Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2017] FCA 610 | Case summary

BESANKO J: 1 There are two proceedings in this Court which raise for consideration the affairs and activities of a company called P & L Livestock Pty Ltd (the company). The company has two directors and each director holds one half of the shares in the company. The directors are Mr Peter Lamond and Mr Owen Pettingill and they are in dispute about a number of matters involving the company's affairs and activities. Mr Lamond contends that Mr Pettingill has taken property and monies of the company and has facilitated a third party, Green Triangle Livestock & Real Estate Pty Ltd and others, to establish a rival business which now has customers who were formerly clients of the company. For his part, Mr Pettingill claims that Mr Lamond has carried out a number of wrongful acts in connection with the company's affairs. There is a good deal more to the disputes than that brief description, but it will suffice for present purposes. 2 On 8 December 2016, Mr Lamond issued an application for urgent relief under r 7.01 of the Federal Court Rules 2011 (Cth) (SAD 333 of 2016). He obtained various forms of relief, including search orders. By an interlocutory application made in that proceeding, Mr Pettingill seeks an order that the company be wound up. Although in his application Mr Pettingill relies on the insolvency ground (s 459A Corporations Act 2001 (Cth)), it is clear from the evidence filed and the submissions made that the principal ground relied upon by Mr Pettingill is the other ground referred to in his application, that is to say, the just and equitable ground in s 461(1)(k). Again, putting the matter very generally for the present purposes, Mr Pettingill contends that there has been a complete breakdown in his relationship with Mr Lamond. There are many authorities on this type of case. I mention two which were at the forefront of Mr Pettingill's submissions: Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170; (2000) 34 ASCR 469; Malos v Malos [2003] NSWSC 118; (2003) 44 ASCR 511. Mr Lamond has filed a notice of opposition to the application to wind up the company. 3 Mr Lamond has also issued a second proceeding in which he seeks leave under s 237 of the Corporations Act to bring a proceeding in the company's name (as well as his own name) against Mr Pettingill and parties that I will refer to as the Green Triangle parties (SAD 93 of 2017). 4 Initially, I considered that, subject to further information, the winding up application should be heard expeditiously. After being given estimates of the likely length of the hearing, I provisionally listed the winding up application for a three day hearing. Further matters then came to light which made it clear that the winding up application would not be disposed of within three days. Those further matters were the nature of the "defences" to the winding up application which Mr Lamond wishes to raise and the evidence to be called in support of those matters. It also became clear that there was likely to be a considerable overlap between the issues in the winding up application and the issues in the proposed proceeding identified in SAD 93 of 2017. In the circumstances, the provisional dates were not confirmed. I delivered reasons which dealt with the provisional listing as well as another matter (Lamond (No 2) [2017] FCA 548). Those reasons should be read with these reasons. In those reasons, I said the following (at [27]): In terms of listing the winding up application, there are other considerations that seem to be relevant in light of the likely length of the hearing. There is Mr Lamond's application for leave to bring proceedings in the name of the company and the fact that, if leave is granted, there will be considerable overlap between the issues in the winding up proceeding and the proposed proceeding. If that point is reached, then there are issues as to whether the two proceedings should be heard together to avoid unnecessary expense and delay and the possibility of inconsistent findings (In the matter of Mudgee Dolomite & Lime Pty Limited [2016] NSWSC 1933 at [12] per Black J; Garden Mews-St Leonards Pty Ltd v Butler Pollnow Pty Ltd & Ors (1984) 9 ACLR 91 at 95 per McLelland J). 5 The matters identified in this passage must now be addressed because of applications made by the respective parties. Mr Pettingill asks the Court to list the winding up application for a two week hearing as soon as possible. He submits that Mr Lamond's application for leave under s 237 should not be listed before then, but rather be listed for hearing immediately following the winding up application as the outcome of the former is likely to have a material bearing on the outcome of the latter. Mr Lamond on the other hand, seeks orders that the proposed proceeding identified in SAD 93 of 2017 be heard first, immediately followed by the winding up proceeding and that the evidence in the former proceeding be evidence in the latter proceeding. 6 Mr Lamond's proposal assumes that his application for leave under s 237 will be heard and determined first. As I understand it, Mr Lamond accepts that if leave is refused, Mr Pettingill can then apply to have the winding up application heard and determined. 7 Both courses of action have their advantages and disadvantages. On balance, I think that the course proposed by Mr Pettingill is the preferable one. 8 Mr Pettingill made a number of submissions which I will briefly summarise. First, he stressed the merits of the winding up application and he pointed out that not only was a lack of clean hands not decisive on such an application, but it was not even relevant if, as he contended was the case here, the conduct was not causative of the breakdown in the relationship. Secondly, he pointed to difficulties in the ongoing operations of the company. It appears that there are ongoing problems with the conduct of the company's business. Mr Pettingill claims that the company has not paid his wages and other entitlements. Mr Lamond claims that this is because Mr Pettingill has not performed his duties for the company. Mr Lamond claims that Mr Pettingill has not facilitated the payment of wages and other entitlements to employees essential to the operation of the company's business. He has issued an application seeking an order requiring Mr Pettingill to authorise the making of payments to employees. There are also allegations and counter-allegations as to whether the company is lawfully carrying on a real estate agency business. Furthermore, there are contentions from each side concerning the extent to which the company is presently operating at a profit. It is not necessary for me to set out the details of these matters. Thirdly, Mr Pettingill pointed to the fact that he opposes Mr Lamond's application for leave under s 237 and that one of the relevant considerations is the best interests of the company (s 237(2)(c)). That will inevitably overlap (so it was submitted) with considerations relevant to the winding up application. Finally, Mr Pettingill submitted that the possibility of inconsistent findings is quite remote. It only arises or possibly arises if the winding up application is refused and Mr Lamond obtains leave under s 237, or the winding up application is allowed and the liquidator brings proceedings. 9 I am of the opinion that the winding up application is reasonably arguable. I do not think it is appropriate for me to go any further than this on an application such as the present. I am also of the opinion that there may well be an overlap of issues between the winding up application and the application for leave under s 237 of the Corporations Act. 10 I also summarise Mr Lamond's submissions. First, he also addressed the merits of the winding up application and submitted that there was a good argument that it should be refused on the ground, among other grounds, that alternative and more appropriate relief is available (Peter Exton & Anor v Extons Pty Ltd & Ors [2017] VSC 14 at [74]-[91] per Sifris J). As I have said, I go no further than determining that the winding up application is reasonably arguable. Secondly, he submitted that in terms of the ongoing operations of the company, Mr Pettingill cannot rely on his own wrongful conduct. That proposition is correct, but it should be noted that it is often difficult on an interlocutory application to determine the merits of the issues in other than a prima facie or provisional way. Thirdly, Mr Lamond referred to the fact that Mr Pettingill's proposal involved the possibility of two trials, additional expense and inconsistent findings. In that context, he referred to the well-known principles relating to the consolidation of proceedings, concurrent trials and sequential trials (Traditional Values Management Limited (in liq) v Taylor & Ors [2012] VSC 299 at [9]-[12] per Ferguson J; In the matter of Mudgee Dolomite & Lime Pty Limited [2016] NSWSC 1933 at [12] per Black J). These matters are weighty considerations. As part of the inconsistent findings debate, there was debate before me about the estoppels which may arise where a party seeks to re-litigate an issue previously determined or an issue which ought to have been previously raised and determined. Mr Lamond referred to Morgan v WorkCover Corporation (2013) 118 SASR 297; [2013] SASCFC 139. I do not propose to discuss the various possibilities which may, in any event, be affected by subsequent events. It is a matter for the parties to take such action as they may each be advised with respect to those matters. Whichever way this matter proceeds, the Court may be required to determine issues (or related issues) twice or the extent to which an issue estoppel has arisen. It seems to me that there is an overlap (or at least it is arguable that there is an overlap) in considering whether it is in the company's best interests that Mr Lamond be given leave to bring proceedings in the company's name and Mr Pettingill's argument that it is just and equitable that the company be wound up in a similar way in which there is an overlap between the factual basis of the lack of clean hands argument in the winding up application and the factual basis of the proposed proceeding. 11 As I have said, on balance, the course of action proposed by Mr Pettingill is the preferable one. First, there is the prospect of inconsistent findings and estoppels whichever course is adopted. Secondly, it is in the interests of all parties that failing resolution by agreement between the parties, a number of the disputes between the parties should be heard and determined by the Court as quickly as reasonably possible. The winding up proceeding, even acknowledging the likely overlap, may involve a narrower focus compared with the proposed proceeding. It should be capable of being listed for hearing shortly. There is the prospect of delay with the proposed proceeding because of the contested leave application. Finally, the winding up application has been made, it is reasonably arguable and, in my opinion, should be dealt with. 12 The orders sought in paragraphs 1 and 2 of the Amended Interlocutory Application dated 24 May 2017 are refused. Subject to any further order made by the trial judge, Mr Lamond's application for leave in SAD 93 of 2017 will be listed for hearing immediately following the hearing of the winding up application. 13 I will make an order that the hearing of the winding up application be expedited to the extent possible with an estimated hearing time for the application and the application for leave of 10 days. The matter will have to be ready before it is listed. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (8)

Cited By (1)