HER HONOUR: This is an application brought by amended originating process filed by the plaintiffs in the Corporations List. The plaintiffs seek declarations as to the ASIC register in relation to two companies, the third plaintiff (Embedded Claims Pty Ltd), to which I will refer as Embedded Claims, and the fourth plaintiff (Embedded Investments Pty Ltd) to which I will refer as Embedded Investments; and consequential relief by way of an order that the plaintiffs have liberty to restore the matter on 24 hours for the purpose of joining ASIC to obtain orders for the rectification of ASIC's register to reflect the declarations sought.
The background to the dispute I will only go into relatively briefly but it relates to a joint venture arrangement that was entered into pursuant to a term sheet dated 10 February 2020 between an entity named Litigation Finance Australia Pty Ltd (Litigation Finance Australia), which the second defendant in the proceeding, and an entity named Aeris Capital Pty Ltd (Aeris Capital). The joint venture arrangement relates to the joint pursuit by the parties of what are referred to in the recitals to the term sheet as substantial class action claims in relation to landlords overcharging tenants of shopping centres for electrical power.
The first defendant, Mr Philip Kapp, signed the term sheet on behalf of Litigation Finance Australia and has forwarded to the Court an affidavit containing his contentions and submissions in relation to the matter which I have read (albeit that it has not been executed in circumstances where Mr Kapp says he has had difficulties doing so because of the current restrictions in relation to the pandemic).
The second defendant, as I say, is Litigation Finance Australia. It has filed a submitting appearance as have the third defendant (Mr Kapp's wife, Maryann Kapp), and the fourth defendant (Bruce Scott).
The issue in question in relation to the ASIC records of Embedded Claims and Embedded Investments (the incorporation of which Mr Kapp says he effected) is as to the directors and shareholders there recorded.
On incorporation, the directors of Embedded Claims were Maryann Kapp and Patrick Dale; and the shareholders were Litigation Finance Australia and Aeris Capital. The ASIC register was subsequently amended to show, as the 50% shareholder (in place of Aeris Capital), JPC Projects Pty Ltd (JPC Projects) the second plaintiff. There is evidence that this followed the acquisition of the shares of Aeris Capital by JPC Projects. In relation to Embedded Investments, the directors of that company were, on incorporation, again Patrick Dale and Maryann Kapp.
Subsequently, by documents lodged purportedly by Maryann Kapp as director, the company details of the companies were changed on the ASIC register in order to remove Mr Dale as a director (and appoint Bruce Scott as a director) and to remove JPC Projects as a shareholder. The documents were purportedly executed by Mrs Kapp as director at a time when Mrs Kapp had already sent a letter to the companies notifying her resignation as a director. There was no evidence that there had been compliance with cl 11 of the constitution of the companies (which required the appointment or removal of a director to be effected by resolution of the company) nor was there any resolution by the board in relation to the appointment of Bruce Scott (the fourth defendant) as a director.
By reference to authorities in relation to the rectification of the ASIC register (see, for example, In the matter of New Seabay Kitchen Pty Ltd [2019] NSWSC 1904; Re McDonagh Management Pty Ltd (2019) 139 ACSR 447; [2019] NSWSC 1099; and Re Centura Global Holdings Pty Ltd (2016) 111 ACSR 185; [2016] NSWSC 62), there is jurisdiction under the Corporations Act so as to correct incorrect information included in a notification given to ASIC. I should note that there is no application at this stage for an order for rectification of the register; and the plaintiffs properly accept that, if they were to make such an application, ASIC should be joined as a party. Nevertheless, it is contemplated that, if declarations as to the status of the directors and shareholders of the respective companies were here to be made, then ASIC would be likely to comply with the request for rectification of the register in that regard.
I am satisfied on the material to which I have been taken that Mrs Kapp resigned as a director and that after the date of her resignation forms were lodged which notified ASIC of the change of directors and appointment of a new director and change of shareholders; and that they were not authorised in accordance with the constitution of the companies.
I note that Mr Kapp has submitted that it was a term of the joint venture agreement that both parties were permitted to nominate a director to the companies. I have not been taken to any particular term of the contract to that effect but his submission is that there was an oral agreement in that regard. If there is, indeed, an oral agreement that Mr Kapp is able to enforce, then he can bring an application in due course in order to compel Mr Dale to consent to the appointment of the director in question (Mr Scott). However, at the moment it seems to me that the plaintiffs have established that the company register has been invalidly amended and the declarations sought should be made. Accordingly, I make the declarations sought in prayer 1 of the amended originating process, and the consequential order in prayer 2 of the originating process.
The orders sought in prayers 3 and 4 are orders for the delivery up by Mr Kapp to the first plaintiff (Mr Dale) of the share register and company login details and corporate key for the ASIC registers in respect of both Embedded Claims and Embedded Investments.
Mr Kapp was initially of the position that he had no difficulty with the provision of a copy of the share register. However, Mr Kapp does take issue with the provision of the share register itself; and there is no doubt that there is a significant level of distrust between Mr Dale and Mr Kapp. Mr Kapp informs me quite candidly that if I make the orders sought in prayers 3 and 4 then he will appeal them. So be it. I am of the opinion that at the moment there is only one director validly appointed as a director of Embedded Claims and Embedded Investments, and that is Mr Dale; and that it is appropriate to require the delivery up of the share register and company login details and corporate key for the ASIC registers to Mr Dale. This is so, particularly in circumstances where it does not seem to be disputed that Mr Kapp has been using the company login details and corporate key in order to lodge company forms in the name of Mrs Kapp; and it is understandable that the sole existing director of the company wishes to avoid that recurring.
More problematic is the order sought in prayer 5 of the amended originating process. Prayer 5(a) seeks an order restraining Mr Kapp from, whilst ever he is an undischarged bankrupt (and I interpose to note that he is presently an undischarged bankrupt), acting or holding himself out as a director or manager of Embedded Claims or of Embedded Investments. Mr Kapp has assured me that he is well aware of the requirements or restrictions on his acting as a director or manager of the company while he is an undischarged bankrupt. He has submitted forcefully that he has no management role in Embedded Claims or Embedded Investments (the latter being described by him as a dormant company), and he says that he has not and will not breach s 206A of the Corporations Act. Mr Kapp has indicated that he is prepared to offer an undertaking to the Court that whilst ever he is an undischarged bankrupt he will not act or hold himself out as a director or manager of Embedded Claim or of Embedded Investments.
I have sought to ensure (since he is self‑represented) that Mr Kapp understands that the significance of an undertaking to the Court is akin to that of the making of an injunction in terms of the consequences that may follow if there is any breach. I will accept his undertaking to the Court, and on that basis I consider that the injunction sought in 5(a) is not necessary.
The injunction sought in prayer 5(b) is to the effect that Mr Kapp be restrained from, whilst ever he is not a director of Embedded Claims, without the consent of Embedded Claims:
(i) sending by himself or his servants or agents any correspondence or communications purportedly on behalf of Embedded Claims; or
(ii) using in trade or commerce by himself or his servants or agents the name Embedded Claims.
Prayer 5(c) seeks an order that also restrains Mr Kapp from, whilst he is not a director of Embedded Investments, without the consent of Embedded Investments, sending such communications or using the name Embedded Investments in trade or commerce. In that regard, Senior Counsel for the plaintiffs emphasises that there has been a submitting appearance filed by Litigation Finance, and it is submitted that Litigation Finance would be the only entity which would be in a position to authorise Mr Kapp to take the conduct of the kind which it is clear from the correspondence in the Court Book he has made. I should add that that correspondence does not describe Mr Kapp as a director, nor as a manager of the company, albeit that it relates to matters in respect of the pursuit or conduct, and in that sense, management of particular claims for the company.
My concern in relation to this is that the injunctive relief sought in prayers 5(b) and (c) is very broad. I am concerned that it would not necessarily be apparent whether or not there had been the requisite consent to certain conduct (if Mr Kapp's allegations in relation to the oral joint venture agreement or the like were to be made good at the end of the day), and because what is sought is a final injunction no undertaking as to damages has been proffered.
In my opinion, it is not appropriate at this stage to make final relief of that kind. I consider that this would require a more complete testing of the evidence in relation to the arrangements that were entered into at the time that the joint venture was set up. I therefore do not make orders in accordance with 5(b) and (c).
In relation to the order sought in prayer 6 (that Mr Kapp swear an affidavit identifying all persons to whom he has sent correspondence in the name of Embedded Claims or Embedded Investments and on what dates, and annexe some copies of such correspondence), that seems to me to be akin to a preliminary discovery application, and the requirements for such an application have not been attempted to be made out at this stage. Therefore I am not making an order in accordance with prayer 6 of the amended originating process.
In relation to costs that I consider that costs, in accordance with the general rule that costs follow the event, and given that the substance of the relief sought has been granted, I consider it appropriate that there be an order that the first defendant pay the plaintiffs' costs (in circumstances where the balance of the defendants have filed submitting appearances).
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Orders
For the above reasons I make the following orders:
1. Declarations that:
1. the Change to Company Details Form 484 (Document Number 7EBI36285) lodged with ASIC on 15 June 2021 in respect of Embedded Claims is of no effect;
2. the Change to Company Details Form 484 (Document Number 7EBI36286) lodged with ASIC on 15 June 2021 in respect of Embedded Investments is of no effect;
3. the Change to Company Details Form 484 (Document Number 7EBI46015) lodged with ASIC on 17 June 2021 in respect of Embedded Claims is of no effect;
4. the first plaintiff is a director of Embedded Claims and Embedded Investments;
5. the second plaintiff holds 50 shares each in both Embedded Claims and Embedded Investments;
6. the third defendant is not a director of either Embedded Claims or Embedded Investments;
7. the fourth defendant is not a director of Embedded Claims;
8. the Change to Company Details Form 484 (Document Number 7EBI64341) lodged with ASIC on 22 June 2021 in respect of Embedded Claims is of no effect;
9. the Change to Company Details Form 484 (Document Number 7EBI64568) lodged with ASIC on 22 June 2021 in respect of Embedded Claims is of no effect;
10. The Change to company details Form 484 (Document Number 7EBI64761) lodged with ASIC on 22 June 2021 in respect of Embedded Investments is of no effect;
1. Order that the plaintiffs have liberty to restore the matter on 24 hours' notice for the purposes of joining ASIC to obtain orders for the rectification of ASIC's register;
2. Order that the first defendant deliver up to the first plaintiff the share register, company login details and corporate key for the ASIC registers in respect of both Embedded Claims and Embedded Investments.
3. Order that the first defendant pay the plaintiffs' costs.
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Decision last updated: 04 August 2021