Plaintiff v Defendants

2 Following the adjourned hearing on 14 May 2021, Mr Angelodemou offered to provide undertakings and to consent to orders which provide for the sale of the land and the application of the net proceeds of sale to Land Co. The undertakings and orders proposed on his behalf on 17 May 2021 were further modified in reply submissions filed on his behalf on 19 May 2021.

3 The critical question for determination is whether the proposed undertakings and orders in the modified form offered by Mr Angelodemou provide a better alternative in the best interests of Land Co than the grant of derivative leave for which Create contends.

4 For the reasons that follow, I consider the undertakings and orders offered on behalf of Mr Angelodemou, in a modified form from those ultimately put forward, provide an appropriate outcome in the interests of the company. If Mr Angelodemou does not signify his agreement within five business days from the date of publication of these reasons to the provision by him of undertakings and orders in the form set out at paragraph 58 of these reasons, I will grant derivative leave to Create to bring a proceeding against Mr Angelodemou and Renex Land Holdings substantially in accordance with the draft statement of claim exhibited to the affidavit of Mr Pulitano, a director of Create, dated 8 February 2021. It is in the best interests of Land Co to grant derivative leave unless undertakings and orders substantially in accordance with those set out in paragraph 58 are agreed to by Mr Angelodemou.

5 The application by Create filed 8 February 2021 for derivative leave and for an injunction pursuant to s 1324 of the Act, amongst other things, compelling Land Co to lodge a caveat over the land and restraining Mr Angelodemou from selling, encumbering or otherwise dealing with the land, is supported by the following evidence:

(a) an affidavit of Domenic Joseph Anthony Pulitano dated 8 February 2021; and

(b) two affidavits of Adam Nahum Ayliffe, the solicitor acting on behalf of Create, dated 7 April 2021 and 4 May 2021.

6 Opposing the application, Mr Angelodemou relied upon the following:

(a) an affidavit of Anish Chandy, solicitor acting on behalf of the defendants sworn 27 April 2021; and

(b) an affidavit of Marinos Angelodemou sworn 27 April 2021.

1. The parties filed written submissions in advance of the hearing. In the lead-up to the hearing, including by letter dated 12 May 2021, Mr Angelodemou offered certain undertakings in respect of the land as a means of resolving the issues between the parties. The undertakings offered were not acceptable to Create.
2. This proceeding is the second proceeding between these parties concerning the land. On 13 November 2020, Create instituted proceeding S ECI 2020 04258 against Land Co. On 16 November 2020, the Court ordered that Mr Angelodemou and Renex Land Holdings be added as defendants to that proceeding. Undertakings made in that proceeding that have the effect of restraining dealings with the land by Mr Angelodemou and by Renex Land Holdings were due to expire on Sunday, 23 May 2021.[1] Orders were made in this proceeding on Friday, 21 May 2021 that until 21 days after the determination of the application for derivative leave, Mr Angelodemou, as sole director, secretary and member of Renex Land Holdings be restrained from procuring or allowing that company to sell or encumber the land without the written consent of Create or further order of the Court.

9 Towards the end of the hearing on 14 May 2021, counsel for Mr Angelodemou foreshadowed a further revised form of undertaking and orders to be offered on his behalf as an alternative to the Court making an order granting derivative leave in favour of Create to bring the proposed proceeding in the name of Land Co. The form of that proposed undertaking and orders was set out in an email to Create and its legal advisers, copied to the Court, on 17 May 2021:

1. The undertaking offered by Mr Angelodemou and Renex Land Holdings Pty Ltd (Renex Land Holdings) to the Court is as follows.

(a) The undertaking only takes effects upon the orders set out in paragraph 6 below being made.

(b) Upon the release of Mr Angelodemou, Renex Land Co Pty Ltd (Land Co) and Renex Land Holdings Pty Ltd (Renex Land Holdings) from the undertakings referred to in the "other matters" section of the orders of Justice Almond made on 20 November 2020 in Supreme Court proceeding no. S ECI 2020 04258, or the expiry of those undertakings, Mr Angelodemou shall procure that Renex Land Holdings sell the Land with the sale to be conducted:

(i) by way of competitive tender, public auction, private treaty or as otherwise agreed between Mr Angelodemou, Renex Land Holdings and Create; and

(ii) as soon as reasonably practicable.

(c) Mr Angelodemou and Renex Land Holdings are not to sell the Land to a related entity of either Mr Angelodemou or Renex Land Holdings.

(d) Mr Angelodemou and Renex Land Holdings are to apply the proceeds of the sale of the Land as follows:

(i) all costs associated with the purchase of the Land (including financing costs), all costs associated with the sale of the Land (including selling costs incurred by Mr Angelodemou or Renex Land Holdings) and all amounts that must be withheld for taxes be deducted from the gross proceeds and paid to the party who incurred those costs or must pay or withhold those taxes; and

(ii) the net proceeds, being the gross proceeds of the sale of the Land minus the amounts referred to in subparagraph (d)(i) above, be paid to Land Co.

(e) If the net proceeds paid to Land Co is less than $2,750,000, Mr Angelodemou will "top up" the amount to $2,750,000.

1. The undertaking only takes effect upon the following orders being made and the following "other matters" being noted in the orders.

(a) The undertaking apply subject to further or other order of the Court.

(b) The Proceeding be struck out with a right of reinstatement reserved to the parties in relation to the undertaking or any dispute about deductions from the gross proceeds of the sale of the Land.

(c) There be no order as to costs.

Other matters

Mr Angelodemou has given the undertaking on the understanding that neither Mr Domenic Pulitano or Create will interfere with the sale process for the Land and Mr Angelodemou may reinstate the proceeding and seek orders in respect of the sale of the Land if he believes Mr Pulitano or Create are interfering or have interfered.

10 On 18 May 2021, Create filed submissions responding to the 17 May 2021 proposed undertaking and orders. Create identified what it considered to be a series of shortcomings in the proposed undertakings and orders. It submitted the appropriate course was for the Court to grant derivative leave and injunctive relief as per the February 2021 application.

11 Mr Angelodemou filed submissions on 19 May 2021 in which the proposed form of undertakings and orders was further modified, in essence to address a number, but not all of the concerns identified by Create in its 17 May 2021 submissions.

12 Land Co is part of the Renex group of companies. The group is involved in the business of commercial waste processing and management. Create is a 50% shareholder in the ultimate holding company of Land Co, Renex Founder Hold Co Pty Ltd. The following diagram, extracted from submissions filed on behalf of Mr Angelodemou, is a corporate structure diagram that conveniently shows the relationship between Create, Land Co and Mr Angelodemou:

13 Renex Land Holdings, the proposed second defendant in the proceeding for which Create seeks derivative leave, is a company owned and controlled by Mr Angelodemou that sits outside the Renex group of companies shown in the diagram. The role of that company in this dispute is readily understood from the chronology of events that led Create to instituting proceeding S ECI 2020 04258.

14 On 14 September 2018, Land Co entered into two separate contracts for the purchase of the land for a total price of $17 million. Land Co paid the deposit of $1.7 million. A 24 month settlement period was provided for in both contracts.

15 It is agreed by the parties that the land was purchased because it presented an opportunity for the Renex group to expand its business. In his affidavit, Mr Angelodemou says that the purpose of the purchase was for the Renex group to provide for a second waste treatment and resource facility in western metropolitan Melbourne so as to ensure that the group remained competitive in the industry.

16 In August 2020, the parties to the land contracts negotiated an extension of the settlement date to 16 November 2020. On 13 August 2020, Mr Angelodemou received a valuation of the land from Charter Keck Cramer, land valuers, of $19.45 million.

17 On 15 October 2020, an offer to purchase the land for $21 million was received from Charter Hall, a publicly listed company. That offer was conditional, including on a 28 day due diligence period and board approval by Charter Hall. It is common ground between the parties to the dispute that at the time the Charter Hall offer was received, Land Co did not have sufficient funds to complete the purchase of the land. It appears that part or all of the land was occupied by tenants. The Charter Hall offer required vacant possession at settlement.

18 On 15 October 2020, Mr Angelodemou sent an email to Mr Pulitano saying the offer from Charter Hall was unacceptable. Text messages exchanged on 16 October 2020 provide support for the contention advanced on behalf of Create that Charter Hall was prepared to pay $25 million for the land.[2] However, no written offer from Charter Hall offering to purchase the land for the sum of $25 million is in evidence.

19 On 27 October 2020, Mr Angelodemou sent an email to Mr Pulitano which noted that Land Co would not be in a position to settle the contracts in its own capacity. The email said that the board of Renex Hold Co Pty Ltd would resolve that the contracts be nominated to a Special Purpose Vehicle ('SPV') to complete settlement. Further, that the structure of the SPV would be determined by, and established to satisfy the requirements of any senior lender, so as to ensure that settlement of the contracts could be completed. The email advised Mr Pulitano that, 'the SPV will be a related party'. On the same day, a nomination form was signed by Mr Angelodemou, the sole director of Renex Hold Co Pty Ltd, and by Mr Chandy, the secretary of that company.

20 Between 27 October 2020 and 12 November 2020, Mr Pulitano unsuccessfully sought details from Mr Angelodemou of the nomination of the SPV. Details not having been provided, on 13 November 2020, Create issued proceeding S ECI 2020 04258 seeking the production of documents. On that day, the Court made orders directing Land Co to produce to Create by 7.00 pm that evening, the contracts of sale, the nomination of the land by Land Co, the terms sheets from the nominee's financier for the land and offers or terms sheets made to or received from any third party.

21 Pursuant to orders made on 13 November 2020, Create was provided with a copy of a nomination form for the contracts of sale which nominated Renex Land Holdings as the purchaser. It will be recalled that Renex Land Holdings is a company of which Mr Angelodemou is the sole director and shareholder that sits outside the Renex group. It is trustee of the Renex Property Holdings Trust.[3]

22 On the weekend following the 13 November 2020 hearing, Mr Pulitano received confirmation from Mr Chandy that Renex Op Co had advanced funds to Land Co totalling at least $2.7 million for the purchase of the land, the deposits of $1.7 million and stamp duty of approximately $1 million. Create issued an application for injunctive relief seeking to restrain the completion of the purchase of the land in the name of Renex Land Holdings.

23 On 16 November 2020, Create was successful in its application for injunctive relief. Following negotiations between the parties, on 20 November 2020, subject to undertakings given to the Court by Mr Angelodemou, Land Co and Renex Land Holdings, by consent, proceeding S ECI 2020 04258 was dismissed. That is, so as to allow completion of the contracts of sale before notices of default issued on behalf of the vendor of the land came into effect.

24 Prior to settlement of contracts for sale of the land, the vendors offered to effect the sale of the land to a third party for $20 million. Under that proposal, Land Co would have shared in the $3 million uplift from the initial purchase price of $17 million and would have received $18.5 million for the land.[4] That offer was not accepted. The contracts settled and Renex Land Holdings became, and to this day remains, the registered proprietor of the land.[5]

The proposed proceeding in the name of Renex Land Co

25 The proposed proceeding in the name of Land Co for which derivative leave is sought is a claim against Mr Angelodemou and Renex Land Holdings. The draft statement of claim alleges breach of statutory and fiduciary duties on the part of Mr Angelodemou concerning the land, and knowing participation in breaches of the duties owed by Renex Land Holdings. It alleges that on 27 October 2020, being aware that the value of the land was much greater than the price payable under the contracts that Mr Angelodemou resolved to nominate Renex Land Holdings as purchaser to take a transfer of the land and authorised the vendor to apply the deposit paid by Land Co as a deposit paid by Renex Land Holdings. The proposed proceeding seeks relief including a declaration that Renex Land Holdings holds the land as constructive trustee for the benefit of Land Co. It seeks an order that the defendants account to Land Co for any profits derived from the land. It seeks compensation pursuant to s 131H of the Act for breach of statutory obligations and orders for the payment of equitable compensation or damages for breach of fiduciary duties.[6]

26 Responding to the substantive allegations in the proposed proceeding, Mr Angelodemou submits that since 27 October 2020, his actions and those of Renex Land Holdings have been actions to ensure the benefit of the land was saved for the Renex group. It is his position that the nomination of Renex Land Holdings was made honestly, in good faith, and for a proper purpose. His affidavit evidence and submissions express concern that actions taken by Create have given and continue to give rise to a risk that an event of default will be triggered under the GCI facility used to settle the purchase of the land, personally guaranteed by him. He submits that offers made by him that have included various proposed undertakings to the Court concerning dealing with the land have sought to give effect to the intention to benefit Land Co which, he submits, was the purpose of the nomination in favour of Renex Land Holdings.

27 Sections 236 and 237 of the Act are relevantly in the following terms:

Section 236

Bringing, or intervening in, proceedings on behalf of a company

(1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a) the person is:

(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii) an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

(2) Proceedings brought on behalf of a company must be brought in the company's name.

...

Section 237

Applying for and granting leave

(1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2) The Court must grant the application if it is satisfied that:

(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b) the applicant is acting in good faith; and

(c) it is in the best interests of the company that the applicant be granted leave; and

(d) if the applicant is applying for leave to bring proceedings--there is a serious question to be tried; and

(e) either:

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

...

28 There is no contest that Create has standing to seek leave pursuant to s 236(1)(a) of the Act as a member of a related body corporate of Land Co. It is also accepted that it is probable that Land Co, of which Mr Angelodemou is the sole director, will not bring the proposed proceedings, pursuant to s 237(2)(a) of the Act.

29 If the criteria in s 237(2)(a)-(e) are satisfied, the Court has no discretion, it must grant derivative leave. Mr Angelodemou submits that leave must be refused because the preconditions in ss 237(2)(b) and (c) of the Act have not been satisfied. He submits that Create is not acting in good faith in seeking leave and that it is not in the best interests of Land Co that leave be granted.[7]

The allegation that Create is not acting in good faith

30 Mr Angelodemou contends there is an absence of good faith on the part of Create such that leave must be refused pursuant to s 237(2)(b) of the Act.

31 Mr Angelodemou advances various arguments in support of his submission that the Court cannot be satisfied Create is acting in good faith. First, because Create seeks leave for the purposes of pursuing its private interests and for the collateral purpose of pressuring Mr Angelodemou in relation to the purchase of its shares and its exit from the Renex group. Second, because Create 'cannot honestly believe' that it is in the best interests of Land Co that leave be granted in circumstances where Mr Angelodemou has made offers to deal with the land on terms that include undertakings. Third, that Create has not requested Mr Angelodemou to justify why he nominated Renex Land Holdings or demanded he confirm the benefit of the land belongs to Land Co or would be returned to it prior to resorting to litigation. Fourth, an inference arises that Create has no interest in resolving its claims by means other than litigation. Such an inference is said to be drawn from Create's refusal to accept offers in relation to dealings and disposition of the land. Fifth, that Mr Chandy does not support the grant of derivative leave. Mr Chandy is the CFO and company secretary of Land Co and the only shareholder in Renex group other than Create and MSA Renex; MSA Renex being a company controlled by Mr Angelodemou.

32 In response to the alleged lack of good faith, Create acknowledges there are other proceedings on foot between the parties. It accepts there have been negotiations for the purchase of Create's shares in the holding company. It submits that those matters should not impact upon the Court's determination whether or not to grant derivative leave. That is submitted to be the case in circumstances where it is said to be clear that the proposed action is necessary in order to bring back the benefit of the land to the Renex group. Further, so far as the offers on behalf of Mr Angelodemou are concerned, only recently have those offers demonstrated a realisation that the land is actually held for Land Co, such acknowledgement being relied upon by Create as an acknowledgement of the strength of the proposed claim.

33 I do not accept the submissions on behalf of Mr Angelodemou that by applying for derivative leave Create is not acting in good faith. There appear to be good reasons for Create to seek to bring the proposed proceeding in the name of Land Co.

34 In October 2020 Mr Pulitano sought details in relation to the nomination and the proposed settlement arrangements concerning the land. Those requests were met with a refusal to provide relevant information. The assertions on behalf of Mr Angelodemou that at all times he was acting in the best interests of the Renex group are not supported by the fact that Renex Land Holdings is a company incorporated outside the group. Those assertions are not supported by the failure of Mr Angelodemou to disclose details of the nomination until ordered to do so. The apparent application of the deposit moneys paid under the contract, $1.7 million, toward settlement of the purchase of the land in the name of Renex Land Holdings is not consistent with the interests of Land Co.

35 The 27 October 2020 email informed Mr Pulitano 'the SPV will be a related party'. It is not.

36 Up to and including the offer made on 12 May 2021, Mr Angelodemou was insisting, as a condition of his offers, that a deed of release and settlement be executed in exchange for undertakings that the land be sold. To reject proposals that required a release is not inconsistent with Create acting in good faith.

37 Having regard to the matters referred to in paragraphs [31] to [36], I consider both that when the application was issued and continuing up to and including the hearing on 12 and 14 May 2021 and the further written submissions provided on 18 May 2021, Create satisfied the obligation in s 237(2)(b) of the Act.

38 I accept that the proposed claim is one which, if instituted, appears to enjoy substantial prospects of success. However, the critical question is whether the grant of derivative leave is in the best interests of Land Co (s 237(2)(c)).

39 Is it in the best interests of the company to grant derivative leave to bring the proposed proceeding which, on its face, appears to have strong prospects of success and is a proceeding which, absent a grant of derivative leave, will not be brought by the company for so long as Mr Angelodemou controls Land Co? In the alternative, are the undertakings and orders proposed by Mr Angelodemou on 17 May 2021, as modified in reply submissions, sufficient to protect and to advance the best interests of the company such that derivative leave should be refused?

40 The parties are agreed that the four factors identified by Sifris J in Daiwa Can Company v Barokes[8] are required to be addressed in order to determine whether the grant of derivative leave is in the best interests of the company:

1. In Swansson Palmer J provided four factors for the applicant to address in order to establish on the balance of probabilities that granting leave be given to bring an action is in the best interests of the company. These factors were summarised in a list by the South Australia Court of Appeal in Ragless v IPA Holdings Pty Ltd (in liq):[9]

(1) There should be evidence as to the character of the company.

(2) There should be evidence of the business, if any, of the company so that the effects of the proposed litigation on its proper conduct may be appreciated.

(3) There should be evidence enabling the court to form a conclusion whether the substance of the redress which the applicant seeks to achieve is available by a means which does not require the company to be brought into litigation against its will**.**

(4) There should be evidence as to the ability of the defendant to meet at least a substantial part of any judgment in favour of the company in the proposed derivative action so that the court may ascertain whether the action would be of any practical benefit to the company.[10]

41 Taking the factors listed in Daiwa Can Company[12] in turn, neither the character of the company nor the effect on the business of the company of the proposed litigation are material considerations in this case. The company is part of the Renex group but it does not trade in its own right. The fact of the proceedings, if derivative leave is granted, will not impact upon the proper conduct of the business of the company.

42 There is no real contest that, if leave is granted and the proceeding is successful, given the apparent value of the land, that Renex Land Holdings would be unable to meet at least a substantial part of any such judgment. There is no reason to suppose that if the action were successful the declaratory relief sought would not be granted.

43 The real contest is whether the substance of the redress which Create seeks to achieve for the benefit of Land Co is available by means that does not require Land Co to be brought into litigation against its will. That is, by a combination of undertakings and orders substantially in accordance with those offered on behalf of Mr Angelodemou on 17 May 2021.

44 Are the best interests of Land Co better served by the Court accepting the undertakings offered and making the orders proposed, rather than granting derivative leave. I consider the answer to that question is in the affirmative, provided the substantive concerns identified in the 18 May 2021 submissions filed on behalf of Create are satisfactorily addressed. If they are not satisfactorily addressed, then it is in the best interests of Land Co that derivative leave be granted.

45 The 19 May 2021 reply submissions accepted a number of modifications to the 17 May 2021 letter so as to address concerns identified on behalf of Create. It was accepted there should be an undertaking that a real estate agent be appointed within 30 days of the proposed orders striking out the proceedings being made. It was accepted that the sale of the land must be to an arm's length purchaser and that the sale be at market value (as determined by the competitive sales process). It was accepted that, instead of providing for a deduction of all costs associated with the purchase of the land, the costs to be deducted should be confined to those required for the payment of fees and interest associated with the finance facility for the purchase of the land and for paying out the finance facility. Mr Angelodemou offered an undertaking to provide an accounting of these deductions to Create so, it was submitted, there can be no meaningful dispute in relation to purchase costs. The 17 May 2021 undertaking was offered on the basis the proceeding be dismissed with no order as to costs. This position was revised in the 19 May 2021 reply submissions with an order that Mr Angelodemou pay Create's costs of the proceeding on a standard basis being proposed.

46 There remain three further matters of substance concerning the 17 May 2021 offer identified on behalf of Create that the reply submissions did not accept. The first concerns taxes. The second concerns the proposed 'top-up'. The third concerns the ambit of the proceeding in the future.

47 The position of Mr Angelodemou that 'all amounts must be withheld for taxes, be deducted from the gross proceeds and paid to the party who incurred those costs or must pay withhold those taxes' was maintained. To agree to such an order, particularly when accompanied by an order the proceeding be dismissed with a right of reinstatement, cannot objectively be seen to be in the best interests of Land Co. The usual adjustments on settlement of contract of sale for rates and taxes as between vendor and purchaser are one matter. However, the tax obligations of Renex Land Holdings or of any one or more beneficiaries of the Renex Property Holdings Trust are very different matters. I accept the submission on behalf of Create that to allow such a deduction from the proceeds of sale is to prefer the interests of third parties over those of Land Co. If Renex Land Holdings had not been nominated as purchaser and then registered as proprietor of the land subsequently sold, whatever tax obligations, whether land tax, capital gains tax or tax liabilities otherwise incurred by Renex Land Holdings or by beneficiaries of the Trust of which it is Trustee, those tax liabilities would not have been incurred. Any such tax liabilities are not obligations of Land Co. The quantum involved is not known and not disclosed. It cannot be said to be in the best interests of Land Co to allow deductions of unknown and undisclosed amounts in favour of unknown parties from the proceeds of sale to cover the actual or potential liabilities of those parties. That is particularly so when the terms of the draft order would permit payment from the gross proceeds to the unidentified person who must pay, or withhold 'those taxes'. The offer in the 19 May 2021 reply submissions that Mr Angelodemou will account for profits is not a satisfactory answer. It is not to the point that amounts withheld as tax will be paid as tax and will be accounted for in the manner proposed. Tax liabilities of Landholdings or beneficiaries of the trust of which it is the trustee are not tax liabilities of Land Co.

48 The second matter not agreed concerns the level of the 'top-up' referred to in paragraph 5(e) of the 17 May 2021 draft order. The reference to $2,750,000 when coupled with a provision for the dismissal of the proceeding with a right of reinstatement is intended to limit any future dispute about deductions from the gross proceeds of sale and to limit the amount of any damages that might be recoverable by Land Co.

49 Counsel for Mr Angelodemou submitted that if the vendor's proposal had been accepted, then Land Co would have received $1.5 million less 30% tax, or $1,050,000.[13] She submitted that the 'cap' for the purposes of the proposed 'top-up' payment by Mr Angelodemou, payable only if the sale price of the land does not result in a surplus of more than $2.75 million, reflects the return of the deposit of $1.7 million together with the further amount of $1,050,000.[14]

50 Taking the Charter Hall offer at $21.5 million, counsel for Mr Angelodemou submitted that $21.5 million less agent's commission of $295,625 and less $17 million required to be paid to the vendor results in $4,204,375. From this amount it was submitted capital gains tax would be payable of $1,261,313, providing a benefit to Land Co of $2,943,063. On Mr Angelodemou's own submissions, so calculated, the proposed cap of $2.75 million falls $200,000 short of 'making whole' Land Co compared to acceptance of the Charter Hall $21.5 million offer.

51 Based on the evidence of Mr Pulitano, the calculations made on behalf of Mr Angelodemou in relation to both the vendor's proposal to sell, and the Charter Hall $21.5 million offer fail to account for the additional $1 million advanced to Land Co for stamp duty and which may have been applied by Renex Land Holdings for its purposes in relation to the purchase of the land.

52 The offer to 'top-up' to $2.75 million falls well short, on any view, of the mooted Charter Hall offer of $25 million, not in evidence in the form of a written offer capable of acceptance but of which there is some evidence.[15]

53 If the undertakings are given and the proposed orders are made, the land will be sold for its current market value. The offer on behalf of Mr Angelodemou to 'top-up' net sale proceeds to $2.75 million may never be required to be actioned. That depends upon the market value obtained on the sale of the land. It may be that the sale price in 2021 is such that the net proceeds paid to Land Co is substantially greater than $2.75 million. It may be that the price obtained reflects what Land Co would have obtained, had the land sold for $25 million in October 2020. However, none of these matters can be known until after the land is sold.

54 It is not in the best interests of Land Co for the offer of $2.75 million to be accepted on the basis that it is the maximum amount that might be recovered by the company, as is the basis of the 17 May 2021 offer. However, it is clearly in the best interests of the company to secure an undertaking on behalf of Mr Angelodemou that if the shortfall in the net proceeds is less than $2.75 million, then he will personally 'top-up' to that amount.

55 I accept the submission on behalf of Create that it is 'simply too soon to attempt to quantify Land Co's loss or to say there should be a cap on those losses'. I reject the contention on behalf of Mr Angelodemou that it is in the best interests of Land Co to agree to a top-up to $2.75 million in return for an acknowledgement, implicit in the proposed undertakings and orders, that no further damages shall be recoverable. That is so whether from Mr Angelodemou or from Renex Land Holdings, as would be the case if derivative leave were granted and the proposed proceeding was successful against those parties. If derivative leave were granted, there would be no cap on damages that may be recovered. To accept a cap of $2.75 million, as forms part of Mr Angelodemou's offer, is not in the best interests of Land Co.

56 Turning to the third matter, the proposed undertakings are only to be provided if the proceeding is struck out with a right of reinstatement limited to the issues of the undertaking or the deductions made. Limiting the right of reinstatement in the manner proposed does not provide sufficient scope for the determination of disputed matters arising from the events of 2020 concerning the land which Create, if it were granted derivative leave, would legitimately seek to pursue. To limit issues in this way would shut out the ability for the Court to determine disputes about other aspects of actions taken by Mr Angelodemou and Renex Land Holdings.

57 Nevertheless, it is clearly in the best interests of Land Co if the costs and the time delays that are inevitable and would attend a grant of derivative leave and any subsequent proceeding can be avoided. Such an outcome can be appropriately avoided in the best interests of Land Co if undertakings in a modified form are provided by Mr Angelodemou and if the orders proposed on his behalf, as modified in the 19 May 2021 submissions are further modified. Those modifications need to address the three contentious topics: taxes, the 'top-up' constituting a ceiling on possible damages recovery and the proposed order the proceeding be struck out with a right of reinstatement limited to the issues of the undertaking or the deductions.

58 Undertakings and orders substantially in accordance with those which I now set out, if agreed to by Mr Angelodemou, would be in the best interests of the company:

Upon Marinos Angelodemou and Renex Land Co Pty Ltd undertaking as follows:

1. that Mr Angelodemou shall procure that Renex Land Holdings Pty Ltd shall sell the land at 157-167 and 169-179 Dohertys Road, Laverton North, Victoria in accordance with the orders set out below; and
2. that Mr Angelodemou will provide a full accounting to Create Environment Pty Ltd in relation to the proceeds of sale of the land within 14 days of the settlement of such sale; and

1. that no tax will be paid or deducted from the proceeds of sale of the land at settlement directly or indirectly that relates to or is attributable to the beneficial interest of any person in the Renex Property Holdings Trust.

1. Within 30 days Renex Land Holdings Pty Ltd shall appoint an estate agent to market and sell the land.
2. The land shall be sold by way of a competitive tender, public option, private treaty or otherwise as agreed between Mr Angelodemou, Renex Land Holdings Pty Ltd and Create Environment Pty Ltd.
3. The sale of land shall take place as soon as reasonably practicable.
4. The land is to be sold to an arm's-length purchaser for market value (such market value to be determined by the competitive sale process otherwise provided for in these orders).
5. The land is not to be sold to a related entity of either Mr Angelodemou or Renex Land Holdings Pty Ltd.
6. The gross proceeds of sale of the land are to be applied as follows:

(i) to pay out the finance facility directly relating to the purchase of the land, including any outstanding interest on that facility;

(ii) to pay fees and interest directly related to the finance facility for the purchase of the land, including by way of reimbursement to any third party in respect of fees and interest previously paid;

(iii) to pay all reasonable costs associated with the sale of the land including selling costs incurred by Renex Land Holdings Pty Ltd;

(iv) to pay at settlement any amounts required to be paid or required to be adjusted as between vendor and purchaser in relation to rates and taxes; and

(v) the net proceeds, being the gross proceeds of the sale of the land less the amounts referred to in subparagraphs (i)-(iv) shall be paid to Renex Land Co Pty Ltd.

1. If the net proceeds of sale paid to Renex Land Co Pty Ltd is less than $2,750,000 then, within 14 days of settlement, Mr Angelodemou shall personally 'top up' the amount of the net proceeds by paying an amount corresponding to the shortfall between the net proceeds received and the sum of $2,750,000 to Renex Land Co Pty Ltd.
2. Mr Angelodemou shall pay Create Environment Pty Ltd's costs of and incidental to this proceeding to date, including reserved costs, on a standard basis.
3. Upon the undertakings referred to above being proffered to the Court:

(1) the orders made in this proceeding on 21 May 2021 shall be discharged; and

(2) the further hearing of the proceeding, in particular, the hearing and determination of any disputes as to the proper application of the gross proceeds of sale of the land shall be adjourned for directions on a date no later than 60 days after the date of settlement of the contract for the sale of the land; and

1. The matter is otherwise listed for directions on 10 December 2021.

59 Unless undertakings are proffered on behalf of Mr Angelodemou in substantially the same form as set out above and unless he agrees to orders substantially in the form outlined above within five business days, the best interests of Land Co are properly served by the grant of derivative leave. Unless agreement is reached substantially in the form outlined, the redress which Create seeks to achieve will not be available by a means which does not require Land Co to be brought into litigation against its will.

60 If the proposed undertakings and orders are substantially in a form that is acceptable to Mr Angelodemou but there are drafting issues that are of concern, those acting on his behalf should contact my chambers within the five business day period. In that event, the matter can be listed for mention to deal with matters of drafting detail before final orders are made.

[1] Defendants, Affidavit of Marinos Angelodemou dated 27 April 2021 ('Angelodemou Affidavit'), [75]; Affidavit of Anish Chandy dated 27 April 2021, [19]; Plaintiff, Affidavit of Domenic Pulitano dated 8 February 2021 ('Pulitano Affidavit'), exhibit DJAP-26.

[2] Pulitano Affidavit, exhibit DJAP-15.

[3] Angelodemou Affidavit, exhibit MA-4.

[4] Pulitano Affidavit, exhibit DJAP-21.

[7] Initially it was also submitted that leave should not be granted given the alleged insufficiency of Create's undertakings to both fund the proposed action and also to bear the burden of any adverse costs orders. That issue fell away upon counsel for Create informing the Court that Create would provide an undertaking to both fund the proposed proceeding and to meet any adverse costs order.

[8] [2016] VSC 296; (2016) 51 VR 540 ('Daiwa Can Company').

[9] Ragless v IPA Holdings Pty Ltd (in liq.) [2008] SASC 90, [35].

[10] Swansson, Ragless v IPA Holdings Pty Ltd (in liq.) [2008] SASC 90, [35].

[11] [2016] VSC 296; (2016) 51 VR 540, 554 [64].

[12] [2016] VSC 296; (2016) 51 VR 540.

[13] Transcript, Create Environment Pty Ltd v Renex Land Co Pty Ltd & Anor (Supreme Court of Victoria, Delany J, 14 May 2021), 14.

[15] Pulitano Affidavit, exhibit DJAP-15.