G B Radio (Australia) Pty Ltd v Marchant [2000] VSC 213

11. The material filed on behalf of the parties is voluminous. In my opinion much of it is irrelevant to the issues I am required to determine. Certainly no useful purpose will be served by setting out the detail of it in my reasons for judgment.

14. The case for the plaintiffs may be summarised as follows.

17. The plaintiff Roger Thomas who is resident in the United Kingdom developed a radio chip which enabled radio broadcasts in foreign languages to be coded. At that time the defendant operated a small business in Victoria trading as British Electronic Industries.

20. In 1990 the defendant contacted Roger Thomas with a view to using the chip in his receivers.

23. In 1991 Roger Thomas began supplying the chip to the defendant.

26. At that time a man named Stewart Coad owned a site at Ferny Creek which was suitable for radio transmission.

29. There were discussions between the three men about the possibility of acquiring radio licences in Australia and elsewhere with a view to broadcasting to Australian residents of British origin. The programming for such stations would be obtained by Thomas from radio stations in the United Kingdom.

32. On 11 June 1992 Thomas, the defendant and Coad signed a letter of intent in relation to the proposal. The letter reads:

" Letter of Intent This Letter of Intent forms the basis and foundation of a binding (sic) between each of he signatories hereto. Each and every agreement required pursuant to achieving the PURPOSE as defined below, is to be written, initialled and appended to this original after the signature of each of the partners to this agreement. Thereafter, copies are to be sent to each of the partners and kept secure as their own private copies. We, the named signatories to this document, hereby agree to preserve and hold confidential all information and plans relating to our association and the PURPOSE of this association as defined below. Henceforth, it is the PURPOSE and joint intention of the signatories to this agreement that together, and not separately, not individually, and not in association with any other parties, save by unanimous written agreement, to form a radio station and/or group of radio stations and/or radio station and/or group of radio stations operated and/or serviced by the holding company owned by the partnership, all broadly operated under the NAS licences and covered by the VAEIS guide-lines as defined by the Department of Transport and Communications. The organisation(s) formed to implement the PURPOSE shall be regarded and herein described as the PROPERTY and will be owned and shared equally between each of the three partners. Each party shall hold and retain his one third share of the PROPERTY free of lien or mortgage and any partner wishing to sell all or part of his share in the PROPERTY must first offer such share(s) to the other partners. In the event of disagreement regarding the values of shares offered for sale, the partners will accept the valuation from an independent auditor who will be selected by the partners and whose charges and fees will be paid by each partner equally. In the further event of the partners failing to agree on the nomination of an auditor then an arbitrator nominated by the Australian Industrial Relations Commission will be accepted. It is understood and accepted by each of the partners that prior to this agreement Pieter Marchant and Roger Thomas were already involved with several ethnic groups which where possible will be brought to the antenna sites owned by Stewart Coad. In the event that this proves impossible the partners will accept these prior associations remain outside the scope of this agreement. Henceforth and to avoid problems related to conflict of interest the partners will not involve themselves with competitive product and/or stations unless unanimously agreed to in writing by all partners. Signed this 11th day of June 1992. Stewart Coad Pieter Marchant Roger Thomas 5 Alimar Crt 24 Clematis Ave 6 Shawford Rd Brighton Ferntree Gully West Ewell Vic. 3184 Vic. 3156 Surrey Australia Australia England."

36. In 1994 Coad resigned as a partner for personal reasons.

39. In October 1994 the defendant applied for and received broadcasting licences numbered 1151299 and 1151390 for low power open narrowcasting stations at Croydon and Bayswater. In March 1995 he applied for and received a similar licence numbered 1311787 for Mitcham.

42. In July 1995 the defendant applied for and received broadcasting licences numbered 1130395 and 1130396 for narrowband area service stations at Bayswater in Victoria and St. Marys in New South Wales. The licences were issued in the name of "P. Marchant GB Radio".

45. It is the case for the plaintiffs that those licences were obtained for the then partnership between Roger Thomas and the defendant but were held in the name of the defendant as the corporate structure contemplated by the letter of intent of 11 June 1992 had not been established.

48. In 1997 GB Radio commenced broadcasting on the Melbourne frequencies from a studio at Bayswater. The programs for the broadcasts were obtained by Thomas from the United Kingdom.

51. In August 1997 Roger Thomas and the defendant agreed to take Roger Thomas' brother Alan into the partnership.

54. It was agreed that each of the existing partners would sell 3% of their interest in the partnership to Alan Thomas for £13,500. As a result the interests of the three men in the partnership would be:

60. The sale agreement executed by the parties at that time is dated 9 August 1997 and reads:

" Sale Agreement I Pieter Marchant of 13 Hazelwood Rd., Boronia, Victoria, Australia hereby confirm that 3% (three percentum) of my holdings in the property of the partnership, as defined in agreement dated 11th June 1992, are herein transferred to Mr. Alan Thomas of 204 Watchouse Rd., Galleywood, Chelmsford, Essex, England. I Roger Thomas of 6 Shawford Rd., West Ewell, Surrey, England hereby confirm that 3% (three percentum) of my holdings in the property of the partnership, as defined in agreement dated 11th June 1992, are herein transferred to Mr. Alan Thomas of 204 Watchouse Rd., Galleywood, Chelmsford, Essex, England. It is understood by each of the partners named above that this instrument is signed as a bill of sale/receipt to Mr. Alan Thomas whereby ownership of our respective shares in 'the property' as defined above are herein sold to Mr. Alan Thomas for the sum of £13,500 (Thirteen Thousand Five Hundred pounds). The value being calculated on valuation of the two main licences held by the partnership covering Melbourne and Sydney, which at an exchange rate of £0.45 to AU$1.00 is £225,000. We, the major shareholding partners, hereby confirm to Mr. Alan Thomas that he will be repaid the full amount above from the profits of the partnership and that until such time as he is fully repaid we will hold free of mortgage or lien all collateral items as would be needed to fully repay him with standard bank interest (Bank of England rates applied for the period). We, the major shareholding partners further confirm that if the monies are not repaid within two years that we will sell some of the collateral of the partnership to repay Mr. Alan Thomas with interest. Signed & Dated Roger Thomas Pieter Marchant 9/8/1997 9/8/1997 Witnessed P.J. Pride NAME & Address in full Cedar Close, Dulwich."

64. In June 1998 the defendant introduced Roger Thomas to an accountant named Kerry Philip Grills who at the time was a presenter on a radio station known as Knox FM.

67. Grills agreed to assist the three partners to set up the appropriate corporate structure for GB Radio. In due course the first plaintiff GB Radio (Australia) Pty. Ltd. was established for the purpose. It was to own and operate the Australian radio licences. Grills would take 6% of the issued shares in the company whilst the remaining 94% of the shares would be held by GB Radio Ltd. a company incorporated in the United Kingdom - the shareholders of that company being Roger Thomas and his wife Susan.

70. In his affidavit of 24 February 2000 Roger Thomas has sworn that he and his wife hold the shares in the United Kingdom in Trust for the defendant as to 47%, Roger Thomas as to 47% and Alan Thomas as to 6%.

73. When GB Radio (Australia) Pty. Ltd. was established Roger Thomas, the defendant and Grills were appointed its directors.

76. On 16 November 1998 the defendant wrote the following letter to the Australian Communications Authority requesting that the five radio licences in question be transferred into the name of GB Radio (Australia) Pty. Ltd. The letter reads:

"ACA 16 November 1998 Attn Mick Owens Dear Mick,

Ref. Licence Numbers 1130395; 1130396; 1151299; 1151390; 1311787 Client Number 1150089

As can be seen from the above header, GB Radio (Australia) is now a fully registered 'P/L' company. It is sensible for the abovementioned licences to now be transferred from their temporary ownership, in my personal name, to the Company name. I would appreciate the necessary amendments being made as soon as possible and new licences issued in the name of GB Radio (Australia). Any problems, please call me on 9720 9696 or 0418 318 029. Many thanks and kind regards, Pieter C.M. Marchant."

80. On 18 November 1998 the Authority transferred the five licences into the company's name. Its letter of that date to the defendant reads:

"Mr. P. Marchant GB Radio (Australia) P/L 23 Macauley Place BAYSWATER VIC. 3153. Dear Mr. Marchant, TRANSFER OF LICENCES I refer to your letter of 16 November 1998 advising that you have registered your company GB Radio (Australia) P/L and would like all licences in your name transferred to the new company. This transfer would normally attract a fee of $30.00 per licence however, as you are just transferring them to your own company I have waived this requirement. A copy of each of your licences is attached. Yours sincerely Michael Owens Manager Customer Access Team Victoria Area Office 18 November 1998."

84. On 30 November Grills wrote the following letter to the Authority:

"30 November 1998 Mr. M. Owens Manager Customer Access Team Victoria Area Office Australian Communications Authority P.O. Box 13120 Law Courts Melbourne Vic. 8010. Dear Mr. Owens, Thank you for your letter about the radio licences which you have now transferred to the company for us. And thanks also for waiving the fee normally associated with licence transfers. It's very much appreciated by Pieter Marchant and the other directors of the company. Now that we're using the licences under our company structure, would you kindly take this as our official advice to the ACA that any actions instigated by us concerning those licences will need in future to be signed by at least two of the directors of the company. Again, many thanks for your help with the transfers. Yours sincerely, Kerry Grills, Director."

88. In January 1999 the Authority re-issued the licences to the company upon payment of the annual renewal fees.

91. It would appear that following the re-issue of the licences the relationship between the three directors broke down. There were allegations made by Roger Thomas that the defendant had taken company property and was threatening staff.

94. On 12 April 1999 there was a meeting of the members of the company. At that meeting the defendant was removed as a director.

97. On 10 June 1999 the defendant wrote to the Authority stating that the radio licences were his property and that he had been "conned" into having them transferred into the name of the company.

100. Somewhat surprisingly the Authority transferred the licences back into the name of the defendant. Its letter of 30 June 1999 whereby it informed Roger Thomas and Kerry Grills it had done so is a masterpiece of bureaucratic humbug worthy of the best of "Yes Minister"; so much so that I set it out verbatim in my reasons for judgment. It reads:

"File Reference: 3050366 Messrs K. Grills and R. Thomas Directors GB Radio (Australia) Pty. Ltd. 337 Maroondah Highway CROYDON VIC. 3136. Dear Messrs. K. Grills and R. Thomas, Transfer of Radiocommunication Apparatus Licences Mr. Pieter Marchant wrote to this Authority early this month requesting re-examination of a request that he had lodged with the Authority on 16 November 1998 for the transfer of the undermentioned Radiocommunications Apparatus licences from himself to GB Radio (Australia) Pty. Ltd. of which he had become one of the directors. Broadcasting (Narrowband Area Service Station) licences Nos. 1130395 and 1130396, and Broadcasting (Narrowcasting Service Station) licences Nos. 1151299, 1151390 and 1311787. An examination of that request revealed that section 131AA of the Radiocommunications Act 1992 had not been complied with in that instance as an approved transfer form completed by the parties involved in the transfer had not been lodged with this Authority. Section 131AA of the Radiocommunications Act 1992 states that: (1) Subject to section 131AC, a licensee of an apparatus licence may, at any time before the licence is due to expire, apply in writing to the ACA for the licence to be transferred to another person. (2) The application must be in a form approved by the ACA and must be signed by both the licensee and the proposed transferee. (3) The ACA may approve different forms for transfer of different types of apparatus licence. Furthermore, the required amount of $185,00 ($37.00 in respect to each licence) in transfer fees had not been tendered. Accordingly, a mistake was made in registering, in accordance with section 148(d) of the Radiocommunications Act 1992, which states: The ACA must, as soon as practicable, make the changes to the information in the Register about an apparatus licence that the ACA considers are necessary or convenient in order to take into account any transfer of the licence under section 131AB, the transfers in the Register of Radiocommunications Licences. This means that information in the Register is incorrect. The Register cannot be considered as correct if information in it is based on a wrong entry or wrong entries by the ACA that are not supported by a valid decision. Therefore in accordance with the provisions of section 153(1) and section 153(2)(a) of the Radiocommunications Act 1992, which states: (1) The ACA may, at any time, correct information in the Register, (2)(a) The correction may be made in any case - on the ACA's own initiative, action has been taken re-instate Mr. Pieter Marchant as the licensee of the abovementioned licences. I have enclosed a copy of the guide 'The ACA, the Law and You' with this letter and draw your attention to the information on pages 2 and 3. In re-instating Mr. Marchant as the licensee of these radiocommunication apparatus licences, I am required to advise you that you have the right to seek reconsideration with the ACA within 28 days of the date of this letter. If you are still dissatisfied, you have the right to apply to the Administrative Appeals Tribunal or the Commonwealth Ombudsman for a review of the original decision. Arthur Brunton OIC Licensing Customer Access Team 25 June 1999."

104. One can make the following points about the Authority letter:

(1) As the licences had not only been transferred into the name of the company in November 1998 and re-issued to it in January 1999, why did not the Authority obtain the information it required for the register from the first plaintiff and make whatever entries in the register it considered appropriate? After all it had the letter of consent from the defendant authorising the transfer of the licences from his name into that of the company.

(2) Why did it not simply request the first plaintiff to send a cheque to it for $185?

(3) Why did it not give notice to the first plaintiff of its intention to amend the register before it did so? In my opinion one could not have a clearer breach of the rules of natural justice.

110. To unilaterally transfer the licences from the first plaintiff to the defendant in the high-handed manner it did and without notice to the first plaintiff was totally unacceptable behaviour on the part of the Authority and should not be condoned. For all the Authority knew that may have had serious financial implications for the first plaintiff and parties to whom it may have been contractually bound e.g. advertisers.

113. When the plaintiffs found out that the Authority had transferred the licences back into the name of the defendant the first plaintiff immediately lodged an application with the Commonwealth Appeals Tribunal for a review of the Authority's decision. The application is dated 16 August 1999.

116. On 20 September 1999 the first plaintiff consented to the defendant becoming a party to the AAT proceedings. The proceedings are still pending.

119. Unbeknown to the plaintiffs, on or about 29 October 1999 the defendant leased the Sydney licence to Keith Reginald Hutton and James Evan Lilburne and/or Radio Homepage Pty. Ltd. The lease is for a term of 12 years at a rental of $500 per week. It would appear that the lessee or lessees have now sub-let the licence at a rental of $3,000 per week.

122. Ashton, Lilburne and/or Radio Homepage are now seeking to relocate the Sydney licence from St. Marys to Horsley Park which it contends is a far more satisfactory site.

125. It was when the plaintiffs became aware of the lease of the Sydney licence that they first made their application to the Court for injunctive relief, fearing that if they did not do so the defendant may lease the other licences for lengthy periods of time and at uneconomic rentals, as he has done in the case of the Sydney licence.

128. The submissions made on behalf of the defendant in opposition to the plaintiffs' application may be summarised as follows:

(1) At all times the licences have been and are his property.

(2) The partnership formed by the letter of intent dated 2 June 1992 was for a single venture only and terminated when Coad left it in 1994.

(3) At the time the defendant signed the letter to the Authority in November 1998 asking that the licences be transferred into the name of the company he did so in the belief that the letter would not be acted upon by the Authority.

(4) Any transfer of the licences to the company was conditional upon the defendant receiving share certificates representing 47% of the issued shares in GB Radio Ltd. and that has not occurred.

(5) There is no evidence before the Court that the defendant intends to sell or otherwise encumber the four remaining licences.

(6) There is no evidence that the plaintiffs have suffered any loss or damage as a consequence of the actions of the defendant.

(7) The only party which has a claim to the ownership of the licences is the first plaintiff.

138. The plaintiffs' answers to those contentions may be summarised equally succinctly.

(1) The licences are not the defendant's property. They were held by him in his name until the establishment of GB Radio (Australia) Pty. Ltd. They were then transferred into the name of that company pursuant to the agreement between the parties.

(2) The partnership formed by the letter of intent was not terminated when Coad resigned but continued to exist and was expanded to include Alan Thomas in August 1997. That that is the situation is established by the sale agreement of 9 August 1997 in particular the opening words which read:

"I Pieter Marchant of 13 Hazelwood Rd Boronia Victoria Australia hereby confirm that 3% (three percentum) of my holdings in the property of the partnership, as defined in agreement dated 11 June 1992 are herein transferred to Mr. Alan Thomas."

(3) The explanation the defendant gives for signing the letter of 16 November 1998 lacks credibility. The defendant was not acting under any duress at the time he signed the letter and the letter accurately records the fact that the licences were in his name temporarily and only until such time as a corporate body was established by the partners.

If the defendant never intended the licences to be transferred into the name of the company and believed that despite his application to the Authority, that would not occur why did he not take steps to remedy the situation at or about that time or at the least when the licences came up for renewal in January 1999.

(4) At no time have the plaintiffs denied the defendant's entitlement to 47% of the issued shares in the United Kingdom company and indeed a share certificate has now been issued to the defendant in respect of his shares.

(5) The defendant's behaviour in relation to the Sydney licence has been such as to demonstrate that if he is not restrained there is every risk that he may encumber or otherwise deal with the other licences.

(6) The fact that the sub-lessee of the licence is paying Ashton, Lilburne and/or Radio Homepage $3,000 a week for the Sydney licence as against the $500 paid by Ashton, Lilburne and/or Radio Homepage to the defendant is of itself evidence of the loss being suffered by the first plaintiff as a consequence of the defendant's actions. It also establishes the value of such licences and the harm which would be caused to the first plaintiff if the defendant was to deal with the remaining licences in a similar fashion.

(7) That is not necessarily so. If it was not part of the agreement that the licences be registered in the name of the company then it is strongly arguable that they are the property of Roger Thomas, Alan Thomas, Grills and the defendant and accordingly Roger Thomas, Alan Thomas and Grills do have a cause of action against the defendant.

150. On any view of the matter I consider that there are serious issues to be tried in the proceeding.

153. Where then does the balance of convenience lie?

156. In my opinion it is in the plaintiffs' favour.

159. In the first place I consider that the plaintiffs' case is a strong one. On the other hand it is arguable that certain aspects of the defendant's case lack credibility.

162. In the second place if the defendant has no present intention of dealing with the remaining four licences, and if any order made does not interfere with the lease of the Sydney licence to Keith Reginald Ashton, James Evan Lilburne and/or Radio Homepage, there can be little prejudice to the defendant by the grant of injunctive relief. On the other hand if the defendant is not restrained in the manner sought the plaintiffs may suffer loss which they will never be able to recover.

165. The usual undertaking as to damages having been given to the Court by counsel for the plaintiffs I make the following orders in the proceeding:

1. The defendant by himself or through any of his employees or agents is restrained until the trial and determination of this proceeding or further order from selling, agreeing to sell, transferring or attempting or applying to transfer, encumbering or otherwise dealing with

(a) Broadcasting licences 1130395 and 1130396 for narrowband area service stations at Bayswater, Victoria and St. Marys, New South Wales;

(b) Broadcasting licences 1151299, 1151390 and 131187 for low power open narrowcasting stations at Croydon, Bayswater and Mitcham respectively;

save and except dealings with existing lessees in respect of the lease dated 29 October 1999 of broadcasting licence 1130396 to Keith Reginald Ashton, James Evan Lilburne and/or Radio Homepage Pty. Ltd. Insofar as the lease of that licence is concerned there shall be no transfer of the transmitter tower from St. Marys to any other site without the consent in writing of the first plaintiff.

2. I order that the plaintiffs deliver their reply to the defence of the defendant on or before the 1st day of June 2000.

3. Subject to any direction of the trial Judge to the contrary I order that the trial of this proceeding be by affidavit.

4. I order that any further affidavits to be relied upon by the plaintiffs be filed and served on or before the 15th day of June 2000.

5. I order that any further affidavits to be relied upon by the defendant be filed and served on or before the 22nd day of June 2000.

6. I order that the parties give discovery of any documents not already exhibited to their affidavits on or before the 29th day of June 2000.

7. I refer the proceeding to the Listing Master to enable a date to be fixed for the trial of the proceeding after the 29th day of June 2000. I request that the Listing Master give the proceeding such priority as she considers appropriate.

8. I direct that within 72 hours this order be prepared by the plaintiffs' solicitors and be brought to me for authentication.

9. I direct that within 7 days of its authentication a copy of the order be served on the Associate to the Listing Master.