitated.  Preparation of submissions and the development of arguments might proceed at a more leisurely and deliberative pace but the point now agitated is a short legal issue.  The submissions of counsel for the Le Roux parties were clear and succinct.  It is hard to see, in light of the issue as it was narrowed, how there could be any prejudice to the Le Roux parties by the submissions being made at this hearing, rather than later at an expedited trial.

5. In these circumstances, it ultimately became common ground that the application in this case was, effectively, indistinguishable from a trial of a preliminary issue of construction.  I accept that this approach is appropriate.  Counsel for the Le Roux parties did not submit that there was any reason why a mandatory interlocutory injunction would be unavailable if the Le Roux parties' construction were not correct.  For instance, he did not suggest that the injunction should not be granted because it would amount to specific performance in circumstances in which specific performance was unavailable.  It was common ground that the application's success or failure depended solely on the issue of construction.

The proper construction of clauses 13.10 and 13.12

1. The short legal point of construction in dispute between the parties clearly emerged by the conclusion of oral submissions.  As I have explained, the issue is whether JTA Le Roux 'default[ed] on an acquisition of Shares pursuant to this clause [13.12]' by failing to communicate an intention to acquire Shares.

2. It was common ground that, as the Offeree, JTA Le Roux was required by clause 13.10 to communicate its intention to the Lawsons either by a Counter Notice which included notice that it did not intend to purchase the Lawson shares, or by some form of notice that it did intend to purchase the Lawson shares. 

3. There is no express requirement for JTA Le Roux to communicate its intention to purchase the Lawson shares prior to effecting any such purchase.  But that requirement must be implied by the conditions of purchase in clause 13.11.  Those conditions require, within seven days, contemporaneous exchange of:  (a) the purchase price (from JTA Le Roux); (b) the share certificates and an executed transfer for the Lawson shares; and (c) an executed transfer of those shares in favour of the purchaser (from the Lawsons).  That contemporaneous exchange could only take place if notice of an intention to purchase were given by JTA Le Roux.

4. The question then is whether there is a 'default on an acquisition of Shares pursuant to [clause 13]' arising from the failure of JTA Le Roux either to give notice of its intention to acquire or to give a Counter Notice which includes notice that JTA Le Roux does not intend to purchase the Lawsons' Shares.  Clause 1.1 defines Share as 'an ordinary share in the capital of the Company'.

5. This failure by JTA Le Roux to give notice cannot be a 'default on an acquisition of Shares' by the Lawsons since the Lawsons had not received any Counter Notice and were not obliged to acquire any shares. 

6. Nor, on the proper construction of clause 13.12 could there be a default on an acquisition of Shares by JTA Le Roux.  This is for four reasons.

7. First, as a matter of linguistic usage, the communication of whether there is an intention to acquire is different from, and precedes, any possible acquisition itself.

8. Counsel for the Le Roux parties submitted that the use of the word 'on' in clause 13.12 was material.  He submitted that there was a distinction between a default 'in an acquisition of Shares' and a default 'on an acquisition of Shares'.  I do not consider that the use of the word 'on', assists the Le Roux parties.  If anything, a default 'on' an acquisition, much like a default 'upon' an acquisition, implies that there has already been an agreement to acquire.  But, in any event, later in clause 13.12, the words 'default in acquisition of shares' are used interchangeably:  'the party (or parties as the case may be) shall not otherwise be deemed to be in default under clause 12 by virtue of the default in acquisition of shares under this clause 13' (emphasis added).

9. Secondly, JTA Le Roux failed to give either a notice of intention to acquire or a Counter Notice which included an intention not to acquire.  How could JTA Le Roux be in default on an acquisition of Shares if its obligation could be satisfied by issuing a notice that it did not intend to acquire the Shares?  In other words, JTA Le Roux could not be in default on an acquisition of Shares in circumstances in which it was not required to acquire Shares.

10. Thirdly, if a failure to give notice of intention in response to a clause 13.8 offer were a default on an acquisition of Shares which led to compulsory winding up then this could defeat the operation and manifest purpose of the Texas Shootout clause, clause 13.10. 

11. As I explained in my first judgment in this matter, a Texas Shootout has been described as the 'optimal exit mechanism'.[18]  The amount of the offer in this case, $100, might raise questions about whether the fairness assumed in the theory of these clauses is as real in practice.  But such clauses appear, at least in theory, to be designed on the principle of the Golden Rule.  The party who cites the terms should be prepared either to buy or to sell on those terms.  If the party to whom the offer is made has, in effect, the alternative of winding up the company instead of accepting the offer or making a counter‑offer, then the careful balance created by the Texas Shootout is shattered.  The Texas Shootout is no longer a shootout at all. 

    [18] Brooks R, Landeo C & Spier K, 'Trigger Happy or Gun Shy? Dissolving Common‑Value Partnerships with Texas Shootouts' (2010) 41(4) Rand Journal of Economics 649, 650.

12. Fourthly, the scheme of clause 13 (the dispute resolution clause) involves a progress from the most consensual forms of dispute resolution to the least consensual.  This scheme involves an objectively narrow scope for the circumstances of operation of the final dispute resolution mechanism, which is winding up. 

13. The clause begins with informal discussion.  It then moves to formal mediation.  It then creates an enforced consensual agreement by a Texas Shootout, although not before providing for the option of reconsideration of the deadlock issue between the parties immediately before the shootout.  The final, and last, resort is the possibility of a compulsory winding up if there is a default on an acquisition of shares under the Texas Shootout. 

14. This scheme favours a narrow approach to clause 13.12 and a narrow construction of the circumstances which amount to default on an acquisition of shares.

Conclusion

1. An order should be made for a mandatory interlocutory injunction. 

2. It is appropriate that the order be made in terms similar to those sought by counsel for the Lawsons, with one exception.  The exception is that the terms of the proposed injunction require JTA Le Roux to act 'forthwith'.  An injunction carries the potential sanction of contempt of Court.  The requirement of acting 'forthwith', in the circumstances of this case, is too imprecise.  I will hear from the parties if a precise period cannot be agreed for the order for performance of the obligation of JTA Le Roux to give notice of its intention as offeree under the Texas Shootout clause.

3. This has been the second contested proceeding in this matter concerning the application of the dispute resolution clause of the Shareholders' Agreement.  It appears from the oral submissions and the affidavit evidence that it is unlikely that this will be the last hearing.  The circumstances in which the parties now find themselves involve the following:

   (i)the company remains deadlocked;

   (ii)Mr Lawson's evidence, and no doubt the position also of the Le Roux parties, is that he is suffering considerable stress;

   (iii)Mr Lawson's employment contract with the company concluded on 1 July 2013, although he continues to operate the company as the managing director;

   (iv)a previously close relationship between Mr Le Roux and Mr Lawson has disintegrated to communication only through their legal advisors; and

   (v)legal costs for all parties must be mounting, and with no end in sight.

4. The parties have mediated their dispute.  There was affidavit evidence that at the mediation JTA Le Roux reached agreement with the Lawsons which was conditional upon JTA Le Roux obtaining finance, which it was unable to do.[19]  Presumably, the finance was for more than $100.  On the part of the Lawsons, the Texas Shootout offer was in the amount of $100.  One can only hope that the parties do not lose sight of possible commercial resolution of a dispute which has the real possibility of spiralling out of control in terms of both financial and personal cost to all the parties.

   [19] Affidavit of Mr Lawson (26 September 2013) [6].