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Judgment - ex tempore

1. By Interlocutory Process filed on 27 April 2016 the Plaintiff, Felan's Fisheries Pty Ltd ("Felan's") claims an order under s 74K of the Real Property Act 1900 (NSW) extending the operation of caveat number AK292467 ("Caveat") until further order.
2. Felan's alternatively seeks an interlocutory injunction under s 1324(4) of the Corporations Act 2001 (Cth) restraining the First Defendant, Sydney Fish Market Pty Ltd ("SFM") from taking certain steps in respect of particular premises at the fish market or surrendering or agreeing to surrender the estate created under SFM's lease of the land from the Crown which it occupies for the fish market, so far as that land comprises the premises formerly occupied by Felan's. In submissions in reply, Felan's extended its application to seek an injunction in the Court's equitable jurisdiction, a matter to which I will return below.
3. The parties made extensive submissions in respect of the matter, continuing for more than a day. Because of the urgency of the matter, in circumstances that the Caveat will imminently expire, and other hearing commitments, it will be desirable to deliver judgment in a manner that focuses on the key issues in dispute, without disrespect to the subtlety and extensive character of the submissions which were made before me. I should note that, where this is an interlocutory application in ongoing proceedings, it is in any event desirable that I restrict my judgment, so far as possible, to those matters which need to be determined in order to determine this application, and do not express views, where it is possible to avoid doing so, as to matters which will need to be determined in the substantive hearing.
4. I will first address the relationship between the parties, then the chronology of events, then the affidavit evidence and then the respective applications. SFM operates the Sydney Fish Market under a lease granted in 1994 by the Crown in respect of New South Wales. The shareholders in SFM are the Second Defendant in the proceedings, SFM Tenants and Merchants Pty Ltd ("Buyers"), and NSW Fishermen's Holding Co Pty Ltd ("Catchers") which each hold half of the shares in SFM. The relationship of those entities is governed by a Shareholders Agreement dated 27 September 1994 between them, to which SFM is not party, and some of the provisions of that Shareholders Agreement are in turn reflected in SFM's Constitution. Felan's owns 1.875m ordinary shares in Buyers, constituting 25% of its ordinary shares.
5. I should also briefly refer to the chronology of events, where I have been assisted by a helpful chronology prepared by Mr Dempsey who appeared with Mr Carey on behalf of Felan's. Felan's took a sublease of the relevant premises from the predecessor to SFM, the Fish Marketing Authority, in 1989, which had a term of 20 years expiring 18 July 2006, and Felan's has remained in possession after that date as a tenant holding over on a monthly basis. Felan's also subsequently took a licence of an additional space, although it did not seem to me that that licence was of significance for the determination of this application.
6. It appears that, since July 2014, there has been a proposal for the redevelopment of the area surrounding the Sydney Fish Market, including the premises on which the Sydney Fish Market is located, which has progressed to the extent that it presently involves a proposal for the relocation of the Sydney Fish Market. That proposal appears to have given rise to some controversy, at least between competing commercial interests that hope to benefit from it. In January 2015, a meeting was requisitioned of members of Buyers, which as I noted above is one of the two shareholders in SFM, to consider a proposal to remove three of its directors and appoint three new directors. It appears that that requisition was associated with differing views as to the merits of competing commercial proposals in respect of the redevelopment of the Sydney Fish Market.
7. The existing directors of Buyers resolved, at a meeting on 25 February 2015 that, if there was no quorum at the initial meeting on 25 February, the further meeting would be adjourned to 30 April 2015. It appears that it was predictable that there might well be no such quorum at that point. The requisitionists instead adjourned the meeting for one week in the absence of a quorum, and there is a dispute at least between Felan's on the one hand and Buyers on the other as to these matters. The adjourned meeting continued a week later and resolved to remove three directors and appoint three new directors of Buyers. The new board of Buyers in turn removed and replaced, or purported to remove and replace, two nominee directors of Buyers to the board of SFM. The validity of those steps was not accepted by the previous board of Buyers or SFM.
8. In April 2015, in a step which appears to have had at least some relationship with the existing corporate disputes, although it may well have also been prompted by other matters, SFM issued a notice to quit to Felan's, which was then holding over in premises at the Sydney Fish Market under a lease that had long expired. There is a significant controversy, to which I will refer below, as to the validity of the authorisation given by SFM's board to issue that notice to quit and as to the validity of that notice to quit. However, Felan's did not bring any proceedings to challenge its validity until eight months after it was issued. In the meantime, correspondence between Felan's and SFM and their legal representatives had continued, debating the validity of the notice to quit, an extended time for Felan's to vacate the premises was negotiated and, in July 2015, SFM re-entered and took possession of the premises, although its entitlement to do so is now in dispute. SFM then advised Buyers of its re-entry into the premises, which had the consequence that Buyers may be entitled, or obliged, to take steps to require Felan's to dispose of its shares in Buyers in accordance with reg 52 of its Constitution, which linked eligibility to hold a shareholding in Buyers with a tenancy in the Sydney Fish Market.
9. Events in respect of the proposed redevelopment of the area surrounding the Sydney Fish Market thereafter advanced and, in October 2015, a substantial transformation plan was issued by Urban Growth, an entity associated with the state government, in respect of that redevelopment. In December 2015, after the events to which I have referred occurred, and presumably with knowledge of them, Mr Robert Deans acquired control of Felan's (Fraser 27.4.16 [13]). Subsequently, on 16 December 2015, the substantive proceedings were commenced and, on 16 March 2016, nearly a year after the notice to quit had been issued, the Caveat was lodged. A lapsing notice was served by SFM on 13 April 2016, which would take effect tomorrow, 4 May 2016, unless the Caveat is now extended by the Court. On 27 April 2016, Felan's sought and obtained an order for short service of its application for an order extending the Caveat, that application having been brought shortly after the time which would ordinarily be contemplated for such an application by Supreme Court Equity Practice Note 8.
10. I should broadly note, at this point, several matters that emerge from that chronology. First, there has been an issue for some time, of which Felan's would have been aware by no later than November 2015, as to the possibility that the loss of Felan's tenancy in the Sydney Fish Market would bring about a requirement for sale of Felan's shares in Buyers, by the mechanism contained in Buyers' Constitution. Second, Mr Deans acquired the shares in Felan's after this issue had arisen. Third, proceedings were not commenced until some eight months after the notice to quit and five months after SFM's re-entry into the premises, although I recognise that correspondence between the parties was taking place in the interim, and interlocutory relief was not sought when the proceedings were commenced. The Caveat was not lodged until March 2016, nearly a year after the notice to quit and eight months after possession had been retaken by SFM. Obviously enough, the delays in these circumstances are substantial, a matter to which I will return below.
11. However, I also recognise that Felan's has identified a concern that the grant of a new lease to a third party, if it occurred, would potentially affect the interest which it contends it still has in the relevant premises, and expose it to a disposition of its shares under Buyers' Constitution, if it is not already exposed to that risk. On the other hand, I have been informed from the bar table, although there is no evidence as to this before me, that SFM has offered an undertaking, which has not been accepted, that it would not grant such a tenancy interest to a third party pending the determination of the proceedings. There is evidence before me that it has previously offered an undertaking that it would, at least, not grant such a tenancy interest to a third party without giving notice to Felan's of its intention to do so. If a forced disposition of shares held by Felan's is in fact the consequence of a breach of SFM's Constitution (so far as it deals with the objects of SFM) and the Shareholders Agreement, and Felan's has standing to enforce the rights arising under those agreements as it contends, then it would seem that any loss it suffers could readily be quantified, as constituting the difference between the value of its shares, not in the context of a forced sale, and the price which was achieved by the particular mechanism of a sale under Buyers' Constitution. I will return to several of those matters below.
12. Turning now to the affidavit evidence, Felan's relied on an affidavit of its director, or former director, Mr Turner, dated 15 December 2015, filed in the main proceedings, which exhibited voluminous documentary material including the constitutions of Buyers and SFM, a Shareholders Agreement dated 27 September 1994 between Buyers and Catchers to which I have referred above, the lease between SFM's predecessor and Felan's, the notice to quit issued by SFM to Felan's in April 2015, and subsequent correspondence. Felan's also tendered the minutes of the meeting held on 21 April 2015, by which SFM's board determined to give notice to quit to certain tenants, Felan's being one of those tenants, although it may be that the circumstances of other tenants to which such notices to quit were given were different, as Mr Dempsey points out, to those of Felan's.
13. Felan's also relied on a further affidavit of its solicitor, Mr Fraser, dated 27 April 2016 which set out the relief sought and purported to annex the form of the Caveat lodged by Felan's with the Registrar-General. It subsequently emerged in the course of the hearing that the Caveat annexed to that affidavit was not in fact the Caveat that has been initially lodged with the Registrar-General, or served on SFM, but had subsequently been amended in hand to address a significant issue raised in a requisition by the Registrar-General. Mr Fraser also provided an explanation of sorts for the lateness of filing this application, which involved, in substance, other commitments of his firm and of counsel and the fact that the sole director of Felan's had been interstate for several days. I should observe, in passing, that the days in which commitments of legal practitioners, or absence of a client interstate, provided substantial explanations for delay in urgent applications have long passed, if they ever existed. It is, however, not necessary to address the significance of delay of that character, given the conclusions I have reached on other grounds. There is also some force in Mr Dempsey's submission that ultimately the application was filed only shortly after the time that would be required by Practice Note SC Eq 8, and I will deal with its substance in any event.
14. A further affidavit of Mr Fraser dated 2 May 2016 addressed subsequent correspondence between the parties, by their solicitors. An affidavit of Mr Deans dated 2 May 2016 identified the fact that the premises previously occupied by Felan's were presently the subject of limited use by SFM and identified use to which they could be put by Felan's if it was now allowed back into possession. It should be noted, in passing, that the relief sought by Felan's does not in fact have the consequence that Felan's would be permitted back into possession by reason of any orders made in this application.
15. SFM in turn relies on an affidavit of its solicitor, Mr Webster, dated 2 May 2016 which dealt with issues as to the adequacy of Felan's undertaking as to damages and the impact of the grant of injunctive relief on SFM, so far as the injunctive relief which was sought included an injunction preventing the surrender of the Crown lease for the Sydney Fish Markets site, which may be a necessary step in respect of the plans for relocation and redevelopment of the fish market which are presently under discussion with Urban Growth.
16. I turn now to the first form of relief sought, namely the order extending the Caveat under s 74K of the Real Property Act. That section relevantly provides that the Court may make an order extending a caveat for such period specified or until further order if it satisfied that the caveator's claim has or may have substance, or may make such other order as it thinks fit, but must dismiss the application if it is not so satisfied. Mr Hewitt, who appears for SFM, has drawn attention to several authorities dealing with the nature of an interest which would support the extension of a caveat and the matters which are relevant to such an application. It is sufficient to note, for present purposes, that an order to extend a caveat requires that the Court be satisfied that the caveator's claim to an interest in the property raises a seriously arguable case for final relief to justify maintenance of the caveat and that the balance of convenience favours extending the caveat. The test is similar to that which is applied in applications for an interlocutory injunction, namely whether there is a serious question to be tried as to final relief, although a caveat which has substance is less likely to be extinguished on balance of convenience grounds: Syndication Capital Group Pty Limited v MDR Cornish Investments Pty Limited [2011] NSWSC 1289. In Gerard v Jacquin [2011] NSWSC 913, Slattery J in turn noted, by reference to authority, that the relevant test is not a very demanding test and that it may be satisfied if a caveator can show that there is an arguable case for final relief even though establishing that claim may not be without its difficulties. I have had regard to that proposition in dealing with Felan's application.
17. It seems to me that Felan's case fails by reason of a significant difficulty in respect of the Caveat, where the Caveat lodged with the Registrar-General, as distinct from that annexed to Mr Fraser's affidavit, and sought to be extended by Felan's Interlocutory Process, sought to restrain dealings with the whole of the Sydney Fish Market site and not merely the premises that had been previously occupied by Felan's. I do not accept, as Mr Dempsey submitted, that that is a merely technical issue. First, it has a significant impact upon the impact of the Caveat on third parties who sought to deal with other interests in the Sydney Fish Market site, as well as upon SFM itself. It may or may not have been an inadvertent error, where paragraph 2(c) of the interlocutory relief that is sought by Felan's would itself, in practical terms, limit SFM's ability to surrender the Crown lease as a whole, although it is in terms directed to a surrender of the lease which would affect Felan's premises. Whether or not the width of the restriction on dealings claimed in the Caveat was inadvertent, it seems to me that it extends well beyond any possible interest of Felan's based on the identified interest and the Caveat could not be extended on that basis alone.
18. Mr Dempsey submits that the Court could otherwise order, including that the Caveat be extended or varied. With respect, I see no reason to make such an order, because it was and is open to Felan's to withdraw the existing Caveat and lodge a caveat that properly identifies the extent to which dealings are sought to be restricted, consistent with the interest claimed, subject to any necessary application for leave under s 74O of the Real Property Act and to the other observations which I make below. I can see little reason why the Court should order a party to do that which it can do for itself without such an order. In any event, there would be no purpose in my taking such an approach where, as I have noted below, it seems to me that narrower caveat would not be supportable in the relevant circumstances.
19. Although the matter could be determined on that basis alone, that would not be a proper course so far as the parties have devoted significant efforts in developing submissions as to substantive issues, and it is desirable that I address those other issues, against the contingency that an appellate court might take a different view than I have taken as to the scope of the Caveat, and in order to reduce the risk that the parties will be required to re-agitate, on a future occasion, matters that have already been agitated before me. I will, therefore, turn to the substantive matters on which Felan's relies to support the Caveat. I have been assisted, in that respect, by an outline of the basis on which the Caveat was put, which was prepared by Mr Dempsey at the Court's request, and which identified the elements of Felan's case in an admirably succinct way. I have also had regard to the parties' more detailed written submissions in chief and in reply and to oral submissions put by both parties.
20. First, Felan's submits that it holds a proprietary interest arising from a holding over pursuant to cl 8(b) of its lease, despite the service of the notice to quit and the fact that it has now been out of the premises for a considerable period. This proposition turns on a challenge to the validity of the notice to quit, in the sense of its legal effectiveness, which in turn derives from a challenge to the steps taken by SFM's board to authorise the issue of the notice to quit. Felan's contends that those steps did not comply with the requirements of SFM's Constitution and the Shareholders Agreement which, as I have noted above, is an agreement between Buyers and Catchers, to which SFM is not party. In particular, Felan's submits that there was no quorum at the meeting of the directors of SFM which authorised the issue of the notice to quit, because nominee directors appointed by Buyers which attended SFM's board meeting had previously been removed, following the replacement of three directors of Buyers by the adjourned general meeting on 4 March 2015. It seems to me that a serious question to be tried is established as to whether the purported removal of the directors of Buyers, and the consequential removal by Buyers of its nominee directors to SFM, was valid, which depends upon relatively complex questions as to the propriety of the earlier purported adjournment of the general meeting of Buyers by its board.
21. That, however, is not sufficient to establish the seriously arguable case that Felan's needs to establish, not only as to the invalidity of the board resolution authorising the issue of the notice to quit, but also the invalidity of the notice to quit when issued by SFM to Felan's. That also involves an associated issue, identified by Mr Hewitt, as to whether Felan's, as the recipient of the notice to quit, can challenge the corporate steps taken within SFM to authorise the giving of that notice.
22. So far as Felan's relies on an asserted noncompliance with the requirements of SFM's Constitution in respect of the quorum of the meeting that authorised the issue of the notice to quit, SFM relies on ss 124 and 125 of the Corporations Act to submit that a third party which receives the notice to quit cannot challenge that notice, because, SFM submits, those sections place the company's ability to rely on that notice beyond challenge by a third party. Mr Hewitt draws attention to the decision of the Full Court of the Supreme Court of Queensland in ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd [1991] 2 Qd R 360; (1990) 2 ACSR 676, where, in dealing with a predecessor provision, McPherson J noted that the purposes of the provision would be sufficiently achieved if the validity of corporate dealings with outsiders was made unimpeachable and, in turn, that the section operated to exclude what was formerly understood in corporate law as the wider form of ultra vires. Mr Dempsey, in turn, responds that the operation of those sections depends on there having first existed an act of the company, leaving open a question whether an act of the company was established by a decision of the board which, on Felan's case, was not taken in accordance with the constitutional requirements for such a decision.
23. It seems to me that there is a seriously arguable question as to this aspect of Felan's case, namely that the alleged invalidity of the decision of SFM's board may have the result that there is no corporate act of SFM to which ss 124 and 125 of the Corporations Act could apply, so as to prevent a challenge to the notice to quit by Felan's. It seems to me that at least two matters suggest that that question rises to the point of a serious question to be tried. The first is that, as I noted in submissions, Austin J has previously taken the view in Hillig v Darkinjung Pty Ltd [2006] NSWSC 594; (2006) 57 ACSR 733 that s 125 of the Corporations Act does not save an act that does not comply with the provisions of the constitution directed to the powers of directors. Mr Dempsey, in turn, refers to a passage in Ford's Principles of Corporations Law, which explains that view on the basis that such an act does not constitute an act of the company for the purposes of that section. It might, in turn, be noted, as Austin J there did in respect of a range of provisions, and I did in submissions in respect of s 129(1) of the Corporations Act, that it would be an odd result if an act which did not comply with a company's constitution, and could otherwise be protected at a third party's election under s 129(1) of the Corporations Act, did not require such protection in the first place because it was already valid by reason of s 125 of the Corporations Act.
24. I recognise that Mr Hewitt also points to a question whether Felan's has standing to take a point as to noncompliance with SFM's Constitution, where the statutory contract under s 140 of the Corporations Act does not confer rights on third parties: see the authorities cited in Re Anglican Development Fund Diocese of Bathurst [2015] NSWSC 1856 at [397]. However, as I understand it, Felan's point is not, in terms, an attempt to enforce the provisions of SFM's Constitution, as distinct from a challenge to the validity of the notice to quit, so far as it would affect it. It seems to me that these issues involve genuine legal complexity, and that is sufficient to create a serious question to be tried as to the question of the validity of the notice to quit. I note, however, that that does not assist Felan's in the present case, so far as the prohibition on dealings in the Caveat which it lodged extended well beyond the interest that it claims.
25. Next, Felan's submits that the resolution to issue the notice to quit was a disposition or variation of the lease for the purposes of cl 6.3(a) of the Shareholders Agreement. I note that there is an issue in respect of Felan's reliance on that provision, to which Mr Hewitt refers, namely that SFM is itself not party to the Shareholders Agreement. Felan's seeks to address that issue by contending first, that Buyers holds the relevant right under the Shareholders Agreement on trust for it, by reliance on the principle in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107. It seems to me that that claim does not rise to the question of a serious question to be tried. First, there is no pleaded claim in the substantive proceedings to raise a claim for the existence of such a trust. Second, it seems to me that there is no structural or textual basis to suggest that such a trust exists, and there is no evidentiary basis to which Mr Dempsey has drawn attention, for the existence of such a trust. It is also difficult to see, at least in respect of provisions dealing with the internal workings of SFM, how the shareholders of SFM, Buyers and Catchers, could hold their rights on trust for individual shareholders in those companies, not least where it might be anticipated that those individual shareholders might well take different views among themselves as to relevant matters of internal governance.
26. Second, Mr Dempsey submits that Felan's could enforce the rights of Buyers under the Shareholders Agreement by a derivative action brought under ss 236-237 of the Corporations Act in its capacity as a shareholder in Buyers. The difficulty with that proposition is that the grant of leave under ss 236-237 of the Corporations Act is a statutory prerequisite to such a step being taken, and that step cannot be taken until leave is granted for it to be taken under s 237 of the Corporations Act, by reference to the matters specified in that section. An application for such leave has not been taken to hearing in the period since the proceedings have been commenced. The present position is that Felan's cannot bring such a claim on that basis. It seems to me that no serious question to be tried can arise on the basis of any derivative claim, unless and until such leave were granted having regard to the statutory prerequisites to it.
27. Alternatively, Felan's contends that clause 50 of SFM's Constitution required that Buyers' nominee directors to SFM's board had voted in favour of a resolution to issue the notice to quit, and points to the fact that they abstained from the resolution to issue that notice. There are questions as to the construction of the relevant clause, and as to whether the issue of a notice to quit amounts to an act that is within the scope of it, to which Mr Hewitt drew attention in submissions. It seems to me, however, that the proposition in respect of clause 50 of SFM's Constitution is also seriously arguable, by reference to the same matters to which I have referred above in respect of a lack of quorum, so far as it may impugn the validity of the issue of the notice to quit.
28. Felan's also submits that the resolution to issue the notice to quit was not for a proper purpose. That submission appears to be pressed in support of its claim for relief under s 1324 of the Corporations Act, but could not support the extension of the Caveat. A contravention of s 181 of the Corporations Act, even if it were established, would not invalidate the resolution, unless and until the Court made an order arising from that contravention, and does not support an existing proprietary interest on Felan's part.
29. Next, Felan's submits that it has a proprietary interest arising from an obligation on SFM under the Shareholders Agreement, to which it was not party as I noted above, to offer rights of first refusal in respect of a new lease. Again, Felan's relies on Trident General Insurance Co Ltd v McNiece Bros Pty Ltd above and a derivative claim in order to assert its ability to rely on that provision. It may be arguable that there would be a stronger case for such a right to be held on trust for Felan's, so far as there may be a more plausible case that Buyers might be treated as holding such a right on trust for the body of tenants that would benefit from it. I note, without deciding, that question at this point. It nonetheless seems to me that this matter cannot give rise to a serious question to be tried to support a caveatable interest. The most immediate difficulty with it is that a right of this kind confers no immediate right upon Felan's, unless and until a lease is offered by SFM, and no such lease has been offered by SFM so as to trigger an obligation to offer a right of first refusal. Authority indicates that such a term is merely contractual and does not confer an interest in the land prior to the relevant triggering event of the offer of a lease by SFM: Mackay v Wilson (1947) 47 SR (NSW) 315 at 325; Jonns v Tan [1999] NSWSC 648; (1999) 9 BPR 17,113 at [9]. Whatever the position might be if SFM were in fact to offer, or propose to offer, a lease to a third party, it does not seem to me that Felan's can establish an interest arising from the right of first refusal until that occurs.
30. It is not strictly necessary for me to address the balance of convenience, given the view which I have expressed above as to the scope of the prohibited dealings identified in the Caveat. I will nonetheless refer to that issue, in relatively broad terms, again against the contingency that an appellate court may take a different view, and in deference to the detailed submissions made by the parties. I bear in mind that there is a risk to Felan's if SFM exercised a right to grant a lease to a third party, which might extinguish any subsisting interest of Felan's by way of a proprietary interest under the sublease, although I have pointed above to the fact that, so far as the consequence of that clause was to trigger a forced disposal of the shares, any loss suffered would appear to be compensable in money.
31. However, it seems to me that there are countervailing considerations such that the balance of convenience would not in any event have favoured the grant of interlocutory relief, by way of an extension of the Caveat. First, the extension of the Caveat has the capacity to have a substantial adverse impact on SFM and on third parties, so far as it would occur at a time that there appears to be detailed consideration of the plans for redevelopment of the relevant area, which may include a potential surrender of SFM's Crown lease over the Sydney Fish Market site. Mr Dempsey points out, I recognise, that if that matter came to fruition, SFM could make a further application to the Court. While I accept that proposition, I am nonetheless bound to have regard to the existing position, including the prospect that that matter will come to fruition, in assessing the balance of convenience. I recognise that Felan's submits, and has asserted in correspondence, that it does not seek to frustrate the transformation plan or the relocation of the Sydney Fish Market site. It seems to me, however, that I should give limited weight to that proposition, where it is no more than an assertion in correspondence, although repeated in submissions, and the form of relief sought by Felan's would in fact impact directly upon SFM's ability to implement the surrender of the Crown lease, and it appears at least possible that a developer with a competing interest in the proposal would have an economic incentive to take advantage of that opportunity, if it were available to it.
32. The evidence also indicates, although I do not express any final view, that there is a substantial risk that Felan's could not meet an undertaking as to damages from its own resources, given the scale of the damages that might potentially be suffered. Had I otherwise been satisfied as to the basis of the Caveat, it is likely that I would have imposed a condition that Felan's provide security for any undertaking as to damages, although I have not heard the parties as to that matter where it is not necessary to do so given the views that I have reached on other grounds.
33. I should also add that the chronology which I have set out above indicates substantial delay, running back for months since the notice to quit was issued, and indeed for several months since the proceedings were commenced, and it seems to me that that also would have been sufficient basis to withhold interlocutory relief in terms of the extension of the Caveat on discretionary grounds.
34. Alternatively, Felan's seeks wider relief, in paragraph 2 of its Interlocutory Process, relying on s 1324 of the Corporations Act. Section 1324(1) of the Corporations Act provides that, where a person has engaged in or is engaging in conduct that contravenes the Corporations Act, or was knowingly concerned in or party to the contravention, the Court may, on the application of a person whose interests are affected by the conduct, grant an injunction restraining the first mentioned person (i.e. the person acting in contravention of the Corporations Act or knowingly concerned in it) from engaging in that conduct or requiring that person (i.e. the person in contravention or involved in the contravention) to do any act or thing.
35. Section 1324(4) in turn authorises the Court to grant an interim injunction pending determination of an application under s 1324(1). Mr Dempsey draws attention to authority as to the flexibility of s 1324(4) of the Corporations Act. I accept that that section is remedial and flexible in its operation. I do not, however, understand that section to authorise the grant of an interim injunction that is wider than the final injunction that the Court would be authorised to grant under s 1324(1) of the Corporations Act and, even if I am incorrect about that, it is almost impossible to see that it could ever be desirable, for the purposes of s 1324(4) of the Corporations Act, to grant interim relief to restrain an act that the Court could not restrain on a final basis.
36. Felan's contends that such an injunction should be granted because the resolution to issue the notice to quit was not made in good faith in the best interests of SFM because it did not coincide with the objectives stated in cl 3.1(c)(viii) of the Shareholders Agreement relating to a right of first refusal to tenants, or clause 57 of SFM's Constitution which requires voting and decisions of the directors to be consistent and directed to the specified objectives in the Shareholders Agreement. There is a question, which it is not necessary to resolve, whether Felan's submission depends on prioritising one particular objective identified in the Shareholders Agreement over all other objectives identified in the Shareholders Agreement. Felan's also submits that SFM's board acted for an improper purpose, to exclude Felan's from involvement in Buyers in the relevant circumstances.
37. Felan's also asserts a contravention of s 181 of the Corporations Act by Buyers' directors, and that matter is in turn pleaded in paragraph 5 of the Originating Process which commenced the proceeding. I note, however, that the proceedings do not advance any claim against SFM either on the basis that it had contravened any identified provision of the Corporations Act, or on the basis that it was knowingly involved in any contravention by Buyers' directors of the Corporations Act. Mr Dempsey, in oral submissions, at one point raised the submission that SFM was knowingly concerned in or party to the alleged breach of duty by Buyers' directors. Mr Dempsey withdrew that submission, possibly in response to matters I had raised as to whether a company could be knowingly involved in a contravention by its own directors. I should recognise, in fairness to Mr Dempsey, that the matters which I raised with him may have reflected an incorrect premise, so as far as any knowing involvement contemplated by Felan's submission would be by SFM in a breach of duty owed by the directors of Buyers to Buyers, rather than by SFM in a breach of duty owed by its directors to itself. However, the more fundamental difficulty with this submission, if it had not been withdrawn, was that an allegation of knowing involvement against SFM is a serious allegation, which would require Felan's to establish both the factual bases of SFM's involvement in the alleged contravention, and the element of knowledge on SFM's part, and that allegation could not properly be pursued where no such allegation was pleaded, and no attempt was made to identify the material facts on which it was based. That is sufficient to support Mr Dempsey's withdrawal of that submission.
38. It seems to me possible to determine Felan's application under s 1324 of the Corporations Act on a narrow basis, notwithstanding the parties' comprehensive submissions, and it is preferable that I do so where many of the other matters addressed will have to be determined at a final hearing. The Interlocutory Process seeks an order restraining SFM from specified conduct. SFM is not alleged to have contravened the Act nor is it alleged to fall within any other category of person against whom an order can be made under s 1324(1) of the Corporations Act. There is no statutory jurisdiction to make such an order against SFM on a final basis, and no proper interest would be served in making such an order on an interim basis where it cannot be made on a final basis. I agree with the view expressed by White J in ASIC v Mapstone [2006] NSWSC 993; (2006) 59 ACSR 214 at [34] that, unless there is a serious question to be tried that an applicant is entitled to final injunctive relief under s 1324(1), it would not be proper to grant an interim injunction under s 1324(4), given the nature of the jurisdiction under the latter section as supportive of the application under s 1324(1). It is therefore not necessary to, and not appropriate to, address the question whether sufficient basis for such an order could have been established as against the directors of Buyers, against whom no such order is sought. I should, however, add that the discretionary considerations to which I have referred above would have tended strongly against the making of such an order, even if the Court had jurisdiction to make it. In particular, the significance of delay in an application under s 1324 was also recognised by White J in ASIC v Mapstone above at [36].
39. I should note, for completeness, that Mr Dempsey in submissions in reply raised the possibility of an interim injunctive relief in the Court's equitable jurisdiction, if the requirements for relief under s 1324 of the Corporations Act were not satisfied. It seems to me that the matters to which I have referred above, including issues as to the adequacy of an undertaking as to damages and, most importantly, as to delay, would have the result that the Court would not have exercised its discretion to order an interim injunction on that basis, even if a basis for it could have been established having regard to the issues which I have addressed above and even if that relief had been sought in chief rather than in reply when the Defendants had no opportunity to respond to it.
40. In these circumstances, the Interlocutory Process should be dismissed. My preliminary view is that Felan's should pay SFM's costs of the application, as agreed or as assessed. However, I will hear the parties, briefly, if they seek to be heard as to that question.