SHOWFIELD Nominees Pty Ltd v Knight
[2014] WASC 479
•16 DECEMBER 2014
SHOWFIELD NOMINEES PTY LTD -v- KNIGHT [2014] WASC 479
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 479 | |
| Case No: | COR:87/2014 | 21 NOVEMBER 2014 | |
| Coram: | CHANEY J | 16/12/14 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Variation to undertaking approved | ||
| B | |||
| PDF Version |
| Parties: | SHOWFIELD NOMINEES PTY LTD ROBERT IAN DENMAN KENNETH KNIGHT CHRISTOPHER KNIGHT GLENN CONNELL 1188 PTY LTD STARGROVE PTY LTD ASTOR THEATRE WA PTY LTD SHOW TICKETING PTY LTD |
Catchwords: | Practice and procedure Undertakings Limited release from undertakings Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) |
Case References: | Astor Theatre WA Pty Ltd v Zimmermann Investments Pty Ltd [2014] WASC 329 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
ROBERT IAN DENMAN
Second Plaintiff
KENNETH KNIGHT
Third Plaintiff
AND
CHRISTOPHER KNIGHT
First Defendant
GLENN CONNELL
Second Defendant
1188 PTY LTD
Third Defendant
STARGROVE PTY LTD
Fourth Defendant
ASTOR THEATRE WA PTY LTD
Fifth Defendant
SHOW TICKETING PTY LTD
Sixth Defendant
Catchwords:
Practice and procedure - Undertakings - Limited release from undertakings - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Result:
Variation to undertaking approved
Category: B
Representation:
Counsel:
First Plaintiff : Mr M G Pendlebury
Second Plaintiff : Mr M G Pendlebury
Third Plaintiff : Mr M G Pendlebury
First Defendant : Mr D Vilensky
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Solicitors:
First Plaintiff : Price Sierakowski
Second Plaintiff : Price Sierakowski
Third Plaintiff : Price Sierakowski
First Defendant : Bowen Buchbinder Vilensky
Second Defendant : No appearance
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : No appearance
Sixth Defendant : No appearance
Case referred to in judgment:
Astor Theatre WA Pty Ltd v Zimmermann Investments Pty Ltd [2014] WASC 329
1 CHANEY J: On 21 November 2014, I dealt with an application by the second plaintiff, Robert Denman, and third plaintiff, Kenneth Knight, for orders releasing them from an undertaking dated 15 April 2014 which was subsequently filed in these proceedings on 19 May 2014. The orders sought were opposed by the first defendant, Christopher Knight. At the conclusion of the hearing, I made orders substantially in the terms sought by the second and third plaintiffs on the basis that I would provide my reasons for doing so subsequently. These are those reasons.
Background
2 The substantive relief sought by the plaintiffs in this action is orders that the fifth defendant, Astor Theatre (WA) Pty Ltd (Astor), and sixth defendant, Show Ticketing Pty Ltd (Show Ticketing) be wound up on the basis of oppression or, alternatively, by reason that it is just and equitable that the companies be wound up. The proceedings arise in the context of an acrimonious breakdown in relationships between directors and shareholders of Astor and Show Ticketing.
3 At the time the proceedings commenced, Astor held a lease over premises known as the Astor Theatre from which it carried on a business of providing facilities for live performances. Show Ticketing carried on a related business of ticket sales for performances at the Astor Theatre. Astor's lease was due to expire on 1 September 2014, although an option to extend the lease was available if exercised in accordance with the terms of the lease.
4 In order to enable Astor and Show Ticketing to continue to conduct their business, notwithstanding the issues between the directors, and pending the finalisation of the present proceedings, mutual undertakings were proffered by the second and third plaintiffs on the one hand, and the first defendant on the other. Paragraphs 1 and 2 of the undertakings of the second and third plaintiffs of 15 April 2014 and filed in these proceedings, were as follows:
The Second Plaintiff and Third Plaintiff jointly and severally undertake that:
1. They will do all things reasonably necessary on their part to ensure that the businesses of the Fifth Defendant and Sixth Defendant are continued in the ordinary course until these proceedings are resolved by agreement or by order of the Court, including without limitation:
(a) doing in a timely way whatever is reasonably necessary (including signing any authorities required by NAB to operate the bank accounts) to enable the Fifth and Sixth Defendants to operate their businesses, including paying expenses including wages, salaries, rent, operating and running expenses and trade creditors and amounts due to performers, agents, promoters and general expenses to the extent that such expenses are properly incurred and substantiated; and
(b) subject to paragraph 6 below, agreeing to and cooperating In the giving of a notice In writing under clause 5(15) of the lease of the Astor Theatre dated 1 July 2009 ("Lease'') requesting renewal of the Lease for the First Extended Term (as defined in the Lease) by 2 June 2014.
2. They will not take any step to change the status quo with respect to authorities to operate the accounts of the Fifth Defendant and Sixth Defendant with the NAB, except with the written agreement of the First Defendant.
3. They will cause the Fifth Defendant and Sixth Defendant to take urgent steps to engage a suitably qualified accountant (through Robert Half International) and to use their reasonable endeavours obtain the assistance of Ms Jo Mayled in a handover of that role for not more than seven (7) days.
4. They will ensure that any written communication between the Fifth Defendant or its solicitors and the landlord of the Astor Theatre is copied to the solicitors for the First Defendant when sent.
5. The undertakings in paragraph 1 to 4 above will remain in force until the earlier of:
(a) the Second and Third Plaintiffs giving 14 days' notice to the First Defendant that they intend to take an action or actions which are not consistent with any of those undertakings (so that on the expiry of the 14 days the undertakings will no longer apply to the action or actions specified in the notice); or
(b) the resolution of these proceedings by agreement or by order of the Court.
6. The undertaking in paragraph 1(b) does not oblige the Second or Third Plaintiff to provide or offer to provide a personal guarantee for obligations under the Lease for the First Extended Term (as defined in the Lease).
5 On 20 June 2014, Christopher Knight brought an application pursuant to ss 236, 237, 241 and 420 of the Corporations Act 2001 (Cth) for leave to commence proceedings in the name of and on behalf of Astor against Zimmermann Investments Pty Ltd (Zimmermann), the landlord of the Astor Theatre premises, for an injunction restraining it from re-entering the premises at the end of the lease. That application was brought on the basis that Christopher Knight contended that Astor had validly exercised its option for an extension of the lease, but because of the breakdown in the relationship between the directors, it was unlikely to take action itself to enforce the extension of the lease. Limited leave to commence proceedings was granted to Christopher Knight. On the same day, proceedings were commenced pursuant to that leave by Astor against Zimmermann. On 28 August 2014, I dealt with an application by Zimmermann for summary judgment against Astor. The application for the defendants' summary judgment was successful.1 The consequence of that decision was that, as from 2 September 2014, Astor no longer had a lease of the Astor Theatre. It had, however, contracted to provide the Astor Theatre premises to various performers after 2 September 2014, and, it seems, well into 2015.
6 There followed a number of directors' meetings of both Astor and Show Ticketing.
7 The first was on 29 August 2014. Notice of the meeting was given by Robert Denman to the directors of Astor on 26 August 2014. The notice contained a contingency plan as to what might happen if (as ultimately proved to be the case) Zimmermann was successful of the hearing on 28 August 2014. The contingency plan proposed, in essence, enabling Zimmermann to assume the responsibility of Astor for contracts for future performances booked at the Astor Theatre through Astor in consideration for relief of Astor's make good requirements under the lease, and in consideration of enabling Show Ticketing to continue to sell tickets for performances at the Astor Theatre subject to certain terms and conditions. Notice of a meeting of Show Ticketing directors to consider motions to the same effect was also given. Christopher Knight declined to attend on the basis of insufficient notice of the meeting and on the basis that 'the meeting is improper and any resolution has no effect'. According to Robert Denman, the meeting proceeded and the resolutions proposed in the notice of meeting were made and set into effect.
8 According to Robert Denman, following that meeting, discussions ensued between himself and Kenneth Knight and Zimmermann. Those discussions were not concluded before certain performances scheduled between 5 and 9 September 2014 took place, being performances which had been booked by Astor many months beforehand. An interim proposal was developed in discussions between the legal representatives of Zimmermann and Kenneth Knight, and was circulated by Kenneth Knight to Christopher Knight with a call for an urgent directors' meeting on 5 September 2014. Robert Denman was agreeable to the proposal, but Christopher Knight declined to attend on the basis of insufficient notice and on the basis that any meeting of the directors of Astor or Show Ticketing was considered by him to be invalid. The meeting on 5 September 2014 proceeded in Christopher Knight's absence, and the directors present resolved to adopt the proposal to substitute Zimmermann as the venue provider for the shows occurring from 5 to 9 September 2014 and such future shows as may be agreed. A meeting of Show Ticketing directors also proceeded on 5 September 2014 and resolutions in relation to performances from 5 to 9 September 2014 were passed. The resolutions required certain payments to be made by Show Ticketing to Zimmermann and for Show Ticketing to pay all third parties for services rendered in relation to those shows, presumably from the funds received by Show Ticketing from Ticket sales. Christopher Knight subsequently contended that the meetings of 5 September 2014 were of no effect.
9 On 11 September 2014, a further proposal was received from Zimmermann in relation to future performances. Robert Denman then circulated notices of proposed meetings of Astor and Show Ticketing on 12 September 2014. Christopher Knight declined to attend on the same basis as he had declined the earlier meetings. The meeting proceeded and it was resolved that Show Ticketing would pay all venue hire fees for shows to Zimmermann in a timely manner.
10 Further meetings of the two companies were held on 22 September 2014 in order to consider an offer to Astor from Zimmermann to settle a range of outstanding issues. Further meetings in relation to negotiations with Zimmermann were held on 6 and 30 October 2014. Christopher Knight maintained the position which he had expressed in relation to earlier meetings and did not attend.
11 On 22 September 2014, Christopher Knight circulated notices for general meeting of Astor and Show Ticketing and motions proposed to be considered at the meetings. That was met by suggestions by Kenneth Knight's solicitors that the notices should be withdrawn due to the inability of the general meeting to make any of the resolutions proposed. It appears that the meeting proposed by Christopher Knight did not proceed.
12 As a result of the arrangements put in place to avoid breaches of the contracts made by Astor with performers and promoters, Show Ticketing continued to receive funds from ticket sales, and became liable for payments to performers, third parties and Zimmermann related to the performances for which Show Ticketing sold tickets. As a result of the undertakings given at the outset of these proceedings, payments by Show Ticketing required the consent of all three directors. Christopher Knight refused to consent to various payments. That led to the application by the second and third plaintiffs for a release from their undertaking so as to enable payments to be made. Various reasons were given by Christopher Knight for refusing to approve payments.
13 Following an initial directions hearing in relation to the present application, counsel for Christopher Knight indicated that consent might be given for payment of at least some of the amounts which Show Ticketing was said to be liable to pay. As a result of a process of conferral following that directions hearing, by the time the matter came on for hearing, the only accounts which remained to be paid were an invoice for $6,985 from Know Books Know Tax, and invoices received from Zimmermann in relation to various performances between 5 September 2014 and 11 November 2014 totalling $124,420.05. Accordingly, the second and third plaintiffs sought the following orders:
1. The Second Plaintiff and the Third Plaintiff be and are hereby released from the second undertaking (being item 2) of the Undertakings filed on 19 May 2014 (which undertakings are attached as Schedule 1) such that, subject to order 2 below, they are permitted to:
(a) act pursuant to the resolutions of the directors meetings of the Fifth Defendant and Sixth Defendant on 16 April 2014 (which resolutions are attached as Schedule 2); and
(b) take such other steps as may be necessary to change the requirement that banking transactions of the Fifth Defendant and Sixth Defendant be authorised by all three directors of the Fifth Defendant and the Sixth Defendant respectively.
2. The release from the Undertakings in order 1 shall only apply to facilitate:
(a) payment by the Fifth Defendant and the Sixth Defendant in equal shares of the invoice from Know Books Know Tax dated 26 June 2014 in the amount of $6,985 (being annexure RD-33 to the affidavit of Robert Denman sworn 17 November 2014), a copy of which is attached hereto as Schedule 3;
(b) payment of invoices received by the Sixth Defendant from Zimmerman [sic] Investments Pty Ltd (being the invoices listed in the schedule contained on page 7 of the affidavit of Brett Raymond Molony sworn 19 November 2014), a copy of which is attached hereto as Schedule 4; and
(c) payment by the Sixth Defendant to Zimmerman [sic] Investments Pty Ltd or:
i. venue hire fees in respect of shows for which the Sixth Defendant has agreed to, or in the future agrees to, sell tickets for (but not including any venue hire fees referred to in (b) above); and
ii. ticketing fees payable pursuant to the agreement between, inter alia, the Sixth Defendant and Zimmerman Investments Pty Ltd on 5 November 2014.
14 Christopher Knight opposed the making of the orders sought. The precise basis of his opposition was far from clear. As I understand it, Christopher Knight's objections to the making of the orders involved the following propositions.
15 The first is that the question of payments of accounts by Show Ticketing has nothing to do with the substantive issues in these proceedings, which concern whether or not the companies should be wound up. That submission overlooks the fact that the orders sought are necessary by reason of undertakings given in these proceedings. Relief from the obligations arising pursuant to those undertakings is clearly a matter which falls to be determined in the context of an interlocutory application in these proceedings. The undertakings were given for the purpose of enabling the companies to function in an appropriate manner pending resolution of the substantive application. The fact that the substantive application has not yet been dealt with is a result of a series of consent orders between the parties which have deferred steps being taken in the proceedings, no doubt pending the outcome of other related proceedings. The present application concerns matters which are important to the continued operation of the companies and the orderly resolution of issues that had to be dealt with following termination of Astor's lease. The application was appropriately brought as an interlocutory application in this action.
16 A second objection by Christopher Knight was that there is no evidence as to the amounts of the payment sought in paragraph 2(c) of the proposed orders, being the amounts payable to Zimmermann in relation to future performances. It is not, of course, possible to identify precise amounts payable in relation to future performances, since those amounts will vary depending on the level of ticket sales. It is clear that the amounts will be ascertained by reference to the formula already agreed with Zimmermann. In any event, Christopher Knight's concern in this regard is ameliorated to some extent at least by the plaintiffs' agreement to insert before paragraph 2(c) the words 'subject to invoices being provided to the first defendant by the plaintiffs not less than seven days before payment'.
17 The third concern expressed by Christopher Knight was that the release of funds in order to pay Zimmermann will, in effect, provide a substantive conclusion to the dispute which Christopher Knight has as to the appropriateness of the arrangements that have been made with Zimmermann by the other directors. That contention requires some closer analysis. When pressed, counsel for Christopher Knight asserted that Christopher Knight's contention is that the other directors of Astor and Show Ticketing have breached their duties or acted in bad faith in reaching the agreement with Zimmermann and, although it was not clearly articulated, that Zimmermann participated in that breach of duty. There is no evidence of any such participation by Zimmermann. Even if there were, and some claim of the character intimated exists, presumably that would give rise to a claim in damages. There is no reason why, if such a claim can be articulated, it could not be pursued notwithstanding that payment had been made to Zimmermann. There is no suggestion in the evidence that, if Zimmermann were liable to repay amounts paid to it by reason of the arrangements, it would not be able to do so. In any event, I have indicated that the substantive claims in the proceedings will need to be dealt with quickly if the matter is not resolved at a mediation which is due to occur during December 2014. In the meantime, the contractual obligations of Astor need to be addressed and it would seem to be desirable that Show Ticketing continue to operate its business. Those objectives are best served if outstanding accounts can be paid. In those circumstances, I did not consider that Christopher Knight's third basis of objection warranted refusal of the application.
18 The fourth contention by Christopher Knight was that there was no evidence of urgency in providing the relief, and that the matter should simply be left to mediation. I do not accept that proposition. There are clear references in the correspondence passing between Zimmermann and the plaintiffs or their legal representatives that Zimmermann will look to alternative arrangements for ticket sales in the event that payments, which are clearly due under the arrangements made between Zimmermann and the second and third plaintiffs as directors of the companies, are not paid quickly. Non-payment may well result in the effective termination of Show Ticketing's business. Although counsel for Christopher Knight argued that there was no evidence that continuation of Show Ticketing's business is in Show Ticketing's interest, I am content to infer for present purposes that that is the case.
19 In the circumstances, I considered it appropriate that the limited release from the undertaking which is sought should be made in the interests of the fifth and sixth defendants. On the face of it, Astor is at risk of actions for breach of the contract which it made to provide premises for performances after 1 September 2014. It is also clear that Astor is subject to a potential claim by Zimmermann in relation to its obligations following termination of its lease. That claim is put by Zimmermann at several hundred thousand dollars. That is said by counsel for Christopher Knight (from the bar table rather than on the basis of any evidence) to be an excessive claim. I accept that it was not possible for me to make any assessment to the extent to which such a claim may ultimately succeed, but forbearance in relation to the claim would appear to be beneficial to Astor in addition to the benefit of having been relieved of the potential liability for breaches of contracts with performers in relation to future performances.
20 In relation to Show Ticketing, as I have indicated, I am prepared to infer that the continuation of Show Ticketing's business is in its interests. Continuation of the arrangement which enables Show Ticketing to continue its business, which would otherwise be jeopardised if payment is not made to Zimmermann and Zimmermann makes alternative arrangements in relation to ticketing, provides a basis upon which the orders should be made. In this context, it should be borne in mind that the purpose of the undertakings is to preserve the businesses of the companies. The variation sought is consistent with that overall purpose.
21 A further reason to make the orders sought is that it appears that Zimmermann has in fact put in place novations of the future contracts with performers which had previously been made by Astor. If that is the case, then Zimmermann clearly has an entitlement to be paid for the use of its premises, and there appears to be no basis upon which consent to those payments should be withheld.
22 In relation to the payment to Know Books Know Tax, the evidence is that the outstanding invoice relates to conclusion of certain investigative work undertaken on behalf of the fifth and sixth defendants. Robert Denman's evidence is that Christopher Knight approved engagement of Know Books Know Tax for that purpose, and approved the payment of the initial deposit for the work. The only basis upon which counsel for Christopher Knight indicated opposition to the payment was that Christopher Knight did not now consider that the work was required. That is not a basis upon which the companies can decline to make the payment. There is no reason why that payment should not be made.
23 It was for those reasons that I made the orders varying the undertakings of the first and second plaintiffs in terms which they sought, subject to the proviso inserted in relation to order 2(c) to which I refer above.
1Astor Theatre WA Pty Ltd v Zimmermann Investments Pty Ltd [2014] WASC 329.
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