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[2018] VSC 111
General information, not legal advice.
Supreme Court of Victoria
2018-03-16
SIFRIS J
Original judgment source is linked above.
CORPORATIONS - Dispute between brothers in relation to numerous companies and trusts - Claims and cross-claims alleging oppression - Remedies sought under s 233 of Corporations Act 2001 (Cth) - Directions and orders including valuations made.
PRACTICE AND PROCEDURE - Four properties co-owned by brothers (directly and indirectly) - Whether four proceedings commenced by one brother in VCAT under of (Vic) are complex and should be heard by the Supreme Court which has jurisdiction in cases of complexity.
1 Salvatore and John Vitale ('Sam and John') have had a falling out with their brother Jim Vitale ('Jim'). The brothers own and control (directly and indirectly) numerous companies and trusts ('the Vitale group') and they also co-own (in their own names) three properties that have some connection with the Vitale group. A fourth property ('Cooper Street') is co-owned by Jim, and Sam and John's respective superannuation funds, who seek to be joined to one of the proceedings as referred to below.
2 Each have commenced a proceeding against the other.
3 Jim was first in time and commenced proceeding S ECI 2017 00 140 ('Jim's proceeding') seeking relief from oppressive conduct in relation to the affairs of each of the following companies:
(a) F Vitale & Sons Pty Ltd (ACN 005 212 162) in its own capacity and as trustee for the F Vitale & Sons Pty Ltd Superannuation Fund 1982 and as trustee for the Francesco Vitale Family Trust;
(b) F Vitale & Sons Commercial Pty Ltd (ACN 114 591 276) as trustee for the Vitale Commercial Trust;
(c) Vitale Holdings (Vic) Pty Ltd (ACN 007 074 937) as trustee for the Vitale Holdings Trust;
(d) Vintage Dell Pty Ltd (ACN 131 975 301) as trustee for the Vintage Dell Trust;
(e) Elativ Pty Ltd (ACN 006 002 606) as trustee for the Vitale Property Trust;
(g) F Vitale & Sons (Vic) Pty Ltd (ACN 004 791 397);
4 The specific claim and relief sought by Jim is as follows:
(a) An order pursuant to s 233 of the Corporations Act 2001 (Cth) ('the Act') that Salvatore Vitale and John Vitale, the eighth and ninth defendants, purchase the plaintiff's fully paid ordinary shares in each of the Companies, at fair value.
(b) Alternatively, an order that each of the Companies be wound up pursuant to s 461(k) of the Act.
5 In addition, Jim commenced four further proceedings in VCAT seeking orders for the sale of the four properties held by him and his brothers (and in the case of Cooper Street held by Sam and John's superannuation funds) as equal co-owners. The properties are:
(a) 485 Cooper Street, Campbellfield ('Cooper Street');
(b) 86 to 88 Albion Street, Essendon ('Albion Street');
(c) 1 Plummer Avenue, Frankston South and 581A Nepean Highway, Frankston South ('Frankston'); and
6 On 11 October 2017 Sam and John commenced proceeding S ECI 2017 00238 ('Sam and John's proceeding') alleging oppressive conduct by Jim and seeking orders pursuant to s 233 of the Act that they purchase his shares in the Companies and units in the trusts.
7 Orders have been made progressing these proceedings. However, each party has made application for interlocutory relief.
8 In Jim's proceeding, Jim seeks orders amending his Originating Process:
(a) to remove claims for oppression relief in relation to the non-trading entities, being the second to seventh defendants in each proceeding as set out in paragraphs 3(b)-(g) above ('Non-Trading Entities');
(b) to seek the winding up of the Non-Trading Entities on the just and equitable ground; and
(c) to seek orders for compulsory sale to him of Sam and John's shares in the trading entity (F Vitale & Sons Pty Ltd) ('Trading Entity').[1]
Sam and John do not oppose these amendments, but dispute that Jim is entitled to the relief as sought.
(i) leave to amend their originating process to seek the relief under s 234C(4) of the Property Law Act 1958 (Vic) ('PLA') with respect to the four properties identified above and which are currently the subject of an application by Jim in VCAT;
(ii) a declaration that the court has jurisdiction to hear the application under s 234C(4).[2]
(b) Jim seeks an order that the proceeding continue as if commenced by writ and an order requiring Sam and John to file a statement of claim or points of claim.[3]
These applications are opposed and require determination.
10 For the reasons discussed during argument, I propose to order points of claim and defence and accordingly there is no need to deal with (b) above.
11 The remaining issue therefore is whether the proceedings presently before VCAT should be dealt with in this Court.
12 The proposed amendments to the originating process of Sam and John, in order to give effect to the above, are as follows:
The application under Part IV of the PLA is as a co-owner of land whereby the first and second plaintiff (plaintiffs) seek relief in the form of an order that the eighth and ninth defendants' interest in the following properties (properties) be sold to the plaintiffs or their nominee/s by way of a just and fair private sale:
13 The following paragraphs have been included in the claim:
6.1 that the Eighth and Ninth Defendant's interest in the Properties be sold to the Plaintiffs and/or their nominee/s by way of private sale for market value; or
6.2 In the alternative, that the Properties be sold by way of public sale and expressions of interest and that the proceeds, after costs and expenses of sale, be distributed to the owners of each Property in accordance with each owner's interest in the Property.
14 No argument was addressed to paragraphs 4 and 5 of the proposed claim and I will allow such amendments.
15 The application under Part IV of the PLA (s 234C(4)) and the proposed paragraph 6 comprise the remaining issue.
16 Section 234C(4)(b) of the PLA permits the Court to hear an application for the division of co-owned lands if 'in the opinion of the Supreme Court or the County Court (as the case requires), special circumstances exist which justify the Supreme Court or the County Court hearing the application.'[4]
17 By s 234C(5), 'special circumstances' means circumstances in which:
(a) the matter which is the subject of the application is complex; or
(b) the matter which is the subject of the application, or a substantial part of that matter, does not fall within the jurisdiction of VCAT.
18 Counsel for Sam and John submitted, in essence, that the Supreme Court has jurisdiction to hear the application. It was submitted that the matters were indeed complex (a requirement to enliven the jurisdiction of the Supreme Court) and that the primary relief sought (private sale and acquisition of Jim's share) was available. If this relief was not available, it was submitted that the alternative relief sought was available. Sam and John did not rely on s 234C(5)(b).
19 Counsel for Jim submitted, in essence, that the specific relief sought, as identified above, was not available under the legislation and that in any event the matters were not complex despite their suggested connection with the Vitale group, the extent of which was in any event disputed. It was further submitted that each property should be considered separately and not globally.
20 It was common ground that critical to the resolution of this dispute was whether determination of the VCAT proceedings would be complex. If they are not complex that is the end of the matter, and presumably Sam and John could seek orders, as identified above, at VCAT if they are available under the legislation. However, there is one further point raised by Jim, that is even if the matters are complex the primary relief sought by Sam and John, in effect a buy out, is not available.
21 It is not strictly necessary to determine whether the relief sought by Sam and John, as identified above, is available because clearly the alternative claim set out in paragraph 6.2 of the proposed amended originating process is available, that is a public sale by expression of interest. Consequently if the primary relief sought in 6.1, that is a private sale to Sam and John, is not available, as contended by Senior Counsel for Jim, the alternative or fall-back position is clearly within the relevant provisions.[5] Back to complexity.
22 Neither the provisions of the PLA nor the relevant Explanatory Memorandum give any guidance as what is intended by the word 'complex'. The Court must, as was submitted, be guided by an interpretation which would promote the purpose or object of the PLA.[6]
23 According to the Explanatory Memorandum,[7] the object of the relevant amendments to the PLA was to transfer to VCAT the power to adjudicate on co-owned land matters unless the matter is either complex or a substantial part of the matter is not within the VCAT's jurisdiction. The Parliament has purposely not defined the term 'complex'. The only reasonable inference for not doing so was, it was submitted, was so as to not limit the Court's discretion to make a determination as to what is and is not complex. Clearly it is up to this Court to decide whether the matters are complex.
24 According to the Macquarie Dictionary, (relied upon by Sam and John) a matter is complex if it is '1. Composed of interconnected parts; compound; composite. 2. Characterised by an involved combination of parts'.[8] Senior Counsel for Jim relied on the Shorter Oxford dictionary definition which defines 'complex' as 'intricate, not easily analysed or disentangled, complicated'.
25 In my opinion, the matters before VCAT are complex and fall within both dictionary definitions, essentially by virtue of their connection to the oppression proceedings, and in particular and as a consequence the extent and nature of the relief to be granted. The Court (or VCAT) is required and empowered to make 'any order it thinks fit to ensure a just and fair sale or division of land' (s 228(1))[9]. The proper exercise of this broad discretion requires the Court to consider all relevant matters including the content and context of the dispute. This is what clearly makes the matter complex whether or not a buy out is available. Even if it is not, the matter is still complex.
26 The relationship between the matters relevant to the relief sought under Part IV of the PLA and the matters relevant to the oppression claims create a complexity of issues that should not be determined separately in two fora. This is not simply a matter of convenience. As pointed out, it is relevant to the proper exercise of the Court's discretion.
27 Senior Counsel for Sam and John submitted that the Properties are 'key' properties in that each (as referred to below) currently serves a critical function in the businesses of the Trading Entity and that accordingly any relief in relation to the four properties must take these matters into account in the proper exercise of the discretion of the Court. I agree.
32 It follows that a separate determination in the VCAT Proceeding in relation to the Properties would threaten the stability of the businesses operated by the Trading Entity and the value of the shares in the Trading Entity.
33 If the Properties were sold to a third party, the businesses would likely be required to move. There would be a number of costs incurred, including business interruption, construction costs at the new premises and ongoing rent to be paid:[19]
(a) The moving costs associated with Albion Street are estimated to be approximately $2m;[20]
(b) The moving costs associated with Cooper Street are estimated to be approximately $1m.[21]
34 Senior Counsel for Jim submitted there was nothing to stop Sam and John from bidding at any auction and that the suggested relocation costs were far too high.
35 Whilst no operations of the Trading Entity are conducted from them, both Frankston and Camerons Road form part of the security in relation to the Trading Entity's loan facilities with Westpac for the operations and finances of the business.[22]
36 If Frankston and Camerons Road properties were sold, the Trading Entity would be required to arrange replacement security in relation to the finance facilities with Westpac, which would require consent from Jim and one or more of the Trading and Non-Trading Entities.[23] If no replacement security were offered to the Bank, then the outstanding liabilities to the Bank would become immediately repayable pursuant to the terms of the facility.[24]
37 Senior Counsel for Jim submitted that it was not explained why other properties could not be offered as security. Consequently these properties should in any event be dealt with separately.
38 All of the above issues would inevitably affect the valuation of the Properties and the Trading Entity, a process that is already underway in the oppression proceedings.
39 Accordingly the complexity arises out of the need to determine the appropriate relief available in the circumstances, given the relationship of the parties, the subject matter of the various proceedings and the role and use of the properties within the family and the corporate structures. As pointed out this is not simply a matter of convenience although it certainly is more convenient to deal with all matters in one forum. However, ultimately it is difficult and undesirable to consider the appropriate relief in the VCAT proceedings in a vacuum. If this is so, which is must be, it is the context and peculiar circumstances that require proper consideration in determining the appropriate relief. As pointed out, this is a complex exercise. Accordingly, I do not accept the submission that complexity should not be measured against the entire dispute between the brothers, but should be restricted to the matters before VCAT. For the reasons set out this is not desirable and undermines the broad discretion of the Court in relation to the appropriate form of relief.
40 Although it is true, as submitted by Senior Counsel for Jim, that the matters do not involve the usual complex co-ownership dispute such as complicated finance adjustments or unequal contribution and the like, this does not mean that there are no other complexities, like the form of relief and the proper exercise of the Court's broad discretion to achieve a 'just and fair sale or division of the land'.
41 I do not accept, as was submitted by Senior Counsel for Jim, that as the only remedy available is a sale, this does not involve any complexity. Even if there was no other remedy - which given the nature, extent and intent of the legislation I very much doubt - an order for sale is far from a simple matter in the circumstances.
42 In addition to the complexity referred to, the precise scope of the legislation and in particular the relief available is, as the debate before me indicated, not without complexity. There is no reason why complex matters of statutory interpretation should not fall within the term 'complex'. Put another way, whether Sam and John are entitled to the relief they claim involves complex matters of statutory interpretation best dealt with by this Court. Although not necessary for the purpose of these reasons, I am firmly of the view that the legislation is broad enough to enable a buy out to occur. It is not necessary or desirable to rehearse the various arguments. Ultimately, this matter of construction and interpretation will need to be determined, whether in VCAT or this Court. It is complex and best determined by this Court.
43 I will hear from the parties as to the appropriate form of relief and costs.
F. Vitale & Sons Pty Ltd (ACN 005 212 162) in its own capacity and as trustee for the F. Vitale & Sons Pty Ltd Superannuation Fund 1982 and as trustee for the Francesco Vitale Family Trust
F. Vitale & Sons Commercial Pty Ltd (ACN 114 591 276) as trustee for the Vitale Commercial Trust
Vitale Holdings (Vic) Pty Ltd (ACN 007 074 937) as trustee for the Vitale Holdings Trust
Vintage Dell Pty Ltd (ACN 131 975 301) as trustee for the Vintage Dell Trust
Elativ Pty Ltd (ACN 006 002 606) as trustee for the Vitale Property Trust
F. Vitale & Sons Pty Ltd (ACN 005 212 162) in its own capacity and as trustee for the F. Vitale & Sons Pty Ltd Superannuation Fund 1982 and as trustee for the Francesco Vitale Family Trust
F. Vitale & Sons Commercial Pty Ltd (ACN 114 591 276) as trustee for the Vitale Commercial Trust
Vitale Holdings (Vic) Pty Ltd (ACN 007 074 937) as trustee for the Vitale Holdings Trust
Vintage Dell Pty Ltd (ACN 131 975 301) as trustee for the Vintage Dell Trust
Elativ Pty Ltd (ACN 006 002 606) as trustee for the Vitale Property Trust
[1] Interlocutory process in S ECI 2017 00140 dated 30 January 2018.
[2] Interlocutory process in S ECI 2017 00238 dated 5 December 2017.
[3] Interlocutory process in S ECI 2017 00238 dated 30 January 2018.
[5] Unless of course it is only the very primary relief sought that makes the matter complex so that if the relief is not available there would be no complexity.
[7] Explanatory Memorandum - cl 1 and div 4.
[9] Subsection (2) commences 'without limiting VCAT's [the Court's] powers ...'.
[10] Affidavit Salvatore Vitale 23 February 2018, paragraph 13; Affidavit Ian Nathaniel 5 December 2017 paragraph 12.3.
[11] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.3.
[12] Affidavit Salvatore Vitale 23 February 2018, paragraph 9; Affidavit Ian Nathaniel 5 December 2017, paragraph 12.2.
[13] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.1, 12.2.
[14] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.4.
[15] Affidavit of Ian Nathaniel 5 December 2017, paragraph 16.1.
[16] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.7.
[17] Affidavit of Giacomo Vitale dated 15 February 2018, paragraph 20; Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.5.
[18] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.6.
[19] Affidavit of Ian Nathaniel 5 December 2017, paragraph 16.3 to 16.5.
[20] Affidavit of Salvatore Vitale 23 February 2018, paragraph 12.
[21] Affidavit of Salvatore Vitale 23 February 2018, paragraph 14.
[22] Affidavit of Ian Nathaniel 5 December 2017, paragraph 12.8, 12.9, exhibit IAN-7.
[23] Affidavit of Ian Nathaniel 5 December 2017 at exhibit IAN-8.
[24] Affidavit Salvatore Vitale 23 February 2018, paragraph 5.1.
Plaintiffs
F VITALE & SONS PTY LTD IN ITS OWN CAPACITY AS TRUSTEE FOR THE F VITALE & SONS PTY LTD SUPERANNUATION FUND 1982 AND AS TRUSTEE FOR THE FRANCESCO VITALE FAMILY TRUST