Wells v Teamwork

[2012] VSC 301

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST

No. 3431 of 2012

IN THE MATTER OF TEAMWORK INVESTING PTY LTD (ACN 139 975 807)

BETWEEN

David Stewart Wells	First plaintiff
-and-
Lynette Anne Wells	Second plaintiff
-and-
Teamwork Investing Pty Ltd (ACN 135 975 807)	Defendant

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JUDGE:	Robson, J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 June 2012
DATE OF RULING:	19 June 2012
CASE MAY BE CITED AS:	Wells v Teamwork
MEDIUM NEUTRAL CITATION:	[2012] VSC 301

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CORPORATIONS - Interlocutory injunction – Call made on shares that were issued as fully paid – Prima facie case and balance of convenience favours granting of injunction

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	JG Pennell	Donaldson Trumble Lawyers
For the Defendant	No appearance

HIS HONOUR:

1. I propose to make the interlocutory injunction sought for the following reasons.

1. The company, Teamwork Investing Pty Ltd has purported to make a call on shares issued to Mr and Mrs Wells when the company was incorporated in 2009.  At the time it was incorporated, shares were also issued to a Mrs Carol Colby.  The company records with ASIC, and the share certificate, indicate that the shares were issued to Mr Wells as fully paid.  I assume they were also issued to Mrs Colby as fully paid.  The exhibits to Mr Merang's affidavit suggest that the reason for the company's call on the shares is that Mr Wells has taken clients of the company.

1. Although the material is sketchy, it appears that it may well be the case that on the incorporation of the company the assets and property introduced and given or transferred to the company were the client base of the existing two members of the company, Mrs Colby and Mr Wells.  One of the complaints against Mr Wells now appears to be that he has taken some of the clients that were introduced to the company and form the basis of the allocation of their respective shares between him and Mrs Colby.  On this I am speculating because it is not yet clear what the real dispute between the parties is. 

1. The authorities make it clear that a company can issue shares as fully paid without the payment of cash.  Other assets can be agreed between the incorporators as satisfying the company for the issue of the shares.  Whether Mrs Colby and Mr Wells so agreed is a matter which will need to be determined at the trial. 

1. The granting of an injunction is guided by two tests: whether there is a prima facie case to answer, and whether the balance of convenience favours granting the injunction.

1. On face of the ASIC records showing that the shares were issued as fully paid, there is a prima facie case that the call that has been made on them is an improper call.

1. The balance of convenience favours the company taking no further steps to forfeit the shares until that issue is resolved in court.  The issue may well be resolved in favour of the company, but I can see no prejudice to the company in the meantime in restraining it from forfeiting the shares.  On the other hand, if the shares are forfeited that may cause prejudice to Mr Wells and, should he win the case, he may be put in a difficult position of having to have his shares reinstated.  Therefore, in my view, the plaintiff has made out a case for an interlocutory injunction. 

1. As this is an interlocutory proceeding, it is prudent for me to refrain from saying too much about the nature of the dispute.  I note, however, that Ms Muhlen‑Schulte a Director, appeared in court today.  She was informed she could not appear for the company, but she was given leave to address the court on the issues that she said I should take into consideration. 

1. Ms Muhlen-Schulte pointed out that Mr Wells has had notice since 4 June 2012 of the company's intention to forfeit the shares and but that he waited some two weeks before taking any steps and then brought on an application for an urgent injunction.  She says that the company has therefore been deprived of the opportunity to obtain proper legal advice and properly prepare itself for this hearing.

1. I accept that there has been the delay raised by Ms Muhlen-Schulte.  On the other hand it appears that the solicitors for Mr Wells have written to the company pointing out the legal position regarding the call on shares, and in fact referring the company to the relevant and long standing authorities which clearly establish that the company can issue shares as fully paid without the consideration being cash.

1. In this case, as I have said, what the original incorporators agreed may be critical to the determination of the issue.  It seems to me this case is ideally suited for mediation: the sums of money at issue are not enormous; the costs in this court are quite high; this case cries out for resolution otherwise the parties are going to spend a large amount of money for little return.  It is for that reason that I will order the matter go to mediation at the earliest possible opportunity.  I would strongly suggest that the plaintiff company obtain legal representation, whether it be a solicitor or a barrister, to attend the mediation to try and resolve all these outstanding issues.  The consequence of not resolving the mediation will be that one or other of the parties will win, but it will be a pyrrhic victory because the costs will be so high that it may not be worth the effort.  It is my understanding that if the successful party obtains costs they will probably only average out about half of what the actual costs will be.

1. The plaintiff sought orders for examination of the books and records.  I decline to grant that order at this stage because I do not think it is appropriate that Mr Wells, or his solicitors, go through the books and records when there might be confidential information relating to the activities of the company.  It might be appropriate, if particular books and records were requested by Mr Wells for inspection, particularly ones which relate the incorporation process, and if those books and records are not made available for inspection, that a further application could be made to court.

1. I propose to make the orders the following orders:

1.        Until further order the defendant whether by itself or by its servants or agents                 or howsoever otherwise, be restrained from altering, in any way, the share                capital of the defendant.

2.        Until further order the defendant whether by itself or by its servants or agents                 or howsoever otherwise, be restrained from dealing with, in any way, the   shares of David Stewart Wells and Lynette Anne Wells in the defendant.

3.        Until further order the defendant whether by itself or by its servants or agents                 or howsoever otherwise, be restrained from disposing of or transferring any             assets other than in the ordinary course of its business as a financial advisor              and broker. 

4.        The defendant to file and serve any affidavit upon which it shall rely by   4.00pm on 29 June 2012.

5.        A mediation to be conducted by the end of July 2012.

6.        The proceeding be listed for directions on 10 August 2012.

7.        The costs of the application be reserved.

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