31 Prima facie, ACPL thereby required VCML to negotiate with it to attempt to resolve the dispute within 20 business days. In the event of the dispute not being resolved, either party could serve a Transfer Notice under clause 22.2. The plaintiffs say that VCML did not negotiate in good faith as required by clause 22.9(b) to attempt to resolve the dispute and that, accordingly, VCML was not entitled to serve a Transfer Notice under clause 22.2.
32 On 5 May 2010 a meeting was held between representatives of the two unitholders. The three issues of disagreement were discussed. On 10 April 2010 VCML submitted an "alternative business case" for the payment of fees to AMPL. VCML proposed a revised and lower fee structure for the development services being provided by AMPL based on the assumption that the Project would be sold after development approval was obtained. ACPL did not agree to the proposal.
33 The plaintiffs did not clearly particularise the basis for contending that the negotiations envisaged by clause 22.1 were not carried out by VCML in good faith, except by submitting that the dispute in relation to the three issues had only arisen because of VCML's breach of its obligation to pursue the objectives of the Project in good faith as those objectives were set out in clause 2.2. The plaintiffs say, as I understand it, that for VCML to adhere in negotiations to a position taken in breach of contract was not to negotiate for the resolution of the disputed issues in good faith.
34 VCML has taken the position that the dispute about the three issues, namely, equity contributions, the scope of the Project to be reflected in a project plan and budget, and the amount of fees payable to AMPL, was not resolved by 27 May 2010, being 20 business days after ACPL's notification of the dispute for resolution under clause 22.
35 Later on 27 May 2010, VCML served a purported Transfer Notice pursuant to clause 22.2 of the Unitholders' Agreement offering to either purchase the whole of ACPL's Interest in the Project for $20 million, or to sell the whole of its Interest in the Project to VCML for $20 million. Counsel for ACPL said that it could not raise $20 million to buy VCML's share of the project, although there was no evidence about that. If ACPL is required to sell its Interest to VCML for $20 million, it will still be required by clause 22.8 to pay VFML the introduction fee of $20 million. The plaintiffs submit that this would be unfair. The plaintiffs' counsel submit that the parties expected that the introduction fee would be paid from the profits on completion of the development, and although the Unitholders' Agreement provides for the fee to be payable earlier in the event of a transfer under the deadlock provisions in clause 22, it would be unfair if the payment were accelerated because of VCML's alleged breach of the agreement where, so it is said, that breach led to the deadlock to which clause 22 applied. By contrast, if ACPL had sought to invoke clause 14, and to have required VCML to transfer its Interest in the Project to ACPL at valuation, the fee would not be accelerated (clause 14.10).
36 ACPL did not serve a Recipient's Notice under clause 22.3 electing to accept either offer.
37 On 8 June 2010 VCML served an Offeror's Notice purportedly pursuant to clause 22.4. This required ACPL to sell its Interest to VCML for $20 million. VCML contends that on 4 August 2010 ACPL will be required to transfer its shares in the Trustee and its units in the Trust to VCML. ACPL denies that it is so obliged. It contends that VCML is not entitled to rely on clause 22 because VCML has breached the Unitholders' Agreement by failing to comply with clause 2.2 and has breached the agreement by failing to comply with cl 22.9(b). ACPL also says that VCML is not entitled to rely on clause 22 where to do so would be "part of a regime of oppressive conduct of VCML against [ACP] and TCL". It also contends that clause 22 is void for uncertainty.
38 On 19 May 2010 ACPL filed an originating process seeking an order that the first defendant be wound up on the just and equitable ground. ACPL is not the shareholder in the Trustee. TCL holds the shares on its behalf. ACPL lacked standing to bring that application. After this was pointed out by VCML's solicitors, ACPL filed an interlocutory process seeking orders that TCL be joined as an additional plaintiff or be substituted as plaintiff. VCML filed an interlocutory process seeking summary dismissal of the originating process. Those applications were all brought in proceedings 2010/124642.
39 On 28 May 2010 both applications were heard by Brereton J. At that time TCL and ACPL also sought leave to file an amended originating process claiming further relief, including orders in respect of alleged oppression and declarations in respect of the parties' contractual position. The orders sought in the proposed amended originating process are the same as those sought in the originating process in the current proceedings filed on 1 June 2010.
40 On 28 May 2010 Brereton J refused leave to the plaintiffs to file an amended originating process and dismissed the originating process. His Honour's reasons are not yet available. The parties were at issue as to the grounds of his Honour's decision. The notes of the solicitor for VCML of his Honour's reasons, relevantly, read as follows:
" HIS HONOUR : Because the proceedings require urgent resolution, I will give some reasons now.
As presently constituted, the proceedings are doomed to fail as the plaintiff has no standing. The relevant party is the shareholder who is trustee. The proceedings are amenable to summary dismissal.
The question is whether the amendment to substitute should be given. I am entitled to approach this, on view of the court by application to prevent a winding up. It is uncontroversial that the new plaintiff has standing. I also assume that, but for clauses 22 and 23, it would have a seriously arguable case for winding up. Typically, injunctions for restraining are granted on two grounds:
(1) Abuse of process (e.g. Byanston v Devries 2 (1976) 1 All ER 25; Charles Forte Investments v Amand [sic] (1963) 2 All ER 940; Fortuna Holdings (1978) VR 83); and as the developments in anti-suit injunctions progressed;
(2) Breach of contract ((2009) NSWSC 724).
In my view, there is a seriously arguable case that in view of clauses 22 and 23, institution of these proceedings would be in breach of the express or implied terms in the Unitholders Agreement. Alternatively, in light of clauses 22 and 23, it is at least seriously arguable that for a party to proceed to litigation in face may be an abuse of process (Branabelle 54 NSWLR 503-517; Dirty Dancing at [52]-[53]).
On the balance of convenience, it is plain that serious jeopardy to defendant if leave to amend granted to keep proceedings on foot, the event of default. I am entirely unconvinced by [exhibit] DX 03 that Suncorp could be relied on to not, and there is no other reason.
There is no prejudice to the plaintiff to not proceed at this moment.
As at the date of the proceeding (today), winding up proceedings would not and could not succeed as the dispute resolution procedure could resolve any question of deadlock or failure of substratum. It may be that at a later time, once followed or the court ... then it may become apparent that winding up may succeed. But no court would at the date of application or today, [make an order to] wind up. Maybe post the dispute resolution procedure.
Leave to amend to substitute (TCL) should not be granted. So constituted, the proceedings are doomed to fail. Dismissed with costs. "
41 On 1 June 2010 TCL and ACPL filed a new originating process in these proceedings. They seek the following relief:
" 1. An order that the first defendant be wound up.
2. Further or other orders for oppression, including:
a. an order that the fourth and fifth defendants be removed as directors of the first defendant and not be replaced;
b. an order that the fourth and fifth defendants (and any replacement directors appointed by the second defendant) take all necessary steps to progress and complete the redevelopment of the Project in accordance with the terms of the Unitholders Agreement dated 5 May 2008 between the Plaintiffs and the first, second and third defendants ('Unitholders Agreement');
c. a declaration that the second defendant is not entitled to rely on the transfer provisions in clause 22 of the Unitholders Agreement;
d. an order that the Fee under the Fee Agreement dated 5 May 2008 between the second plaintiff and the third defendant ('Fee Agreement') is not payable by the Second plaintiff;
e. an order that the second defendant purchase the shareholding and unitholding of the first plaintiff.
and the plaintiffs claim:
3. A declaration that the fourth and fifth defendants have engaged, are engaging or are proposing to engage, in conduct that constituted, constitutes or would constitute a contravention or an attempted contravention of sections 181 and 182 of the Corporations Act 2001 (Cth).
4. An order that the fourth and fifth defendants take all necessary steps to progress and complete the redevelopment of the project in accordance with the provisions of the Unitholders Agreement.
5. A declaration that the second and third defendants have engaged, are engaging or are proposing to engage, in conduct that constituted, constitutes or would constitute aiding, abetting, counselling or procuring the fourth and fifth defendants to contravene sections 181 and 182 of the Corporations Act 2001 (Cth).
6. An order that the second and third defendants take all necessary steps to ensure that the fourth and fifth defendants (and any replacement directors appointed by the second defendant) take all necessary steps to progress and complete the redevelopment of the project in accordance with the provisions of the Unitholders Agreement.
7. A declaration that the fourth and fifth defendants owed fiduciary duties to the plaintiffs.
8. A declaration that the fourth and fifth defendants have breached their fiduciary duties to the plaintiffs.
9. A declaration or order that the third defendant is not entitled to seek recovery of the Fee under the Fee Agreement.
10. A declaration that clause 22 of the Unitholders Agreement is void for uncertainty.
11. A declaration that the second defendant is not entitled to rely upon the provisions of clauses 22.2 to 22.8 of the Unitholders Agreement.
12. A declaration that the second and third defendants are in breach of the Unitholders Agreement.
13. Specific performance of the Unitholders Agreement.
14. Equitable compensation.
15. Damages.
16. Interest.
17. An order that the defendants pay the plaintiffs' costs.
18. Such further or other order as the Court thinks fit. "
42 The relief is stated to be claimed "On the facts stated in the supporting affidavit of Craig Anthony Anderson affirmed 18 May 2010". The application for winding up is expressly put on both the just and equitable ground and on the ground of oppression.
43 I turn to the first ground upon which the second to fifth defendants seek an order for summary dismissal of the winding-up application, namely, that that claim seeks to re-agitate a matter Brereton J had decided. Mr Sullivan QC, who appears with Mr Free for the second to fifth defendants, submitted that his Honour had decided that a claim instituted at that stage by TCL for the winding-up of the first defendant before the dispute resolution procedure was exhausted, or the Court decided that it did not bind ACPL, was doomed to fail. Mr Fagan SC, who appeared with Mr Cheshire for the plaintiffs, submitted that his Honour simply decided that the application by ACPL was doomed to fail as it lacked standing and decided that the application to amend to join TCL as plaintiff was dismissed on discretionary grounds.
44 I would not conclude from the abbreviated note of his Honour's reasons that his Honour found that a claim by TCL to wind up the first defendant was doomed to fail. According to the solicitor's note, his Honour had earlier stated that it was seriously arguable that the institution of winding-up proceedings was a breach of clauses 22 and 23 of the Unitholders' Agreement and that the balance of convenience did not favour the grant of leave to amend. That language does not suggest a decision that a winding-up application brought by TCL would be doomed to fail. The reference to "so constituted" suggests that his Honour decided that as the proceedings were then constituted, that is to say with ACPL as plaintiff, they were doomed to fail.
45 His Honour is also reported to have said that at the date of hearing a winding-up order would not be made as the dispute resolution procedure might resolve any question of deadlock or failure of substratum. That appears to be a ground for refusing the amendment to join TCL as a plaintiff. At the date of the hearing VCML had served its Transfer Notice the previous day. It was not known whether ACPL would accept either offer. Understandably, according to the note, his Honour did not deal with the arguments raised before me that VCML was not entitled to serve a Transfer Notice or an Offeror's Notice, and that even if it were entitled to do so as a matter of contractual right, the exercise of that right was an instance of oppressive conduct for which relief by way of winding-up of the first defendant was available under s 233 of the Corporations Act because the disputes which triggered the right arose from VCML's breach of contract.
46 I am not satisfied that the current application is an abuse of process because it seeks to re-litigate an issue already decided by Brereton J.
47 The second ground on which the second to fifth defendants seek summary dismissal of the winding-up application is that the institution of the proceedings for a winding-up order is a breach of the contractual dispute resolution clause. To this ground those defendants add that the resolution of the dispute under that clause is imminent.
48 Unlike clause 23, clause 22 makes no provision that proceedings in relation to a matter giving rise to the dispute will not be brought if the mechanism in clause 22 is invoked or is in train. I do not think that there is an implication to that effect.
49 Clause 23 deals with disputes about matters that are not material to the Project. It is entirely understandable that in respect of such immaterial disputes there should be a restraint on a party's right to institute litigation whilst negotiations are being carried out. However, a dispute about a matter material to the Project might require urgent resolution, or the matter giving rise to the dispute might not be capable of being resolved by one or other party buying the other out.
50 In this case ACPL contends that VCML has breached the Unitholders' Agreement in a fundamental way. It claims that it is VCML's breach that has given rise to the disputes which triggered clause 22. If, as a result of clause 22 being triggered it is compelled to sell its Interest in the Project to VCML, it is by no means apparent that ACPL would not be entitled to sue for damages. There is no express term which would bar such a claim and I doubt that such a term could be implied on Codelfa principles (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 345-347).
51 I do not consider that instituting proceedings for winding-up is a breach of a term implied from the express provision in clause 22. It is, of course, a different question whether the clause 22 procedure is an answer to the winding-up application.
52 Of more difficulty is whether the institution of winding-up proceedings is a breach of clause 27.10. By that clause, and subject to immaterial exceptions, ACPL and TCL agreed not to take any step prior to the sale of the Development Site or the sale of their Interest in the Project to procure any distribution of the capital or assets other than profits of the Trust. Counsel for the plaintiffs said that the purpose of the application for the winding-up of the first defendant was to bring about a sale of the underlying assets to the market, rather than ACPL's being compelled to sell its interest under the provisions of clause 22. At one point counsel submitted that the effect of the first defendant's being liquidated would be "to collapse the trust". By this, counsel did not mean that an order for the winding-up of the Trustee would require a winding-up of the Trust. There is no provision to that effect in the trust deed. Nor is there a provision in the trust deed for the automatic vacation by the first defendant from the office of trustee if it is wound up. Therefore, if the Trustee were wound up and a liquidator appointed, then, unless the Trustee were removed, it would be a matter for the liquidator to decide how the trust assets should be dealt with. Assuming the secured creditor does not step in, then unless both unitholders agreed to provide funding for the development, the prospects would be high that the liquidator would sell the site. If the site were sold it is likely that any capital remaining after payment of liabilities and expenses, would be distributed to unitholders. The Trustee has power under clause 11.32 of the trust deed to make distributions of capital. It has power under clause 22.2(c) of the trust deed to terminate the Trust.
53 Clause 27.10 precludes any party, prior to the sale of the Development Site or of its Interest, taking any step to terminate or "vest" the Trust. Applying for a winding-up of the Trustee is not the taking of a step to terminate or vest the Trust. Nor, in my view, is the making of the winding-up application the taking of a step to "procure any distribution of the capital or assets ... of the Trust". Rather, such an application is a step preparatory to the unitholder's seeking to persuade the Trustee to distribute the capital or assets of the Trust or otherwise to terminate the Trust. But even if that view is wrong, it does not follow that making the winding-up application for the purpose stated by counsel for the plaintiffs was a breach of clause 27.10. In the scenario outlined above, prima facie at least, any distribution to unitholders of capital or assets of the Trust would be made after expenses and liabilities had been paid or provided for, and any such distribution would, at least prima facie, properly be characterised as a distribution of profits of the Trust. Taking a step for the purpose of achieving a distribution of profits of the Trust is not a breach of clause 27.10. For these reasons, I do not think that the bringing of the winding-up application is a step taken in breach of contract.
54 The third ground for the application as identified in counsel's opening - although there numbered the fourth ground - is that the application is misconceived because a winding-up of the Trustee would not be a winding-up of the Trust. At one point the second to fifth defendants submitted that if the Trustee were wound up there would be no trustee, but that submission was, rightly, not persisted with. Whilst it is correct that an order winding up the Trustee would not ipso facto result in a winding-up of the Trust, that is not a basis for summarily dismissing the winding-up application. The winding-up order would place control of the Trustee in the hands of a third party. That may be a desirable and necessary means of breaking a deadlock.
55 The fourth ground, and the last ground on which the case was opened, was that the application was brought for a collateral purpose, namely, to engineer a situation where the Trustee committed an event of default under its facility agreement with Suncorp. I do not accept that ground. It does appear that it is in neither party's interest for Suncorp to exercise its powers on the occurrence of an event of default. It is clear that in bringing the present application for seeking a winding-up order, the plaintiffs recognise that potential risk. It does not follow that the plaintiffs are motivated by a desire to cause Suncorp to exercise its powers as mortgagee. That would make no apparent sense, as it would appear to be detrimental to the plaintiffs as well as to the first to third defendants.
56 There is no evidence that it is the plaintiffs' purpose in bringing the winding-up application that it engineer a situation where the first defendant has committed an event of default. Mr Anderson swore an affidavit which was read. He was not cross-examined. I reject this ground of the application.
57 During the course of argument two further grounds for summary dismissal were raised. First, it was said that clause 22 provides an unarguable answer to the plaintiffs' claim to wind up the first defendant. No doubt if the deadlock mechanism in clause 22 has been properly invoked it provides an answer to the winding-up application on just and equitable grounds based on the existence of a deadlock. However, I cannot decide on this application for summary dismissal that clause 22 is an answer to the winding-up claim. Before reaching that conclusion I would have to be able to decide that the plaintiffs' claim that VCML is not entitled to invoke clause 22 could not possibly succeed or is manifestly groundless. I would also have to be able to decide that the plaintiffs' claim to be entitled to a winding-up order on grounds of oppression could not possibly succeed or is manifestly groundless.
58 There is a serious question to be tried that each of the three grounds of dispute identified by VCML arises from a desire on the part of VCML not to proceed with the full redevelopment as envisaged by clause 2.2 of the Unitholders' Agreement. That is clear in the case of the dispute as to the 2009/2010 business plan and budget. It is also arguably so in relation to the other two identified disputes. The failure to agree on what service fee should continue to be payable to AMPL arguably arises from VCML's contention that service fees should be appropriate to the services that will be required only to obtain a development approval so that the site could then be sold. The dispute about equity contributions is wider. ACPL says that it was agreed that having regard to the level of debt finance obtained, the parties' equity contributions, as provided for in the Unitholders' Agreement, could be reduced. VCML says otherwise. On the face of it, that dispute does not arise from the asserted breach by VCML of its obligations to further the objectives in clause 2.2. But ACPL also says that it is reluctant to agree to VCML's demand for equity contributions where VCML has withdrawn its commitment to the development as originally agreed on. It is thus arguable that that dispute also arises from the alleged breach of the Unitholders' Agreement by VCML.
59 If, as ACPL submits, the disputes have arisen because VCML repudiated its obligations to carry out the objectives in clause 2.2 of the Unitholders' Agreement, then it is a question for final hearing whether in negotiations about the disputes VCML could insist on a position taken in breach of contract consistently with observing the good faith required by clause 22.9. Such questions are not capable of being resolved on a summary judgment application when the facts are not known or have not been found.
60 The law in relation to obligations of good faith is far from settled and the questions to which the argument gives rise were touched on only lightly in submissions. The resolution of such questions seems to me to depend upon the ultimate findings of fact. I do not consider that the plaintiffs' arguments on these questions have been shown at this stage to be manifestly groundless or untenable.
61 In any event, TCL also seeks a winding-up order pursuant to s 233(1)(a) of the Corporations Act on the grounds that the first defendant's affairs have been and are being conducted in a manner contrary to the interests of the members as a whole, or in a way which is oppressive to or unfairly prejudicial to TCL. In the oppression action it is arguably open to TCL to contend that even if VCML is contractually entitled to acquire its Interest in the Project under clause 22, the conduct of VCML's nominees as directors of the first defendant, which it claims brought about the situation that triggered the rights under clause 22, was conduct unfairly prejudicial to TCL and orders should be made under s 233 which would have the effect of reversing the exercise of VCML's contractual rights and would lead to the appointment of a liquidator to break the deadlock. No submission was made that such orders would be beyond the scope of the powers under s 233 and I do not think that such arguments are manifestly hopeless or obviously untenable. I would not summarily dismiss the application on those grounds.
62 The final ground which was raised in the course of oral submissions concerns the concept of abuse of process in the context of a winding-up. In Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83, McGarvie J described two branches of the principles upon which a party may be restrained from presenting a winding-up petition on the ground of abuse of process. The first is where the winding-up application cannot possibly succeed. For the reasons I have given this is not such a case. The second was described by his Honour as follows (at 93):
" The second branch applies to cases where there is a more suitable alternative means of resolving the dispute involved in a disputed claim against the company. They are not necessarily cases in which, as a matter of law or through absence of evidence, there is an inherent incapacity of success. They may be cases where the petitioner is entitled to present the petition, the ground is sufficient in law and there is evidence to support the ground. They are cases, though, where, due to the availability of the more suitable alternative remedy, the Court hearing the petition would in the circumstances, in the exercise of its discretion, decline to make a winding up order, at least while the circumstances remain as they are at the time of the application for an injunction. Thus the second branch applies where, because of the availability of a suitable alternative procedure, the petition is unlikely to succeed in the circumstances existing at the time. "
63 In the note of Brereton J's reasons it appears that his Honour referred to this case and to Charles Forte Investments Ltd v Amanda [1964] Ch 240, which is an illustration of this second branch. The continued application of this second branch of principles concerning abuse of process in winding-up applications was confirmed by the Court of Appeal in Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd [2007] NSWCA 57; (2007) 69 NSWLR 374 at [52]-[57]. In Charles Forte Investments Ltd v Amanda the petitioner sought the winding-up of the company because the directors had refused to register a transfer of shares. One ground for summary dismissal of the petition was that the petitioner could have sought what he was really seeking to obtain from the litigation by bringing a claim for rectification of the register, which would not potentially cause irreparable damage to the company.
64 If only the claim for winding-up on the just and equitable ground were in issue, it would be appropriate summarily to dismiss these proceedings as an abuse of process because there is a more suitable remedy available to the plaintiffs, namely, the determination of whether VCML is contractually entitled to acquire ACPL's shares. If it were held in proceedings which litigated that contractual right that VCML was entitled to acquire ACPL's shares, there would be no basis for TCL to rely upon the deadlock as the ground for winding-up on just and equitable grounds. Moreover, as Brereton J apparently said, no winding-up order could be made at this stage when that contractual claim is unresolved.
65 However, in the application now before me TCL also relies upon ss 232 and 233 of the Corporations Act. As I have said, I cannot exclude the possibility that even if VCML is contractually entitled to acquire ACPL's Interest (held through TCL) in the Project, thus breaking the deadlock, TCL may nonetheless be entitled to relief against that consequence under s 233 of the Corporations Act and may be entitled to an order for the winding-up of the first defendant.
66 The fact that there may be serious adverse consequences to both parties if the proceedings are not summarily dismissed because Suncorp may be able to exercise its rights as a secured creditor is a reason for considering, carefully, whether the proceedings should be dealt with summarily on the second branch of the principle concerning abuse of process in the area of winding-up, but that consideration does not warrant applying a different test from the principles compendiously known as those in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 in determining whether the plaintiffs' claim could not possibly succeed.
67 For the reasons I have given, I do not consider that either branch of the principle on which a winding-up application may be dismissed as an abuse of process has been made out.
68 For these reasons I order that the second to fifth defendants' interlocutory process filed on 8 June 2010 be dismissed with costs.