Episodi
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âWe need to *wind up* the trust and sell the farms!â
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The Ps and the Ds each owned 50% of the units in a unit trust: [1]
TCo owned substantial real property - farms. The Ps sought to have the trust ended and distribute the assets. The Ds took the opposite view: [5]
The Ps said: 1. there was an agreement or estoppel that if one party wanted to exit, the assets would be sold; 2. the trust deed allowed a unit holder to terminate; 3. the TCoâs conduct was oppressive; and 4. a receiver should be appointed to trust assets: [7]
The Ps and Ds were bankers who, after a time, resolved to add valuable farmland to their portfolio: [15] - [18]
They sought advice on structuring: [19] - [30]
TCo was incorporated and established as trustee, with Ps and Ds funding TCoâs purchase of the land: [31], [32]
A unit holders agreement was considered but not signed: [33] - [36]
Once commenced, the parties considered: which farm management services Co was best, the possible acquisition of further properties by TCo, the Ds frustration with the Psâ acquisition of a farm themselves and not for TCo, and the looming threat of drought: [39] - [53]
As the drought intensified, arguments arose about: (i) whether to de-stock or borrow to buy feed: [54] - [65], (ii) the Ps stretching their finances to make their own acquisitions thereby depriving TCo of a source of funds to buy land, and (iii) the Ps standing in the way of the Ds buying some land for themselves: [54] - [72]
The relationship deteriorated.In 2021 and 2022 the Ps put purchase offers to the Ds. The Ds accepted neither: [87] - [89]
Later in 2022, the Ps served a notice purporting to âwind upâ the trust: [90]
Re 1., the Ps said there was an agreement, or representations founding an estoppel, that each party could unilaterally terminate the JV on notice: [107], [109]
The Court found no evidence of a âone out / all outâ arrangement: [122]
Re 2., the unit holders has a present entitlement to trust capital; a position adopted for land tax purposes: [126], [136]
The Ps failed on this point; incl because the Deed did not give rise to a present entitlement for *each unit holder separately* rather than the unit holders together: [168], [184]
Re 3., the Court accepted oppression can occur with a trustee Co, with the relevant member protecting their familyâs beneficiary interest: [202] - [204]
None of the pleaded oppression bases was made out: [209] - [255]
Psâ complaints arose from disagreements re management of the farms through drought, and the lack of an exit strategy - neither proved commercial unfairness: [256] - [258]
Re 4., the trust property was not in jeopardy and TCo appeared to be performing satisfactorily: [266]
The Court was not moved by the Psâ analogies to partnerships or s461 applications, leaving no basis for the appointment of a receiver: [267] - [283]
The Psâ application was dismissed: [286]
__
Please give James d'Apice, Coffee and a Case Note, and James' firm Gravamen a follow on your favourite platform!
www.gravamen.com.au
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In August 2024 James was invited to appear on Glover Lane's ESG podcast, 'What Keeps You Up At Night?'
This interview traverses Gravamen's journey to becoming a firm that tries to live its values by donating $1,000.00 per month to charity; and reflects on what the future might hold.
It's also a great primer for anyone hoping to understand ESG a little better.
You can find Rebecca Barry's firm Glover Lan here: https://www.gloverlaneconsulting.com.au/
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Episodi mancanti?
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âSome of these debts are trivial⊠do I still have to pay the really small ones?â
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2,653 clients deposited money with a Co, who was a trustee. Only 74 of those beneficiary clients had a balance worth over $100: [2], [3]
A liquidator, P, was appointed to the Co: [1]
P approached the Court seeking advice as to whether (i) the benefs with a <$100 balance could be treated as having no right to participate in the dist'n of funds, and (ii) the balance could be distributed to the remaining 74 pro rata: [4]
Advice was sought pursuant to both s90-15 and s63: [6]
None of the notified <$100 beneficiaries raised objections or appeared at the hearing: [8]
When operational, the Co engaged in various foreign currency related financial dealings. In 2019 it was placed into liquidation. As part of the liquidation, an investigation found that around $50K was held by the Co on trust for the Coâs (former) clients: [9] - [29]
The liquidator did not have banking details of the benefs: [31]
In order to make payment to each benef the liquidator (by their staff) would have to find and confirm payment details of each of them. Costs would arise from this process: [32]
A proportionality issue.By way of example, the liquidator pointed to 48 benefs whose shared claim was $26.10; the highest individual claim from that group being $1.34: [33]
The Court traversed the relevant law relating to s90-15 and s63 applications noting the breadth of the Courtâs power to give advice: [38] - [43]
P drew particular attention to authority that suggested Courts in such proceedings (which are, of course, ex parte) sometimes had to do ârough justiceâ with benefsâ rights which might be affected on the basis of evidence that would not necessarily sustain a claim in contested litigation: [44]
The Court gave the P the advice they sought I.e. that they would be justified in distributing only to the >$100 benefs. This was because (i) the very small sums held for the other benefs, (ii) the practical steps required to distribute to all benefs, and (iii) the cost of distributing to all benefs: [53]
The Court found it was significant that P had notified all creditors whose details they had, and that having done so there were no objections: [59]
P applied to have their costs paid from the outstanding balances. The Court acceded, ordering that this was justified in part because what P was doing was essentially administering a trust i.e. the order having been made, P would be indemnified from the property of the trust they were acting as trustee of: [64]
___Please consider following James d'Apice, Coffee and a Case Note, and James' firm Gravamen on your favourite platform!www.gravamen.com.au#auslaw #coffeeandacasenote #gravamen
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âBring the company back from the dead so we can go to Court!â
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P approached the Court to seek the reinstatement of a deregistered Co: [1]
In 2010 the Co was incorporated. Shortly afterwards P and D1 - who were siblings - were the 2 Dirs and 2 equal shareholders: [4], [5]
P said that at about this time P and D1 agreed the Co would purchase some property, each funding 50% of the purchase, each owning a 50% share, and each entitled to 50% of the rent. The property was tenanted by D1: [7]
Shortly after this, the Co became the registered proprietor of the property: [8]
In 2012 (leaving aside the partiesâ confusion as to whether the Co was a trustee) forms were lodged with ASIC recording Pâs retirement as director. (P could not recall consenting or not.) From this time D1 managed the property for the Co: [9], [10]
In 2021 terse emails were exchanged between P and D1. P sought information. D threatened to âtransfer outâ some of the Coâs assets: [11]
In 2022 the Co transferred the property to OtherCo with nil consideration recorded on the transfer. OtherCoâs directors and shareholders were D1 and their spouse: [12], [13]
Shortly after, in 2022, D1 paid to P half the purported net proceeds of a sale of the property which D1 said was sold for $1.7m: [14], [15]
Some evidence showed that in August 2021 D1 had emailed P a valuation for the property at ~$2.4m and then attempted to recall that email; re-sending it with a valuation of $1.7m to $2.0m: [16]
In August 2022 D1 caused the de-registration of the Co, with P alleging P had no knowledge of D1 doing so: [17], [18]
P alleged the Co ought to have received around $1.6m in rental income over the period the Co owned the property. P said P had seen only $91K of this: [19]
All Ds consented to the Coâs reinstatement pursuant to s601AH: [20], [21]
The Court considered the relevant principles relating to an application brought by a âperson aggrievedâ by reregistration: [23], [24]
Where reinstatement is sought to bring legal proceedings, the Court need not forensically scrutinise the claim. There must be âsome level of arguabilityâ by the threshold is âvery lowâ: [26]
P said they met this threshold as the Coâs deregistration prevented both an oppression claim and a derivative suit against D1 in the name of the Co: [28]
The Court agreed: [29]
In the normal course, D1 would be Dir upon reinstatement. D1 agreed to immediately retire on reinstatement: [31]
The parties consented to P and Pâs nephew being appointed Dirs on reinstatement: [33] - [35]
The Co was reinstated, P and nephew were appointed Dirs, and the costs of the application were reserved to the contemplated oppression and / or derivative action proceedings: [39]
___
Please following James d'Apice and his firm Gravamen on your favourite platform!
www.gravamen.com.au
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âValuation is art not science; so let the partnershipâs receiver sell it.â
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10 partners - 5 family members and their spouses - planned to run a blueberry farming and forestry business on land owned by the partnership: [2], [5]
8 partners, the Ps, sued the other 2, the Ds: [3]
In 2007 the partners purchased the Property and entered into a deed: [4], [6]
The deed required that forestry profits and losses be shared equally; but that each partner would take berry farming profits and bear losses in relation to their own plots on the Property: [12]
It was agreed partners would contribute equally to a partnership bank account for mortgage payments, rates, water, bills etc. Each partner agreed to pay for their own stock and machinery: [15]
Over time, the partners did not contribute equally to this account: [16]
Disputes began early about plot allocation, apparently excessive use of water by some partners etc: [17]
The partnership did not sell blueberries (each partner did, with those blueberries having been grown on their own plot). No forestry business was ever operated: [18], [19]
In 2020 the relevant regulator found the dams on the Property to be unlawfully large. Remediation works reducing dam capacity were done. From this time the Ps gave up farming the Property. The Ds continued: [22]
The Ps commenced proceedings seeking the dissolution of the partnership and the appointment of a receiver. The Ds cross-claimed seeking to buyout the Ps for $1.5m, but later resiled from this position: [23], [24], [29]
The Ps amended their claim their claim to propose two Ps buy the partnership assets for $2m: [26]
There was no dispute that the partnership should be dissolved, that the Property was a partnership asset, or that the final distribution ought to account for the unequal contributions of each partner to the bank account: [32] - [34]
The principal issue was: should the Psâ $2m buyout order be made?: [45]
The Property was valued at ~$1.85m and the timber on it valued at ~$150K, those figures underpinning the Psâ proposal: [47] - [51]
The Ps emphasised the saving in agentâs fees that would be made, and the âpurchasing Psâ longstanding relationship with the Property: [52]
The Court noted its broad discretion on how a sale of partnership property should be effected: [54]
The Court did not make the Psâ requested buyout: [56]
The valuation evidence before the Court was 15 months old. Neither valuer was required for XX, but the Court was not bound to accept the evidence: [61]
The Court had no evidence about property or timber prices in the ensuing 15 months meaning it could have no real confidence that the $2m sale price was beneficial to all partners: [62], [63]
(The Court noted âvaluation is an art, not a scienceâ: [62])
The Court appointed a receiver who would be best placed to realise the full value of the partnership assets: [66], [75]
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Please consider following James d'Apice, James' firm Gravamen, and Coffee and a Case Note on all your favourite platforms...
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âYou changed the business I sold you so you could underpay me!â
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By deed P sold their shares in an online retail business to D.P was to receive $20M, some shares in D, and the Earn Out Amount (âEOMâ): [3]
According to the deed, the EOM was the Base EOM of $10M plus the Additional EOM: [6]
The Additional EOM was the rounded difference between the Base EOM (I.e. $10M) and âEarningsâ: [7]
âEarningsâ meant EBITDA over the relevant year. The deed contained a mechanism for D send a proposed Earnings calculation (as part of a P and L), for P to make a reply including setting out âContested Mattersâ, for the parties to negotiate the contested matters in good faith, and for the matter to be referred to an expert if negotiations failed: [10] - [14]
D sent a P and L suggesting Earnings were ~$6M (making the Additional EOM zero): [16]
P sent a reply calculating Earnings at ~$15M (taking the Additional EOM to its maximum possible figure) and raising Contested Matters: [17]
Following unsuccessful good faith negotiations, the matter was referred to an expert: [18]
How was the expert to calculate Earnings?: [19]
Cll 2.1 and 2.2 of the deed required Earnings to be calcâd disregarding revenues or expenses not part of the Coâs ordinary business including: costs relating to the share sale, restructure costs, certain related party transactions, and the costs of kicking off any new business: [21]
Cl 2.3 of the deed noted the partiesâ agreement that Earnings were to be calcâd as if the Coâs business were run the same way post-purchase as it had been pre-purchase; and that D would not make big changes to the Coâs business (or, if D did make big changes, the EOM would be normalised to exclude those changesâ impact): [21]
P sued, seeking declarations that the expert determine Earnings in accordance with all of the above. D resisted: [25] - [27]
The Court found for the P: [28]
The well-known principles regarding contractual interpretation were (respectfully) helpfully restated at [29] - [33]
The Court noted the partiesâ explicit agreement on the mandatory language in Cl 2.3; that Earnings *must* be calculated that way: [48] - [50]
The proper construction was found to be on that basis: [54]
Pâs pressed for their Contested Matters to be referred to the expert.P said Earnings had to be adjusted due to D failing to implement a new website, leading to lower website traffic. The Court accepted this Contested Matter was appropriately dealt with by the expert: [63] - [77]
Similarly: Pâs complaint regarding Dâs failure to implement Pâs logistics proposal was to be properly dealt with by the expert: [78] - [82]
Again similarly: Pâs complaint that Dâs marketing efforts wrongly focussed on conversion rather than branding was properly dealt with by the expert: [83] - [86]
The expert was required to value Earnings as P proposed, and to deal with Pâs Contested Matters: [87]
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Please head to www.gravamen.com.au - that's my law firm!
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âOur parentsâ citrus farm is a partnership asset!â
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Two siblings in partnership, P and D, ran a citrus farming business, having received it from their parents in the 2000s: [1]
(P, the parentsâ exec, sought access to the parentsâ privileged documents after death. As exec, P could waive privilege, however doing so was for themselves and not in the interests of the estate or benefs. Noting an execâs duty to avoid conflict, access was denied: [4] - [10])
In the 1990s the parents gifted D the âLotâ, a part of the citrus farm: [29] - [31], [45], [50], [268]
In 1999, P bought a nearby farm with the parents providing both deposit and guarantee. P rented the house on the nearby farm out and continued to live with the parents at the citrus farm: [54], [60]
The orchards on the nearby farm were deployed in the parentsâ business but there was no suggestion Pâs nearby farm was a partnership asset: [55], [149]
In 2001, the parents gifted P and D the citrus farm and the business: [61], [62]
The farm was transferred before the commencement of P and Dâs partnership and, being a gift, was not paid for with partnership funds: [142]
From around 2018 relations between D and P soured: [104] - [107]
As Pâs nearby farm was not providing fruit for the partnership (and even though P continued to work for the partnership) payments to P were reduced: [121], [122]
Valuations were obtained as part of a potentially unwinding process. During this, Pâs lawyer shared comments on a Deed (apparently made on Pâs instructions) acknowledging Pâs ownership of the Lot: [123]
P said that, in 2022, they attended Dâs home to demand their share of partnership profits and were rebuffed. Police became involved and an AVO was obtained: [125], [126]
From around this time P was not paid by the partnership and did no further work for it: [129]
Shortly after this, Pâs lawyer asserted the farm, including the Lot, was an asset of the partnership: [131]
The Court found the partnership ended on the date of the altercation, noting that from that time, P did no work and received no payment: [140]
P sought a declaration that the citrus farm, including the Lot, was a partnership asset: [141]
Although the evidence was imperfect, the Court was not convinced by Pâs argument that the citrus farm was a partnership asset. This was based in part on its tax treatment via instructions given by P and D to an accountant over the years: [153]
P was found to have an equitable interest in the farm, namely in the Lot: [155] - [223]
The Court declined to make an s66G order and instead made a Woodson order, requiring P to offer their remaining interest in the farm to D at market value. If D was not willing or able to buy, a sale should proceed: [249]
___
Please give James d'Apice, Coffee and a Case Note and James' firm, Gravamen, a follow on your favourite platform!
www.gravamen.com.au
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The most fun James has ever had guesting on another podcast!
There's laughter, James' advice for how to enjoy Drake, there's more laughter, and there's also some depth as James, Jordan and Nathan reflect on what it means to be progressive (and to question some of the central tenets of capitalism) while also doing financial and corporate work.
A wonderful chat - James just hopes he gets invited back!!!
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In April 2024 James sat down with Roger Christie, MD of Propel, to talk about the use of LinkedIn for building a legal practice (but it's extremely interesting and includes James having to take a pause because Roge has said something pretty moving and insightful).
You can catch the Digital Reputation Podcast here: https://propelgroup.com.au/podcast/
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Gaaaah! James got to be the first ever private practice lawyer on Mel Storey's incredible in-house counsel themed podcast, Counsel!
This pod was recorded IMMEDIATELY after James launched his firm Gravamen at the Happy Lawyer Happy Life retreat in November 2023.
Grab yourself a mimosa and enjoy this incredible chat.
A link to Mel's podcast is here: https://www.counselpodcast.com
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âGive me back my job selling diamonds!â
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A Co that sold diamonds and jewellery had 4 shareholders, entities related to the Coâs directors who were P1, D2, D3, and D4: [1], [9]
P1 and their sibling, P2, were fired by the Co from their roles as CEO and sales director respectively: [3]
The Ps (including P1âs shareholding entity) sued alleging the Coâs conduct was oppressive to P1 and seeking inter alia P1 and P2âs reinstatement on the basis of s232 oppression: [4], [5]
A Terms Sheet and employment contract governed P1âs relationship with the Co and Dirs: [11], [12]
Following slackening performance the Dirs met in Nov 2023. They resolved to reduce P1âs salary by 11%. P1 mentioned that P1 and P2 may not be compatible with the Dirs into the future: [24], [25]
In December 2023 P1 offered to sell their and P2âs shares (on the basis P2âs option had vested) for $750K: [27], [28]
D2 responded that P1 could expect a response in January 2024: [29]
Apparently with no further word in the intervening period, in April 2024 P1 and P2 received letters purporting to terminate their employment immediately: [30], [31]
P1 and P2 sought reinstatement and were then prevented from entering the Coâs premises: [35]
The Coâs Sydney office was closed. An industry publication informed other jewellers of P1âs and P2âs departure. Allegations were made regarding P1âs use of their Co credit card: [37], [38], [40]
The Court had to consider (i) whether there was a serious question to be tried, and (ii) whether the balance of convenience weighed in favour of reinstatement: [41] - [43]
The Court accepted there was a serious question to be tried because - apparently in breach of the Terms Sheet - a resolution was reached to terminate P1 and P2, and to close the Sydney office, in the absence of P1: [48]
A complexity arose: P1âs employment contract gave the Co broad termination rights that, arguably, meant the Coâs approach was not oppressive: [50] - [52]
The Ps failed on their balance of convenience argument for four reasons: (i) the inconsistency between an interlocutory order for reinstatement and final order for a share buyout [54] - [56]; (ii) damages being adequate, noting any final share valuation will account for oppressive behaviour [57]; (iii) reinstatement would upset, not maintain, the status quo as new people were performing P1âs and P2âs roles [58]; and (iv) generally, the Courtâs reluctance to make reinstatement orders over the wishes of majority business owners: [59] - [62]
The Court declined to order the interlocutory relief sought: [63]
___
Please consider giving Coffee and a Case Note, James d'Apice and Gravamen a follow on your favourite platform!
#auslaw #gravamen
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James got to sit down for a chat about his progression through the world of legal practice with the legal Amogh Kadhe, of the ChatterMatters Podcast in early 2024.
Please enjoy!
You can find the ChatterMatters LinkedIn page here: https://www.linkedin.com/company/chattermatters-podcast/?originalSubdomain=au
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âIâve retired as a partner. I want market value with no discounts!â
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In 2018, 4 Cos entered into a partnership agreement. The business related to growing and selling tea: [1], [5]
P retired from the partnership. The agreement provided that the partnership would not be dissolved on a partnerâs retirement: [2]
The question was: what value should P receive for its partnership stake?P argued for, in essence, a pro rata distribution according to its 19% stake: [3]
The Ds, who were the remaining partners, argued for a market value approach i.e. including discounts for Pâs lack of control and the lack of marketability of Pâs stake: [4]
The partnership agreement provided that the partners were entitled to the property and goodwill of the partnership in their respective shares: [8]
P sued, and initially applied for the appointment of a receiver to the partnershipâs assets without pressing this application: [21]
By consent, the parties sought orders appointing a referee, a valuer, to value Pâs interest in the partnership including goodwill at the date of retirement: [22] - [24]
The valuer sought further instruction on the basis of the valuation; fair value, market value, equitable value etc: [25]
Following an informal conference with the parties and the valuer the details of which were not in evidence, the valuer prepared their report on the market value basis: [27]
Pâs view of what a market valuation entailed differed from the Dâs views in that P resisted the suggestion that a discount ought to be applied for lack of control and a lack of marketability; or if those discounts were to be applied they ought to be reduced: [27]
The Ds said P had âagreedâ to the more traditional market value approach: [28]
P said it was entitled to recover its share from the partnership as a debt due: [33]
The Ds denied P was entitled to an account and instead considered the valuation as a âstepping stoneâ to a potential transaction or (if their valuation position was accepted) grounds for a Syers order requiring P to sell to the Ds at the relevant value: [34]
The Court was receptive to Pâs suggestion that if P were forced into a minority discount, and the Ds then sold the partnershipâs business the Ds would enjoy a windfall: [50]
The Court accepted Pâs entitlement to an account noting the parties could have agreed on a different outcome if they wished: [51]
The Court found the P did not âagreeâ to the minority discount as part of the market valuation process, having openly argued against it through the valuation process: [52] -[57]
The Court accepted Pâs view on valuation of its interest and considered as a preliminary matter that legal costs be paid from the assets of the partnership: [65], [68]
The parties were invited to provide SMOs reflecting the outcome: [74]
___Please consider giving Coffee and a Case Note, James d'Apice and Gravamen a follow on your favourite platform!
www.gravamen.com.au #auslaw #gravamen
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âYou tried to kick me out of the law firm partnership!â
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A partnership operated a law firm. A deed governed the partnersâ relationship. The partners were either fixed draw (âsalariedâ) partners or (often more lucrative) capital partners: [1], [2]
Each partner was a trustee of a separate trust: [2]
P was a capital partner, purportedly expelled from the partnership in November 2020: [5]
P said the purported expulsion was contrary to the deed; meaning P remained a partner or was entitled to damages: [6]
The Ds characterised the partnership as âeasy in, easy outâ - partners did not make a contribution to join, and were not âpaid outâ on their exit: [13]
When a capital partner exited, that exit was a âcomplete, forced, and absolute divorce from the firmâ: [29]
The Ds proposed Pâs expulsion by email with a âvoting buttonâ mechanism and also proposed that the technical requirements for expulsion (e.g. the giving of 7 days notice) be waived or abridged: [38] - [40]
Crucially, only one button was required to be pressed in order to vote on both proposed Extraordinary Resolutions (which the deed said needed 80% of the vote to pass): first (i) expulsion, and then (ii) waiver of technical requirements: [39]
P said this process was invalid because (i) the waiver of technical requirements (like notice) should come before the substantive expulsion vote, and (ii) the question of waiver and the substantive expulsion vote should have had separate voting buttons, allowing partners to vote separately on each resolution: [41]
The Court found the requirement of notice was for a purpose including, potentially, the marshalling of support by the capital partner at risk of expulsion: [48]
The Court found it undermined the seriousness of the consequences of expulsion for the question to be bundled up with the technical variation resolution (or, in the alternative) before it: [49]
The Court found what had taken place was a âplainly invalid processâ: [50]
Pâs expulsion from the partnership was, therefore, invalid: [51], [101] - [103]
This view was bolstered by the Courtâs finding that the Extraordinary Resolution (as defined in the deed) required 80% of all partners to vote in its favour in order to be passed.This was by contrast to the Dsâ position, who asserted that only 80% of the *voting* partners were needed for such a resolution to pass: [52] - [57]
Noting the solemnity of the outcome of an Extraordinary Resolution, and based on the general tenets of commercial construction, the Court found 80% of the partnership was required to pass an extraordinary resolution, not merely 80% of partners engaging in the vote: [58], [59]
P therefore succeeded in their liability argument, with a cost order made in their favour: [122]
The argument about damages was saved for another day.
___
If you get a moment please give Coffee and a Case Note, James d'Apice, and / or Gravamen a follow on your favourite platform.
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In March 2024 James had a chat with Josh Lawlor and Monica Walmsley from the Personal Branding Unlocked podcast.
It's a wide-ranging chat that features James' views on his own branding *journey* with some lessons you can apply in your practice.
You can find the PBU pod here: https://www.personalbrandingunlocked.com.au/
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âCompensate the company. Then pay that money to me!â
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P, a former shareholder, sought to bring a claim on behalf of the Co and then have the proceeds paid to themselves: [1] - [3]
s237(2)(a): the Co was not going to bring the claim itself: [8]
s237(2)(d): the Court considered (i) whether the pleaded case could be proved, and (ii) if so whether that would ground the relief sought: [12]
When practising, P was the sole shareholder of the Co and principal benef of the trust the Co operated. That way, Pâs work earned income for the Co: [16]
P chose that structure, and form of income distribution, likely due to financial advantages P considered arose - and so was bound to the risks arising from that choice: [17]
P made an agreement with some the Ds that would see advisory work referred to the Co, and would see NewCo established to do additional work: [19]
From 2013 the relationship between P and the Ds deteriorated with the Ds allegedly not referring work to NewCo and otherwise breaching the agreement: [24]
The Ds purported to remove Co from controlling NewCo thereby displacing P NewCo and diverting NewCoâs business to themselves: [31]
In 2017 P was made bankrupt, and later removed as beneficiary of the trust with the Ds buying Pâs shares in Co from Pâs bankruptcy trustee: [37], [53]
Despite a contract claim being out of time, it appeared there was âapparent unlawfulnessâ and claims that the Ds breached their duties to NewCo: [32], [35]
Importantly, the relief P sought chiefly was for distribution to be made to them as former benef of the trust, requiring the Co to on-pay its compensation to the P: [36], [40]
P attempted to characterise the Coâs loss as Pâs loss due to their benef status at the time: [44]
P was unable to show (i) the Coâs income would inevitably be distributed [45], (ii) that if distributed that it would go to P solely, noting she was not the sole beneficiary [47], or (iii) that all the money paid to the Co would be distributed and not otherwise applied to e.g. costs of administering the trust etc: [48]
The Court found there was no entitlement to the distribution relief sought by P: [49]
An argument that Pâs bankruptcy trustee may have entitlement did not require determination: [51]
The Court found there was no serious question to be tried as to Pâs final relief, leaving other prayers arguably intact. However the problems with the relief meant the s237(2)(c) best interests test was not met: [56[
s237(2)(c): Pâs claim was only for Pâs benefit and without regard for the Coâs other obligations or objectives. It was not in the best interests of the Co that it be brought: [58] - [65]
s237(2)(b): In seeking an unlitigated determination that the Co pay all compensation to her the Court found P was not coming in good faith: [82], [83]
Having failed to meet the s237(2) criteria, Pâs application was dismissed: [90]
___
Please follow, James d'Apice, Coffee and a Case Note and Gravamen whereever you can! (If you'd like!)
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In early 2024 James sat down (remotely) with David Turner to chat about starting a law firm from scratch.
Even though James was only a matter of weeks (!) into his journey he did his best to share everything he could - warts and all.
Please enjoy this revealing and entertaining chat between James and David.
___
You can find other episodes of Hearsay: The Legal Podcast here: https://hearsay.legalcpd.com.au/episodes/
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In March 2024 James had the opportunity to talk with Communications and Law student and producer of the Hearsay Legal Podcast, Jacob Malby, about creativity, freestyle rap, and law.
This conversation traverses Coffee and a Case Note as well as other projects of James' with his Spooko co-creator, Thomas McMullan.
A link to Spooko is here: https://fbiradio.com/podcast/spooko/
A link to Hearsay is here: https://hearsay.legalcpd.com.au/
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âHey! Stop trying to work for our competitor!â
D was a consultant who, in 2022, left one large firm and joined another. Dâs expertise was defence work: [2], [3]
The 2022 role included a 2 year restraint: [4]
The 2022 employer underwent a restructure following a scandal and D was then employed by P, or an entity related to it: [6], [9]
Dâs contract with P included a 3 month notice period with a right for P to force D to take that time as âgardening leaveâ [11] and cascading restraints commencing at 12 months and Australia-wide: [12], [14]
In November 2023 D resigned indicating they planned to work at another firm.
Shortly afterwards P sent D a letter directing D to take gardening leave for 3 months and asserting the restraints: [16], [17]
D acknowledged gardening leave but resisted the restraints: [18]
By the end of Dâs gardening leave, neither party had shifted from their position and P commenced proceedings seeking an urgent injunction: [19] - [24]
P had to show there was a âlegitimate commercial interestâ in enforcing the restraint and that it went no further than necessary to protect it: [28]
P said the restraint would protect Pâs legitimate interest in (i) the relationships with Pâs clients, or (ii) the confidentiality of Pâs confidential information e.g. pricing: [32]
The Court spent some time considering the work done with P and the work to be done at the new entity (noting the evidence was âbedevilled with management jargonâ [44]) concluding that the question was one of contractual construction to be set aside for final hearing: [47]
The Court accepted there was a prima facie case in respect of the information D had access to: [48], [49]
The Court noted D had previously accepted a 2 year restraint and so there was a prima facie case for a one year restraint: [51]
Generally, the Court considered P had a prima facie case and turned to the balance of convenience question: [52]
The Court noted D was well paid, had no evidence to show their asset position, had tax liability suggesting significant income in the past, and had their âeyes wide openâ when accepting the restraints and then resigning: [53] - [64]
This weighed against D in a balance of convenience argument.
However, Pâs delay was pivotal.P only brought the application at the conclusion of Dâs gardening leave in February 2024 despite having first raised issues in November, and after various exchanges with D and Dâs lawyers during leave: [65]
Delay can be a complete answer to an interlocutory application: [67]
The Court found it would be unreasonable now to restrain D from joining their new employer simply because P âhas now belatedly discovered the urgency of the caseâ without Pâs delay having been adequately explained: [80], [81]
This delay tipped âthe scale the other wayâ. Pâs application failed. Costs followed the event: [81]
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âItâs my wind-up application, so surely I should get my choice of liquidator...?â
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The Ps brought an application to windup various entities on the s461(1)(k) just and equitable basis, and to appoint receivers to the assets of the associated trusts: [1], [2], [6]
The various entities were variously incorporated and settled to develop a marina. That development did not progress as hoped: [3], [13]
The relationship between Dir1 and Dir2, the 50-50 controlling minds and shareholders of the relevant entities, irrevocably broke down: [1], [4], [5]
The Court found it was just and equitable that the various companies be placed into liquidation on the just and equitable basis, and receivers appointed to the associated trusts: [10]
The sole area of dispute was the identity of the liquidator(s) to be appointed: [14]
Generally, a Court will appoint a plaintiffâs choice of liquidator, though will bear in mind partiality, fitness, qualification, cost, perceived independence etc. It is for a defendant to argue for a departure from that course: [15] - [18]
The different hourly rates of the parties proposed IPs were found to be likely to lead to significantly different cost outcomes: [19]
An argument that one IP had previous experience with marinas was âvery thinâ - especially noting that this venture did not proceed and that the Court was not provided with evidence of how this previous experience might assist: [20]
The difference in the price of flights from Sydney or from Brisbane (to the ventureâs Bundaberg location) was a âminor considerationâ, especially noting the Sydney IPs had offices in Brisbane staffed by employees who could assist: [21]
The Court was troubled by the perception (*perception* only - no finding or criticism was made) of possible conflict where the Dsâ proposed IP would likely use the advisory services of a firm who was the major shareholder in a proposed purchaser of the marina: [22]
The Cos were wound up on the J and E basis, and relevant trust assets placed in receivership, with the Psâ preferred IPs appointed: [24], [25]___
#auslaw #coffeeandacasenote #gravamenPlease follow James d'Apice, Coffee and a Case Note, and James' firm Gravamen wherever you can!www.gravamen.com.au
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