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  4. Myers v Petrie Dental Property Pty Ltd - [2022] QSC 230

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Myers v Petrie Dental Property Pty Ltd[2022] QSC 230

Myers v Petrie Dental Property Pty Ltd[2022] QSC 230

SUPREME COURT OF QUEENSLAND

CITATION:

Myers v Petrie Dental Property Pty Ltd & Anor [2022] QSC 230

PARTIES:

LINDSAY JAMES MYERS

(applicant)

v

PETRIE DENTAL PROPERTY PTY LTD

ACN 059 033 902

(first respondent)

PAUL HARVEY GOLLEDGE

(second respondent)

FILE NO/S:

BS No 4807 of 2022

DIVISION:

Trial Division

PROCEEDING:

Originating Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 November 2022

DELIVERED AT:

Brisbane

HEARING DATE:

7 October 2022

JUDGE:

Cooper J

ORDERS:

  1. The originating application filed 27 April 2022 is dismissed.
  2. It is declared that the lease between Paul H Golledge Pty Ltd and Petrie Dental Property Pty Ltd executed on 20 April 2011 in respect of the premises at 25 Dayboro Road, Petrie, properly described as Lot 41 on RP 30213 in the County of Stanley, Parish of Redcliffe, Title Reference 14369058 is valid.
  3. Petrie Dental Property Pty Ltd is to be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
  4. Anne Meagher and David Michael Stimpson are appointed joint and several liquidators of Petrie Dental Property Pty Ltd.
  5. Anne Meagher and David Michael Stimpson are appointed as receivers, without security, over all present and after acquired property, rights and undertakings (Trust Property) of the Petrie Dental Property Unit Trust (Trust).
  6. It is declared that Petrie Dental Property Pty Ltd has a right of exoneration from the Trust Property in respect of all costs, charges and expenses incurred by Petrie Dental Property Pty Ltd as trustee for the Trust (Trustee) in relation to the proper performance of its duties in respect of the Trust, which are provable in Petrie Dental Property Pty Ltd’s liquidation.
  7. Anne Meagher and David Michael Stimpson, as liquidators of Petrie Dental Property Pty Ltd, are justified, subject to paragraphs 11, 12, 13 and 14 below, in treating the proceeds of the Trust Property received in the liquidation of Petrie Dental Property Pty Ltd pursuant to the right of exoneration referred to in paragraph 6 above as being available for distribution to Trust creditors in accordance with the order of priorities provided for in Division 6 of Part 5.6 of the Corporations Act 2001 (Cth).
  8. Anne Meagher and David Michael Stimpson are conferred with the following powers in respect of the property of the Trust:
  1. (a)
    the powers recited in s 420 of the Corporations Act 2001 (Cth), as if the references in that section to “property of the corporation” was reference to property of the Trust;
  2. (b)
    the powers that a liquidator has in respect of property of a company by s 477 of the Corporations Act 2001 (Cth); and
  3. (c)
    the power to do all things necessary and convenient to:
  1. (i)
    distribute the net proceeds of the sale of the assets of the Trust (after payment of the costs, expenses and remuneration of Anne Meagher and David Michael Stimpson in their capacity as receivers and as liquidator of Petrie Dental Property Pty Ltd in accordance with order 7 above) to creditors of the Trust in accordance with order 6 above;
  2. (ii)
    distribute any surplus thereafter to the members of the Trust.
  1. The need for Anne Meagher and David Michael Stimpson to file security under r 268 of the Uniform Civil Procedure Rules 1999 (Qld) is dispensed with.
  2. Anne Meagher and David Michael Stimpson, in their capacity as receivers of the Trust and liquidators of Petrie Dental Property Pty Ltd, are directed to cause Petrie Dental Property Pty Ltd to wind up the Trust, pursuant to clause 17 of the Deed of Trust of the Trust dated 6 April 1993.
  3. Anne Meagher and David Michael Stimpson, in their capacity as receivers of the property of the Trust or in their capacity as liquidators of Petrie Dental Property Pty Ltd, may have recourse to the Trust Property for their costs, expenses and remuneration in so far as the property or proceeds therefrom relates to costs, expenses and remuneration at the remuneration calculated in accordance with the rates set out in the Consent of Liquidator filed 11 July 2022 and Consent of Receiver filed 5 October 2022, and otherwise as ordered by the Court.
  4. The work referred to in paragraph 11 above is to include work relating to:
  1. (a)
    the identification of Trust assets and liabilities;
  2. (b)
    the identification of Trust creditors;
  3. (c)
    the ascertaining of the state of the accounts between the beneficiaries and the trustee;
  4. (d)
    the recovering or attempting to recover Trust assets for the purposes of meeting the right of exoneration;
  5. (e)
    the realisation or the attempted realisation of the Trust assets for the purposes of meeting the right of exoneration;
  6. (f)
    the securing of Trust assets (or their value) to meet the right of exoneration and their application to the Trust creditors;
  7. (g)
    the distribution of funds which are the subject of the right of exoneration to those who are entitled to them; and
  8. (h)
    any matter in the administration of the Trust which is reasonably ancillary to the above to the extent to which it had been undertaken for the purposes of the identified tasks.
  1. The amounts which Anne Meagher and David Michael Stimpson are entitled from the Trust Property under paragraph 11 above are to be determined by the Court.
  2. Anne Meagher and David Michael Stimpson have a lien over the Trust Property of the amounts to be paid to them under paragraphs 11, 12 and 13 above.
  3. The applicant pay the respondents’ costs of and incidental to the consolidated proceeding to be assessed on the standard basis unless otherwise agreed.

CATCHWORDS:

CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS’ REMEDIES AND INTERNAL DISPUTES – PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER – STATUTORY DERIVATIVE ACTION – where the applicant and second respondent operated dental practices from a property commercially rented by the first respondent of who they were each a director – where no formal lease was initially entered into – where the applicant retired and sold his interest in the dental practice to a third party – where the two dentists in their capacity as directors of the first respondent executed two written leases with the third party tenant and the dentist who was continuing to operate his dental business from the property – where the third party later vacated the property leaving the original dentist as the only tenant who continued to pay according rent to the lease – where the applicant claims that unpaid rent due to the first respondent should be recovered – where leave is sought pursuant to s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of the first respondent – whether the proposed proceedings raise a serious question to be tried – whether the proposed proceedings are in the best interests of the first respondent – whether the proposed proceedings are in good faith – whether leave should be granted for derivative proceedings to be commenced

CORPORATIONS – WINDING UP – OTHER GROUNDS FOR WINDING UP – JUST AND EQUITABLE – OTHER CASES – where the relationship between the two directors of the first respondent is in deadlock – where the first respondent remains solvent – whether a winding up order is just and equitable – whether the first respondent should be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth), s 236, s 237, s 461(1)(k), s 467

Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498, cited

Coeur de Lion Investments Pty Ltd v Kelly [2014] 1 Qd R 296; [2013] QCA 160, cited

Jones v Matrix Partners Pty Ltd (2018) 260 FCR 310; [2018] FCAFC 40, cited

Mudgee Dolomite & Lime Pty Ltd v Murdoch [2020] NSWSC 1510, cited

Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749, considered

Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364, considered

Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193, cited

Re Wyndham Park Estate Pty Ltd [2019] VSC 92, cited

Regent v Millett (1976) 133 CLR 679, considered

Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313, cited

Wood v Links Golf Tasmania Pty Ltd (No 2) [2013] FCA 143, cited

COUNSEL:

M Thomson for the applicant

N J Derrington for the second respondent

SOLICITORS:

Robinson Locke Litigation Lawyers for the applicant

McCullough Robertson Lawyers for the respondent

  1. [1]
    These proceedings involve two related applications.
  1. [2]
    In matter number 4807 of 2022, the applicant (Dr Myers) has applied for leave pursuant to s 237 of the Corporations Act 2001 (Cth) (the Act) to bring proceedings on behalf of the first respondent (PDP) against the second respondent (Dr Golledge) and Paul H. Golledge Pty Ltd (PHG) (collectively the Golledge parties).
  2. [3]
    The Golledge parties then commenced a separate proceeding, matter number 7981 of 2022, in which they apply for an order to wind up PDP on the just and equitable ground pursuant to s 461(1)(k) of the Act and associated relief.
  3. [4]
    On 19 August 2022, an order was made by consent consolidating the two proceedings.
  4. [5]
    Dr Myers’ application for leave to bring proceedings on behalf of PDP raises three issues for determination:
    1. (a)
      whether the proposed proceeding raises a serious question to be tried;
    2. (b)
      whether it is in the best interests of PDP that the proposed proceeding be brought; and
    3. (c)
      whether Dr Myers is acting in good faith in seeking to bring the proceeding.
  5. [6]
    The Golledge parties’ application raises the issue whether the deterioration of the relationship between Dr Myers and Dr Golledge makes it just and equitable in all of the circumstances for PDP to be wound up.

Background

  1. [7]
    PDP was incorporated on 10 February 1993.
  2. [8]
    Dr Myers and Dr Golledge are directors of PDP.
  3. [9]
    At around the time that PDP was incorporated:
    1. (a)
      Dr Myers and Dr Golledge:
      1. through their associated companies, Lindsay J Myers Pty Ltd (LJM) and PHG respectively, operated a dental practice known as the Petrie Dental Centre (Petrie Dental);
      2. through the corporate trustees of their respective superannuation funds, had purchased a property at 25 Dayboro Road, Petrie (Property) near the premises from which Petrie Dental was then operating;
      3. intended to move Petrie Dental to a building which was to be constructed on the Property;
    2. (b)
      the Property was transferred to PDP as trustee of a unit trust, of which Dr Myers’ and Dr Golledge’s respective superannuation funds each held a 50% interest, and then leased to LJM and PHG at a commercial rate with profits to be distributed equally to the superannuation funds.
  4. [10]
    No formal lease was entered into between PDP and either of the corporate tenants at that time.
  5. [11]
    Following the construction of the proposed building and the transfer of the Property to PDP, Dr Myers and Dr Golledge operated Petrie Dental from the Property.  LJM and PHG each paid one half of the rent charged by PDP.
  6. [12]
    Dr Myers retired from practice on about 29 March 2011 and sold his interest in Petrie Dental to a third party, KH & LAJ Pty Ltd (KHLAJ).
  7. [13]
    In the context of that sale, on about 20 April 2011, PDP (by both of its directors, Dr Myers and Dr Golledge) executed two written leases:
    1. (a)
      one with KHLAJ, which granted:
      1. exclusive use of one of the two surgery rooms in the Property, referred to in the lease as Unit 1, being the room from which Dr Myers had previously practiced; and
      2. shared use of the common areas, referred to in the lease as Unit 3;
    2. (b)
      one with PHG, which granted:
      1. exclusive use of the other surgery room in the Property, referred to in the lease as Unit 2, being the room from which Dr Golledge had, and would continue, to practice; and
      2. shared use of the common areas referred to as Unit 3.
  8. [14]
    Each of these leases was for a term of five years commencing on 4 May 2011, with two options to renew for further terms of five years.  The rent payable under each lease represented 50% of the commercial rent previously charged by PDP to LJM and PHG.
  9. [15]
    In mid-2013 KHLAJ decided to leave Petrie Dental and, in that context, entered into a Deed of Release and Settlement with Lambowl Pty Ltd (Lambowl), the corporate trustee of Dr Golledge’s superannuation fund, by which Lambowl indemnified KHLAJ and assumed all of its obligations under its lease with PDP.
  10. [16]
    By about 15 November 2013, KHLAJ had vacated the Property. 
  11. [17]
    Lambowl paid the rent due under PDP’s lease to KHLAJ until about 3 September 2016, at which time it vacated Unit 1, removed all plant and equipment and ceased paying rent to PDP.
  12. [18]
    From that time, Dr Golledge continued to practice from Unit 2 in the Property and to use the common areas identified as Unit 3.  Unit 1 remained vacant. 
  13. [19]
    PHG paid rent to PDP in accordance with its lease: that is, 50% of the commercial rent for the Property.  Dr Myers’ asserts that from the time PHG became the sole occupant of the Property, it was liable to pay 100% of the rent.
  14. [20]
    The lease from PDP to PHG came to an end in May 2021.  PHG remained in occupation on a month to month tenancy until March 2022.  At that time, Dr Golledge moved his practice to a different location.

Leave to commence derivative proceedings

  1. [21]
    As a director of PDP, Dr Myers has standing to apply for leave to bring proceedings on behalf of the company.[1]
  2. [22]
    The court must grant the application if it is satisfied that the requirements set out in s 237(2) of the Act have been fulfilled.  Dr Myers bears the onus of satisfying the court that all those requirements have been met.[2]
  3. [23]
    I have identified the matters in contention in [5] above.  I turn now to consider each of those matters.

Serious question to be tried

  1. [24]
    In seeking to establish that there is a serious question to be tried, Dr Myers is not required to establish that it is more probable than not that the claims would succeed, but he must establish that the claims are sufficiently cogent to warrant the grant of leave.  Although the court will not normally entertain the merits of the action to any great degree, it is required to undertake a screening process and exclude cases with insufficient prospects of success.  The tender of legal advice, subject to the maintenance of privilege, may facilitate the court in reaching the conclusion that a proposed action is not merely hypothetical or unsupported.[3]
  2. [25]
    Dr Myers proposes to bring claims against both PHG and Dr Golledge.
  3. [26]
    A proposed claim and statement of claim for each of the proposed claims were exhibited to an affidavit sworn by Dr Myers.
  4. [27]
    No legal advice was included in the material Dr Myers read in support of his application.

The proposed claim against PHG

  1. [28]
    The proposed claim against PHG is, in substance, one for unpaid rent although the claim expresses the relief sought as “equitable compensation” for outstanding rent or “an account of profits” for outstanding rent.
  2. [29]
    The draft statement of claim pleads the following material facts:
    1. (a)
      in or about November 1993, PHG verbally agreed to rent the Property from PDP with LJM as tenants in common, with no written lease ever having been executed;
    2. (b)
      this created an equitable lease (thereafter referred to in the draft statement of claim as the Rental Agreement);
    3. (c)
      on 4 May 2011, KHLAJ replaced LJM as tenant of the Property and executed a written lease with PDP;
    4. (d)
      on an unspecified day, the Rental Agreement with PHG was “changed to mirror” the lease between KHLAJ and PDP;
    5. (e)
      on 15 November 2013, KHLAJ left the Property and transferred its rights under the lease to Lambowl, which then paid rent with PHG in equal shares until Lambowl left the Property on 4 September 2016;
    6. (f)
      from 4 September 2016, PHG:
      1. as the sole tenant of the Property, was liable for 100% of the rent owed to PDP;
      2. paid only half the rent owing to PDP.
  3. [30]
    The proposed claim takes no account of the written lease between PDP and PHG. 
  4. [31]
    Dr Myers did not address the written lease in his affidavit.  He simply deposed, in bald terms, that no lease was executed between PDP and PHG.  He provided no explanation for the fact that his signature appears on the written lease to PHG.
  5. [32]
    Dr Myers was cross-examined on his affidavit and was shown the original of the written lease to PHG.  He did not dispute that it bore his signature.  Despite that concession, Dr Myers maintained that he did not sign the document.  In re-examination Dr Myers said that it was his understanding that he signed three copies of the lease to KHLAJ, but that he did not sign a lease to PHG.
  6. [33]
    The circumstances in which the written leases with KHLAJ and PHG were prepared and signed were addressed in affidavits sworn by Dr Golledge and by Mr Kong, who provided accounting services to PDP, Dr Myers and Dr Golledge.
  7. [34]
    In summary:
    1. (a)
      On 18 April 2011 Dr Myers’ wife provided Mr Kong with a copy of the lease which Dr Myers had negotiated with KHLAJ.
    2. (b)
      The next day, 19 April 2011, Mr Kong met both Dr Myers and Dr Golledge for lunch at the Petrie Hotel to discuss the sale of Dr Myers’ interest in Petrie Dental to KHLAJ.
    3. (c)
      During the course of that lunch, Mr Kong:
      1. referred to the lease which had been prepared for KHLAJ and said that PHG would also need a lease from PDP, otherwise Dr Golledge’s superannuation fund would not be compliant for taxation purposes;
      2. asked if he could copy the KHLAJ lease, the terms of which were satisfactory to Dr Myers and his wife. 
    4. (d)
      Dr Myers agreed to Mr Kong’s request.
    5. (e)
      The following day, 20 April 2011, Mr Kong:
      1. prepared the written lease to PHG by copying the terms of the lease to KHLAJ;
      2. went to the Property and met with both Dr Myers and Dr Golledge. 
    6. (f)
      At the meeting on 20 April 2011:
      1. Dr Myers and Dr Golledge first signed the lease to KHLAJ and Mr Kong witnessed their signatures on that lease;
      2. Mr Kong then took out a copy of the lease to PHG, said that it was the lease for Dr Golledge and asked Dr Myers: “Are you ok to sign it?”;
      3. Dr Myers looked through the lease, said something to the effect of: “Yup, ok” and then signed the lease to PHG; 
      4. Dr Golledge also signed the lease to PHG and Mr Kong witnessed their signatures on that lease.
  8. [35]
    Neither Dr Golledge nor Mr Kong were cross-examined.  I prefer their evidence as to the circumstances in which the written lease to PHG came to be signed by Dr Myers.  I do not accept Dr Myers’ evidence that he had no understanding, at the time he signed that lease, that it was a lease to PHG.
  9. [36]
    There is a further, more fundamental difficulty with the proposed claim against PHG.  Even on the material facts described in [29] above, the draft statement of claim fails to explain how a lease to PHG of Unit 2 with shared use of common areas somehow became, after the lease to KHLAJ ended, a lease to PHG for both Units 1 and 2 and exclusive use of common areas. 
  10. [37]
    In the course of argument, counsel for Dr Myers submitted that the basis for that aspect of the proposed claim was the doctrine of part performance and referred to Regent v Millett.[4]  The act of part performance was said to be PHG having possession of the Property as the sole tenant after the lease to KHLAJ ended.
  11. [38]
    Regent v Millett establishes that the giving and taking of possession of a property under an oral contract will constitute an act of part performance sufficient to take the oral contract outside the operation of legislation equivalent to the Statute of Frauds.  That principle provides no assistance to Dr Myers in the circumstances of this case. 
  12. [39]
    PHG had possession of Unit 2 and shared possession of the common areas of the Property under its written lease with PDP.  The fact that no tenant took up Unit 1 after the lease to KHLAJ ended did not mean that PHG took possession of that part of the Property.  Dr Golledge’s unchallenged evidence was that PHG did not ever occupy or use Unit 1.  Likewise, the absence of a tenant in Unit 1 did not mean that PHG took exclusive possession of the common areas of the Property.  Had a new tenant been proposed for Unit 1 then PHG would, consistent with the terms of its lease, have been required to share possession of those common areas with the new tenant. 
  13. [40]
    In effect, the claim Dr Myers proposes to bring against PHG rests on the proposition that the departure of the tenant from Unit 1 upon the expiry of the lease to KHLAJ effected a variation of the lease to PHG such that PHG became liable to pay 100% of the rent for the Property.  The doctrine of part performance does not, in my view, provide a reasonable basis for such a claim.  No other legal basis for the claim was advanced.
  14. [41]
    I am not satisfied that the claim Dr Myers proposes to bring against PHG raises a serious question to be tried.

The proposed claim against Dr Golledge

  1. [42]
    The relief sought in the proposed claim against Dr Golledge is said to be “equitable compensation to be assessed by the Court for loss of profits caused by breach of director’s duties by [Dr Golledge] to [PDP].”
  2. [43]
    That claim relevantly alleges that:
    1. (a)
      in circumstances where a dispute had arisen as to the proper amount of the market rent for the Property, Dr Golledge misrepresented the nature of the Property to Taylor Byrne, a valuer engaged by Dr Golledge to assess the market rent;
    2. (b)
      as a consequence, the value determined by Taylor Byrne was lower than the true value of the market rent and Dr Myers, as director of PDP, did not accept that valuation;
    3. (c)
      by misrepresenting the nature of the Property, Dr Golledge breached his duties as a director of PDP by, in effect, acting to prevent PDP from increasing the rent to market value rent.
  3. [44]
    There are numerous difficulties with the proposed claim against Dr Golledge.
  4. [45]
    First, the manner in which Dr Golledge is alleged to have misrepresented the nature of the Property to Taylor Byrne is not specified.
  5. [46]
    Secondly, Dr Myers’ assertion that the market rent for the Property is higher than the value determined by Taylor Byrne is unsupported by any valuation evidence.
  6. [47]
    Thirdly, in circumstances where it is not alleged that the Taylor Byrne valuation was contractually binding upon PDP and PHG, the proposed claim fails to identify a causal link between Dr Golledge’s alleged breaches and the loss suffered by PDP.  It was open to Dr Myers to obtain an alternative valuation of the market rent.  He did not do so.  As the Golledge parties submitted, it is difficult to understand how Dr Golledge can be said to have frustrated the rent review process when he was the only person who arranged for a valuation. 
  7. [48]
    Finally, the claim against Dr Golledge assumes that PHG is liable to pay 100% of the rent for the Property.  I have already explained why I do not consider there to be any reasonable basis for such a claim.  Even if the claim against Dr Golldege were otherwise reasonably arguable, the quantum of the claim would be half that set out in the draft pleading.
  8. [49]
    In all of the circumstances, I am not satisfied that the proposed claim against Dr Golledge raises a serious question to be tried.

Interests of the company

  1. [50]
    My assessment that neither of the proposed claims raises a serious question to be tried bears heavily on the question whether it is in the best interests of PDP that Dr Myers be granted leave to commence the proposed proceedings.
  2. [51]
    That is particularly so where:
    1. (a)
      no legal advice was tendered on a confidential basis to demonstrate that advice had been sought and Dr Myers had been advised that the proposed claims had reasonable prospects of success;
    2. (b)
      there was no evidence of the likely costs of running the proposed claims and Dr Myers said in cross-examination that he did not know what those costs were likely to be;
    3. (c)
      there was no evidence that Dr Myers, or anyone else, had considered whether the likely costs of litigating the proposed claims were warranted having regard to the quantum of the claims and their prospects of success.
  3. [52]
    When he was re-examined, Dr Myers was asked whether he would be prepared to offer an indemnity in respect of the costs of litigating the proposed claims.  He said that he would.  That evidence carries little, if any, weight where the likely costs of running the proposed claims are unknown and there is no material to establish the worth of Dr Myers’ undertaking to meet such costs.
  4. [53]
    In the circumstances, I am not satisfied that it is in the interests of PDP that Dr Myers be granted leave to bring the proposed proceedings against either PHG or Dr Golledge.

Good faith

  1. [54]
    I have some reservations as to whether Dr Myers has acted in good faith in applying for leave to bring the proposed proceedings.  Those reservations principally arise from:
    1. (a)
      the unsatisfactory nature of his evidence concerning the existence of the written lease to PHG and the circumstances in which his signature came to be on that document; and
    2. (b)
      his apparent failure to turn his mind to whether the amount likely to be recovered from the proposed claims warrants the costs of running the litigation.[5]
  2. [55]
    However, because I have already concluded that two of the requirements of s 237(2) of the Act have not been fulfilled, it is not necessary for me to say anything further about the question of good faith.

Conclusion

  1. [56]
    As I am not satisfied that all of the requirements of s 237(2) of the Act have been met, Dr Myers’ application to bring proceedings on behalf of PDP against PHG and Dr Golledge must be dismissed.

Application to wind up on the just and equitable ground

  1. [57]
    There was no real dispute between the parties as to the principles which apply on an application to wind up a company on the just and equitable ground.  Useful summaries of the relevant principles were set out in Re Docklands Chiropractic Clinic Pty Ltd[6] and in Re Crow Inn Pty Ltd (No 2).[7] 
  2. [58]
    The court must consider the factual matrix of the dispute in order to form a view as to whether a sufficient reason for making the winding up order has been demonstrated.[8]  A winding up order must be just and equitable not only for Dr Golledge, but also for Dr Myers.[9]
  3. [59]
    A deadlock in the management of a company’s affairs is a common case in which an order that a company be wound up on the just and equitable ground has been made, including in circumstances where a company was formed on the basis of a personal relationship involving mutual confidence and that confidence has broken down so that continuation of the association would be futile.
  4. [60]
    That is an apt description of the present situation with PDP. 
  5. [61]
    The company was incorporated in the context of Dr Myers and Dr Golledge operating Petrie Dental in quasi-partnership.  Dr Myers and Dr Golledge sought to obtain a benefit for their respective superannuation funds from the requirement that LJM and PHG pay commercial rent for premises from which to operate Petrie Dental.  PDP’s purpose was to facilitate that aim. 
  6. [62]
    When Dr Myers’ sold his interest in Petrie Dental the previously amicable relationship between him and Dr Golledge rapidly deteriorated.  The evidence shows that they have not held a meeting as directors of PDP since 2011.  Their communications since that time, which have been conducted largely in writing, demonstrate a breakdown in trust between them. 
  7. [63]
    Unsurprisingly, this has had an adverse impact on the management of PDP’s affairs.  There have been ongoing difficulties in appointing an accountant for PDP and completing financial statements.  None of PDP’s financial statements for the financial years since 2015 have been agreed or signed off by the directors.  Dr Myers and Dr Golledge have been in dispute for more than 10 years as to how PDP’s financial affairs should be conducted.  They have been unable to agree as to the requirement for PDP to undertake work to maintain the Property.
  8. [64]
    Dr Myers does not dispute that the management of PDP is currently in deadlock.  However, he submitted that:
    1. (a)
      the principal cause of this deadlock is the proposed claims he sought leave to bring against PHG and Dr Golledge on behalf of PDP;
    2. (b)
      once those claims are resolved, whether in PDP’s favour or otherwise, this cause for disagreement will be removed such that Dr Myers and Dr Golledge would be able to continue to manage PDP’s business of leasing the Property.
  9. [65]
    On this basis, Dr Myers submitted that the grant of leave for him to bring the proposed claims against PHG and Dr Golledge would permit the parties to agitate their concerns and to have their dispute determined without the need to wind up PDP.  This, it was submitted, would be a less drastic remedy which was available and appropriate to resolve the present deadlock.[10]
  10. [66]
    For reasons already given, I have dismissed Dr Myers’ application.  Consequently, I am not satisfied that bringing derivative proceedings is an appropriate alternative means of resolving the present deadlock.
  11. [67]
    In any event, I do not accept Dr Myers’ submission that determination of those derivative proceedings would be likely to resolve the deadlock.  That submission ignores evidence of the significant level of distrust and discord in the relationship from 2011 to 2016, before the proposed claims about unpaid rent and frustration of the rent review process had arisen.  The animosity which presently exists between Dr Myers and Dr Golledge is hardly likely to dissipate after the prosecution of the proposed derivative proceedings, whatever their outcome.
  12. [68]
    Given that relations between Dr Myers and Dr Golledge are unlikely to improve, it is difficult to see why either of them should be required to maintain their joint investment, through PDP, in the Property.  The underlying reason for that investment no longer exists.  Dr Myers has retired.  Dr Golledge has moved his practice to a different location.  There is no reason for them to remain in a commercial relationship.
  13. [69]
    Dr Myers also resisted the winding up application on the grounds that:
    1. (a)
      a liquidator appointed to PDP might not pursue the proposed claims against PHG and Dr Golledge due to a lack of funding (such decision not being in the best interests of PDP and resulting in detriment to Dr Myers);
    2. (b)
      the court should be reluctant to wind up a solvent company.
  14. [70]
    A liquidator would be required to make an objective assessment of the prospects of the proposed claims succeeding and the likely costs of litigating those claims.  If the liquidator formed the view that, upon that objective analysis, it was in the interests of PDP to bring those claims then, after the sale of the Property but before the distribution of the assets of the unit trust, there would be funds available to prosecute those claims.
  15. [71]
    This form of objective analysis is the type of consideration that Dr Myers should have undertaken, but did not undertake, before applying for leave to bring the proposed claims as derivative proceedings.  I do not consider the prospect that, upon such objective assessment, a liquidator might decide not to pursue the proposed claims means that a winding up order would not be just and equitable to Dr Myers.
  16. [72]
    As to the question of solvency, the Golledge parties accepted that PDP was probably solvent.  They did not argue against the principle that winding up a solvent company is something which the court would not do lightly but submitted, correctly, that there is no absolute rule that a court will not wind up a solvent company.[11] 
  17. [73]
    One of the principal reasons explaining the courts’ reluctance to wind up solvent companies is the impact on apparently successful businesses conducted by such companies.  In this case, there is no ongoing business being conducted.  The only business of PDP is renting out the Property.  Following Dr Golledge’s departure, the Property is vacant and is not producing income.  Although the evidence does not directly address the reasons why PDP has been unable to secure a new tenant for the Property, I infer that it is because of the deadlock between Dr Myers and Dr Golledge.  There is no reason to think that situation is likely to change in the future.
  18. [74]
    Although that deadlock might, in theory, be overcome by replacing PDP as trustee of the unit trust, I accept the Golledge parties’ submission that there is no reason to incur the costs of appointing an independent trustee for the sole purpose of managing the renting out of a single commercial property in Petrie.  Further, replacing PDP as trustee would mean that the Property and any other assets held by PDP would vest in the new trustee.  All that would be left to PDP would be its right of indemnity in respect of expenses properly and reasonably incurred as trustee.  Once any expenses were met from that right of indemnity PDP would be left as a shell without any assets or any means of generating income.
  19. [75]
    I am satisfied that, in all of the circumstances, it is just and equitable to make an order for the winding up of PDP.  The deterioration of the relationship between Dr Myers and Dr Golledge and the resulting deadlock in the management of PDP’s affairs constitute sufficient reasons for making the winding up order.  A winding up will lead to the sale of the Property and, thereafter, a distribution of the property of the unit trust to unitholders and the end of the parties’ relationship.
  20. [76]
    The Golledge parties have also sought orders appointing the proposed liquidators of PDP as receivers of the property of the unit trust.  This was done to address:
    1. (a)
      the operation of cl 4.1(b) of the trust deed whereby, upon the appointment of liquidators, PDP will cease to be the trustee of the unit trust and would become a bare trustee of the trust property until a new trustee is appointed;
    2. (b)
      the difficulty that the liquidator of a corporate trustee cannot sell the trust’s property without order of the court or by the appointment of a receiver over the trust’s assets.[12]
  21. [77]
    I am satisfied that it is appropriate, where the evidence suggests that PDP would otherwise be without funds in a liquidation, to make orders appointing the liquidators of PDP as receivers over the property of the unit trust for the purpose of realising those assets to pay the costs of the winding up and to distribute surplus assets to the unitholders.

Declaratory relief sought by the Golledge parties

  1. [78]
    A final issue for determination is raised by the Golledge parties’ application for a declaration that the written lease between PDP and PHG was valid.
  2. [79]
    In dismissing Dr Myers’ application, I have already determined that the proposed claim against PHG for unpaid rent did not raise a serious question to be tried.
  3. [80]
    As I prefer the evidence of Dr Golledge and Mr Kong concerning the execution of the written lease to PHG over that of Dr Myers, I am satisfied that the written lease between PDP and PHG was valid and binding upon PDP during its term.
  4. [81]
    In circumstances where the existence and validity of the written lease has caused significant dispute between the parties, I am satisfied that there is utility in making the declaration sought by the Golledge parties.

Final disposition of the applications

  1. [82]
    The orders will be:
  1. The originating application filed 27 April 2022 is dismissed.
  2. It is declared that the lease between Paul H Golledge Pty Ltd and Petrie Dental Property Pty Ltd executed on 20 April 2011 in respect of the premises at 25 Dayboro Road, Petrie, properly described as Lot 41 on RP 30213 in the County of Stanley, Parish of Redcliffe, Title Reference 14369058 is valid.
  3. Petrie Dental Property Pty Ltd is to be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
  4. Anne Meagher and David Michael Stimpson are appointed joint and several liquidators of Petrie Dental Property Pty Ltd.
  5. Anne Meagher and David Michael Stimpson are appointed as receivers, without security, over all present and after acquired property, rights and undertakings (Trust Property) of the Petrie Dental Property Unit Trust (Trust).
  6. It is declared that Petrie Dental Property Pty Ltd has a right of exoneration from the Trust Property in respect of all costs, charges and expenses incurred by Petrie Dental Property Pty Ltd as trustee for the Trust (Trustee) in relation to the proper performance of its duties in respect of the Trust, which are provable in Petrie Dental Property Pty Ltd’s liquidation.
  7. Anne Meagher and David Michael Stimpson, as liquidators of Petrie Dental Property Pty Ltd, are justified, subject to paragraphs 11, 12, 13 and 14 below, in treating the proceeds of the Trust Property received in the liquidation of Petrie Dental Property Pty Ltd pursuant to the right of exoneration referred to in paragraph 6 above as being available for distribution to Trust creditors in accordance with the order of priorities provided for in Division 6 of Part 5.6 of the Corporations Act 2001 (Cth).
  8. Anne Meagher and David Michael Stimpson are conferred with the following powers in respect of the property of the Trust:
  1. (a)
    the powers recited in s 420 of the Corporations Act 2001 (Cth), as if the references in that section to “property of the corporation” was reference to property of the Trust;
  2. (b)
    the powers that a liquidator has in respect of property of a company by s 477 of the Corporations Act 2001 (Cth); and
  3. (c)
    the power to do all things necessary and convenient to:
  1. (i)
    distribute the net proceeds of the sale of the assets of the Trust (after payment of the costs, expenses and remuneration of Anne Meagher and David Michael Stimpson in their capacity as receivers and as liquidator of Petrie Dental Property Pty Ltd in accordance with order 7 above) to creditors of the Trust in accordance with order 6 above;
  2. (ii)
    distribute any surplus thereafter to the members of the Trust.
  1. The need for Anne Meagher and David Michael Stimpson to file security under r 268 of the Uniform Civil Procedure Rules 1999 (Qld) is dispensed with.
  2. Anne Meagher and David Michael Stimpson, in their capacity as receivers of the Trust and liquidators of Petrie Dental Property Pty Ltd, are directed to cause Petrie Dental Property Pty Ltd to wind up the Trust, pursuant to clause 17 of the Deed of Trust of the Trust dated 6 April 1993.
  3. Anne Meagher and David Michael Stimpson, in their capacity as receivers of the property of the Trust or in their capacity as liquidators of Petrie Dental Property Pty Ltd, may have recourse to the Trust Property for their costs, expenses and remuneration in so far as the property or proceeds therefrom relates to costs, expenses and remuneration at the remuneration calculated in accordance with the rates set out in the Consent of Liquidator filed 11 July 2022 and Consent of Receiver filed 5 October 2022, and otherwise as ordered by the Court.
  4. The work referred to in paragraph 11 above is to include work relating to:
  1. (a)
    the identification of Trust assets and liabilities;
  2. (b)
    the identification of Trust creditors;
  3. (c)
    the ascertaining of the state of the accounts between the beneficiaries and the trustee;
  4. (d)
    the recovering or attempting to recover Trust assets for the purposes of meeting the right of exoneration;
  5. (e)
    the realisation or the attempted realisation of the Trust assets for the purposes of meeting the right of exoneration;
  6. (f)
    the securing of Trust assets (or their value) to meet the right of exoneration and their application to the Trust creditors;
  7. (g)
    the distribution of funds which are the subject of the right of exoneration to those who are entitled to them; and
  8. (h)
    any matter in the administration of the Trust which is reasonably ancillary to the above to the extent to which it had been undertaken for the purposes of the identified tasks.
  1. The amounts which Anne Meagher and David Michael Stimpson are entitled from the Trust Property under paragraph 11 above are to be determined by the Court.
  2. Anne Meagher and David Michael Stimpson have a lien over the Trust Property of the amounts to be paid to them under paragraphs 11, 12 and 13 above.
  3. The applicant pay the respondents’ costs of and incidental to the consolidated proceeding to be assessed on the standard basis unless otherwise agreed.

Footnotes

[1]See ss 236(1)(a)(ii) and 237(1) of the Act.

[2]Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313 at 318-9 [24], [26].

[3]Wood v Links Golf Tasmania Pty Ltd (No 2) [2013] FCA 143 at [53].

[4](1976) 133 CLR 679.

[5]Coeur de Lion Investments Pty Ltd v Kelly [2014] 1 Qd R 296 at 311-312 [57].

[6][2020] VSC 364 at [19]-[25].

[7][2020] NSWSC 1749 at [276]-[279].

[8]Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364 at [21]; Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498 at [14].

[9]Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364 at [39]; Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193 at 201.

[10]See s 467(4) of the Act; Re Wyndham Park Estate Pty Ltd [2019] VSC 92 at [40]-[43].

[11]Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364 at [24]; Mudgee Dolomite & Lime Pty Ltd v Murdoch [2020] NSWSC 1510 at [293]; Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749 at [279].

[12]Jones v Matrix Partners Pty Ltd (2018) 260 FCR 310 at 323 [44].

Close

Editorial Notes

  • Published Case Name:

    Myers v Petrie Dental Property Pty Ltd & Anor

  • Shortened Case Name:

    Myers v Petrie Dental Property Pty Ltd

  • MNC:

    [2022] QSC 230

  • Court:

    QSC

  • Judge(s):

    Cooper J

  • Date:

    02 Nov 2022

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2022] QSC 23002 Nov 2022-
Notice of Appeal FiledFile Number: CA 10854/2419 Aug 2024-

Appeal Status

Appeal Pending

Cases Cited

Case NameFull CitationFrequency
Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498
2 citations
Jump To
Cite 1 - [2011] FCA 498
Cite 2 - [2011] FCA 498
Coeur de Lion Investments Pty Ltd v Kelly[2014] 1 Qd R 296; [2013] QCA 160
3 citations
Jump To
Cite 1 - [2013] QCA 160
Cite 2 - [2014] 1 Qd R 296
Cite 3 - [2014] 1 Qd R 296
G. Jeffery (Mens Store) Pty Ltd (1984) 9 ACLR 193
2 citations
Jump To
Cite 1 - (1984) 9 ACLR 193
Cite 2 - (1984) 9 ACLR 193
Jones (liquidator) v Matrix Partners Pty Ltd [2018] FCAFC 40
1 citation
Jump To
Cite 1 - [2018] FCAFC 40
Jones v Matrix Partners Pty Ltd (2018) 260 FCR 310
2 citations
Jump To
Cite 1 - (2018) 260 FCR 310
Cite 2 - (2018) 260 FCR 310
Mudgee Dolomite & Lime Pty Ltd v Murdoch [2020] NSWSC 1510
2 citations
Jump To
Cite 1 - [2020] NSWSC 1510
Cite 2 - [2020] NSWSC 1510
Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749
3 citations
Jump To
Cite 1 - [2020] NSWSC 1749
Cite 2 - [2020] NSWSC 1749
Cite 3 - [2020] NSWSC 1749
Re Docklands Chiropractic Clinic Pty Ltd [2020] VSC 364
5 citations
Jump To
Cite 1 - [2020] VSC 364
Cite 2 - [2020] VSC 364
Cite 3 - [2020] VSC 364
Cite 4 - [2020] VSC 364
Cite 5 - [2020] VSC 364
Re Wyndham Park Estate Pty Ltd [2019] VSC 92
2 citations
Jump To
Cite 1 - [2019] VSC 92
Cite 2 - [2019] VSC 92
Regent v Millett (1976) 133 CLR 679
2 citations
Jump To
Cite 1 - (1976) 133 CLR 679
Cite 2 - (1976) 133 CLR 679
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313
2 citations
Jump To
Cite 1 - (2002) 42 ACSR 313
Cite 2 - (2002) 42 ACSR 313
Wood v Links Golf Tasmania Pty Ltd (No 2) [2013] FCA 143
2 citations
Jump To
Cite 1 - [2013] FCA 143
Cite 2 - [2013] FCA 143

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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