Millar v Ropeload Pty Ltd

Case [2020] FCA 725

FEDERAL COURT OF AUSTRALIA

Millar v Ropeload Pty Ltd [2020] FCA 725

File number(s): VID 519 of 2019
Judge(s): O'CALLAGHAN J
Date of judgment: 28 May 2020
Catchwords: CORPORATIONS – application for cancellation of shares, rectification of share register or damages – representations as to future matters – alleged misleading or deceptive conduct – whether representations were conveyed
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth) ss 12GD, 12GF

Corporations Act 2001 (Cth) ss 175, 1324, 1325

Cases cited:

Watson v Foxman (1995) 49 NSWLR 315

Jackson v Lithgow City Council [2008] NSWCA 312

Re McCarthy Surfacing Ltd [2009] 1 BCLC 622

Date of hearing:

7-10 October 2019

13 November 2019
Date of last submissions: 29 April 2020
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 115
Counsel for the Applicant: Mr MD Wyles QC with Ms S Pathan
Solicitor for the Applicant: Kellow Commercial Lawyers
Counsel for the First and Second Respondents: Mr EN Magee QC with Mr SK Morris
Solicitor for the First and Second Respondents: Kennedy Guy Lawyers
Solicitor for the Third Respondent: Mr S Angelatos of Maciel Pizzorno & Co Lawyers and Consultants

ORDERS

VID 519 of 2019
BETWEEN:

JASON JAMES LESLIE MILLAR

Applicant
AND:

ROPELOAD PTY LTD ACN 616 555 750

First Respondent

ROBERTO CORVETTI

Second Respondent

MILLARS HEAVY HAULAGE PTY LTD ACN 106 794 478

Third Respondent

JUDGE:

O'CALLAGHAN J

DATE OF ORDER:

28 MAY 2020

THE COURT ORDERS THAT:

1.The applicant’s application be dismissed.

2.The first respondent’s cross-claim be dismissed.

3.The parties file and serve outlines of submission on costs not exceeding 5 pages within 7 days.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

O’CALLAGHAN J:

INTRODUCTION

  1. Mr Jason Millar (or the applicant) has experience, skill and reputation in the heavy haulage industry in Australia, which involves the transportation of oversized components of infrastructure, including large components of wind farm equipment.  He is the Managing Director of Ares Transport Group Pty Ltd (Ares), which since August 2016 has provided heavy haulage services using specialised equipment.

  2. Mr Millar is also the Managing Director of the third respondent, Millars Heavy Haulage Pty Ltd (MHH), which owns heavy haulage equipment and leases it to Ares.  Ares is wholly owned by MHH.

  3. Mr Millar caused Ares to be incorporated on 10 August 2016.  Originally, it was wholly owned by Jason Millar Investments Pty Ltd (JMI), which was wholly owned by Mr Millar.

  4. On 22 November 2016, Mr Millar and Mr Roberto Corvetti agreed that Mr Corvetti or his nominee would be issued 45% of the shares in Ares.  Mr Corvetti, the second respondent, was and is the General Manager of Westkon Precast Concrete Pty Ltd (Westkon) and the CEO of Westkon’s corporate group.  Westkon specialises in the production and construction of precast concrete products for major public projects.

  5. On…

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Details
AGLC
Millar v Ropeload Pty Ltd [2020] FCA 725
Case
[2020] FCA 725
Decision Date

CaseChat Overview and Summary

The case of Millar v Ropeload Pty Ltd involves Mr Millar, a former employee of Toll Global Logistics, who seeks either the cancellation of shares, rectification of the share register, or damages against Mr Corvetti and Ropeload. Millar claims that Corvetti made misleading or deceptive representations regarding future work opportunities for a new heavy haulage business that Millar and his friend, Mr Kelly, intended to start. Millar alleges that these representations induced him to issue shares in his company to Ropeload, resulting in a significant economic loss. The legal issues before the court include whether Corvetti's representations were indeed misleading or deceptive, and if these representations materially influenced Millar's decision to issue shares to Ropeload.

The court meticulously examined the nature and content of the alleged representations made by Corvetti to Millar. It was established that Corvetti made various statements about the future business opportunities and commitments from Westkon, which Millar believed to be credible due to Corvetti's position and influence. However, the court found that Corvetti did not have the authority to make such commitments on behalf of Westkon and that his statements were not substantiated by any actual agreements or board approvals. The court held that while Millar was entitled to rely on Corvetti's representations, there was insufficient evidence to establish that these representations were misleading or deceptive within the legal framework of the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001.

Consequently, the court dismissed Millar's application, finding that the representations did not meet the threshold for misleading or deceptive conduct. Additionally, the court dismissed the cross-claim brought by Mr Corvetti. The parties were directed to submit outlines of their submissions on costs within a specified timeframe. This decision underscores the importance of substantiated and authorised representations in business dealings and the stringent requirements for proving misleading or deceptive conduct under corporate law.

Orders

Orders of the court

1. The applicant’s application be dismissed.

2. The first respondent’s cross-claim be dismissed.

3. The parties file and serve outlines of submission on costs not exceeding 5 pages within 7 days.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

Mr Corvetti also brings, by way of cross-claim, an oppression case. THE EVIDENCE Early 2016 – October 2016 Mr Millar was employed by Toll Global Logistics as its national operations manager of heavy haulage between late 2012 and August 2016. He had started Toll’s heavy haulage division and had assisted it to build a business unit that had, by the time of his departure, an annual turnover of approximately $25 million. By early 2016, Mr Millar was considering leaving Toll, and starting a heavy haulage business of his own, with his friend Mr Jon Kelly. Mr Kelly was employed by Toll as a business development manager, and had in the late 1990s established and run a heavy haulage business of his own. Mr Millar and Mr Kelly had discussed the idea of establishing a new business specialising in heavy haulage for wind farm projects, which require particularly specialised logistical and engineering skills. Mr Millar gave evidence that, in late 2015, Toll had conducted a heavy haulage project relating to the M1 Freeway in Werribee for Westkon. Heavy haulage of precast components for such projects generally involves transporting long concrete beams, pillars, crossheads, haunches and barriers. Mr Millar managed that project for Toll. In early June 2016, Mr Millar was asked by an estimating manager at Westkon that Toll quote for a large job involving the haulage of 400 beams to be delivered between December 2016 and April 2017, for the purposes of the Victorian Government’s Level Crossing Removal Project (or LCRP, also referred to as the Sky Rail Project). This request was copied to Mr Corvetti. Mr Millar had some reservations about Toll’s ability to tender convincingly or to perform the work without acquiring some jinkers (specialised trailers used for hauling long objects), which Mr Millar knew were for sale, and which Toll had so far declined to purchase. He shared these concerns with Mr Kelly. In June and July 2016, Mr Millar and Mr Corvetti had several telephone conversations. During one of these conversations, Mr Millar told Mr Corvetti that he doubted Toll could do the LCRP job without the jinkers. This led them to discuss alternative ways that someone might acquire the jinkers and do the work. Mr Millar gave the following oral evidence in chief:[W]e were basically trying to figure out how we could come up with a way that we could kick something off that would get this [LCRP] job done … We kicked the idea around of me going to work for Westkon. We kicked around the idea of Westkon buying the jinkers – starting up a new company and contracting to them. We talked about whether or not Westkon could purchase the jinkers and we could lease them off Westkon and – just a number of ideas. During these conversations, Mr Millar said that he was dissatisfied with Toll and was contemplating leaving the company. Mr Corvetti said that Westkon was dissatisfied with Hi‑Haul, one of its incumbent heavy haulage contractors, and that it would like a competitor to Hi-Haul to enter the market. Mr Millar and Mr Corvetti also discussed upcoming projects. On this topic, Mr Millar gave the following oral evidence in chief:Did you have any discussions about the Westkon business?---Yes. Again, I don’t know if it was June or July when we spoke about that. But we talked about other works, about building – you know, if we’re going to start another … business, what the business would consist of. And then we talked about jobs that Westkon had done, work that was coming up. We talked about the amount of work that Westkon did in the general freight side of things. So we talked about what Westkart did …Westkart is the general transport side of Westkon.Do you recall Mr Corvetti telling you anything about what Westkart did?---I already knew what Westkart did as far as I knew that Westkart did general – they did their hollow core and did the panels and all the rest of it. He just spoke about – he said that … Westkart was an internal business to Westkon. He said that they did about two or three million dollars a year just in general transport and Westkart. But look, I don’t know if he referred to that as being a cost or a revenue. But he just – that was just the number that he said.And what about work that Westkon had been performing? Do you recall him saying anything about that?---Yes. We talked about work in the past and work that was coming up.What did he tell you?---Look, the only thing I remember him talking about historically was the Mornington Peninsula job. And I remember him saying that their spend on transport … was anywhere between two to three to five million dollars a year up to … he said on the year that they did the Peninsula Link, they spent – it was a $10 million on transport. But that may have been throughout the entire business, not just on that particular project.Okay. Now, can I just ask you before you – yes. Before you went to Vietnam, do you recall Mr Corvetti saying anything about Westkon’s future?---It was in nearly every conversation that we sort of had, that Westkon was - - -So can you recall what he said to you? It’s important - - -?---Yeah.- - - for his Honour to be able to understand if you can recall what he said to you?---Well, at that point in time, the – CTD – so the level crossing project had heaps of subprojects inside of it. So the level crossing project was – I don’t know the number. It may have been 50 crossings or something throughout the state that got converted to remove the level crossings. At that point, they were about to be awarded CTD, which is nine crossings in Caulfield to Dandenong. And he talked about all of the other crossings. And then we talked about the tunnel and Footscray Road and – sorry, when I say the tunnel, the Metro Tunnel. We talked about the Westgate Tunnel, which is a separate tunnel project again. So when you talked about these things, are you able to recall what Mr Corvetti was saying to you about these things, these projects?---Not word for word. But it was - - -The sense of it?---It was just that there’s a lot of work coming up. There’s a lot of work coming up. And one of the concerns was that Bill [Smith of Hi-Haul] couldn’t do it all on his own anyway. So even if he wasn’t disgruntled or Westkon weren’t disgruntled with Bill or with Hi-Haul, that Bill wasn’t – on his own, Bill couldn’t do all of it anyway.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Mr Millar seeks either: (1)an order under s 1324 or s 1325 of the Corporations Act 2001 (Cth) (Corporations Act), alternatively s 12GD of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), that the shares allotted in the capital of MHH to Ropeload be cancelled;(2)an order under s 175 of the Corporations Act that the share register of MHH be rectified by removing Ropeload as a shareholder nunc pro tunc; or(3)an order under s 1324 or s 1325 of the Corporations Act, alternatively s 12GF of the ASIC Act, against Mr Corvetti for damages in a sum equal to the economic value of the shares held by Ropeload in MHH. From the outset of the hearing, counsel for the first and second respondents insisted, as they were entitled to do, that the applicant be held strictly to his pleaded case. The Amended Statement of Claim dated 7 October 2019 relevantly provides:6. From about June 2016 to January 2017 Millar discussed with Corvetti:(a) the establishment of Ares; and(b)the establishment of a heavy haulage transport business ultimately to be conducted by Ares (Ares Heavy Haulage Business).7.In the course of the discussions between them in the period June 2016 to January 2017, Corvetti engaged in conduct comprising representations either orally or in writing or by conduct to the following effect (Representations):(a)Westkon had much work coming up which would allow Westkon to purchase services to the value of $5m per annum from the Ares Heavy Haulage Business if Millar commenced it, and that if Corvetti was a part owner of the Ares Heavy Haulage Business he would ensure that Westkon purchased such services from it;(b)Further, that if Corvetti was a part owner of the Ares Heavy Haulage Business he would procure Westkon to continue to engage it for substantial projects other than the Skyrail project;(c)Corvetti was known to and influential with other manufacturers of precast concrete products and was in a position to, and if he was a part owner of the Ares Heavy Haulage Business would, assist Millar to secure work for it from those other manufacturers of precast concrete products;(d)Corvetti possessed the business acumen and skills to grow a successful business and, if a part owner of the Ares Heavy Haulage Business, would utilise those skills for its benefit;(e)Corvetti had secured the approval of the board of Westkon to treat the Ares Heavy Haulage Business as Westkon’s preferred heavy haulage contractor and, if a part owner of the Ares Heavy Haulage Business, would ensure that Westkon did so,(f)Corvetti had the authority of the board of Westkon, alternatively that the board would act in accordance with any recommendation he made, to ensure that Westkon continue to engage the Ares Heavy Haulage Business as its preferred contractor for haulage services,(together the Representations)PARTICULARSThe representations referred to in paragraph (a), (b) and (c) were by telephone on 7 June 2016 and later in June 2016, by email dated 18 July 2016 from Corvetti to Millar, at a meeting in Lygon Street, Carlton, on 4 August 2016, attended by Millar, Corvetti, Jon Kelly and Geoffrey Turner.Further, the representation referred to in paragraph (b) above was made by Corvetti’s conduct in failing to inform Millar that the assumptions made by Millar in each of the November and December business cases as to the projects identified in each of the business cases as projects which Westkon would award to Ares was an incorrect assumption.The representation referred to in paragraph (c) was by telephone on 7 June 2016 and later in June 2016, and by email dated 18 July 2016.The representations referred to in paragraphs (d) and (e) were by telephone in late June 2016 and at the Lygon Street meeting on 4 August 2016.The representation referred to in paragraph (e) was to be inferred from the representations set out and the business case documents emailed by Millar to Corvetti on 22 November 2016 on 6 December 2016 and Corvetti’s failure to suggest or say to Millar that the assumptions therein about work from Westkon were not accurate.The representation referred to in paragraph (f) was by email dated 12 January 2017 from Corvetti to Millar.14 [sic]. As at 24 January 2017 Millar was the ultimate beneficial owner of each of MHH and Ares.PARTICULARSMillar owned all of the issued shares in JMI. JMI owned all of the issued shares in Ares. Millar owned all of the issued shares in MHH.15.On 24 January 2017, Corvetti requested that Millar cause MHH to issue 9 shares being 45% of MHH’s capital to Ropeload.PARTICULARSLetter dated 24 January 2017 from Graeme Knott of Knott Partners (acting on behalf of Corvetti) requesting that MHH issue 9 shares in MHH to Ropeload as trustee for the R & D Corvetti Family Trust.16. Pursuant to the request and relying wholly upon the Representations:(a)on 25 January 2017 Millar caused JMI to transfer to MHH all the shares that JMI held in Ares, causing Ares to become a wholly owned subsidiary of MHH from that date; and(b)on 27 January 2017 Millar caused MHH to issue the 9 ordinary shares in MHH to Ropeload,so that from that 27 January 2017 MHH and its wholly owned subsidiary Ares became owned as to 45% by Ropeload and as to 55% by Millar.17.Neither Ropeload nor Corvetti provided any consideration to MHH for the shares in MHH allotted to Ropeload.18. Each of the Representations was:(a)conduct in relation to a financial product for the purposes of s 1041H of the Corporations Act 2001;(b)a statement or dissemination of information that was likely to and did induce MHH to dispose of a financial product within the meaning of s 1041E of the Corporations Act 2001;(c)conduct in relation to financial services within the meaning of s 12DA of the Australian Securities and Investments Commission Act 2001 (“ASIC Act”).19.Each of the Representations in paragraph 7 above was at least in part a representation as to a future matter within the meaning of s 769C of the Corporations Act 2001 and s 12BB of the ASIC Act.20.Further or alternatively to paragraph 19, each of the Representations was conduct that was misleading or deceptive, likely to mislead or deceive or materially misleading in that:(a)Corvetti, as the general manager of Westkon at all material times, knew that Westkon was not committed to purchasing services from the Ares Heavy Haulage Business:(i)being further substantial projects in addition to the Skyrail project;(ii)for which Ares would be able to invoice Westkon at least $5m per annum; or(iii)likely to make sufficient purchases of services to allow the Ares Heavy Haulage Business to rely on Westkon for 100% of its revenues;(b)Corvetti knew that, as general manager of Westkon, he was at all material times subject to the instructions of the board of Westkon in making purchasing decisions, including further substantial services for the Ares Heavy Haulage Business in addition to the Skyrail project; (c)in the circumstances, unless Corvetti had obtained the approval of the board of Westkon to purchase services from the Ares Heavy Haulage Business having an invoice value of no less than $5m per annum he had no reasonable basis to represent that he could assist Millar to secure work for the Ares Heavy Haulage Business from:(i) Westkon; or(ii)that Westkon would treat the Ares Heavy Haulage Business as its preferred provider of such services;(d)absent Corvetti having confirmed with other manufacturers of precast concrete product that they would use services of the Ares Heavy Haulage Business, there was no reasonable basis for Corvetti to represent that he was in a position to procure those manufacturers to do so;(e)Corvetti did not intend to divert himself from his occupation as general manager of the Westkon business and bring to bear for the benefit of the Ares Heavy Haulage Business any business skills or acumen he might possess, nor has he done so; and(f)as at 12 January 2017, Corvetti had not secured the approval of the board of Westkon to treat the Ares Heavy Haulage Business as its preferred supplier of heavy haulage services.21. In the circumstances, Corvetti engaged in:(a)the making of materially of [sic] misleading statements in contravention of s 1041E of the Corporations Act 2001;(b)misleading or deceptive conduct in contravention of s 1041H of the Corporations Act 2001; and/or(c)conduct, in trade or commerce, in relation to financial services that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the ASIC Act.22. But for the Representations:(a)Millar, who at all material times had complete control of both Ares and MHH, would not have caused MHH to issue 9 shares in its capital, or any such shares, to Ropeload for no consideration or at all;(b)Millar would not have caused MHH to record in its share register Ropeload as the holder of 9 shares; and(c)Millar would continue to enjoy ownership of 100% of the issued shares in MHH and the concomitant economic value (being the maximum price that a buyer is prepared to pay for the shares) of that shareholding.23.Further, in taking the shares in MHH for no consideration, Ropeload has taken the benefit of Corvetti’s said wrongful conduct to obtain for the beneficiaries of the Corvetti Family Trust, including Corvetti himself, the economic value of that shareholding to the detriment of Millar, who otherwise would have enjoyed that economic value.24.In the circumstances, Millar, in consequence of and relying upon Corvetti’s said misleading and deceptive conduct, has deprived himself of the economic value of the shareholding recorded in MHH’s share register as held by Ropeload, being 9 of 20 issued shares, being 45% of the issued shares.25.Upon rectification of the share register by removing Ropeload as the holder of 9 of 20 of the issued shares in MHH, Millar will be restored to holding 100% of the shares in MHH and to enjoying the economic value of such shareholding.(Emphasis in original.)