(2000) 172 ALR 586
J C Decaux Pty Ltd v Adshel Street Furniture Pty Ltd [2000] FCA 118
Source
Original judgment source is linked above.
Catchwords
(2000) 172 ALR 586
J C Decaux Pty Ltd v Adshel Street Furniture Pty Ltd [2000] FCA 118
Judgment (7 paragraphs)
[1]
Introduction
These reasons concern an application by the second to fifth defendants to summarily dismiss or strike out as an abuse of process the whole of the plaintiffs' statement of claim or, alternatively, to summarily dismiss or strike out the plaintiffs' oppression claim.
[2]
The parties and the nature of the proceedings
The proceedings concern the first defendant, Brianine Pty Limited (the Company).
It is common ground that the Company was incorporated on 21 January 1999. In March 1999, one A class share was issued to each of the first and second plaintiffs. They became directors of the Company on 19 March 1999. It is common ground that the first and second plaintiffs each continue to hold one A class share in the Company.
The proceedings have arisen out of a dispute concerning:
1. two A class shares in the Company that ASIC records indicate were issued to the fifth defendant, Whiteknight Group Pty Limited (Whiteknight), on 14 April 2015 and transferred to the second defendant, Property Group Pty Limited (Property Group), on 15 March 2020;
2. whether the second plaintiff, Mrs Teresa Camera, resigned as a director of the Company on 19 August 2015;
3. whether the first plaintiff, Mr Giuseppe Camera, resigned as a director of the Company on 22 September 2015;
4. whether the third defendant, Mr Adam Sheppard, was appointed as a director of the Company on 22 September 2015;
5. whether the fourth defendant, Mr Geoffrey Shannon (who has been the sole director of WhiteKnight since 5 July 2019 and is also that company's sole shareholder), was appointed as a director of the Company on 1 March 2021; and
6. if the two A class shares were validly issued to WhiteKnight on 14 April 2015 and subsequently transferred to Property Group on 15 March 2020 (which the plaintiffs deny), whether the affairs of the Company have been conducted in a manner that is contrary to the interests of the members as a whole and oppressive, unfairly prejudicial to or unfairly discriminatory against the interests of the plaintiffs.
The plaintiffs plead two alternative cases.
The first case concerns the matters referred to at [4(a)]-[4(e)] above. It is a claim for declarations that the plaintiffs are the sole shareholders in the Company, that Mr Sheppard and Mr Shannon have never been validly appointed as directors of the Company and the plaintiffs are presently the sole directors of the Company. The plaintiffs also seek an order for the Company's register of members and directors to be corrected and an order pursuant to s 1322(4)(b) of the Corporations Act 2001 (Cth) for rectification of the ASIC register.
The plaintiffs allege that the issue of two A class shares to Whiteknight on 14 April 2015 was not approved or authorised by them, and that the power to issue shares in the Company was vested in them as the only directors of the Company at that time. The second to fifth defendants plead that the shares were issued to Whiteknight with the approval and authority of Mr and Mrs Camera in accordance with a Heads of Agreement dated 6 January 2014 between the plaintiffs and Ms Paige Taylor Shannon (the daughter of Mr Shannon). The second to fifth defendants further plead that Ms Shannon nominated Whiteknight as the entity to which the shares were to be issued and Mr Camera signed the Form 484 by which ASIC was notified of the issue of the two A class shares to Whiteknight. In reply, the plaintiffs do not admit the authenticity of the Heads of Agreement or the Form 484 dated on or about 9 April 2015.
ASIC records state that Mrs Camera resigned as a director of the Company on 19 August 2015 and Mr Camera resigned on 22 September 2015. The plaintiffs plead that they have never resigned or been removed as directors and that the ASIC register is incorrect. The second to fifth defendants say that Mrs Camera did resign on 19 August 2015 and Mr Camera resigned on 21 September 2015, referring to minutes dated 21 September 2015. In reply, the plaintiffs do not admit the authenticity of the minutes.
In relation to Mr Sheppard, the plaintiffs plead that they were the only members of the Company as at 22 September 2015, a director could only be appointed by a resolution of members and the plaintiffs did not pass any resolution appointing Mr Sheppard. Accordingly, the plaintiffs plead that ASIC's register incorrectly records Mr Sheppard as having been appointed as a director of the Company on 22 September 2015.
The second to fifth defendants deny that the plaintiffs were the only members of the Company as at 22 September 2015, repeating their contention that two A class shares were issued to Whiteknight on 14 April 2015. The second to fifth defendants plead that Mr Sheppard was validly appointed to replace Mr Camera on his resignation, relying on the minutes dated 21 September 2015 referred to above. As I have already mentioned, the plaintiffs do not admit the authenticity of those minutes.
The plaintiffs plead that the power to approve a transfer of shares in the company was vested in the directors at all material times, and that they were the only directors of the Company as at 15 March 2020. They plead that they did not approve or authorise the transfer of two A class shares from Whiteknight to Property Group. As referred to above, the plaintiffs also dispute the validity of the issue of those shares to Whiteknight. The second to fifth defendants deny that the plaintiffs were the only directors of the Company as at 15 March 2020, say that the Company's directors had no right to refuse to approve a transfer of shares from Whiteknight to Property Group in any event, and say that ASIC's register reflects a due and proper transfer of those shares to Property Group.
In relation to Mr Shannon, the plaintiffs plead that they were the only members of the Company as at 1 March 2021, a director could only be appointed by a resolution of members and the plaintiffs did not pass any resolution appointing Mr Shannon. Accordingly, the plaintiffs plead that ASIC's register incorrectly records Mr Shannon as having been appointed as a director of the Company on 1 March 2021. The second to fifth defendants deny this and plead that Mr Shannon was appointed by Mr Sheppard in accordance with s 201H of the Corporations Act.
As will be apparent from the summary of the pleadings above, the starting point of the dispute about the membership and directorships of the Company is the issue or purported issue of two A class shares to Whiteknight on 14 April 2015. It is common ground that the power to issue shares in the Company was vested in the directors. [1] In denying the plaintiffs' allegation that they (as the Company's only directors as at 14 April 2015) did not authorise or approve the issue of shares to Whiteknight, the second to fifth defendants plead the Heads of Agreement (the authenticity of which is disputed) and the Form 484 (the authenticity of which is also disputed). The defence does not plead any resolution of the plaintiffs as directors to issue the relevant shares to Whiteknight. [2]
In relation to all of the plaintiffs' allegations above, the second to fifth defendants rely on s 1274B of the Corporations Act.
The plaintiffs' second case is an oppression suit, as referred to at [4(f)] above. It is expressly pleaded as being in the alternative to the first case and on the assumptions set out in paragraph 38 of the statement of claim that WhiteKnight (from 14 April 2015 until 15 March 2020) and Property Group (from 15 March 2020 to date) have owned two A class shares in the Company and that Mr Sheppard and Mr Shannon have been directors of the Company since 22 September 2015 and 21 March 2021 (respectively).
On the basis of those assumptions (which the plaintiffs deny), the plaintiffs allege that the affairs of the Company have been conducted in a manner that is contrary to the interests of the members as a whole and oppressive, unfairly prejudicial to or unfairly discriminatory against the interests of the plaintiffs. The plaintiffs claim a declaration that the Company's affairs have been conducted in that manner and a compulsory buy-out order or an order for winding up pursuant to s 233 or s 461(1)(k) of the Corporations Act.
The factual matters pleaded by the plaintiffs as constituting the alleged oppression may be summarised as follows:
1. Mr Shannon was engaged in about January 2014 to negotiate refinancing of the Company's debts secured against its farms;
2. the renegotiation resulted in the Company's debts being refinanced by Stacks Finance and RTS Super in about November 2014;
3. the plaintiffs were not made aware of the terms of the refinance arranged by Mr Shannon, and Mr Shannon informed them in January 2015 that Stacks Finance was seeking full repayment of the loan and had threated to take possession of the farms if the loan was not repaid;
4. on the advice of Mr Shannon, Mr Camera authorised Mr Shannon in early 2015 to negotiate the sale of certain land and water entitlements to facilitate repayment of the debt owing to Stacks Finance;
5. Mr Shannon negotiated the sale of two acres of land from the farms on about 21 April 2016 and negotiated the sale of certain water entitlements at a time unknown to Mr and Mrs Camera;
6. Mr and Mrs Camera expected that the sale proceeds would be applied to reduce the debt owing to Stacks Finance, but Mr Shannon has never explained to them how the proceeds were applied and has instructed Stacks Finance not to disclose such details to them; and
7. from 22 September 2015, Mr Shannon has purported to act as the Company's agent, without authority from the Company or from Mr and Mrs Camera, including in dealing with mortgagees, engaging accountants, lawyers and real estate agents for the purpose of selling further land owned by the Company, and negotiating the sale of the produce from the Company's farms.
The plaintiffs allege that they have been unable to resolve issues concerning the Company's water supply for irrigation of its crops because Western Murray Irrigation has declined to discuss those issues with them on the basis that they are no longer directors of the Company.
The plaintiffs also allege that, although they are guarantors of the debt owed by the Company to RTS Super, they were unable to participate in a farm debt mediation in February and March 2021 and have not been informed about the progress of the mediation. On 1 October 2021, Stacks Finance advised that the loan secured over the Company's farms is in default and the mortgagee intends to enforce its rights under the mortgage.
In paragraph 76 of the statement of claim, the plaintiffs plead that Whiteknight and Property Group have exercised their powers as members of the Company to:
1. remove Mr and Mrs Camera as directors without their knowledge or consent;
2. cause two A class shares to be transferred from Whiteknight to Property Group without the knowledge or consent of Mr and Mrs Camera;
3. appoint Mr Sheppard and Mr Shannon as directors of the Company without the knowledge of consent of Mr and Mrs Camera;
4. acquiesce in the exercise of managerial powers by Mr Sheppard and Mr Shannon in the Company's dealings with third parties to the exclusion of Mr and Mrs Camera;
5. secure total control of the Company's assets and affairs to the exclusion of Mr and Mrs Camera; and
6. fail and refuse to provide to Mr and Mrs Camera information reasonably requested by them in relation to the assets and affairs of the Company.
The second to fifth defendants deny the plaintiffs' allegations. They rely on loan and security documents between the Company and RTS Super Pty Limited and Stacks Managed Investments Pty Limited that were signed by Mr and Mrs Camera. The second to fifth defendants maintain that Mr Sheppard and Mr Shannon are the directors of the Company and say that Mr and Mrs Camera had no authority to initiate the farm debt mediation process or to represent the Company in any such process.
[3]
The present application
The present application was made by the second to fifth defendants by interlocutory process filed on 14 February 2022. The Company did not seek to be heard in relation to the application. The plaintiffs opposed the application.
In these reasons, references to "the defendants" are references to the second to fifth defendants only, unless the contrary intention is plainly indicated.
The defendants' principal application is for an order summarily dismissing the proceedings under r 13.4 or striking out the whole statement of claim under r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The defendants submitted that the statement of claim "posits two alternative cases for declaratory relief, which are irreconcilable" and that "the juxtaposition of these two claims … renders the proceeding untenable". The second to fifth defendants contend that the plaintiffs are entitled to elect which of the two cases to bring and, failing such election, the Court should summarily dismiss the proceedings or strike out the whole of the statement of claim.
The defendants' alternative application is for an order summarily dismissing or striking out the plaintiffs' oppression suit.
[4]
Consideration and determination: the defendants' principal application
The applicable principles may be summarised as follows.
A defendant is entitled to plead inconsistent defences in the alternative: Casey v Australian Broadcasting Commission [1981] 1 NSWLR 305 (Casey) at 308-309; UCPR, r 14.18.
However, that is subject to the Court's power to summarily dismiss proceedings or strike out a pleading to prevent what would otherwise be an abuse of process, or to strike out pleadings on any of the grounds set out in UCPR, r 14.28: Casey at 309.
It will be an abuse of process, or a pleading will be liable to be struck out as embarrassing, if a party pleads alternative inconsistent cases and one set of alternative facts is known to the party to be false. However, there is no abuse or embarrassment if the question of which alternative facts are correct involves some complex legal or factual analysis or where the relevant facts are open to different interpretations: Issitch v Worrell [2000] FCA 477; (2000) 172 ALR 586 at [32]; J C Decaux Pty Ltd v Adshel Street Furniture Pty Ltd [2000] FCA 118; (2000) 178 ALR 339 at [21]; CGU Insurance Ltd v Lawless [2008] VSCA 38 at [28]; Hopkins v AECOM Australia Pty Ltd (No. 7) [2016] FCA 234 at [12]-[13]; Otsuka Pharmaceutical Co Ltd v Generic Health Pty Ltd [2019] FCA 230 at [28].
Counsel for the defendants submitted that, in this case, Mr and Mrs Camera positively assert that they are the only shareholders and directors of the Company and deny the authenticity of documents relied on by the defendants as establishing their membership and directorships. It is the denial of the authenticity of those documents that the defendants rely on as precluding the plaintiffs from pleading the alternative oppression suit which rests on the assumed validity of the defendants' membership and directorships of the Company.
The submissions are, with respect, misconceived. The plaintiffs' reply does not admit the authenticity of the relevant documents. The plaintiffs do not positively deny the authenticity of those documents. Moreover, the plaintiffs' first case does not turn solely on the authenticity of the documents. For example, assuming that the authenticity of the Heads of Agreement and Form 484 is established, the pleadings appear to give rise to a legal question about whether those documents constitute a corporate act of the Company through its directors by which shares were issued to Whiteknight: see In the matter of Seabay Kitchen Pty Ltd [2019] NSWSC 790 at [11]. Whether or not the shares were validly issued to Whiteknight will affect the outcome of the other matters in issue in the plaintiffs' first case, as explained at [13] above.
The present case is one in which the Court will be required to undertake a legal and factual analysis in order to make findings as to who were the members and directors the Company at relevant times. Neither the plaintiffs nor the defendants are assured of success in advance of the Court undertaking that analysis. This is not a case in which the plaintiffs know that either the allegations of fact in their first case or the assumptions in their second case are false. There is therefore no embarrassment or abuse of process involved in the plaintiffs pleading the oppression suit in the alternative to their first case and on the assumption that they do not succeed in establishing some of the allegations underpinning their first case. The plaintiffs are not required to make any election.
For those reasons, the defendants' application to summarily dismiss the proceedings or strike out the whole of the statement of claim is dismissed.
[5]
Consideration and determination: the defendants' alternative application
The defendants submit that the facts pleaded by the plaintiffs are not capable of establishing oppression because:
1. alleged events prior to 14 April 2015, when the plaintiffs were the sole shareholders and directors the Company, are not relevant to the oppression suit;
2. there are no facts alleged in the period after 14 April 2015 that, on the assumptions that apply to the oppression suit (see [15]-[16] above), are capable of constitution oppression; and
3. the matters pleaded in paragraph 76 of the statement of claim are said to be the result of the exercise by Whiteknight and Property Group of their powers as members of the Company, yet there is no pleading of facts relied on in support of the contention that Whiteknight or Property Group have exercised their powers as members to remove the plaintiffs as directors without their knowledge or consent or to appoint Mr Sheppard and Mr Shannon as directors.
I reject the first submission. The events prior to 14 April 2015 are relevant as context in which the subsequent events allegedly occurred.
I reject the second and third submissions. The assumptions on which the plaintiffs' oppression suit is based do not affect the plaintiffs' allegation that they have never resigned as directors and were purportedly removed without their knowledge and consent. The alleged events after 14 April 2015 involve the plaintiffs being excluded from representing the Company in important dealings with third parties concerning the Company's debts, property and water entitlements on the grounds that the third parties are only prepared to deal with directors of the Company. This has allegedly incurred in circumstances where the plaintiffs allege that Mr Sheppard and Mr Shannon claim to be the directors and are allegedly carrying on the negotiations and dealings that the plaintiffs have been excluded from. Thus, according to the plaintiffs, they are members of the Company and guarantors of its debts, yet they are excluded from the negotiation table or the decisions being made concerning the Company.
In my opinion, it is sufficiently clear from the statement of claim as a whole that the plaintiffs rely on the shares issued or purportedly issued to Whiteknight (and subsequently transferred to Property Group) as indicating that those entities exercised or purported to exercise powers as members by causing or permitting the removal of the plaintiffs as directors and by appointing Mr Sheppard and Mr Shannon as directors of the Company. Neither the pleadings nor commercial common sense point to any other person who would have any interest in causing a change in the directorship of the Company except, on the defendants' case, the plaintiffs themselves. It is clear that the plaintiffs deny having done so.
Although framed as pleading complaints, the defendants' submissions are in substance concerned with the merits (or lack of merit) of the oppression suit. That is a matter for trial. As the plaintiffs submitted, the defendants understand the pleaded case as they have pleaded a defence to it without any complaint at that time.
An application to strike out a pleading on the ground that it discloses no reasonable cause of action is essentially a summary dismissal application. As the defendants acknowledged, an application to summarily dismiss proceedings must demonstrate that the plaintiffs' claim, taken at its highest, is "manifestly groundless" or "so obviously untenable that it cannot succeed": General Steel Industries v Cmr for Railways (1964) 112 CLR 125 at 129; [1964] HCA 69
As Gleeson JA said in Pi v Zhou [2016] NSWCA 24 at [9]:
"It may be accepted that the power to order summary dismissal is one that should be exercised with great care and not unless it was clear that there is no real question to be tried. The test to be applied has been variously expressed, including: 'So obviously untenable that it cannot possibly succeed'; and 'manifestly groundless', but the underlying point is that there must be a high degree of certainty about the ultimate outcome of the proceedings if it were allowed to go to trial or a hearing in the ordinary way: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552;Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]-[25] (French CJ and Gummow J)."
The defendants' application in the present case does not meet that high test for the reasons explained above.
[6]
Conclusion and orders
For the foregoing reasons, the defendants' interlocutory process must be dismissed. There is no apparent reason why the costs of that interlocutory process should not follow the event.
I make the following orders:
1. Order that the interlocutory process filed by the second to fifth defendants on 14 February 2022 is dismissed.
2. Order the second to fifth defendants to pay the plaintiffs' costs of and incidental to that interlocutory process.
[7]
Endnotes
Statement of claim, paragraph 18; Defence, paragraph 18.
Defence, paragraph 19.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 03 March 2022