Ninatoca Pty Ltd v Kovari Professional Pty Ltd
[2008] FMCA 908
•11 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NINATOCA PTY LTD ATF THE FAGENCE INVESTMENT TRUST & ANOR | [2008] FMCA 908 |
| TRADE PRACTICES – Application for injunctive relief – injunction refused. |
| Applicant: | NINATOCA PROPRIETORY LIMITED ATF THE FAGENCE INVESTMENT TRUST & ANOR |
| Respondent: | KOVARI PROFESSIONAL PROPRIETARY LIMITED ATF THE KOVARI PROFESSIONAL TRUST & ORS |
| File Number: | BRG 374 of 2008 |
| Judgment of: | Wilson FM |
| Hearing date: | 11 June 2008 |
| Date of Last Submission: | 11 June 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 11 June 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Clark |
| Solicitors for the Applicant: | Provest Law |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | N/A |
ORDERS
That this matter be adjourned to 20 June 2008 at 9.30am in the Federal Magistrates Court of Australia at Brisbane.
The applicants forthwith serve the initiating documents on the respondents.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 374 of 2008
| NINATOCA PROPRIETORY LIMITED ATF THE FAGENCE INVESTMENT TRUST & ANOR |
Applicant
And
| KOVARI PROFESSIONAL PROPRIETARY LIMITED ATF THE KOVARI PROFESSIONAL TRUST & ORS |
Respondent
REASONS FOR JUDGMENT
By application filed on 10 June 2008, the applicants seek injunctive relief to restrain the respondents from relying upon three documents pending the trial of these proceedings. The second applicant is a qualified accountant who, until 30 January 2008, practised as a partner in PKF Gold Coast. That practice comprises not only the second applicant, but the third, fifth, seventh, ninth, eleventh and thirteenth respondents. The business is conducted via trusts, both professional and service.
The corporate entities associated with each accountant hold shares in Kovari Professional Pty Limited, the trustee of the Kovari Professional Trust, the first respondent. The shareholders in that company are parties to a Shareholder’s Agreement, relevantly dated 1 January 2007. That agreement permits a shareholder to be given a default notice if an act of default is committed, in accordance with clause 12.4. Such a notice was served on the first applicant on 25 January 2008.
For reasons that it is not presently necessary to resolve, that notice was not acted upon until 19 May 2008, when a document entitled Notice of Exercise of Option was served, together with a document entitled Notice of Final Payment on Default. Put bluntly, the effect of these documents was to divest the first applicant’s shares in the first respondent, at a relatively nominal value of a little over $3000, whereas the applicants contend that the value of the shares is significantly higher than that.
The grounds relied upon in the notice of default are, as one might expect, the subject of dispute. That dispute, obviously, requires a trial to resolve. In deciding whether or not to grant an injunction, as the applicants’ request, I must be satisfied of two matters. First, that there is a serious question to be tried. And secondly, that the balance of convenience favours the grant of an injunction. As to the first, as I have said, there is a factual dispute as to whether or not the applicants committed default sufficient to trigger the entitlement in the respondents to deliver a notice of default. The material potentially overcomes the first hurdle, but it is unnecessary to resolve that because I am no persuaded that the balance of convenience favours the grant of an injunction.
The balance of convenience is a matter that raises more difficulties for three reasons. First, the second applicant has not worked in the practice since 30 January 2008, and I am informed that he does not intend to return. That is understandable, given that the mutual trust between the parties has, it seems, broken down. Given that fact, it seems inevitable that the first applicant’s shares will have to be sold. There are pre-emptive rights in the shareholders agreement. It will be a matter of fixing the proper value for the shares, if the documents relied upon by the respondents do not withstand scrutiny.
It seems, in those circumstances, difficult to cavil with proposition that damages will be an adequate remedy.
Secondly, the applicants have offered an undertaking as to damages, but there is presently little evidence as to the worth of that undertaking. Mr Clark has referred me to the potential value of the real property that the shareholders have interests in as tenants-in-common. That property is encumbered, and is presently caveated to charge the first and second respondents’ potential liability under a guarantee, given to secure debt of a client of the second applicant.
There is, it seems, a dispute as to the value of the shares. In those circumstances, there must be some question as to the value of the undertaking given.
Third, and perhaps most significantly, the proceedings were not served on the respondents. The respondents were put on notice, by letter from the applicants’ solicitors, dated 4 June 2008, which is exhibited to
Mr Provost’s affidavit, filed by leave today. That letter did not, however, specify the date that the matter would be listed before the court.
Given that the notices were served in January and mid May respectively, there seems to me no good reason why the respondents should not have been served with the initiating documents. The applicants are concerned that the respondents will, in any intervening period, act precipitously and so as to devalue the interest of the applicants’ shares in the first respondent. There is currently no evidence that such a course is likely, and if the matter is brought back before the court within a short period of time, the potential for that to occur is minimised, particularly if the respondents are put on notice that the matter is the subject of court proceedings.
At this stage, I am not persuaded that the balance of convenience favours the grant of an injunction, and I decline to so order.
I will adjourn the matter for further hearing to 9.30am on Friday,
20 June 2008, and I direct that the applicants, forthwith, serve the initiating documents on the respondent. On the adjourned hearing date, I will hear further argument as to the need for the grant of an interlocutory injunction.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Wilson FM.
Associate: Lynnette Chin
Date: 2 July 2008
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