Tolo Supermarket (Thornlie) Pty Ltd v Mahrami - [2016] WASC 217

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TOLO SUPERMARKET (THORNLIE) PTY LTD -v- MAHRAMI [2016] WASC 217

CORAM: MASTER SANDERSON

HEARD: 15 JUNE 2016

DELIVERED : 19 JULY 2016

FILE NO/S: COR 288 of 2015

BETWEEN: TOLO SUPERMARKET (THORNLIE) PTY LTD
First Plaintiff
ABDULLAH HAKIMI
Second Plaintiff
AND
MOHAMMAD LATIF MAHRAMI
Defendant

FILE NO/S :COR 111 of 2016

BETWEEN :MOHAMMAD LATIF MAHRAMI
Plaintiff
AND
TOLO SUPERMARKET PTY LTD
Defendant

Catchwords:

Corporations law - Application to wind up company on just and equitable ground - Turns on own fact

Legislation:

Corporations Act 2001 (Cth)

Result:

COR 288 of 2015:
Company wound up

COR 111 of 2016:
Application adjourned

Category: B

Representation:

COR 288 of 2015

Counsel:

First Plaintiff                :     Mr B F Stokes
Second Plaintiff            :     Mr B F Stokes
Defendant:     Mr B P Wheatley

Solicitors:

First Plaintiff                :     Brians Solicitors
Second Plaintiff            :     Brians Solicitors
Defendant:     Mossensons

COR 111 of 2016

Counsel:

Plaintiff: Mr B P Wheatley
Defendant: Mr B F Stokes

Solicitors:

Plaintiff: Mossensons
Defendant: Brians Solicitors

Case(s) referred to in judgment(s):

Nil

MASTER SANDERSON: These two matters were heard together. The first in time was Tolo Supermarket (Thornlie) Pty Ltd v Mahrami (COR 288 of 2015). That action began life as an application for injunctive relief. I declined to make any orders. Subsequently the defendant filed an interlocutory process seeking to wind‑up the first plaintiff. Although procedurally unusual there appears to be no particular reason why such a course could not be followed. The second action is Mahrami v Tolo Supermarket Pty Ltd (COR 111 of 2016). That is an application to wind‑up Tolo Supermarket Pty Ltd a different company from the plaintiff in the earlier proceedings. The order was sought pursuant to s 233 or s 461 of the Corporations Act 2001 (Cth).
The parties agreed both matters should be tried together.
It is important to note there are two separate companies involved in these two separate sets of proceedings. Although the main players are the same in each action, and although there is a good deal of overlap in the conduct complained of between the two companies, they are nonetheless separate legal entities. So a decision to wind‑up one does not necessarily mean the other company has to be wound‑up.
Throughout these proceedings Tolo Supermarket Pty Ltd has been referred to by the parties as 'Tolo No 1'. Tolo Supermarket (Thornlie) Pty Ltd has been referred to as 'Tolo No 2'. I will adopt those descriptions.
The two most important individuals in these two applications are Mr Abdullah Hakimi and Mr Mohammad Latif Mahrami. Without meaning any disrespect I will refer to these gentlemen as 'Hakimi' and 'Mahrami'. Another gentleman by the name of Mohammad Musa Ziraki is also involved particularly with Tolo No 1. Mr Ziraki is referred to as 'Musa' in the affidavit material and again without wishing any disrespect I will refer to him by that name.
The essential background facts are not really in dispute. Hakimi and Mahrami were born in Afghanistan and are both ethnic Afghan Hazarah. Both speak Hazarah which is a dialect of the Persian language. In early 2011 Mahrami arrived in Australia from Afghanistan with money to invest in a business venture in Australia. In April 2011 Hakimi invited Mahrami to invest in his business known as 'Tolo Supermarket and Money Transfer' which he conducted in partnership with Musa. That business was conducted from a shop at Unit 84, 43 Attfield Street, Maddington and is referred to throughout the documents as 'the Maddington Shop'.
On 1 May 2011 Mahrami entered into a partnership agreement with Hakimi and Musa in which they both agreed to contribute $150,000 to the partnership. A copy of that partnership which was originally written in Persian but has been translated into English appears as attachment A to the affidavit of Mahrami sworn 2 February 2016. The partnership agreement seems to anticipate the formation of a company because there is reference throughout the document to 'the Tolou Company'. However, nothing in the document suggests that a corporate vehicle will be used for trading operations. Although of interest by way of background it seems to me nothing turns on this partnership agreement.
On 18 July 2011 Mahrami, Hakimi and Musa registered Tolo No 1. Each of the three men were equal shareholders and each was a director. According to Mahrami the parties agreed the Maddington Shop was not big enough to be a profitable enterprise. With that in mind towards the end of 2011 they took a lease on Shop 13, Thornlie Square Shopping Centre, Thornlie. This is referred to as 'the Thornlie Shop'. A lease was signed in the name of Tolo No 1 with Hakimi, Mahrami and Musa as guarantors. The agreement was that Musa would continue to operate the Maddington Shop, Mahrami would set up and run the Thornlie Shop and Hakimi would spend time in both.
Almost from the first it seems the relationship between the three men deteriorated. From time to time each would form an alliance with one of the others only to see that alliance break down and the disagreements recommence. There are also allegations of fraud levelled by Hakimi against Mahrami and Musa and by Hakimi and Mahrami against Musa. The disputes between the three men have given rise to actions in the Magistrates Court for violence restraining orders and criminal charges being brought against Mahrami. At present Mahrami is restrained from approaching either the Maddington Shop or the Thornlie Shop.
There are three points of particular importance in determining the outcome of these applications. First, in January 2016 Mahrami was purportedly removed as a director of Tolo No 1. In his affidavit sworn 2 February 2016 Mahrami maintains that he was never served with the appropriate notice of meeting at which he was purportedly removed as a director. Although that issue was explored to an extent in cross‑examination of Mahrami the evidence is not such that I could conclude one way or the other whether the purported removal was valid. But for the purposes of these applications I will assume that it was. That is a situation which is most favourable to Mahrami's case. What it shows is he has been excluded from the management of Tolo No 1. That is his primary allegation.
Second, the business of both the Maddington Shop and the Thornlie Shop appears to be conducted by Tolo No 1. At some stage there was an attempt by Mahrami to transfer the business of the Thornlie Shop to Tolo No 2. But there was no agreement between the three men as to if that was to take place let alone any agreement as to terms. There is nothing in the evidence which establishes such a transfer has been effected. However, I accept there is an issue about any alleged transfer and I am not in a position to reach a concluded view as to whether such a transfer was effected.
Finally, it seems clear that Tolo No 1 is solvent. Exhibit A is a copy of financial statements said to be for Tolo No 2. In fact they must be for Tolo No 1. Be that as it may they appear to show the supermarket businesses are profitable. For the 2015 financial year the gross profit from trading was $477,044. The net profit was only $27,480 but the accounts show 'finished goods - at cost' in an amount of $525,900. Both counsel agreed that entry referred to stock on hand. There is an amount of $110,971 in net assets. Exhibit B appears to be at least in its first two pages a trial balance up to 30 September 2015. Although the accounts are not all that easy to read it would appear there has been some deterioration in the business and a net loss of $239,680.34 is shown in the accounts. No attempt was made during the course of the hearing to explain those accounts; certainly no evidence was led from the accountant who prepared the financial statements. But it does seem reasonably clear that the two businesses are viable, profitable and accordingly Tolo No 1 is by no means insolvent.
There is no question in my view but that Tolo No 2 ought be wound up. There has been a complete breakdown in the relationship between Hakimi and Mahrami and it is clear that relationship will not be mended. As each of the two men are directors of the company Tolo No 2 is effectively deadlocked. Accordingly, there will be an order for the winding‑up of Tolo No 2 pursuant to s 461(k) of the Corporations Act.
The position of Tolo No 1 is somewhat different. While Mahrami has been excluded from the management of the company it would appear that has been done in a proper and appropriate manner. In any event given the restraints to which he is presently subject Mahrami could not attend either shop premises and in practice could not take part in the management of the supermarket enterprise. It is difficult to see how this exclusion from the management in and of itself is oppressive and would justify a winding‑up order either under s 232 or s 461(k) of the Corporations Act. One of Mahrami's chief complaints about the conduct of the affairs of Tolo No 1 is the failure of the management to provide him with accounts on a regular basis. So far as the financial year 2015 is concerned that omission has been rectified. It is difficult to characterise a failure to provide monthly or quarterly financial statements as oppressive conduct when they are not required to be provided to shareholders pursuant to the terms of a company's constitution.
On balance I am not satisfied at the moment a winding‑up order for Tolo No 1 would be justified. However I accept the poisonous relationships between the parties are such that some process which disentangles their business relationship is appropriate. At the commencement of the hearing of these matters I was provided with a copy of an open letter from Hakimi to buy out the interests of both Mahrami and Musa. Counsel for Mahrami indicated the terms proposed were unacceptable. While I can well understand why that might be the case (the long settlement time for the purchase of any shares is one potential problem) at least there is a recognition by Hakimi that the business relationship must come to an end. Given the company is solvent and (probably) trading profitably to wind it up now seems to me inappropriate.
Accordingly, I propose to adjourn the winding‑up application for a period of time to allow the parties further discussions. In addition to that with a liquidator appointed to Tolo No 2 it may become clear what, if any, relationship the two companies bear to each other. For instance, the liquidator might determine the business conducted from the Thornlie Shop is the property of Tolo No 2. That may colour the way in which the parties go about resolving their differences. Of course, the matter cannot be left to rest indefinitely and I will hear the parties as to the appropriate timeframe. But for the present I am not satisfied there should be a winding‑up order made with respect to Tolo No 1.
On publication of these reasons I will give the parties the opportunity to consider their respective positions and deal with the form of the orders and the question of costs in due course.