Spence v Rigging Rentals WA Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Spence v Rigging Rentals WA Pty Ltd [2015] FCA 1158

Citation: Spence v Rigging Rentals WA Pty Ltd [2015] FCA 1158
Parties: ERIC MYLES JOHN SPENCE v RIGGING RENTALS WA PTY LTD (ACN 105 556 563), CLIFFORD MCGILLIVRAY and CRAIG SWEETAPPLE
File number: WAD 301 of 2014
Judge: GILMOUR J
Date of judgment: 29 October 2015
Catchwords:

CORPORATIONS - oppressive conduct under s 232 of the Corporations Act 2001 (Cth) - proposed sale of the first defendant – condition in email sent to the plaintiff concerning the issue of additional shares to the second and third defendants and the proposed sale - claims against the plaintiff for misconduct in relation to the affairs of the first defendant - whether the condition amounts to oppressive conduct - second and third defendants achieving a personal benefit although claims against the plaintiff are claims of the first defendant.

CORPORATIONS - cross-claim for breach of directors’ duties under s 182 of the Corporations Act 2001 (Cth) and breach of fiduciary duties - disputed expenses charged to the cross-claimant’s account - alleged excessive remuneration payments to the bookkeeper - receipt of director’s fees from companies that allegedly placed the cross-respondent in a position of conflict - expenses and lost profits.

EVIDENCE - admissibility of email under the Evidence Act 1995 (Cth) - whether s 131 of the Evidence Act applies - classification of the dispute that is the subject of the email communication.

Legislation: Corporations Act 2001 (Cth) ss 182(1), 232, 233, 234, 1317H
Evidence Act 1995 (Cth) s 131
Long Service Leave Act 1958 (WA) s 8(3)
Cases cited: Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336
Joint v Stephens [2008] VSCA 210
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
In re London School of Electronics Ltd [1986] Ch 211
Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279
Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459
Date of hearing: 15-17 June 2015, 2 July 2015
Place: Perth
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 238
Counsel for the Plaintiff/Cross-respondent: Mr C M Slater
Solicitor for the Plaintiff/Cross-respondent: Morgan Alteruthemeyer
Counsel for the Defendants/Cross-claimant: Mr L A Warnick
Solicitor for the Defendants/Cross-claimant: Trinix Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

WAD 301 of 2014
BETWEEN:

ERIC MYLES JOHN SPENCE
Plaintiff/Cross-Respondent
AND:

RIGGING RENTALS WA PTY LTD (ACN 105 556 563)
First Defendant/Cross-Claimant

CLIFFORD MCGILLIVRAY
Second Defendant

CRAIG SWEETAPPLE
Third Defendant

JUDGE:

GILMOUR J

DATE OF ORDER:

29 OCTOBER 2015

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.The second and third defendants, within 28 days of judgment, each pay the plaintiff $300,000 in consideration of the delivery of written share transfer documents, to each of them, of five shares in the first defendant.

2.There be liberty to the parties to apply, on 48 hours’ notice, on any issue concerning Order 1.

3.The first defendant pay to the plaintiff the sum of…

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Details
Case
[2015] FCA 1158
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Spence v Rigging Rentals WA Pty Ltd involved a dispute between Mr Spence and Rigging Rentals WA Pty Ltd (RRWA), along with other defendants. The central issue was whether the condition in an email concerning the issue of additional shares and the proposed sale amounted to oppressive conduct under s 232 of the Corporations Act 2001 (Cth). Additionally, the case addressed cross-claims for breach of directors' duties under s 182 and breach of fiduciary duties, as well as the admissibility of an email under the Evidence Act 1995 (Cth). The court had to determine whether the condition in the email, which allowed the second and third defendants to benefit personally, constituted oppressive conduct. The court also had to consider the admissibility of the email under s 131 of the Evidence Act.

The court concluded that the condition in the email did amount to oppressive conduct, as it allowed the second and third defendants to benefit personally from claims that were actually claims of the company. The court also found that the email was admissible under the Evidence Act. Regarding the cross-claims, the court held that the defendants were not liable for breach of directors' duties or fiduciary duties. The court ordered that the second and third defendants pay the plaintiff $300,000 each for the delivery of written share transfer documents, and the parties were to confer on the costs of the claim and cross-claim. The court also granted liberty to the parties to apply for orders on the questions of costs if they could not agree.

Orders

Orders of the court

1. The second and third defendants, within 28 days of judgment, each pay the plaintiff $300,000 in consideration of the delivery of written share transfer documents, to each of them, of five shares in the first defendant.

2. There be liberty to the parties to apply, on 48 hours’ notice, on any issue concerning Order 1.

3. The first defendant pay to the plaintiff the sum of $36,740.

4. The plaintiff pay to the first defendant the sum of $11,927.18.

5. The parties confer on the questions of costs of the claim and the cross-claim with a view to providing the Court with a minute of consent orders as to these costs by 4:00pm (WST) on Friday, 13 November 2015.

6. There be liberty to the parties to apply as to the orders to be made on the questions of costs on 48 hours’ notice, in the event that these, in whole or in part, cannot be agreed.

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

Background

Background to the litigation

The expert evidence was agreed by the parties to be to the effect that $1,800,000 represented the market value of the Company and $600,000 represented a market value of one-third of the shares owned by Mr Spence as at 30 November 2014.THE BACKGROUND FACTS The following background facts, most of which are not controversial, are substantially taken from the parties’ respective closing submissions in combination. Whilst largely uncontroversial their relevance and effect is often in dispute. For example, there is no dispute as to the expenses of the Company incurred by Mr Spence. The issue rather is whether they were reasonably incurred in the course of the business of the Company (or perhaps – were incurred in breach of his duty to the Company). Where the facts are in dispute I have resolved that dispute. Further, at the outset of the trial, Mr Spence took objection to various paragraphs in the written statements adduced on behalf of the defendants. It is not necessary to deal with each of those objections due to the conclusions I have reached. Where it is necessary, though, I will set out my rulings in these reasons. Establishment of the Company From about 1990 until 2002, Messrs Spence, McGillivray and Sweetapple were all employed by Sling-Rig Pty Ltd (Sling-Rig), a manufacturer and supplier of lifting, rigging and materials handling equipment. In about late 2001 Sling-Rig went into receivership. Shortly after this, Mr McGillivray resigned to set up his own lifting equipment company - Lifting by Design Pty Ltd (Lifting by Design). At about the same time Messrs Spence and Sweetapple were recruited to join Bullivants Pty Ltd (Bullivants), a national lifting equipment firm. Mr Spence managed the Perth branch of Bullivants and Mr Sweetapple managed the Bunbury branch. In early 2003, Mr Sweetapple perceived an opportunity to establish a business of hiring out lifting, rigging and materials handling equipment. He discussed this opportunity with his then colleagues Messrs McGillivray and Spence. All three agreed that there was an opportunity in this field and that they should form a company to exploit the opportunity together. The business plan for the proposed new venture was to begin by hiring equipment to Lifting by Design for on-hire to its customers, and then to grow from that business base. The Company was incorporated on 16 July 2003, initially under the name “LBD Hire Pty Ltd” (LBD Hire) reflecting the proposed close relationship with Mr McGillivray's company Lifting by Design. Each of the three participants in the venture took up ten shares. Messrs Spence and Sweetapple, who at this stage were still employed by Bullivants, took up their shares through trusts. Mr McGillivray took his shares in his own name and became the sole director. Mr McGillivray also carried out the management of the Company, in conjunction with the management of Lifting by Design, for the first two years (from mid-2003 to mid-2005). The original plan was that when the Company's business became established, Mr Sweetapple would resign from his employment and take over management. However, in early 2005 when the Company reached the stage where it could justify having a full-time manager, the three shareholders agreed that Mr Spence, instead of Mr Sweetapple, would resign from his employment and take over management of the Company. Mr Spence took up this position on 11 July 2005.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

There was, I find, a general discussion about what expenses could be incurred in the name of the Company. Any agreement reached was never recorded in writing. Deterioration of relationship The relationship between the three shareholders of LBD Hire initially progressed satisfactorily. However, from about 2006 onwards the relationship deteriorated and a degree of animosity developed between Mr Spence and his fellow directors - particularly towards Mr McGillivray. In May 2008 Messrs McGillivray, Sweetapple, Spence and Gardiner were considering the formation of a new company, Lifting Online Pty Ltd (LOL), with each taking a one-quarter shareholding. In the weeks leading up to the incorporation of LOL, Mr Spence approached Mr Sweetapple in the Star Street office and proposed that Mr McGillivray should be excluded from participation in the proposed new company. Mr Sweetapple declined this proposal and LOL was formed with four shareholders as originally planned.National brand proposal – Rigging Rentals Victoria In late 2009 and early 2010 Mr Spence was approached by industry contacts in Victoria, Mr Richard Johnson and Mr Nathan Van Berkel, who had established a company in Melbourne under the name “Rigging Rentals Pty Ltd” (RRVIC). Mr Van Berkel made a proposal to the Company in an email dated 21 December 2009. The proposal invited "Eric and stakeholders from LBD Hire" to participate, and stated the three broad objectives quoted below:(1)Establishment of a lifting equipment hire company in the Eastern States and South Australia; (2) Partnering with LBD Hire to create a national brand in this sector;(3) Packaging and disposal of part or all of the business in the long term. Mr Spence informed his fellow director/shareholders of this opportunity. However, he also approached Mr Sweetapple and asked him if he was prepared to take a bigger share of this opportunity and cut Mr McGillivray out. Mr Sweetapple declined. The shareholders of the Company took a 25% interest in RRVIC between them, with each holding 8.33% (five shares) personally or through a personal investment vehicle. Notification of the share issue was given to the Australian Securities and Investments Commission (ASIC) on 23 July 2010. As part of the commitment to participate in the proposal to create a national brand, the Company registered the business name “Rigging Rentals WA” on 12 April 2010 and immediately began trading under that name. Mr Spence became a director of RRVIC but the majority did not. Subsequently, in about mid-2011, the shareholders of the Company agreed that it should change its name to “Rigging Rentals WA Pty Ltd” (RRWA). This represented a further step towards the national brand proposed by Mr Van Berkel in his email of 21 December 2009. The name change was notified to ASIC on 9 December 2011.Mrs Amber Mildon In June 2010, the Company required the services of a bookkeeper. Mr Spence engaged Mrs Amber Mildon to fill that role. Mrs Mildon commenced employment on 25 June 2010. In addition to her work as bookkeeper Mrs Mildon's bookkeeping services were contracted to TLR and TLR paid the Company a fee for those services.