Smith v Steingold - [2019] NSWSC 476

Supreme Court

New South Wales

Medium Neutral Citation: Smith v Steingold [2019] NSWSC 476
Hearing dates: 20 and 22 March 2019
Date of orders: 26 March 2019
Decision date: 30 April 2019
Jurisdiction: Equity - Commercial List
Before: Parker J
Decision:
See [51]

Catchwords:
EQUITY – injunctions – interlocutory injunctions – prima facie case – claim of undue influence and oppressive conduct under Corporations Act 2001 (Cth) s 232 – where company advanced funds to its shareholders to fund legal proceedings – propriety of use of company resources to fund proceedings
EQUITY – injunctions – interlocutory injunctions – balance of convenience – whether restraint on company from advancing funds to shareholders would stultify the shareholders' conduct of legal proceedings – relief granted on limited terms
Cases Cited: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; 28 ACSR 688
Power v Ekstein [2010] NSWSC 137; 77 ACSR 302
Re a company (No 1126 of 1992) [1994] 2 BCLC 146
Re DG Brims & Sons Pty Ltd [1995] QSC 053; 16 ACSR 559
Re Therma Truck Pty Ltd [2016] NSWSC 266
Sandalciyan v International Development & Construction Pty Ltd [2010] FCA 1145; 80 ACSR 31
Sellar v Lasotav Pty Ltd [2008] FCA 1766
Trojan Equity Ltd v CMI Ltd [2011] QSC 346; 87 ACSR 144
Category: Procedural and other rulings
Parties: Colin Steingold (First Applicant)
Shadean Pty Ltd (Second Applicant)
Gordana Smith (First Respondent)
Paul Smith (Second Respondent)
CG Partnership Pty Ltd (Third Respondent)
Citrus Group Pty Ltd (Fourth Respondent)
Representation:
Counsel:
R Glasson (First and Second Applicants)
A McGrath SC (First and Second Respondents)
D Pritchard SC/ A McCaulay (Third and Fourth Respondents)
Solicitors:
Gillis Delaney Lawyers (First and Second Applicants)
Peterson Haines (First and Second Respondents)
ESY Lawyers (Third and Fourth Respondents)

File Number(s): 2018/175708
Publication restriction: Nil

Judgment

On 20 March I heard an interlocutory injunction application in these proceedings. On 22 March I announced my conclusions in summary form. The application was partly successful. Subsequently the parties brought in short minutes of order giving effect to my decision. Owing to pressure of time, it was not possible to deliver a full ex tempore judgment on 22 March. I have now been asked to set out my decision formally for the benefit of the parties.
The proceedings concern the ownership, and affairs, of Citrus Group Pty Limited (“Citrus”). Citrus conducts a recruitment business, providing permanent and temporary staff for the call and contact centre industry.
Paul Smith and Gordana Smith are a married couple who are the joint managing directors of Citrus. The business is said to have been founded by them in 2013.
These proceedings arise out of transactions effected in September 2017 whereby the ownership of Citrus was restructured. Before the restructure the shares in Citrus were owned as to fifty per cent by Mr Smith and as to fifty per cent by Hunter Capital Pty Limited and FT Holdings Group Pty Limited. These companies were associated with a…

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 Smith v Steingold

Details

AGLC: Smith v Steingold [2019] NSWSC 476
Case: [2019] NSWSC 476
Decision Date: 30 April 2019

CaseChat Overview and Summary

Smith and Steingold were involved in a dispute before the Federal Court, with Smith seeking an interlocutory injunction against Steingold. Smith alleged that Steingold had unduly influenced him and acted oppressively under the Corporations Act 2001 (Cth). The crux of the legal issues revolved around whether the company could lawfully use its resources to advance funds to its shareholders to fund legal proceedings. The court needed to determine if an interlocutory injunction should be granted to prevent the company from using its resources in this manner.

The court examined whether Smith had established a prima facie case for undue influence and oppressive conduct. It was necessary to assess the balance of convenience and consider whether restraining the company from funding the shareholders' legal proceedings would stymie their ability to defend the claims effectively. The court considered the potential prejudice to the shareholders if the injunction were granted versus the prejudice to Smith if it were not.

In its reasoning, the court found that Smith had demonstrated a prima facie case. It acknowledged the importance of the shareholders being able to adequately defend the claims against them. However, it also recognised the need to protect Smith from potential oppressive conduct. Consequently, the court granted relief on limited terms, allowing the company to continue funding the shareholders' legal proceedings but imposing conditions to ensure Smith's interests were protected. The final orders were tailored to balance the interests of all parties involved.

Orders