Tenser v Quigley

Case [2016] FCAFC 178

FEDERAL COURT OF AUSTRALIA

Tenser v Quigley [2016] FCAFC 178

Appeal from: Quigley v Lunchalot Club Pty Ltd [2015] FCA 1421
File number: NSD 148 of 2016
Judges: NICHOLAS, KATZMANN AND MARKOVIC JJ
Date of judgment: 13 December 2016
Catchwords: COSTS – appeal against awards of costs – whether primary judge erred in not ordering the respondent to pay the appellant’s costs of defending the respondent’s claim, in ordering the retransfer of shares conditional on the repayment of a loan and in ordering the respondent to pay the costs of the appellant’s cross-claim – where respondent failed to obtain relief against the appellant on all grounds of his claim – where appellant’s cross-claim was without foundation – appeal allowed in part
Legislation: Federal Court of Australia Act 1976 (Cth) s 43
Cases cited:

BP Refinery (Westernport) Pty Ltd v Shire of Hasting (1977) 180 CLR 266

DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251

Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127

House v The King (1936) 55 CLR 499

Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112; [2010] FCAFC 16

Date of hearing: 12 August 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 56
Counsel for the Appellant: The appellant appeared in person
Counsel for the Respondent: Mr S Wells
Solicitor for the Respondent: Lazarus Legal Group

ORDERS

NSD 148 of 2016
BETWEEN:

RICHARD TENSER

Appellant
AND:

SHANE QUIGLEY

Respondent

JUDGES:

NICHOLAS, KATZMANN AND MARKOVIC JJ

DATE OF ORDER:

13 DECEMBER 2016

THE COURT ORDERS THAT:

1.Appeal allowed in part.

2.Order 2 made by the primary judge on 17 December 2015 be set aside.

3.The respondent pay the appellant’s costs of the appellant’s application heard and determined by the primary judge.

4.There be no order as to costs of the appeal.

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


REASONS FOR JUDGMENT

THE COURT:

  1. Richard Tenser and Shane Quigley enjoyed a short business relationship as shareholders in a company known as Lunchalot Pty Limited (Lunchalot), the operator of a web based business that provides incentives to customers in the form of discounts at restaurants. 

  2. Mr Quigley provided marketing services to various businesses by implementing search engine optimisation (SEO) services.  He conducted his business through Epiphany Solutions Pty Ltd (Epiphany Solutions) which at one stage provided such services to Lunchalot.  Mr Tenser, at all times a director and shareholder of Lunchalot, invited Mr Quigley to become a shareholder in Lunchalot and to participate more fully in the business.  When that relationship broke down, Mr Quigley sued Lunchalot and Mr Tenser for damages for misleading or deceptive conduct and/or recovery of moneys lent to Lunchalot as well as for declarations and orders relating to his shareholding in Lunchalot.   

  3. The primary judge ordered Lunchalot…

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Details
AGLC
Tenser v Quigley [2016] FCAFC 178
Case
[2016] FCAFC 178
Decision Date

CaseChat Overview and Summary

In the Federal Court, Tenser has appealed against two orders made by the primary judge. The first order required the retransfer of shares in Lunchalot Club Pty Ltd to Tenser, conditional on the repayment of a loan. The second order required Quigley to pay Tenser’s costs for defending Quigley’s claim and for Tenser’s cross-claim. The primary judge had found that the November Agreement was valid and that Quigley was to be issued with 200 shares in the company. The primary judge further found that the shareholders’ agreement was not properly executed, and that Quigley was not entitled to have the shares transferred to him. The primary judge also found that Quigley’s claim against Tenser was not substantiated, and that Tenser’s cross-claim against Quigley was without foundation.
The central issue before the Court was whether the primary judge had erred in making these orders. The Court noted that the primary judge had discretion to order costs in the way he saw fit, and that his orders were not plainly wrong or manifestly unjust. However, the Court found that the primary judge had erred in not ordering Quigley to pay Tenser’s costs of defending Quigley’s claim. The Court held that the primary judge had not given sufficient weight to the fact that Quigley had failed to obtain relief on all grounds of his claim.
The Court found that the primary judge had also erred in ordering the retransfer of shares conditional on the repayment of a loan. The Court held that the primary judge had not given sufficient weight to the fact that the loan was unsecured, and that there was no requirement for Tenser to repay the loan before the shares were transferred. The Court further held that the primary judge had erred in ordering Quigley to pay Tenser’s costs for Tenser’s cross-claim. The Court found that Tenser’s cross-claim was without foundation, and that it was not just and equitable for Quigley to pay Tenser’s costs for that claim.
The Court allowed the appeal in part, setting aside the second and third orders made by the primary judge. The Court ordered that Quigley pay Tenser’s costs of the appeal, and that there be no order as to costs of the appeal. The Court did not make any orders as to the costs of the primary judge’s decision.

Orders

Orders of the court

1. Appeal allowed in part.

2. Order 2 made by the primary judge on 17 December 2015 be set aside.

3. The respondent pay the appellant’s costs of the appellant’s application heard and determined by the primary judge.

4. There be no order as to costs of the appeal.

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

Background

Background to the litigation

Mr Tenser now appeals from two of these orders.BACKGROUND The relevant facts, which are set out below, are largely drawn from the judgment of the primary judge: Quigley v Lunchalot Club Pty Ltd [2015] FCA 1421 (Quigley v Lunchalot). On 18 October 2012, Epiphany Solutions and Lunchalot entered into an agreement for the provision of SEO services pursuant to which Lunchalot was to pay Epiphany Solutions $33,000 plus a performance fee. No amount was ever paid under the agreement. However, on 14 November 2012 Mr Tenser and Mr Quigley entered into an agreement (the November Agreement) which relevantly provided:In consideration for an unsecured loan of $50,000 to the Company on terms outlined below, and the provision of your ongoing services as outlined in the various correspondence between us, you will be issued with 200 shares in the Company which will represent 10% of the issued share capital of the Company. Additionally you will be granted an option to buy further 200 shares from myself for a fixed sum of $50,000 at a timing of your choice up to midnight on November 15th 2013.The loan monies were to be paid in two instalments: $10,000 on the signing of the November Agreement and $40,000 on the signing of a shareholders’ agreement to be prepared and executed by 30 November 2012. The November Agreement also provided that:As part of this agreement I [i.e. Mr Tenser] agree to increase my own unsecured loans to the company by an amount equal to the amount you loan. Your loan and my loan will be repaid as and when the Company is in a position to do so and will be paid out in equal percentages of the loan (so that our loans are extinguished at the same time) with interest at 6% per annum paid at that time. The “ongoing services” to be provided by Mr Quigley referred to in the November Agreement were set out in an email dated 13 November 2012 from Mr Tenser to Mr Quigley which relevantly provided that Mr Quigley would be available “at least half a day a week without salary, until the time comes when the business can compensate us both for our time”. Thereafter the following occurred:(1)on 21 November 2012, Mr Quigley consented to be a director of Lunchalot;(2)on 22 November 2012, 200 shares in Lunchalot were issued to Mr Quigley (the Quigley Shares). At the time Lunchalot had 2000 issued shares; and(3)on 30 November 2012, Mr Quigley advanced the first instalment of $10,000 contemplated by the November Agreement to Lunchalot; On 11 December 2012, Messrs Tenser and Quigley met. Although there was a dispute about what was said about the shareholders’ agreement at that meeting, at that time Messrs Tenser and Quigley agreed that they would each advance $40,000 to Lunchalot by 18 December 2012. On 12 December 2012, Messrs Tenser and Quigley had a further meeting at which Mr Tenser made an offer to Mr Quigley about the extent of Mr Quigley’s involvement in Lunchalot’s business. Mr Quigley said he would let Mr Tenser know how much time he could commit to Lunchalot and did so by email dated 13 December 2012.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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