IN THE MATTER OF KRYPTON NOMINEES PTY LTD (ACN 005 329 868)
KRYPTON NOMINEES PTY LTD (ACN 005 329 868)	Plaintiff
v
JOSEPH ISAAC GUTNICK and NORTHERN STAR INTERNATIONAL PTY LTD (ACN 102 396 878)	First Defendant Second Defendant

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	17, 18, 22, 23, 29 and 30 April 2013
DATE OF JUDGMENT:	27 August 2013
CASE MAY BE CITED AS:	Re Krypton Nominees Pty Ltd
MEDIUM NEUTRAL CITATION:	[2013] VSC 446

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CORPORATIONS – Sale of shares – Misleading and deceptive conduct – Whether plaintiff relied on misrepresentations – Judgment for plaintiff – Corporations Act 2001 ss 1041E, 1041H and 1345.

CORPORATIONS – Sale of shares – Failure to provide Product Disclosure Statement – Whether plaintiff a “sophisticated investor” – Sale of shares on terms – Whether total amounts payable satisfied exemption in s 708(8)(a) – Corporations Act 2001 ss 50AA, 707 and 708(8)(a).

CORPORATIONS – Whether the defendants conduct was unconscionable within the meaning of the unwritten law – Whether the plaintiff was at a special disadvantage – Claim rejected –ASIC Act 2001 s 12CA.

AGENCY – Contract for purchase of shares made by a company in a group of companies pending nomination of a member of that group by group’s accountant as the appropriate purchasing company – Contract negotiated by director who controlled group of companies – Whether company nominated by the accountant entitled to ratify contract of sale and become the purchaser – Whether nominated company entitled to rely on representations made to the director who negotiated the contract in seeking to have contract of purchase set aside for misleading and deceptive conduct and failure to provide a Product Disclosure Statement – Nominated company entitled to ratify contract and exercises remedies available to initial contracting company.

EQUITY – Whether the defendants owed a fiduciary duty to the plaintiff – Relevant applicable principles – Whether inequality of bargaining power – Claim rejected.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P.S. Noonan	Efron & Associates
For the Defendants	Mr N.J. Clelland SC with Mr A.P. Young	SBA Law

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Breaches of Corporations and ASIC Acts – misleading and deceptive conduct.................... 2

Breaches of s 12BAB and 12CA of the ASIC Act.......................................................................... 3

NSI aided and abetted misleading and deceptive conduct....................................................... 3

Failure to provide a product disclosure statement....................................................................... 3

Breach of Fiduciary Duties............................................................................................................... 3

Mr Gutnick’s answer to the alleged representations................................................................... 4

Mr Gutnick’s response to the product disclosure statement...................................................... 5

Mr Gutnick’s response to the alleged fiduciary duties and allegations of unconscionable conduct 5

Issues.................................................................................................................................................... 5

The relevant facts............................................................................................................................... 6

Mr Tashi’s evidence........................................................................................................................... 7

Evidence of Mr Gutnick.................................................................................................................. 22

Relationship with Mr Tashi........................................................................................................... 28

The meeting of 13 July 2010........................................................................................................... 30

Conversation about the Rebbe...................................................................................................... 32

Telephone call on 13 July 2010...................................................................................................... 33

Conversation of 14 July 2010.......................................................................................................... 33

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.

Continue reading Re Krypton Nominees Pty Ltd

Details

AGLC: Re Krypton Nominees Pty Ltd [2013] VSC 446
Case: [2013] VSC 446
Decision Date: 27 August 2013

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Re Krypton Nominees Pty Ltd involved a dispute over the sale of shares. The plaintiff sought to set aside a share purchase agreement due to alleged misleading and deceptive conduct and failure to provide a Product Disclosure Statement. The court was required to determine whether the plaintiff had relied on misrepresentations and whether the sale complied with the Corporations Act 2001, particularly sections 1041E, 1041H, 1345, 50AA, 707, and 708(8)(a). The court also considered whether the plaintiff was a “sophisticated investor” and whether the total amounts payable satisfied the exemption in section 708(8)(a) of the Act.

The court examined whether the defendants' conduct was unconscionable under common law and whether the plaintiff was at a special disadvantage, which would entitle them to relief under the ASIC Act 2001 section 12CA. Additionally, the court addressed issues related to agency law, specifically whether the company nominated by the group’s accountant was entitled to ratify the contract of sale and rely on representations made to the director who negotiated the contract. The plaintiff sought to have the contract of purchase set aside for misleading and deceptive conduct and failure to provide a Product Disclosure Statement. The court also assessed whether the defendants owed a fiduciary duty to the plaintiff and whether there was an inequality of bargaining power.

The court held that the nominated company was entitled to ratify the contract and exercise the remedies available to the initial contracting company. The court rejected the claim that the defendants' conduct was unconscionable and that the plaintiff was at a special disadvantage. The plaintiff's claim that the defendants owed a fiduciary duty was also dismissed. The court found that the plaintiff was not a sophisticated investor and that the sale did not comply with the statutory requirements. Consequently, the plaintiff was awarded a judgment for the relief sought.

The court ordered that the share purchase agreement be set aside, and the plaintiff was entitled to restitution of the amount paid for the shares, with interest. The court further directed that the defendants provide the necessary Product Disclosure Statement to the plaintiff.

Orders