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Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor (No 2) QSC 234
SUPREME COURT OF QUEENSLAND
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor (No 2)  QSC 234
MISHPOCHA PTY LTD
ACN 121 695 163
TYREPOWER MARKETING (QLD) LIMITED
ACN 010 118 153
TPQ INVESTMENTS PTY LTD
ACN 132 133 343
383 of 2019
Supreme Court at Cairns
13 September 2021
1 September 2021, further submissions in writing received 2 September 2021 and 8 September 2021
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – GENERAL MATTERS – DISCLOSURE – where the applicant applied pursuant to r 223(1) or, in the alternative, r 223(3) Uniform Civil Procedure Rules 1999 (Qld) for the disclosure of documents held by the respondent companies – where the application was advanced on the basis the duty of disclosure applies to the documents and resisted on the basis it does not – where there is a difference between r 223(1) and r 223(3) Uniform Civil Procedure Rules 1999 (Qld) – whether the documents are of direct relevance to an allegation in issue as per r 211 Uniform Civil Procedure Rules 1999 (Qld)
Australian Consumer Law (Cth), s 236
Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth), cl 5(1), cl 18
Corporations Act 2001 (Cth), s 140, s 169, s 233(1)(a), s 461(1)
Uniform Civil Procedure Rules 1999 (Qld), r 211, r 222, r 223
M A Jonsson QC for the applicant
M Steele for the respondents
O'Connor Law for the applicant
Calvados and Woolf Lawyers for the respondents
- The plaintiff (“Mishpocha”) makes an application for orders pursuant to r 223(1) or, in the alternative, r 223(3) Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) for the disclosure of some documents held by the two defendant companies (“Tyrepower Marketing” and “TPQ Investments” respectively).
- Those documents are:
- 1.the register of members of each of the first and second defendants;
- 2.the Memorandum and Articles of Association of the second defendant; and
- 3.a licence agreement between Tyrepower Marketing and Tyrepower Limited.
Relief in the alternative superfluous
- In the circumstances of this application it was unnecessary for the application to seek an order pursuant to r 223(1) in the alternative to an order pursuant to r 223(3). Those two rules provide:
“223 Court orders relating to disclosure
- (1)The court may order a party to a proceeding to disclose to another party a document or class of documents by—
- (a)delivering to the other party in accordance with this part a copy of the document, or of each document in the class; or
- (b)producing for the inspection of the other party in accordance with this part the document, or each document in the class.
- (3)The court may order that delivery, production or inspection of a document or class of documents for disclosure—
- (a)be provided; or
- (b)not be provided; or
- (c)be deferred.
- Both of those rules provide a discretionary source of power however r 223(3) merely contemplates an order going to the mechanism or the delay or waiver of the mechanism by which a required disclosure should occur. The subsection’s use of the words “for disclosure” means its application is only triggered where the duty to disclose applies to the document or class of documents in question. The subsection does not provide a basis to order the provision of a document which is not caught by the defendants’ duty of disclosure.
- Counsel for Mishpocha highlights that r 223(4) conditions the power conferred by r 223(1), whereas rule 223(3) has no such conditions applying to it. That is not to the point in that the conditions in r 223(4) confer a reach beyond the conventionally required disclosure within the reach of r 223(3).
- Rule 223(4) relevantly provides:
“(4) An order mentioned in subrule (1) … may be made only if—
- (a)there are special circumstances and the interests of justice require it; or
- (b)it appears there is an objective likelihood—
- (i)the duty to disclose has not been complied with; or
- (ii)a specified document or class of documents exists or existed and has passed out of the possession or control of a party.”
- The terms of Rule 223(4) have the effect of permitting a court to order a party to disclose a document or class of documents even though the duty to disclose might not strictly apply to the document or class of documents in question – hence the prospect of an order for disclosure where there are special circumstances and the interests of justice require it or where a party does not have possession or control of a document.
- The considerations identified in r 223(4)(a) and (b)(ii) were not identified as relevant in argument before me. Mishpocha did not argue the documents’ production should be ordered for some reason other than the application of the orthodox obligation to disclose. In a similar vein, Tyrepower Marketing and TPQ Investments did not argue they did not have possession or control of the documents. The application was advanced on the basis the duty of disclosure applies to the documents and resisted on the basis it does not.
- The upshot is, in seeking the conclusion there is an objective likelihood the duty to disclose has not been complied with, the plaintiff seeks the conclusion the duty to disclose applies to the documents in question. To succeed in securing an order pursuant to r 223(3), the plaintiff would need to secure the same conclusion. It follows that if Mishpocha cannot succeed pursuant to r 223(1), it cannot succeed pursuant to r 223(3). It is accordingly unnecessary to give separate consideration to the application in the alternative pursuant to r 223(3).
The duty of disclosure
- As to the duty of disclosure, r 211 relevantly provides:
“211 Duty of disclosure
- (1)A party to a proceeding has a duty to disclose to each other party each document—
- (a)in the possession or under the control of the first party; and
- (b)directly relevant to an allegation in issue in the pleadings; …
- (3)An allegation remains in issue until it is admitted, withdrawn, struck out or otherwise disposed of.”
- As will be seen, the debate in the present application goes not merely to whether the documents in question are directly relevant to an allegation in the pleadings but also to whether the allegation is “in issue”.
The pleaded issues
- Mishpocha operated a retail tyre store in Mackay. It alleges that in a sub-licence and dealer agreement made by Tyrepower Marketing with it in September 2014, Tyrepower Marketing granted Mishpocha various rights to the marketing, supply and other support enjoyed by members of the so-called Tyrepower group. This allegedly included the right to operate as an authorised Tyrepower dealer from Mishpocha’s Mackay business, displaying the Tyrepower group insignia.
- Mishpocha pleads that under the terms of the sub-licensing and dealer agreement it was, inter alia, obliged to acquire and retain ownership of 6,000 shares in Tyrepower Marketing and in consequence of Mishpocha’s membership of Tyrepower Marketing Mishpocha was, by agreement or arrangement, allotted and accepted 26,007 shares in TPQ Investments subject to conditions. The defendants admit Mishpocha acquired the 6,000 shares in Tyrepower Marketing and 26,007 shares in TPQ Investments.
- Mishpocha’s amended particulars of its statement of claim allege the agreement regarding the shares is evidenced by or implied from facts including the allotment to Mishpocha, without payment, of 26,007 shares at a face value of $1.00 per share, noted in TPQ Investments’ register of shareholders, as well as various other specified share allotments to another 19 tyre businesses throughout Queensland and northern NSW, each at the same face value and proportionate to those businesses’ shareholding in Tyrepower Marketing.
- The conditions of the share allotment are pleaded by Mishpocha to include that Tyrepower Marketing’s profits would divert as capital to TPQ Investments and, for a member exiting, shares would be valued by dividing the net value of TPQ Investments by the number of shares then issued. Another pleaded condition required forfeiture without payment of Mishpocha’s shares in TPQ Investments in the event it ceased to be an active shareholder in or breached its agreement with Tyrepower Marketing.
- Mishpocha pleads it acquired a Cairns business from Track ‘N’ Tyre Pty Ltd and operated the business as a member of the Tyrepower group from 27 July 2016, Tyrepower Marketing having agreed to extend the operation and effect of its existing agreement with Mishpocha to apply to both its Mackay and Cairns businesses.
- Mishpocha pleads the sub-licence and dealer agreement was commenced on 1 January 2015 and expired on 31 December 2017. Mishpocha pleads that by clause 10 of the sub-licence and dealer agreement, it was agreed Tyrepower Marketing might grant a new term of the agreement. Mishpocha pleads the sub-licence and dealer agreement with Tyrepower Marketing was a franchise agreement within the meaning of the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth). If that be so, then clause 18 of that Code required that six months notice be given of whether Tyrepower Marketing intended to extend the agreement or enter into a new agreement. Mishpocha pleads that Tyrepower Marketing was obliged to notify it in writing by 30 June 2017 whether it intended to extend its agreements with Mishpocha. It did not do so and Mishpocha applied for renewal of the agreements for a further period of three years.
- The defendants deny the sub-licence and dealer agreement was a franchise agreement for reasons including that Tyrepower Marketing’s articles of association contemplated the Tyrepower group operated as a co-operative or mutual society and that the agreement did not include the requisites of the Code’s definition of franchise agreement contained in clauses 5(1)(b) or (d).
- Mishpocha pleads that in October 2017 Mishpocha’s Mr Roser complained to the Chief Executive Officer of Tyrepower Limited that its Chairman in Queensland again intended that members not be allowed to ask questions from the floor at the forthcoming Annual General Meeting. Mishpocha pleads Mr Roser also allegedly sent a circular email to members of Tyrepower Marketing prior to the Annual General Meeting, complaining about the same issue.
- Mishpocha pleads that on 22 December 2017 Tyrepower Marketing advised their request for renewal of the sub-licence and dealer agreement was declined and that it required Mishpocha to remove all Tyrepower identification from its business. Mishpocha pleads the latter demand was repeated and in due course two rival tyre businesses, one in Mackay and one in Cairns, gained Tyrepower Marketing’s authority to display Tyrepower insignia. The defendants plead that in any event the sub-licence and dealer agreement did not protect Mishpocha from such competition.
- Mishpocha pleads Tyrepower Marketing manifested a refusal to perform its agreement with Mishpocha and had thereby renounced it. The defendants plead Tyrepower Marketing was entitled to terminate because Mishpocha had conducted its business in contravention of certain clauses of the sub-licence and dealer agreement because it had encumbered its shares in Tyrepower Marketing, failed to pay monies overdue for payment to Tyrepower Marketing and had not conducted its business so that retailing of tyres was its primary source of income.
- Mishpocha pleads on 8 March 2018 Tyrepower sought payment to it by Mishpocha of $426,060.39, purportedly being the amount of $554,842.73 owed by Mishpocha on account less $128,782.34 constituted by a rebate owing plus $6,000 for buyback of Tyrepower Marketing shares and $22,886.16 for buyback of TPQ Investment shares. The latter amount was calculated on the basis that TPQ Investment’s “A” class shares were valued at 88 cents as at 1 March 2018. Mishpocha pleads it paid the amount requested but expressly did so reserving its rights and without admission or acknowledgement of the correctness of the calculation.
- Mishpocha pleads that on 23 April 2018 solicitors for Tyrepower Marketing informed Mishpocha they had advised Tyrepower Marketing to cancel Mishpocha’s shares in it and that Mishpocha’s shares were forfeited with effect from Mishpocha’s cessation of membership in Tyrepower Marketing.
- Mishpocha claims for alleged loss of revenue or alternatively diminution in the capital value of its business because of Tyrepower Marketing’s conduct and seeks recovery of that loss or damage pursuant to s 236 Australian Consumer Law. Mishpocha further alleges Tyrepower Marketing and TPQ Investments have conducted themselves in a manner which is “penal, oppressive, unfairly prejudicial, and unfairly discriminatory towards” Mishpocha and on those grounds seeks orders pursuant to s 233(1)(a) or s 461(1) Corporations Act 2001 (Cth) for the winding-up of the defendant companies or for a share buy-out of Mishpocha’s shares in the defendant companies.
- The defendants counterclaim seeks a declaration Mishpocha holds the shares of both companies in trust for Tyrepower Marketing and an order for their transfer.
Relevance of TPQ Investments’ memorandum and articles of association?
- Mishpocha submits that because TPQ Investments’ memorandum and articles of association constitute a contract, pursuant to s 140 Corporations Act, its contents are relevant to:
- (a)the terms or conditions upon which Mishpocha’s shareholding in TPQ Investments was allotted to and held by Mishpocha;
- (b)the existence and character of any continuing interest Mishpocha retains in its initially allotted shareholding or any constraint upon or qualification with respect to any such continuing interest; and
- (c)Mishpocha’s claim for statutory relief under ss 233 and 461 Corporations Act, for example the existence of any potential impediment upon assignability and thus realisability of any continuing shareholding would be material to that claim.
- The defendants contend none of this is directly relevant to an allegation in issue in the pleadings. They emphasise there is no dispute about the number of shares held by the plaintiff in each company and the only dispute is how the shares in TPQ Investments are to be valued. This is to overlook, however, that the pleadings show the parties are not agreed as to the terms or conditions upon which the relevant shareholding was allotted to the plaintiff.
- It will be recalled the plaintiff pleads in consequence of Mishpocha’s membership of Tyrepower Marketing, Mishpocha was, by agreement or arrangement, allotted and accepted 26,007 shares in TPQ Investments subject to conditions. That pleading, at  of the Amended Statement of Claim, listed an array of conditions regarding the valuation process and circumstances under which Mishpocha would have to forfeit the shares. The Further Amended Defence at  admitted Mishpocha’s acquisition of the shares but did not admit the conditions, asserting it remained uncertain of the truth or otherwise of those matters.
- It is true that the conditions are pleaded by Mishpocha to derive from an agreement or arrangement, so that the memorandum and articles of association may not be of determinative relevance. However determinative relevance is not required. Direct relevance to an allegation in issue is sufficient under r 211. The conditions upon which Mishpocha held the shares, could be required to forfeit the shares or could realise the shares, including how their value ought be determined, remain live issues in the pleadings. It is in the nature of a company’s memorandum and articles of association that TPQ Investments’ memorandum and articles of association likely contains clauses of direct relevance to at least some of those issues.
- It follows for those reasons there is an objective likelihood the duty to disclose has not been complied with in respect of TPQ Investments’ memorandum and articles of association. They should be disclosed.
- An additional reason why TPQ Investments’ memorandum and articles of association ought be disclosed is that, as is admitted, solicitors for Tyrepower Marketing advised Mishpocha in April 2018 that its shares in TPQ Investments register “have been forfeited with effect from” Mishpocha’s “cessation of membership in” Tyrepower Marketing. The content of the memorandum and articles of association is likely directly relevant to the issue of whether TPQ Investments had the legal power to so forfeit and whether it was penal, oppressive or unfair conduct for it to purport to so forfeit the shares.
Relevance of register of members of each defendant?
- Mishpocha submits, consistently with its particulars, that the afore-mentioned agreement or arrangement giving rise to Mishpocha’s shareholding in TPQ Investments may be proved by the conduct of the parties. It submits on that ground the Register of Members maintained by each company is directly relevant to the existence or otherwise of the pleaded agreement or arrangement. It is in effect contended the content of the register will provide evidence of the performance of the alleged agreement or arrangement.
- That the share allotments to Mishpocha may be recorded in each company’s register would provide evidence of the allotments, that is, of 6,000 shares in Tyrepower Marketing and 26,007 shares in TPQ Investments. However, the defendants highlight the allotments of those numbers of shares in each company to Mishpocha has been admitted. Again, they submit the only dispute is how the shares in TPQ Investments are to be valued and that, it was submitted, cannot be informed by the register of members. Again, it appears there are broader relevant live issues than that.
- If compliant with the requirements of s 169 Corporations Act, the two company’s registers of members will contain information going beyond the mere fact the admitted number of share allotments occurred. They will record information including when the allotments occurred, whether they were or are fully paid and the amount paid or unpaid. The Further Amended Defence at [6(d)] denies the allegation pleaded at  of the Amended Statement of Claim that Mishpocha has retained ownership of 6,000 shares in Tyrepower Marketing. Whether Mishpocha has retained its shares is therefore in issue.
- The aforementioned pleading of [6(d)] of the Further Amended Defence later seems to permit the possibility Mishpocha retained legal title to the shares in both Tyrepower Marketing and TPQ Investments, pleading at [6(d)(vii)] that, “to the extent” it has, it holds them on trust. That is scarcely an admission that it has, which allegation is in any event denied earlier in [6(d)] in respect of the Tyrepower Marketing shares. Of course, if Tyrepower Marketing’s register does record Mishpocha’s retention of the shares it will not be determinative, but it is directly relevant to the live issue of whether Mishpocha retained the shares.
- That is sufficient reason to require disclosure of Tyrepower Marketing’s register. An additional reason to do so is that the timing of the allotment of Mishpocha’s shares in Tyrepower Marketing, relative to the timing of the sub-licence and dealer agreement, is not the subject of common ground on the pleadings either. For instance, the Amended Statement of Claim pleads at  the shares were acquired in furtherance of the sub-licence and dealer agreement, whereas the Further Amended Defence pleads at [6(b) and (ca)] that the acquisition occurred earlier and arose by reason of an earlier agreement.
- As to TPQ Investments’ register, what it records as to Mishpocha’s ownership or otherwise of shares in it, is also directly relevant to whether Mishpocha retains its shares in Tyrepower Marketing. That is because, as earlier mentioned, solicitors for Tyrepower Marketing advised Mishpocha its shares in TPQ Investments register “have been forfeited with effect from” Mishpocha’s “cessation of membership in” Tyrepower Marketing.
- Further the TPQ Investments register will record the shares held by each member and thus the overall number of shares issued. The overall number of shares held in TPQ Investments is directly relevant to the valuation process which Mishpocha pleads was agreed to. That process, of obvious relevance to the potential relief now sought, was that the shares of an exiting member would be valued by dividing the net value of TPQ Investments by the number of shares then issued.
- For these reasons disclosure of TPQ Investments register should also be required.
- It will be apparent from the above reasons that while the holdings of other members in the register are relevant, their identifying personal details are not. However, it was not argued that there ought be any obscuring of parts of the registers in the event the application succeeded. As a matter of caution I will give the parties liberty to apply in the event some unheralded need to obscure information arises and cannot be resolved between the parties.
Relevance of the agreement between Tyrepower Marketing and Tyrepower Limited?
- Mishpocha pleads at  that its agreement or implied agreement with Tyrepower Marketing was a franchise agreement. That paragraph is denied at  of the Further Amended Defence, which gives a long list of reasons in support of the denial. Those reasons include that in order to constitute a franchise agreement, the agreement had to include each of the requisites of the definition of a franchise agreement at clauses 5(1)(a),(b),(c) and (d) Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) and the agreement did not include the requisites at (b) or (d). The absence of pleaded reference to requisite (c) is noteworthy.
- The requisite at clause 5(1)(c) is that a franchise agreement is an agreement:
“(c) under which the operation of the business will be substantially or materially associated with a trade mark, marketing or a commercial symbol:
- (i)owned, used, or licensed by the franchisor or an associate of the franchisor; or
- (ii)specified by the franchisor or associate of the franchisor;
- Mishpocha also places emphasis upon the defendants’ pleading at [2(a)(ii)(A)] of the Further Amended Defence that “the recitals of” the sub-licence and dealer agreement provided that:
“[Tyrepower] Marketing holds a licence from Tyrepower Limited to use the group insignia owned by Tyrepower, and to sublicence its use by shareholders of [Tyrepower] Marketing.”
- Mishpocha thought that may be a reference to a head licence agreement under which Tyrepower Marketing is licensed to use the Tyrepower trade mark. If that be so then the document, having been sought by Mishpocha would need to be produced for inspection and copying pursuant to r 222, on the basis it is a document of which “mention is made” in the pleadings. However, the defendants’ lawyer, in email correspondence with Mishpocha’s lawyer, has clarified that the reference is only to what is contained in the recitals of the sub-licence and dealer agreement. In other words the document of which mention is made in the pleadings is the sub-licence and dealer agreement, not the licence which is in turn mentioned within the recitals of that document. That characterisation faithfully reflects the language of the pleading. It should be accepted.
- Nonetheless, setting aside r 222 as a basis for disclosure, Mishpocha still contends the licence is disclosable as a document coming within the ordinary obligation to disclose per r 211 because it would be evidence of licensing of the kind referred to at s 5(1)(c)(i) quoted above and thus be directly relevant to the live issue of whether there was a franchise agreement.
- The defendants submit that is not to the point because they have admitted Mishpocha was granted a sub-licence to use the Tyrepower insignia. They submit that this, along with the absence of reference to s 5(1)(c) in their reasons for denial of the agreement being a franchise agreement, should be interpreted as meaning Mishpocha’s business would, as the words of s 5(1)(c) contemplate, be associated with a commercial symbol “owned, used or licensed” or “specified” by Tyrepower Marketing.
- Minds may differ as to whether those ingredients unambiguously supported that meaning. For instance, section 5(1)(c)(i)’s reference to “licensed” in referring to a commercial symbol “owned, used or licensed by the franchisor” is to a licence held by the franchisor, not a licence in turn granted by the franchisor. As much follows from the surrounding use of the words “owned” and “used”. This is language going to the circumstances under which the franchisor has control of the commercial symbol. That a sub-lease is admitted does not of itself mean Tyrepower Marketing held a license. That said, the existence of a head licence is not essential to satisfying 5(1)(c). It seems implicit in the pleadings that Tyrepower Marketing at the very least “used” or “specified” the commercial symbol, which would be enough to meet s 5(1)(c)(i) or (ii) respectively.
- In circumstances where the defendants have represented to the court through their counsel that the intended meaning of their pleadings is that the pre-requisite element of s 5(1)(c) was met by the agreement and where the pleadings reasonably support that meaning, it should be accepted the head licence is not directly relevant to a live issue. It should not be ordered to be disclosed.
- It follows from the above reasons that Mishpocha has enjoyed substantial success in its application. In the normal course costs would follow that event but I shall allow the parties an opportunity to be heard as to costs.
- My orders are:
- 1.Within seven days of this order the first and second defendants will produce to the plaintiff by way of disclosure copies of:
- (a)the register of members of each defendant; and
- (b)the memorandum and articles of association of the second defendant.
- 2.Liberty to apply on the giving of two business days’ notice in writing.
- 3.The parties will be heard as to costs, if costs are not agreed in the meantime, at 10am 17 September 2021 (out of town parties having leave to appear by telephone or video link).
- Published Case Name:
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor (No 2)
- Shortened Case Name:
Mishpocha Pty Ltd v Tyrepower Marketing (Qld) Limited & Anor (No 2)
 QSC 234
13 Sep 2021