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Jawhite Pty Ltd v Trabme Pty Ltd

 

[2019] QCA 7

SUPREME COURT OF QUEENSLAND

CITATION:

Jawhite Pty Ltd & Anor v Trabme Pty Ltd & Ors [2019] QCA 7

PARTIES:

JAWHITE PTY LTD
ACN 106 661 287
(first appellant)
TRENT ANDREW RYAN
(second appellant)
v
TRABME PTY LTD
ACN 154 609 159
(first respondent)
BOEDRY PTY LTD
ACN 154 609 882
(second respondent)
VESTWELL PTY LTD
ACN 106 478 808
(third respondent)
ADAM BOLAND
(fourth respondent)
MARK WILLIAM EDWARDS
(fifth respondent)

FILE NO/S:

Appeal No 9896 of 2018

SC No 2310 of 2014

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2018] QSC 174 (Boddice J)

DELIVERED ON:

1 February 2019

DELIVERED AT:

Brisbane

HEARING DATE:

26 November 2018

JUDGES:

Sofronoff P and Morrison and McMurdo JJA

ORDERS:

  1. Appeal allowed.
  2. The court will hear the parties as to the appropriate orders, and costs.

CATCHWORDS:

COURTS AND JUDGES – CONTEMPT – PUNISHMENT AND ENFORCING ORDERS OF COURT – ORDERS FOR PAYMENT OF MONEY – where the learned primary judge found the second appellant director misappropriated funds from the second respondent company – where the second appellant ordered to repay the second respondent the misappropriated funds, including interest, by a specified date and time – where the second appellant failed to repay the misappropriated funds by the specified date and time – whether failure to pay money in accordance with the order amounted to contempt of court

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where the appellants, and the fourth and fifth respondents were parties to a contract that required a loan money to the company upon demand – where the primary judge found demand was properly given – where the appellants and the fourth and fifth respondents were contractually obliged to provide the loan demanded – where the fourth and fifth respondents provided loan – where the primary judge ordered the appellants to pay the second respondent a pro rata sum – where the appellants failure to provide the loan did not cause the company any loss – whether a contract to lend money can be specifically enforced – whether the court can order damages for breach of a contract to lend money

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where the appellants and the fourth and fifth respondents were parties to a contract that provided an obligation to give security to the third party lenders for the benefit of the company – where the appellants failed to perform their contractual obligation to provide security to the third party lender – where no demand was made on the appellants by third party lender – where the fourth and fifth respondents, as parties to the contract, seek to compel the appellants to perform the contractual obligation to provide security – where no loss was suffered as a result of the breach – whether the contractual obligation to provide security can be specifically enforced – whether damages can be awarded for breach

APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – POWERS OF COURT – COSTS – where the primary judge ordered the appellants to pay the respondents’ costs of the originating application – where the appellants caused the trial to be lengthy and complex – where the appellants were granted the winding up order sought – where the appellants’ successful order was not given weight in the order for costs – whether the order for costs of the originating application should be amended

Supreme Court Act 1991 (Qld), sch 2

Uniform Civil Procedure Rules 1999 (Qld), ch 19-20

Bakir v Doueihi [2001] QSC 414, cited

COUNSEL:

P Tucker, with N Shaw, for the appellants

A Myers (sol) for the first and second respondents

A Boland (director) for the third respondent and appeared on his own behalf

The fifth respondent appeared on his own behalf

SOLICITORS:

McMahon Clarke for the appellants

Results Legal for the first and second respondents

A Boland (director) for the third respondent and appeared on his own behalf

The fifth respondent appeared on his own behalf

  1. [1]
    SOFRONOFF P:  The second appellant (‘Mr Ryan’) is the controller of the first appellant (‘Jawhite’).  He is a real estate agent.  The fourth respondent (‘Mr Boland’) and fifth respondent (‘Mr Edwards’) are also real estate agents.  In 2011 each of them was a franchisee of the Elders’ Real Estate brand.  Mr Ryan’s office was at Redcliffe and he ran his business through the medium of Jawhite.  Mr Boland’s and Edward’s offices were at Redcliffe and Acacia Ridge.  They operated by means of the third respondent (‘Vestwell’).  Mr Ryan, Mr Boland and Mr Edwards decided to merge their businesses.  To that end, they incorporated the second respondent (‘Boedry’) and first respondent (‘Trabme’) and established a unit trust.  Jawhite took 34 per cent of the shareholding in each company and Vestwell took the remaining 66 per cent shareholding.  Jawhite and Vestwell took units in the trust in the same proportions.  The parties caused a shareholders’ agreement, a unit holders’ agreement, and a trust deed to be prepared.  Not all of these documents were actually signed but the trial and the appeal have been conducted upon the basis that the documents bound the parties.
  2. [2]
    The main assets of the business were the rent rolls that had previously been managed by the parties separately.  They contributed these rolls to the business and merged them.  The rolls had been valued for the purposes of the merger upon the footing that the tenancies listed in the rolls were the subject of valid management contracts in favour of Jawhite and Vestwell respectively.
  3. [3]
    The parties agreed to use Westpac as the banker for the business.  Existing loans of $600,000 to Jawhite and $1.2 million to Vestwell were refinanced by Westpac.  The parties each furnished security for those loans and, otherwise, Westpac had a charge over the rent roll.
  4. [4]
    The new business began operations on 2 January 2012.
  5. [5]
    According to the findings of the learned trial judge, Boddice J, the relationship between the parties began to deteriorate in late 2012.  Matters became so bad that two senior managers of Elders, Messrs Dawson and Whipps, called a meeting in March 2013 at which they extracted an agreement from Messrs Boland, Edwards and Ryan that they would appoint somebody to be the “one decision maker” for the business.  In April 2013 Mr Boland was appointed to this role and styled “Chief Executive Officer”.  Mr Ryan became the Chief Financial Officer.  Mr Edwards continued in a sales role.
  6. [6]
    As Boddice J found, Mr Ryan was incompetent in his position and, as a result, Mr Boland and Mr Edwards resolved to remove him from it.  They also resolved to appoint him to a position as a salesman at a rate of pay that was nominally smaller than he had been receiving as Chief Financial Officer but with the prospect of earning commissions on sales.  Mr Ryan rejected this change because he perceived it as a demotion and also a rejection of the agreement that they should each be involved in the management of the business.  However, he was prepared to sell his interest and get out.
  7. [7]
    Mr Boland and Mr Edwards introduced a prospective purchaser to Mr Ryan.  During the course of this possible purchaser’s investigations into the business, it emerged that Mr Ryan had misrepresented the quality of the rent roll that he contributed to the merged business.  Mr Boland and Mr Edwards were concerned that the rent roll was worth significantly less than the sum at which it had been valued for the purposes of the merger.  Boddice J found that Mr Ryan had given deliberately misleading information to the valuer but also found that the information did not affect the value of the asset.
  8. [8]
    During this period Mr Boland and Mr Edwards also found that Mr Ryan had been involved as an agent in the sale of a property but had not disclosed to them that he had earned a commission in the sum of about $8,000 and that he had instead diverted that commission into his own pocket.  They also found that a credit problem affecting the business that Mr Ryan said he had been managing was not being managed and that this failure had been detrimental to the creditworthiness of the business.
  9. [9]
    Angered and distressed by these discoveries, and disappointed by the quality of Mr Ryan’s performance otherwise, Mr Boland and Mr Edwards took further steps, as they saw it, to protect the business.
  10. [10]
    In early August 2013 they sent a letter to Mr Ryan purporting to suspend his employment.  Boddice J found that the matters relied upon by them to justify the suspension were substantiated by the evidence and would have justified termination of employment.  In response to his purported suspension, Mr Ryan resigned as director.
  11. [11]
    The prospective purchaser of Mr Ryan’s interest signed a contract of purchase but Mr Ryan did not sign it and no sale resulted.  The reasons for the failure of the proposed sale were controversial at the trial but it is not necessary now to canvass them or the findings about them.
  12. [12]
    The position was that, by this stage, Mr Ryan on one side and Mr Boland and Mr Edwards on the other side had totally lost faith in each other and were unable to cooperate in running the business.
  13. [13]
    Boddice J found that Mr Ryan’s removal as CFO had been justified by his failure to perform his duties competently.  He found that the offer to him of employment as a salesman had been made in good faith and for the benefit of the business.  Indeed, that is the role that Mr Edwards had always undertaken.  His Honour found that Mr Ryan had misappropriated money from the business.
  14. [14]
    For a period after Mr Ryan’s removal as CFO he continued to be granted access to the financial records of the business.  That access was terminated after he resigned as a director upon the basis, it seems, that he was no longer entitled to any access because he was not a director.
  15. [15]
    It was in those circumstances that the time came for the loans from Westpac to be refinanced.  The refinancing was to be for a further year.  Mr Ryan refused to give Westpac security although the $600,000 loan to Jawhite remained outstanding and was part of the total amount that Boedry owed to Westpac.  Messrs Boland and Edwards gave Westpac security and, of course, a charge over the rent roll of the business had previously been given as security and that remained.
  16. [16]
    Notwithstanding Mr Ryan’s exclusion from a management position and his resignation as director of the companies, Messrs Boland and Edwards caused Boedry to send Mr Ryan a notice pursuant to the unit holders’ agreement requiring him to lend the company $102,000 by way of “capital contribution”.  The agreement made provision for such a call and Boddice J found that the demand had been made lawfully.
  17. [17]
    For his part, Mr Ryan caused Jawhite to issue an originating application claiming relief for oppression under s 233 of the Corporations Act 2001 and other relief.  The details of the relief claimed will be considered in due course.  Messrs Boland and Edwards counterclaimed for recovery of the $600,000 loan, for recovery of moneys said to have been misappropriated and for damages or “equitable compensation” in respect of losses caused by alleged breaches of contract and breaches of duty by Mr Ryan.
  18. [18]
    The Ryan interests were legally represented at the trial.  Messrs Boland and Edwards represented themselves and Vestwell.
  19. [19]
    The trial began on 20 March 2017 and was adjourned part heard on 30 March 2017.  In July 2017 Boddice J appointed a receiver to the business on the respondents’ application.  The hearing resumed on 29 January 2018 and continued until 9 February 2018.  Closing submissions were heard some time later and reasons for judgment were published on 2 August 2018 but no orders were made at that time.
  20. [20]
    Boddice J found that Mr Ryan had lied in his evidence.  His Honour rejected Mr Ryan’s case that he had been oppressed.  He dismissed Mr Ryan’s claim that Mr Boland and Mr Edwards had misappropriated any money.  He found that Mr Ryan himself had misappropriated company money.  He also found that Mr Ryan had breached his obligation to provide security to Westpac and also his obligation to furnish $102,000 in response to the notice requiring a capital contribution.
  21. [21]
    Upon publishing his reasons Boddice J invited the parties to make submissions about appropriate orders and about costs.
  22. [22]
    Mr Ryan and Jawhite submitted that the appropriate orders were:
    1. Judgment in favour of Boedry for the sum that Boddice J found had been misappropriated.
    2. An order that Boedry and Trabme be wound up under s 461(1)(k)[1] of the Corporations Act 2001.
    3. Certain costs orders by which Jawhite and Mr Ryan would pay the costs of certain of the respondents incurred in defending the originating application and other orders on the counterclaim.
  23. [23]
    Mr Boland, Mr Edwards and Vestwell submitted that orders of various kinds should be made by which the appellants would forfeit their interests in the companies and the trust for no consideration and be ordered to pay various sums by way of compensation.  They opposed the making of a winding up order.
  24. [24]
    Boddice J made the following orders:
    1. The third respondent pay to the second Respondent $33,224.74, with interest at the rate prescribed by section 58 of the Civil Proceedings Act 2011, from 1 September, 2013 until the date of this order, by 4.00 pm on 19 September 2018.
    2. The applicant pay to the second respondent, the sum of $102,000 as capital contribution by 4:00pm on 19 September 2018.
    3. By 4:00pm on 19 September 2018, the applicant and the third respondent are to provide to Westpac Banking Corporation, security for the facilities provided by Westpac Banking Corporation to the first and second respondents, in accordance with their contractual obligations under the shareholding agreement entered into between the parties.
    4. The applicant and third respondent pay the first, second, fourth, fifth and sixth respondents’ costs of the originating application, to be assessed on the standard basis.
    5. The applicant and third respondent pay 50% of the first, second, fourth, fifth and sixth respondents’ costs of the counter-claim to be assessed on the standard basis.
    6. There be no order as to costs of the application filed 22 May 2015.
    7. The appointment of liquidators to the first and second respondents is adjourned to 2:30pm on 1 November 2018.
  25. [25]
    In his reasons for making those orders, Boddice J said that the only reasonable and rational course was for the merged businesses to be wound up.  As to the orders for payment of money by Mr Ryan, his Honour said:

“… the company will be placed into liquidation in due course.  I am trying, however, to put it in the best financial position possible, accepting that there is a considerable unfairness to the respondents in a situation where if a liquidation order was made today, essentially, the applicant and the third [respondent] would simply become debtors in the liquidation.”

  1. [26]
    For these reasons his Honour made the first three of the orders set out above.
  2. [27]
    Mr Ryan’s and Jawhite’s substantive challenges in this appeal are to those orders.  Specifically, they contend that:
    1. The order that Mr Ryan pay Boedry $33,224.74 should not have been made on terms that required that payment be made by 4 pm on 19 September 2018.
    2. The orders that Jawhite pay Boedry $102,000 4 pm on 19 September 2018 should not have been made at all.
    3. The order that Jawhite and Mr Ryan provide security to Westpac for the loans that had been made to Trabme and Boedry should not have been made.

The order to pay $33,224.74

  1. [28]
    Boddice J found that Mr Ryan had misappropriated $33,224.74 of Boedry’s money.  That finding is not challenged.  However, the appellants contend that the requirement that the judgment sum be paid “by 4pm on 19 September 2018” should not have been made.
  2. [29]
    In Bakir v Doueihi,[2] a case cited by Mr Tucker who appeared for the appellants, a judge had made an order that was materially identical to the order in this case.  After the respondent failed to pay, the applicant applied to have the respondent committed for contempt of that order.  Atkinson J had to determine whether a failure by a respondent to make payment in accordance with the order amounted to a contempt of court.
  3. [30]
    Her Honour pointed out that such an order was, in its terms, a “money order” as defined in Schedule 2 of the Supreme Court Act 1991, being “an order of the court … for the payment of an amount, including an amount for damages, whether or not the amount is or includes an amount for interest or costs”.  Chapter 19 of the Uniform Civil Procedure Rules makes express provision for enforcement of such orders and enforcement does not involve proceedings for contempt.  Contempt proceedings are the subject of Chapter 20, a part of the rules that applies to non-money orders, that is to say, orders that require “a person to perform an act … within a time specified in the order”.
  4. [31]
    It follows that the requirement that payment be made by a particular time could not be enforced and was otiose.  That is not to say that occasions might not arise in which an order requiring a person to pay a sum of money might not be made.  Indeed, in cases of specific performance a purchaser of land might be ordered to pay money.  But this is not such a case.  This is simply a case in which a claimant was entitled to judgment for a sum of money.
  5. [32]
    The order should be set aside and, instead of that order, the following order should be made:

“The third respondent pay to the second respondent $33,224.74 with interest at the rate prescribed by section 58 of the Civil Proceedings Act 2011 from 1 September 2013 until 4 September 2018.”

The order to pay $102,000

  1. [33]
    Clause 8 of the Unit Holders’ Agreement provided, relevantly, as follows:

“8. CAPITAL REQUIREMENTS

(For the purposes of this Clause 8, any reference to a Unitholder includes a reference to such Unitholders’ corresponding Covenantors and will bind such Covenantors pro rata to the number of units held by the corresponding Unitholder in the Trust.)

8.1 Loans by Unitholders

8.1.1 The Unitholders must lend or procure loans to be made to the Trust of sufficient funds by way of working capital in order to enable the Trust to properly carry on the Business and unless the Unitholders unanimously agree otherwise, the Unitholders must lend or procure such aforesaid loans to be contributed in the same proportions as the number of units held by them in the Trust bear in relation to the total number of issued Units.

8.1.3 Any request for financial contribution will be made by notice which will specify:

8.1.3.1 the total amount of financial contribution required;

8.1.3.2 the reason for which the financial contribution is required;

8.1.3.3 the rate of interest (if any) payable in respect of the financial contribution;

8.1.3.4 in what events and upon what notice the financial contribution is to be repaid by the Trust;

8.1.3.5 the date by which the financial contribution is to be paid to the Trust.  Each of the Unitholders agree to supply to the Trust the amount of the financial contribution specified in any such notice within the time and upon the terms specified in such notice;

8.1.3.6 in the event that any Unitholder will make or procure a loan to be made to the Trust which in proportion to the number of units held by such Unitholder in the Trust exceeds the loan or loans made or procured to be made to the Trust by the other Unitholders then the amount of such excess will be paid in full before any other repayment of loans to the other Unitholders.  Each Unitholder hereby charges its units in the Trust in favour of the lender with payment of the said excess;

8.1.3.7 all loans made or procured by the Unitholders for the Trust will carry interest at such rate and payable at such intervals as may be agreed upon and in default of agreement at the Default Rate.”

  1. [34]
    Mr Ryan was a “Covenantor” in relation to the unit holder Jawhite and was, therefore, liable to be bound to perform the obligations in clause 8.  On 4 December 2014 solicitors acting for Boedry, as trustee of the unit trust, made demand upon Jawhite and Mr Ryan for payment of $102,000 pursuant to clause 8.  The money was not paid.  Mr Boland and Mr Edwards claimed “Damages and equitable compensation for … the failure to contribute working capital…”  Boddice J found that the notice demanding that sum had been properly given and that it contractually obliged Jawhite and Mr Ryan to pay the money.  That finding is not challenged.  Boddice J did not find that the failure to pay the money had caused the company any loss.  Rather, his Honour found that Mr Boland and Mr Edwards had made capital contributions and that, in those circumstances, Jawhite and Mr Ryan ought to provide a pro rata contribution in accordance with their obligation under clause 8.  His Honour made the following order:

“The applicant pay to the second respondent the sum of $102,000 as capital contribution by 4pm on 19 September 2018”

  1. [35]
    The obligation imposed by clause 8.1.1 is an obligation to “lend or procure loans to be made to the Trust”.  The character of the payment as a loan is reinforced by the parts of clause 8.1.3 that require a notice of demand for such a payment to state, inter alia, the applicable rate of interest and the events upon which the money was to be repaid.  Accordingly, the notice served in this case specified those matters.
  2. [36]
    A contract to lend money will not be specifically enforced.[3]  That is because such an order would create a position of inequality.[4]  The borrower gets the money but the lender does not have the benefit of a court order to secure the payment of interest or the repayment of the principal but must simply take the risk that the interest and principal might not be repaid.  The remedy for a breach of a contract to lend money is damages.  No loss was proved to have been caused by the breach and, consequently, no damages could be awarded other than nominal damages.
  3. [37]
    The order requiring Jawhite to pay $102,000 was wrongly made and should be set aside.

The order to give security to Westpac

  1. [38]
    The respondents had also claimed damages for Mr Ryan’s and Jawhite’s breach of their obligation to furnish security to Westpac.  Boddice J found that the breach was made out but found that no loss had been suffered by that breach.  His Honour held that, nevertheless, Mr Ryan and Jawhite “ought to be required to provide the requisite security in accordance with their obligations”.  His Honour made the following order:

“By 4pm on 19 September 2018 the applicant and the third respondent are to provide to Westpac Banking Corporation, security for the facilities provided by Westpac Banking Corporation to the first and second respondents in accordance with their contractual obligations under the shareholding agreement entered into between the parties.”

  1. [39]
    Clause 8.1.2 of the Unit Holders’ Agreement obliges the parties to “provide … guarantees and collateral security to the Bank or other financiers of the Trust”.  Clause 8.3.1.2 obliges the parties “to make do and execute … all such acts, deeds, documents, matters and things, (including, but without limiting the generality thereof, guarantees and indemnities) as will be reasonably required by the financier in relation to any such loan or financial accommodation to be made or granted to the Trust”.  The clause goes on to provide that such liability is to be proportionate to the parties’ interests.
  2. [40]
    An agreement to give security may be specifically enforceable if damages would not be an adequate remedy.[5]  However, the cases in which such an order has been made are far different from the present case.  They are cases in which a lender has already made a loan and the borrower has promised to give a security over identified property.  In such cases, the agreement itself constitutes an equitable charge or mortgage over particular property and the enforcement of the promise to give security involves no more than a perfection into a legal security of an existing equitable security.[6]
  3. [41]
    In this case, the lender made no demand on Mr Ryan or Jawhite.  Rather, it was their quasi-partners who wanted to compel Mr Ryan and Jawhite to perform their contractual obligation to give security.  The breach of that obligation undoubtedly gave rise to rights in Mr Boland and Mr Edwards.  Some of these were invoked by the respondents, for example by service of notices of default under one of the contracts.  The breach may have caused loss and, if it did, there was a right to claim damages and, indeed, damages were claimed.  However, the innocent parties have not proved that they have suffered any loss by reason of the breach and so, there being no loss, no damages could be awarded.  A breach of the general obligation owed to the respondents to give some kind of security to Westpac cannot justify the Court in making an equally general order to give security for a loan.  There are other problems with the order, such as the fact that no such order was sought by the respondents.  In addition, there was probably a lack of utility in making such an order in the face of an impending winding up of the borrower.  However, it is not necessary to consider these additional obstacles.  The order should be set aside.

The order to wind up the companies

  1. [42]
    Boddice J adjourned the making of a winding up order in order to permit Mr Ryan and Jawhite an opportunity to perform the order to pay money and to give security.  Because two of those orders have been set aside and the third has been varied, there is no longer any reason to postpone the making of winding up orders and such orders should now be made.

The costs orders

  1. [43]
    The appellants appeal against the order for costs that his Honour made on their application.  Boddice J ordered Mr Ryan and Jawhite to pay the respondents’ costs of the originating application.  Mr Ryan was not an applicant in the application but the order against him was made on the footing that he was the real moving party.[7]  Mr Tucker submits that, even on the basis of the facts as found, and notwithstanding that the findings were largely adverse to the appellants, the applicant had established a case of oppression and it followed from that conclusion that a winding up order should have been made pursuant to s 233 on the ground of oppression rather than pursuant to s 641 on the just and equitable ground.
  2. [44]
    That submission cannot be accepted.  The relief that Jawhite sought was, in summary, as follows:
    1. That Vestwell buy Jawhite’s shares and units for an amount set by the Court taking into account that any detriment caused to the value of the business by the respondents’ oppressive conduct ought not be borne by Jawhite;
    2. Alternatively, that Vestwell transfer its shares and units to Jawhite for no consideration;
    3. Alternatively, that Jawhite purchase Vestwell’s shares and units for an amount set by the Court;
    4. Alternatively, that a receiver be appointed to the companies and the trust with a view to setting a value at which the shares and units should be offered for purchase by Vestwell;
    5. Failing such a purchase by Vestwell, the receiver be at liberty to sell Jawhite’s shares and units to a third party or to sell the business assets as a whole to a third party;
    6. In the alternative, a winding up on the ground of oppression;
    7. As a final alterative, a winding up on the just and equitable ground.
  3. [45]
    The trial was a long one partly because Mr Ryan wanted to be vindicated in his claim that Mr Boland and Mr Edwards had trampled on his rights and that they had, in addition, misappropriated sums of money.  Jawhite not only lost on all of those issues but the learned trial judge found that it was Mr Ryan, and not the respondents, who had been guilty of misconduct.
  4. [46]
    Because of these findings, Jawhite failed to obtain all but its final alternative remedy.
  5. [47]
    Such an order could have been obtained with much less trouble and expense and in much less time merely by proving the undeniable state of affairs between the parties.  On no sensible view could this failed venture have been allowed to continue without injustice to one or more of the parties and so, while the making of any order under s 233 was always going to be a matter of controversy, a winding up order was all but inevitable.  The length and complexity of the trial was, therefore, in large part due to Jawhite’s and Mr Ryan’s pursuit of a case that they prodigiously failed to make out.  In part it was also due to the respondent’s counterclaim but that was the subject of another costs order which has not been challenged.
  6. [48]
    Even if the appellants are right in their contention that, on the unchallenged findings, albeit adverse to the appellants, Jawhite was the victim of oppression as a shareholder, that conclusion would not on its own justify an order to wind up under s 233.  An order under that section involves an exercise of discretion and, having regard to the dishonest conduct of Mr Ryan in the affairs of the business, it was hardly a matter of course that Jawhite would be entitled to any remedy at all as an oppressed shareholder.  It is conceivable that, having regard to the findings that the judge made about Mr Ryan’s behaviour, a finding that Jawhite had been oppressed by the respondents would not have resulted in any of the relief that was claimed except that which was granted.
  7. [49]
    In short, the appellants’ submissions did not go the necessary distance to show that an exercise of discretion in their favour was almost inevitable and, for that reason, their argument about costs should be rejected.
  8. [50]
    Nevertheless, Jawhite did seek a winding up order under s 641 and, against the respondents’ opposition, it succeeded in obtaining such an order.  That success was not insignificant but it was given no weight in the order for costs.  It should have been.
  9. [51]
    It follows that his Honour’s order, which gave no significance to the appellants’ limited success, should be set aside.  In its place, having regard to that success but also having regard also to the appellants’ failure to prove their substantive case, as well as to the unchallenged findings about the falsity of the case the appellants ran below, the appropriate order should be that the appellants pay 60 per cent of the respondents’ costs of the trial on a standard basis.

Conclusion

  1. [52]
    Orders 1, 2, 3, 4 and 7 should be set aside.  There should be an order for the winding up of the companies, the appointment of receivers to the trust in aid of that winding up and an order that the appellants should pay 60 per cent of the respondents’ costs of the trial on a standard basis.  The condition as to time for payment in the order requiring payment of $33,224.74 should be removed.
  2. [53]
    There is no reason why the costs of this appeal should not follow the event and so the respondents should be ordered to pay the appellants’ costs of the appeal.
  3. [54]
    The respondents’ loss in this appeal was due to legal arguments about the correctness of the orders made below.  Having regard to the fact that the respondents were not legally represented at trial or on this appeal, they cannot be held responsible for the orders that were made and that have been set aside.  Nor should they be penalised for their defence of those orders in this appeal, which was a natural reaction by persons with no legal assistance.  In these circumstances, and in the circumstances of the factual findings made at trial, the respondents should have the benefit of an indemnity certificate for their liability for the costs of the appeal.
  4. [55]
    MORRISON JA:  I have read the reasons of Sofronoff P and agree with those reasons and the orders his Honour proposes.
  5. [56]
    McMURDO JA:  I agree with Sofronoff P.

Footnotes

[1]  The “just and equitable” ground.

[2]  [2001] QSC 414.

[3] Western Wagon and Property Co v West [1892] 1 Ch 271 at 275 per Chitty J citing Larios v Bonany Gurety (1873) L. R. 5 P. C. 346.

[4] Loan Investment Corp of Australia v Bonner [1970] NZLR 724 (PC).

[5] Swiss Bank Corp. v Lloyds Bank Ltd [1982] AC 584 at 595 per Buckley LJ.

[6]  see the discussion of the facts of Swiss Bank v Lloyds Bank, supra, in the Court of Appeal at [1980] 3 WLR 457 esp. at 496-497.

[7] Knight v FP Special Assets Ltd (1992) 174 CLR 178.

Close

Editorial Notes

  • Published Case Name:

    Jawhite Pty Ltd & Anor v Trabme Pty Ltd & Ors

  • Shortened Case Name:

    Jawhite Pty Ltd v Trabme Pty Ltd

  • MNC:

    [2019] QCA 7

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, Morrison JA, McMurdo JA

  • Date:

    01 Feb 2019

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status