Woods, in the matter of Englewood Australia Pty Ltd v Englewood Australia Pty Ltd

[2015] FCA 749

FEDERAL COURT OF AUSTRALIA

Woods, in the matter of Englewood Australia Pty Ltd v Englewood Australia Pty Ltd [2015] FCA 749

Citation:	Woods, in the matter of Englewood Australia Pty Ltd v Englewood Australia Pty Ltd [2015] FCA 749
Parties:	SHEILA EMILY WOODS v ENGLEWOOD AUSTRALIA PTY LTD (ACN 143 535 728), DANIEL GEORGE ENGLES, HANIF IBRAHIM and INTERSTAFF IMMIGRATION PTY LTD (ACN 601 542 652)
File number(s):	WAD 39 of 2014
Judge(s):	SIOPIS J
Date of judgment:	15 April 2015
Date of hearing:	15 April 2015
Place:	Perth
Division:	GENERAL DIVISION
Category:	No Catchwords
Number of paragraphs:	12
Counsel for the Plaintiff:	Mr L Warnick
Solicitor for the Plaintiff:	Holman Fenwick Willan
Counsel for the First Defendant:	The First Defendant did not appear.
Counsel for the Second Defendant:	The Second Defendant did not appear.
Counsel for the Third Defendant:	The Third Defendant did not appear.
Counsel for the Fourth Defendant:	Mr P Lafferty
Solicitor for the Fourth Defendant:	Kings Park Corporate Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 39 of 2014

IN THE MATTER OF ENGLEWOOD AUSTRALIA PTY LTD (ACN 143 535 728)

BETWEEN:

SHEILA EMILY WOODS
Plaintiff

AND:

ENGLEWOOD AUSTRALIA PTY LTD (ACN 143 535 728)
First Defendant

DANIEL GEORGE ENGLES
Second Defendant

HANIF IBRAHIM
Third Defendant

INTERSTAFF IMMIGRATION PTY LTD (ACN 601 542 652)
Fourth Defendant

JUDGE:	SIOPIS J
DATE OF ORDER:	15 APRIL 2015
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The fourth defendant give standard discovery of the management accounts showing the financial position and the financial performance of the InterStaff business of the fourth defendant from 17 September 2014 to 31 March 2015.

2.The fourth defendant give discovery of the category of documents referred to in order 1 within 14 days and electronic inspection of the discovered documents is to occur within 7 days of the service of the fourth defendant’s List of Documents.

3.The fourth defendant pay the costs of the plaintiff in any event.

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 39 of 2014

IN THE MATTER OF ENGLEWOOD AUSTRALIA PTY LTD (ACN 143 535 728)

BETWEEN:

SHEILA EMILY WOODS
Plaintiff

AND:

ENGLEWOOD AUSTRALIA PTY LTD (ACN 143 535 728)
First Defendant

DANIEL GEORGE ENGLES
Second Defendant

HANIF IBRAHIM
Third Defendant

INTERSTAFF IMMIGRATION PTY LTD (ACN 601 542 652)
Fourth Defendant

JUDGE:	SIOPIS J
DATE:	15 APRIL 2015
PLACE:	PERTH

REASONS FOR JUDGMENT

1. This is an application for discovery of four discrete categories of documents.

2. The parties were able to agree that discovery should be given in relation to three of the four categories.  However, the parties were unable to agree in relation to the fourth category of documents, namely, the management accounts showing the financial position and performance of the Interstaff business from 17 September 2014 to 31 March 2015.  These documents are in the possession of the fourth defendant.

3. It is necessary to state very briefly the background facts.  This is a case in which Ms Sheila Woods, the plaintiff, alleges that there was oppression in the conduct of the business affairs of a company.  The plaintiff claims that she was excluded from the conduct of the Interstaff business in which she and Mr Daniel Engels, the second defendant, jointly participated.  The Interstaff business was conducted by Englewood Australia Pty Ltd, the first defendant, as the trustee of a trading trust.  The plaintiff was a unit holder in the trust and also a director of the first defendant, the trustee company.

4. In September 2014, after this application had been commenced, the trustee company, under the control of Mr Engles, sold the Interstaff business to the fourth defendant.

5. The plaintiff’s allegations, briefly, are that the Interstaff business was sold in order to extinguish the plaintiff’s interest and in order to defeat her rights as a creditor.  The plaintiff also contends that the sale of the business was not a genuine sale because, so it is alleged, Mr Engles has entered into an agreement with the fourth defendant, on terms which permit him to buy back the business for a very small amount in certain circumstances.

6. Accordingly, a major issue at the trial will be whether the sale of the Interstaff business was a genuine sale or not.  In their defence, the second and third defendants, who were directors of the first defendant at the time of the sale, have said that the Interstaff business was failing and, therefore, it had to be sold, otherwise the company would, within a short period of time, have been trading as insolvent.

7. In support of the application for discovery, Mr Warnick, on behalf of the plaintiff, contended that there are matters pleaded which raise the question of whether or not the Interstaff business was, as the second and third defendants claimed, close to being insolvent; and also the question of the extent of the ongoing business relationship between Mr Engles and the fourth defendant, as the new owner of the business.  Mr Warnick went on to contend that the management accounts would provide information which is relevant to each of those questions.

8. In addition, Mr Warnick contended that the relief claimed contemplates that if oppression is found, or if the plaintiff succeeds on the claim that the transfer of the business was not a bona fide transaction, then an order will be sought for the Interstaff business to be retransferred to the first defendant and for Ms Woods to purchase Mr Engel’s units in the trust and his shares in the trustee company so that Mr Engles will thereafter be excluded from the Interstaff business.  Mr Warnick argued that this claim for relief also makes the true value of the Interstaff business an issue in the proceeding and the management accounts are relevant to that issue, also.

9. Mr Lafferty, on behalf of the fourth defendant, contended that none of the issues to which Mr Warnick referred, were pleaded in a way which affected the fourth defendant.  In other words, said Mr Lafferty, there was no relief sought which raised those issues specifically against the fourth defendant.  Therefore, said Mr Lafferty, the fourth defendant should not be required to give discovery of the management accounts.

10. First, I do not accept Mr Lafferty’s contention about the nature of the relief sought, because the claim against the fourth defendant is a claim for participation in the breach of fiduciary duty, and the consequential claim for compensation will raise a question of the value of the Interstaff business.  There may also be an issue as to an account of profits at the trial.  So, in my view, the question of the value of the Interstaff business is relevant to the case made against the fourth defendant.

11. Secondly, I accept Mr Warnick’s contentions that the matters to which he referred mean that the value of the Interstaff business will be a relevant issue at trial.

12. The documents in respect of which discovery is sought, are, as I have said, in the possession of the fourth defendant and are discoverable because they are relevant to the issues in the proceeding and have the potential to either support or undermine each party’s case, depending upon their content.  The fourth defendant must give discovery of those documents.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Associate:

Dated:        21 July 2015