Those specific orders are, it seems to me, within the ambit of the relief which had been foreshadowed by the Statement of Claim.
Construction of Clause 14.1
"Undertakes"
32 The first question which arises concerns the construction of Clause 14.1. Mr Dawson, for the defendant, submits that Clause 14.1 does not impose an obligation. He points out that the word "undertakes" can sometimes be used in a way which does not involve a contractual obligation, as when a solicitor gives an undertaking, which is not contractual because there is no consideration for it.
33 He took me to a decision in Falconbridge Nickel Mines Limited v Minister for National Revenue [1965] CTC 82, a decision of the Exchequer Court of Canada, where Cattanach J said, at paragraph 14:
"… undertook" or "undertake" has various senses depending upon the context in which it is used. If it be said that a businessman "undertook" a particular business operation, the word "undertook" indicates only that he embarked upon that operation. If it be said that a solicitor gave an "undertaking" to another solicitor, one does not think primarily in terms of an obligation enforceable by action in the Court. Where, however, a statutory provision speaks, as subsection (7) of Section 83A does, of an agreement under which a corporation "undertook" to incur expenses, there is no doubt in my mind that the statute is speaking of a legally enforceable agreement to incur those expenses. Such conclusion is reinforced by the presence of the words "in consideration for " "
34 I can readily accept that the word "undertake" and its cognates has these varieties of meaning and indeed it also refers to the business that funeral directors conduct. However, the relevant question is, what does it mean in the context of Clause 14.1? In my view it is quite clear that Clause 14.1, when it says, "each of the respondents undertakes" involves the making of a contractual promise.
"Reasonable Request"
35 The next point which Mr Dawson makes concerning construction is that the obligation in Clause 14.1 is imprecise, insofar as it refers to "reasonable request". He submits that what that does is to leave an area of discretion to the defendants as to whether a request is reasonable or not. I do not agree. When the law imposes a standard of reasonableness, it is imposing an objective standard.
36 While it is true that if the defendant takes the view that a request is not reasonable, then it will not regard itself as obliged to provide the information requested, it is still a matter for the Court to decide, on an objective basis, whether the defendant is right in taking that view, or not.
"Reasonably Informed"
37 As well, he submits that the expression "reasonably informed" in Clause 14.1 means that Messrs Kaye and Shwiel are entitled to be informed to the extent that is reasonable, having regard to the interests which they have in the company. He points to the way that their interest has been significantly diluted over the years, and submits that it is not reasonable for people who have such a small and indirect economic interest in the company to obtain the sort of information which they seek.
38 I do not agree that that is the correct construction of the clause. In my view the expression "reasonably informed" confers an entitlement to be informed to an extent that is sufficient to provide a reasonable understanding about the nature, conduct and financial state of operations of the company.
"Nature Conduct and Financial State of the Operations"
39 The next question of construction - which I should say is probably a problem raised more by myself than by Mr Dawson - concerns whether "the nature, conduct and financial state of the operations" of the company extends to information about the capital structure of the company, or whether it is confined to its trading activities.
40 Having given the matter more thought, it seems to me that that phrase extends to information concerning the capital structure of the company. There are two reasons for taking this view. The first is that, as a matter of ordinary English, "operations" is substantially equivalent to "activities". A company engages in activities when it trades, but it also engages in activities when it changes its capital structure. It seems to me that, in the ordinary meaning of the word, each can be part of the "operations of the company".
41 The fact that the ordinary meaning of the word is capable of extending so wide does not necessarily mean that in fact it extends so wide in the present case. However, in my view, it does extend so wide in the present case. Even in 1994, the company was a holding company. Its operations as such a holding company would inevitably include exercising and receiving the benefit of its rights as a shareholder in its subsidiaries, and participating in the way in which shareholders can, in any variations of the capital structure of the subsidiaries.
42 It would be odd if changes to the capital structure of a subsidiary were part of the "operations" of the company but changes in the capital structure of the company itself were not.
43 As well, Clause 14 needs to be construed in the light of the agreement as a whole, and in a way which gives it business sense. Here, it seems to me that it is important that the agreement contains Clause 10.1, the anti-dilution clause. Knowing whether that clause has been complied with is every bit as important for preserving the ongoing value of the interest of the plaintiffs in the company, as is knowing about the trading activities of the company.
44 As well, if the company were to engage in raising money through debt, that raising of debt would be part of its operations. A company can, for commercial reasons, have a real choice open to it as to whether in particular circumstances it will raise money through debt, or by issuing equity. It would, it seems to me, be commercially odd if the former needed to be disclosed, but the latter did not.
Application of Clause 14 to Facts of This Case
45 As a matter of construction, Clause 14.1 provides two different types of obligation on each of the parties named as respondents in the Deed. The first is, voluntarily and without prompting, to provide to each of Mr Kaye and Mr Shwiel the type of information Clause 14.1 describes. That obligation is to be performed from time to time. As well, each of those respondents undertakes also to provide that type of information on reasonable request.
46 The type of information which is contained, or which is referred to, in the orders which the plaintiffs seek, is, it seems to me, the type of information which is needed to enable Mr Kaye and Mr Shwiel to be reasonably informed of the nature, conduct and financial state of the operations of the company.
Whether Mandatory Orders are Appropriate Relief
Continuous Supervision?
47 The defendant raised a number of reasons why it would be inappropriate to grant any mandatory order to enforce Clause 14.1. One reason was that the order would involve the Court in continuous supervision. It is not apparent to me that the limited orders which the plaintiffs seek today are ones which would involve continuous supervision. Those orders are quite specific, and are to be performed only once.
48 Of course, if there is a failure to comply with Clause 14.1 in the future, that might provide the occasion for other specific orders to be sought, but that is not a possibility which the plaintiffs are trying to deal with by the orders they seek today.
Damages an Adequate Remedy?
49 The next submission which the defendant makes is that damages should be an adequate remedy. I do not accept that that is so. The company is a proprietary limited company. Information about its operations is not readily publicly available. It seems to me to be unrealistic to contemplate that the plaintiffs would be able to establish the damage that they had suffered by not having information, when they are in a situation of not knowing what is the information which they lack.
50 It seems to me that the subject matter of the clause is the type of subject matter, like the subject matter of a contract for the sale of land, concerning which damages are inherently an inadequate remedy.
Object of Covenant Not Able to be Obtained?
51 Another basis on which the defendant opposes relief is that the object of the covenant can no longer be obtained. I was referred to the decision in Knight v Simmonds [1896] 2 Ch 294. That case concerned an application for an injunction to enforce a restrictive covenant on a building lot. It was refused on the ground that there had been a change in the character of the neighbourhood. Lindley LJ at page 297, said:
"But, further, before granting equitable relief, Courts of Equity look not only to the words of the covenant, but to the object to attain which it was entered into, and if, owing to circumstances which have occurred since it was entered into, that object cannot be attained, equitable relief will be refused."
52 That statement of principle is, with respect, undoubtedly correct. In the circumstances where a restrictive covenant has been placed on land, with a view to preserving the character of a neighbourhood, and there has been a change in the character of the neighbourhood, the object of the covenant can no longer be achieved, and it would be a pointless annoyance to require it to be performed.
53 While the principle is undoubted, it does not seem to me that it is applicable in the present case. The provisions of Clause 10 had the effect that the plaintiffs would have an interest, in the nature of a carried interest, in the ongoing operations of the company that they had been involved in establishing, but which they were, as a consequence of the Deed of Settlement, quitting.
54 The way in which they held their interest was not as direct shareholders, but only indirectly, through Jalam. Thus, the plaintiffs did not have even the rights which the Corporations Law confers on shareholders, concerning the operations of the company. The object of Clause 14, it seems to me, was so that they could be kept informed about the activities of the company, so that the value of their ongoing interest in the company could be protected.
55 It is true that their interest has come to be eroded to less than the 5 percent carried economic interest that Clause 10 contemplated. There is not material before me today which enables me to say whether that erosion has happened in the way which the Deed contemplated, or not. However, even if it were the case that an erosion had happened in a way that the Deed contemplated, the interest which they still retain in the company is, given the figures which emerge from its recent balance sheet, which I have earlier mentioned, certainly not so small that it should be disregarded. In my view the object of the covenant is still capable of being attained.
Delay
56 The next basis upon which the defendant opposes any specific relief is one of delay and acquiescence. Even though there were pleadings, the defendant's defence did not raise any defence of laches. I reject the submission that laches is a defence which does not need to be pleaded. Uniform Civil Procedure Rules 14.14 provides:
"(2) In a defence or subsequent pleading, a party must plead specifically any matter:
(a) that, if not pleaded specifically, may take the opposite party by surprise, or
(b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable,
…"
57 Laches falls within that rule. Even though Mr Parker pointed this out, he still dealt with the merits of the allegation of laches. I shall do the same.
58 The defendant submits that there was no request made until March 2006 for information, and that that involved a delay of twelve years. The only evidence before me of any request for information, and either refusal or failure to provide information, is the correspondence which began in March this year. The defendant submits that I ought to draw a Jones v Dunkel (1959) 101 CLR 298 inference that no information was earlier sought.
59 The Jones v Dunkel (1959) 101 CLR 298 inference arises when a court would draw an inference from the material which is before it, and a party who could call evidence to cast light on the topic of that inference, fails to call that evidence. In those circumstances, the Court is entitled to draw more strongly the inference which is otherwise available to it. In the circumstances where there was no allegation of laches on the pleadings, there was no occasion, in my view, for the plaintiffs to put on any evidence about any prior requests for information.
60 There is another answer to the laches claim as well. Even if there had been no request made for information until March 2006, I do not think this would matter. One reason is that the clause is one which requires information to be volunteered from time to time, and also provided when requested. Because it imposes continuing obligations, any failure to comply with it that there might have been prior to March 2006, does not lead to a conclusion that there has been an acquiescence in the obligation under Clause 14 fading away.
61 What is involved in the cause of action asserted today is breach alleged to have arisen from a failure to provide the information in March of this year.
62 There are two different types of laches. Griffith CJ said in Cashman v 7 North Golden Gate Mining Company [1897] QLJ 152 at 153-4:
"Now the term acquiescence is not a term of art. It was used in Courts of Equity as a term to characterise a defence which may be set up by a person against whom another makes a claim for equitable relief. It is a well-known doctrine of equity that when a person claiming equitable relief has lain by for a long time, and so conducted himself that it would be inequitable to permit him to complain of the defendant's actions, the court will refuse to grant the relief. That was called acquiescence; and the term is a convenient one to describe that defence. The term also bears another meaning. It may be fairly applied to a man who, seeing an act about to be done to his prejudice, stands by and does not object to it. He may be very properly said to be acquiescing in that act being done. But the difference in point of law in the legal consequences of the two kinds of acquiescence is quite clear. A man who stands by and sees an act about to be done which will be injurious to himself, and makes no objection, cannot complain of that act as a wrong at all. He never has any right of action, because he stands by and allows the act to be done. Acquiescence in the other sense is a defence to an action for specific relief, on the ground that a plaintiff cannot be reinstated in his original position without doing injustice to the defendant, but it is not an answer to a cause of action already accrued."
63 In the present case, the defendant does not assert that it has done anything in reliance upon an apparent non assertion of the right. Thus, the defence of laches is one which relates to mere delay. In Lamshed v Lamshed (1963) 109 CLR 440 at 452-3, Kitto J, with whom Windeyer J agreed, said:
"… the special remedy of specific performance is available to those only who are prompt to claim it. The degree of promptness required depends on the nature of the case and all its circumstances: Eads v Williams (1854) 4 DeG M & G 674, at p.691 [43 ER 671 at p.678]; Barclay v Messenger (1874) 43 LJ Ch 449, at p.456. Accordingly there is little point in citing cases for the purpose of comparing the period of delay in the present case with the delay which has been considered fatal to claims for specific performance in the circumstances of other cases. The bare fact of delay is not enough. Where there is nothing at all in the circumstances to justify either a conclusion that the delay has been to the prejudice of the defendant or of any third party, or a conclusion that the plaintiff ought to be regarded as having abandoned any rights he ever had, specific performance is not ordinarily refused: Fitzgerald v Masters (1956) 95 CLR at p.433."
64 In the present case, when there is no prejudice asserted to the defendant or any third party, and when I do not conclude that the plaintiffs ought to be regarded as having abandoned any rights they ever had, the occasion for the defence does not arise. See also to the same effect, Meagher, Gummow and Lehane Equity Doctrine and Remedies, 4th Edition, 36-070 and 36-080, and the decision of the Court of Appeal in Savage v Lunn NSWCA, 9 March 1998, unreported, BC 9800548.
Orders
65 In these circumstances it is, in my view, appropriate to make orders of the general type which the plaintiffs seek. At the time the litigation began, the plaintiffs were, it seems to me, entitled to be in some doubt about whether the defendant conceded that it remained bound by the terms of Clause 14.1 of the Deed. Since the litigation has been on foot, the defendant's attitude in that respect has been made clearer, in that it now concedes that it is bound by Clause 14.1.
66 In those circumstances, and for the reason that there is now no issue about it, it is inappropriate to make the two declarations which the plaintiffs sought in their submissions. However, it is, in my view, appropriate to make the specific mandatory orders.
67 I order the defendant, within fourteen days, to: