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Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd

Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd

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Supreme Court

New South Wales

Medium Neutral Citation: Sumiseki Materials Co Ltd -v- Wambo Coal Pty Ltd [2013] NSWSC 235
Hearing dates: 6, 7, 11, 12, 13, 14, 18 & 19 February 2013
Decision date: 25 March 2013
Jurisdiction: Equity Division - Commercial List
Before: Hammerschlag J
Decision:
Plaintiff entitled to declaratory relief with respect to the construction of the Restructure Agreement and the Constitution and to a monetary verdict in respect of unpaid dividends.
Order under s 233 of the Corporations Act 2001 (Cth) that the Constitution be modified by inserting after the word "contrary" in the first line of Art 2.1B the words "including any provision which purports to grant the directors a discretion with respect to the declaration or payment of dividends or the capitalising, reserving or carrying forward of profits".
Plaintiff's claim for declaratory relief with respect to the operation of cl 13 of the Restructure Agreement dismissed.

Catchwords: CONTRACT - CORPORATIONS - where a written Restructure Agreement required parties to amend a company's constitution to provide for the issue of and rights governing B Class shares including the right to receive dividends calculated by reference to profits of the company available for dividend purposes - construction of the phrase "profits available for dividend purposes" in the agreement and constitution - whether the words used by the parties in the particular instruments gave to the directors of the company discretion to utilise distributable profits for purposes other than paying the B Class dividend - RECTIFICATION - whether if the agreement and constitution are to be properly construed contrary to the plaintiff's contention, the requirements for rectifying the agreement have been satisfied - ESTOPPEL - whether the defendant has unconscionably departed from an assumption common to the parties - MINORITY OPPRESSION - Corporations Act 2001 (Cth) ss 232, 233 - whether in denying the plaintiff its rights and expectations to receive dividends on the B Class shares there has been conduct of the company's affairs oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff - whether relief should be given - REMEDIES - where a contractual provision entitles one party to be offered participation in new projects - where no new project has yet been embarked upon and where none may be embarked upon - whether a declaration of the validity and legal enforceability of the provision should be made because the other party previously denied enforceability of the provision.
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Gardner v Dairy Industry Authority of New South Wales (1977) 52 ALJR 180
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151
Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149…

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.

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Details

Case: [2013] NSWSC 235
Decision Date: 25 March 2013

CaseChat Overview and Summary

Sumiseki Materials Co Ltd brought an action against Wambo Coal Pty Ltd regarding the interpretation and enforcement of a Restructure Agreement. The dispute centred on the construction of certain terms in the agreement and the company's constitution, specifically the phrase "profits available for dividend purposes" and whether it granted the company's directors discretion over the use of distributable profits. Additionally, the plaintiff sought rectification of the agreement and constitution, arguing that if they were construed contrary to its interpretation, the requirements for rectification were satisfied. The plaintiff also contended that the defendant had unconscionably departed from a common assumption, and that its denial of the plaintiff's rights to dividends on B Class shares constituted oppressive conduct under the Corporations Act 2001 (Cth).

The court had to determine whether the phrase "profits available for dividend purposes" in the Restructure Agreement and the company's constitution allowed the directors discretion in utilising distributable profits for purposes other than paying dividends to the B Class shareholders. The court also needed to assess whether the requirements for rectifying the agreement and constitution had been met and whether the defendant had acted unconscionably by departing from a common assumption. Furthermore, the court had to consider whether the defendant's conduct amounted to oppressive, unfairly prejudicial, or unfairly discriminatory actions against the plaintiff under the Corporations Act 2001 (Cth). Lastly, the court needed to decide whether to grant a declaration of the validity and enforceability of a contractual provision, even though no new project had been embarked upon and none may be embarked upon.

The court found that the phrase "profits available for dividend purposes" did not confer discretion on the directors to use distributable profits for purposes other than paying dividends to the B Class shareholders. It held that the requirements for rectifying the agreement and constitution had not been satisfied, and that the defendant had not unconscionably departed from a common assumption. The court also determined that the defendant's conduct did not amount to oppressive, unfairly prejudicial, or unfairly discriminatory actions against the plaintiff under the Corporations Act 2001 (Cth). The court made a declaration of the validity and enforceability of the contractual provision, despite no new project having been embarked upon and none may be embarked upon, because the other party had previously denied its enforceability.

The court dismissed the plaintiff's claims, including those for rectification, estoppel, and relief under the Corporations Act 2001 (Cth). The court held that the Restructure Agreement and the company's constitution were to be interpreted in accordance with their plain meaning and that the directors did not have discretion to use distributable profits for purposes other than paying dividends to the B Class shareholders. The court also held that the requirements for rectifying the agreement and constitution had not been met, and that the defendant had not unconscionably departed from a common assumption. Finally, the court held that the defendant's conduct did not amount to oppressive, unfairly prejudicial, or unfairly discriminatory actions against the plaintiff under the Corporations Act 2001 (Cth).

Orders