Bective Enterprises Pty Ltd v Pitcher Partners Advisors Pty Ltd

1. Orders 2, 3, 4, 5, and 6 of the orders made by the Court on 13 December 2022 are set aside.
2. A case management hearing is fixed for 10 March 2023 at a time to be advised.
3. The costs of the respondent's interlocutory application be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The respondent has applied by interlocutory application on notice to set aside procedural orders that were made by consent of the parties on 13 December 2022. The main feature of those procedural orders was to refer the proceeding to private mediation, including a requirement that "the parties are to attend and participate genuinely" in the mediation. In the circumstances that follow, the respondent submits that there would now be no utility in a mediation, and further, seeks orders that would be tantamount to staying this proceeding. Background 2 By their statement of claim in this proceeding, the applicants allege that the second applicant (Mr Cheek) was the director and controlling mind of the first applicant (Bective). The applicants allege that until 20 June 2017, Bective had a majority shareholding in a company, Dockvest Pty Ltd (Dockvest) which operated a business known as "Zap Fitness". Until 13 July 2017, Dr Michael Jackson (Dr Jackson) and a company with which he was associated, Jumic Services Pty Ltd (Jumic,) were minority shareholders. 3 The applicants allege that in about mid-2017 Dr Jackson was desirous of relinquishing his shareholding of Dockvest, and retiring from the business. To achieve that end, Dockvest effected a buyback of shares held by Dr Jackson and Jumic. The applicants allege that for the purposes of effecting the share buyback, they retained the services of the respondent. 4 In June 2017, at about the same time the share buyback was being implemented and before it was concluded, Mr Cheek was approached by a potential buyer of the Zap Fitness business. It is alleged that Mr Cheek did not disclose this fact to Dr Jackson before the completion of the share buyback. The applicants allege that prior to the completion of the share buyback they conveyed the interest of the potential buyer to the respondent, and that in breach of its duties the respondent failed to advise them that the approaches by the potential investor should be disclosed to Dr Jackson pursuant to disclosure obligations under the Corporations Act 2001 (Cth). The respondent disputes any liability to the applicant. The grounds of dispute are extensive, and extend to questions concerning the scope of the respondent's retainer, questions of causation, claims that the applicants suffered no loss, and contributory negligence. 5 In 2018, Dr Jackson and Jumic commenced a proceeding in this Court to which Mr Cheek and Bective were joined as respondents. Dr Jackson and Jumic claimed that they had suffered loss and damage as a result of the breach of obligations of disclosure arising in connection with the share buyback, and in consequence of misleading and deceptive conduct for which Mr Cheek and Bective were alleged to be liable. 6 On 1 December 2018, Mr Cheek and Bective compromised the proceeding brought by Dr Jackson and Jumic. Under the terms of settlement, Mr Cheek and Bective agreed to pay the sum of $4.25 million to Dr Jackson and Jumic by 24 December 2018. The written terms of settlement contained the following releases and covenants not to sue - 3.1. Upon the date of this agreement, Jackson and Jumic forever release and discharge Dockvest, FLG Bidco, Cheek and Bective (and each of their past and present directors, officers and employees) from all claims or causes of action arising out of or related to the matters the subject of the Proceeding or the Cross-Claim, save for any claims or causes of action for breach of this agreement. 3.2. Upon the date of this agreement, Dockvest and FLG Bidco forever release and discharge Cheek and Bective (and each of its past and present directors. officers and employees) from all claims or causes of action arising out of or related to the matters the subject of the Proceeding or the Cross-Claim. 3.3. Upon the date of this agreement, Dockvest, FLG Bidco, Cheek and Bective forever release and discharge Jackson and Jumic (and each of its past and present directors, officers and employees) from all claims or causes of action arising out of or related to the matters the subject of the Proceeding or the Cross-Claim. 3.4. Upon the date of this agreement, Jackson, Jumic, Dockvest, FLG Bidco, Cheek and Bective hereby severally covenant not to sue any other person in respect of the matters the subject of the Proceeding or the Cross-Claim. 7 By this proceeding, Mr Cheek and Bective allege that had Pitcher Partners advised them of their obligations of disclosure, they would have caused Dockvest to comply with those obligations. Importantly, they allege that had they made the disclosure to Dr Jackson the buyback proposal would nonetheless have proceeded. The applicants allege that they have suffered loss and damage, being their liability to Dr Jackson and Jumic under the terms of settlement, and the legal costs that they incurred in the proceeding, which are quantified at $305,113.42. 8 On 22 December 2022, Dr Jackson as plaintiff commenced a proceeding in the Supreme Court of Victoria at Melbourne against Mr Cheek and Bective. The relief sought was an injunction restraining Mr Cheek and Bective from taking any further step in this proceeding. The statement of claim filed in the Supreme Court proceeding alleges that the claims in this proceeding are in respect of matters that were subject of the earlier 2018 proceeding within the meaning of cl 3.4 of the terms of settlement, and that therefore Mr Cheek and Bective have breached the covenant not to sue contained within that clause. On the evidence before the Court, the only relief sought by Dr Jackson is final relief, which would have to follow a trial. 9 By its interlocutory application, the respondent seeks the following orders - 1. Orders 2, 3, 4, 5 and 6 of the orders made on 13 December 2022 be vacated. 2. The matter be listed for a case management conference on a date to be fixed following hearing and determination of the injunction application made in Supreme Court of Victoria Proceeding S ECI 2022 05340. 3. The parties must notify the Court by email () of the outcome of the injunction application made in Supreme Court of Victoria Proceeding S ECI 2022 05340 to enable the Court to list the matter for a case management conference as contemplated in order 2 above. 10 Counsel for the respondent submitted that there was no utility in mediating the present proceeding until the preliminary question whether Mr Cheek and Bective are entitled to bring the present proceeding has been determined. Counsel submitted that the respondent sought a postponement of the mediation until after the determination of Dr Jackson's claim in the Supreme Court, or any application to transfer that proceeding to this Court for both proceedings to be heard together. Counsel submitted that only then would a mediation have any real utility. Counsel submitted that if Dr Jackson's claim in the Supreme Court succeeded, the costs of a mediation would be thrown away. On the other hand, if Dr Jackson's claim failed, it was likely that another mediation might be necessary. It was submitted that in either case to proceed with the mediation was not consistent with the overarching purpose under s 37M of the Federal Court of Australia Act 1976 (Cth) to facilitate the just resolution of disputes as quickly, inexpensively, and efficiently as possible. 11 Senior counsel for the applicants submitted that the claim made by Dr Jackson in the Supreme Court proceeding had poor prospects, referring the Court to the well-known principles essayed in Grant v John Grant & Sons Pty Ltd [1954] HCA 23; 91 CLR 123 relating to the construction of releases. Indeed, counsel for the applicants submitted that Dr Jackson's proceeding in the Supreme Court was likely to fail. Counsel also submitted that there was an evident lack of expedition in relation to Dr Jackson's proceeding, and that this raised a real apprehension that this proceeding might be left in abeyance for an extended period because Dr Jackson's proceeding would not be prosecuted with due expedition. Counsel for the applicants further submitted that no ground had been demonstrated by the respondent to set aside this Court's interlocutory orders of 13 December 2022, citing a decision of the Queensland Court of Appeal in Rockett v The Proprietors - "The Sands" BUP 82 [2001] QCA 99; [2002] 1 Qd R 307 (Rockett) at 310, 311 (McPherson JA, Williams JA and Wilson J agreeing). Finally, counsel for the applicants submitted that if the Court acceded to the application by the respondent, the applicants would be at the whim of Dr Jackson as to how quickly the Supreme Court proceeding might be prosecuted.