Bluebags Nominees Pty Ltd v Snowball

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 671 of 2012

BETWEEN: BLUEBAGS NOMINEES PTY LTD ACN 133 551 532

JUDGE: LOGAN J DATE: 27 NOVEMBER 2012 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 Bluebags Nominees Pty Ltd is the majority shareholder (58% of the issued capital) of Label Plus (Qld) Pty Ltd (LPQ). Bluebags Nominees has by originating process made application under s 236 and s 237 of the Corporations Act 2001 (Cth) (Corporations Act) for leave to commence proceedings in the name of and on behalf of LPQ, the fourth respondent, against the first, second and third respondents. The first, second and third respondents are, respectively, as to the first and second respondents, directors of LPQ and as to their son, Mr Ronald Snowball Jnr, the third respondent, the General Manager of LPQ. The subject of the leave application is an application in respect of alleged past and ongoing breaches of duty to the company, LPQ involving the taking or diversion of some $660,000 of LPQ's funds for their own benefit. 2 In aid of that application Bluebags Nominees seeks injunctive relief on an interim basis. The end to which that interim relief is directed might conveniently be summarised as the prevention of the exercise by the Snowballs of their powers as directors and managers of LPQ's business. A granting of that interim relief would see the first, second and third respondents under an obligation to disclose passwords and related codes concerning LPQ's bank account and other financial records and other corporate records held in electronic form to Mr Rowney who is the controller of Bluebags Nominees. 3 The shareholders in LPQ have executed, in 2001, a shareholders' agreement the effect of which as to matters of corporate policy, is set out in clause 2.5 and require unanimous agreement (see, particularly, clause 2.5.3 of the shareholders agreement). 4 That agreement, at least as a matter of first impression, appears to be subsisting in its operation to the continuing parties to that agreement. Some of the original parties to the agreement have since ceased involvement with the company. Nonetheless, clause 7 of the shareholders agreement, in particular, subparagraph (c), seems to have the effect of continuing to bind the other shareholder parties. Those parties are, in effect, interests controlled by Mr Rowney and interests controlled or held by the Snowballs. 5 Regard to the material read today, which consists of affidavits of Mr Rowney, discloses, prima facie, a disparity between transactions as recorded in LPQ's books of account and nominated payees on cheques drawn to the company's bank account. It also discloses, prima facie, some rather unusual attrition in materials used in the conduct of the company's business, which one might not, having regard to their usual life span, expect to have seen occurred. 6 All of this might, of course, be able to be the subject of ready explanation by one or other or each of the first, second and third respondents. It is enough for today's purposes to indicate that I am well satisfied on the material read that there is a prima facie case. It is important to emphasise that, for a grant of leave, final conclusions on the merits are a matter for another day. 7 As to the question of the relief sought the applicant, Bluebags Nominees, does seem to me to be a "person interested" in terms of s 1324 of the Corporations Act. The approach to that section is to afford a wide interpretation to the notion of who constitutes a person whose interests are affected: see Allen v Atalay (1993) 12 ACLC 7 at 10. 8 To the extent, if any, to which s 1324 of the Corporations Act might not supply adequate power for the making of the orders sought that power would, in my opinion, be conferred by s 23 of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act). That section is not, of course, a source of jurisdiction but a jurisdictional foundation here is found in s 236 and s 237 of the Corporations Act. Section 23 gives the Court power to make orders of such kinds, including interlocutory orders, and to issue or direct the issue of writs of such kinds as the Court thinks appropriate. Read together, s 1324 of the Corporations Act and s 23 of the Federal Court of Australia Act supply, in my opinion, power to make the orders that are sought and which I have described in general terms. 9 I note as to the seeking of those orders that, apart from Bluebags Nominees and Mr Rowney giving the usual undertaking as to damages they also undertake, until further order, to cause each of the first respondent, the second respondent and the third respondent to be paid by LPQ, on the basis presently in force, their salary and superannuation entitlements as directors and employees of LPQ and further undertake, until further order, to preserve and not to destroy or delete any document or information owned by the application or used by LPQ in its business. 10 The application is one which has today been heard on an ex parte basis. I am satisfied that it was an appropriate case to be so heard. I am also satisfied that Bluebags Nominees has observed, appropriately, an obligation of candour in relation to the nature of the relief sought, the material relied on and its strengths and weaknesses. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.