(10) The majority have usurped the exclusive right of signing cheques.
12 The defence admits that Anthony Maine has been removed as a director but says that he was lawfully so removed. It admits that the majority excluded Tony Maine from the business premises. It admits that Nicholas Fyfe was appointed as director, but says that it was appropriate to appoint him.
13 The defendants admit that they have removed Peter Maine as a director. They admit that they have made important commercial decisions in relation to the business and operations of the company without reference to the views of Tony Maine and say they were not obliged to seek his views nor would it have been appropriate to do so. They admit that they have not paid the consultancy fee and say they have properly withheld all monies otherwise due to Anthony Maine.
14 It was apparent at the very beginning of this case that the defendants had taken the view that if they had power to do something, then it could be done without any regard to what I have called earlier in these reasons, the legitimate expectations of the corporators and the equitable restraints upon the exercise of those powers which must necessarily follow.
15 In my view, the admissions made in the defence are sufficient in themselves to show that there has been oppression of the minority so as to make way for an order under s 233 of the Corporations Act.
16 However, the real problems in the company go very much deeper. It is so obvious that there has been oppression it is not necessary for me to go into these other matters in the detail which they would otherwise deserve, but as they are the core of the real dispute I must at least consider them in some detail.
17 Prior to the joint venture, the second plaintiff, Newsnet.com Pty Limited, carried on business as a media broadcaster from O'Connell Street, Sydney. In summary, this business involved multi-media messaging including fax, e-mail, voicemail, image and video distribution.
18 Again, prior to the joint venture, the third defendant, Jardine Thompson Pty Limited, then known as Opipo Pty Limited, carried on the business of: (a) providing fax broadcast distribution at the lower end of the market price range; and (b) electronically distributing advertising material via Protus. Integrated with this latter business was a fax database sales operation where most of its customers were sold combined list access and fax broadcast as an integrated service at a single price. Only business (a) was brought into the joint venture. The database and associated activities were retained by Jardine Thompson.
19 Newsnet.com plied its product through an agency known as Topcall. Topcall was in opposition to Protus. The Maines considered that development of the association with Topcall was the only way in which the business would progress. Mr Chelia in particular was interested in developing relations with Protus, the plaintiffs say, because that was to the advantage of the continued business of Jardine Thompson.
20 As I have said, the joint venture agreement was made and then a joint venture deed was produced.
21 There appears to be little debate that the joint venture deed was duly signed by all parties, though not on the date it bore. Mr Chelia says that what happened was that originally this joint venture deed was signed by Peter Maine as attorney for his brother Anthony. When Anthony returned, further adjustments were made to the deed, it was re-engrossed and re-signed including a signature by Anthony Maine. It would appear this was about 13 November 2004.
22 The Maines say that they made the assumption that the deed was exactly the same as the joint venture agreement and was just being put in a more formal way. They say they did not notice that there had been adjustments in Mr Chelia's favour including an adjustment upwards of Mr Chelia's remuneration.
23 Mr Goldsmith, the solicitor who appeared for the majority, said that as no complaint was made in the pleadings that there had been any fraud associated with the deed or any misrepresentation, that the deed must be taken as it stands. It is quite clear that the Maines read the deed before they signed it. I accept Mr Chelia's version of the additional matters inserted in the deed. Accordingly, as a matter of law the deed must be accepted as defining the parties' rights.
24 However, the joint venture heads of agreement are still relevant as showing the milieu and the expectations of the parties. There does not appear ever to have been anything said which would disabuse the Maines that what they had agreed after long negotiations in the joint venture heads of agreement remained basically untouched.
25 The DMS company was incorporated on 20 September 2004.
26 It is alleged by the majority that its constitution was adopted on 16 November 2004 and that that constitution is the document annexed "I" to Mr Anthony Maine's first affidavit. Anthony Maine denies that the constitution was ever adopted.
27 However, the minutes of 16 November 2004 merely read:
"CONSTITUTION Tony advised that he would like to review the constitution of the company."
28 Mr Chelia says that he gave a copy of the constitution to Tony Maine on about 5 October 2004. The constitution was registered and on 13 October 2004 there was a circular board minute amending the constitution. I cannot accept Mr Anthony Maine on this and the constitution which I have referred to appears to be the constitution of the company.
29 In some respects it would seem that the constitution differs from what was in the heads of agreement or joint venture agreement. The heads of agreement seems to suggest that the directors were to be paid the remuneration that the company determined whereas the joint venture agreement suggests that they were only to be paid consultancy fees and reimbursement of expenses. The constitution makes the quorum at meetings two (clause 152), yet the company seems to have thought that there needed to be three to make a quorum.
30 The Maines say that at the heart of the differences is the activities of the defendants in using more and more of the facilities of DMS to process Jardine Thompson's business. The defendants deny this and say that whilst the two sets of staff were on the same premises they were kept separate. The plaintiffs also say that they have a reasonable fear that the majority are using the DMS facilities for what they class as illegal purposes. This, they say they fear may have repercussions for them. There appear to be two aspects to this, first that some of the Jardine Thompson database has been acquired from Desktop Marketing Systems Pty Ltd, a company against which Telstra Corporation Ltd obtained orders restraining breach of copyright; see Desktop Marketing Systems Pty Ltd v Telstra Corporation Limited [2002] FCAFC 112. It is alleged that part of the Jardine Thompson database has been acquired in breach of copyright from Telstra. Secondly, it is alleged that the activities of Jardine Thompson breached the Spam Act 2003 (Cth).
31 The defendants deny that the current Jardine Thompson database is infected from the material originally obtained from Desktop Marketing Systems. As to spam, whilst it is clear that the principal business of Jardine Thompson is to send unsolicited facsimile and other messages to people, including Australians, promoting sales of product, they say that there is no breach of the Spam Act with which they are well familiar, there is no Australian link as defined by s 7 and that agents and consultants are hired and the work system adopted to make sure that this is so.
32 Little is gained by seeking to establish whether the defendants' contention is correct or not. There is sufficient evidence to show that the plaintiffs had reasonable grounds for suspicion that the Jardine Thompson activities being carried on in the premises of DMS were very questionable.
33 Mr Chelia and Mr Arulampalam say that the reason why they removed Anthony Maine was because of his conduct. First they say that Anthony Maine continually upset the staff and themselves by using obscene language. Secondly they say that Anthony Maine distributed a photograph of nude women, and thirdly that he deliberately upset Mr Chelia by indicating that the Tamil Tigers' cause in Sri Lanka was a lost cause well knowing that Mr Chelia was a prominent member of the Tamil Tigers. They also say the Maines got nowhere near the productivity target they were supposed to achieve.
34 On their side the Maines deny the foul language. There is evidence in support of their position, but it seems to me on the balance of probabilities Anthony Maine did use what might be called foul language.
35 It must be remembered that some key members of the staff were Indian or Australians of Indian descent. Whilst the custom is for many third generation Australians to use foul language and think nothing of it, that is not the way in which persons of Indian descent regard such language. Many people of Indian descent have extremely high moral standards.
36 So far as the photograph of naked women is concerned, Mr Anthony Maine puts this down as a laugh because the photograph was of a nudist camp and there were naked women and naked men. The print in the evidence is a very poor reproduction and nothing offensive could be seen from it, but whether the version distributed to the staff was of high quality I do not know. I could well imagine how, particularly people of Indian descent, would be offended by it.
37 Thirdly, there is no doubt at all that upon resumption of work in January 2005 Mr Chelia was extremely upset about the effect of the Boxing Day Tsunami on Sri Lanka and particularly the Tamil Tigers and that the Sri Lankan Government did not appear to be directing any aid effort to helping the Tamil Tigers. In this connection, Mr Anthony Maine almost certainly made some remark about the Tigers being a lost cause which Mr Chelia took very much to heart. In cross-examination, Mr Lucarelli, who appeared for the plaintiffs, put to Mr Chelia that this was the beginning of the end of the relationship, a matter which Mr Chelia denied, but I consider there is probably a lot of truth in it.
38 So far as failure to meet production targets is concerned, I cannot see the evidence that would justify this view. The dismissal of Mr Cuickshank and the explanation given for his dismissal in not meeting targets appears to me to be extremely harsh. I accept the plaintiffs' suggestion that Mr Chelia was obsessive about sales targets and that he did not examine too closely the real causes for DMS not achieving what Mr Chelia thought could be achieved.
39 Whichever way one looks at it, the relationship between the parties has completely broken down. There is no longer any hope of there being a joint venture in the way suggested in the heads of agreement and the joint venture deed. The majority have used their legal rights to benefit themselves and to exclude the minority from any significant part in the business so that it is no longer a joint venture business. They would also appear to have manoeuvred matters since they gained a controlling position so as to favour Protus and themselves, as opposed to what might have been the course taken had there been full debate as to what was best for the company.
40 Accordingly, in my view the plaintiffs have made out a case under ss 232 and 233 of the Corporations Act.
41 Indeed, my reading of the way in which counsel for the plaintiffs and the solicitor for the defendants treated the matter is that they foresaw that that finding was virtually inevitable so that a lot of effort was put into the submissions as to the order that should be made.
42 The plaintiffs' principal submission is that there should be a demerger. A detailed proposal was put dealing with the details of such a demerger. Essentially its terms were these: