FEDERAL COURT OF AUSTRALIA Wheeler v Wheeler Bros Transport Pty Ltd [1999] FCA 725 KEVIN ANDREW WHEELER & ANOR v WHEELER BROS TRANSPORT PTY LIMITED & ORS NG 3042 OF 1998 LINDGREN J 1 JUNE 1999 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 3042 OF 1998 IN THE MATTER OF WHEELER BROS TRANSPORT PTY LIMITED ACN 002 016 864 BETWEEN: KEVIN ANDREW WHEELER and KRISTINA BARBARA WHEELER Applicants AND: WHEELER BROS TRANSPORT PTY LIMITED First Respondent NOEL STUART WHEELER Second Respondent NEVILLE STUART WHEELER Third Respondent NOEL STUART WHEELER First Cross Claimant NEVILLE STUART WHEELER Second Cross Claimant KEVIN ANDREW WHEELER Cross Respondent JUDGE: LINDGREN J DATE OF ORDER: 1 JUNE 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The motion brought by notice of motion filed on 23 March 1999 be dismissed. 2. The application and cross claim be dismissed. THE COURT NOTES THAT: 1. There is no order as to the costs of the motion or of the application or cross claim, to the intent that the parties bear their own respective costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 3042 OF 1998 IN THE MATTER OF WHEELER BROS TRANSPORT PTY LIMITED ACN 002 016 864 BETWEEN: KEVIN ANDREW WHEELER and KRISTINA BARBARA WHEELER Applicants AND: WHEELER BROS TRANSPORT PTY LIMITED First Respondent NOEL STUART WHEELER Second Respondent NEVILLE STUART WHEELER Third Respondent NOEL STUART WHEELER First Cross Claimant NEVILLE STUART WHEELER Second Cross Claimant KEVIN ANDREW WHEELER Cross Respondent JUDGE: LINDGREN J DATE: 1 JUNE 1999 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I am called upon to decide the question of costs in relation to a motion. Background 2 The third respondent ("Neville") is the father of the first named applicant ("Kevin") and of the second respondent ("Noel"). The second named applicant ("Kristina") is Kevin's wife. Neville and Noel owned two shares each and Kevin and Kristina owned one share each in the first respondent ("the Company"). The four individual parties were directors of the Company. There was deep division within the Company, Kevin and Kristina forming one party and Neville and Noel the other. In general meeting, Neville and Noel controlled two thirds of the votes but on the board of directors the voting power was evenly divided as between the two factions. 3 Kevin and Kristina commenced this proceeding on 13 March 1998. By their application, they sought, among other things, relief for oppression under s 260 of the Corporations Law or, in the alternative, an order for the winding up of the Company. Commendably, on 17 December 1998, the parties went to mediation before Deputy District Registrar Hedge. The mediation occupied eleven hours and ten minutes from 11.30am to 10.40pm. Fortunately, the time was not wasted and the parties reached agreement. "Heads of Agreement" were written out. They were signed by Neville, Noel, Kevin and Kristina. Later they were typed out and orders were entered and an agreement of the parties was noted. 4 The Court ordered, by consent and without admissions, first, that Noel and Neville purchase the shares of Kevin and Kristina pursuant to s 260(2)(e) of the Corporations Law; second, that the order for purchase be stayed pending the carrying into effect of an agreement between the parties, a copy of which was annexed to the order; and third, that the proceeding be stood over to 16 April 1999 "for directions", no doubt in the hope that the agreement about to be described would, by that date, have proceeded to settlement and the application could be dismissed. The Court noted the agreement annexed and the parties' further agreement that there be no order as to costs, that is, as to the costs of the proceeding. 5 I turn now to the terms of the agreement. Noel and Neville were to pay or see paid to Kevin and Kristina $100,000 "less an amount equivalent to the statutory entitlements of [Kevin] upon his separation from employment with [the Company]". This net amount was referred to as "consideration" but the agreement did not specify what it was consideration for. The agreement provided for payment of the consideration by instalments with the outstanding balance to be paid on or before Wednesday 31 March 1999. The Company, Noel and Neville, were to pay or procure payment to Kevin on or before 31 March 1999 of an amount equivalent to his statutory entitlements arising from his separation from employment with the Company. If the amounts payable were not paid by 1 May 1999, all the issued share capital, assets and undertakings of the Company were to be vested in a trustee for sale. Upon payment of the outstanding balance of the consideration to which I referred above, the Company, Noel and Neville were to procure the transfer from the Company of a certain motor vehicle to Kevin and Kristina. Finally, by the agreement, Kevin and Kristina entered into a restraint of trade covenant with the Company, Noel and Neville. 6 Oddly, the agreement was silent on the obligation of Kevin and Kristina to transfer their respective shares in the Company to Noel and Neville although it provided for Kevin and Kristina to resign as directors. I say "oddly" because it will be recalled that the consent order which provided for Noel and Neville to buy Kevin's and Kristina's shares was stayed pending the carrying into effect of the annexed agreement and this caused me to expect that the agreement would provide for a sale of the shares. 7 Under the agreement, the benefits which Noel and Neville were to provide were payment of the consideration and their procuring of the transfer of the motor vehicle by the Company to Kevin and Kristina. The benefits which Kevin and Kristina were to provide were their covenant in restraint of trade and, perhaps implicitly, the transfers of their shares. But the uncertainty over what was the true consideration for the transfers was to give rise to further disputation. 8 On 25 February 1999, Noel and Neville submitted two forms of transfer, one from Kevin to Neville in respect of Kevin's one share for a stated consideration of $62,554.31, and the other from Kristina to Noel in respect of Kristina's one share also for a stated consideration of $62,554.31. Kevin and Kristina rejected these forms of transfer as inappropriate to implement the agreement. Kevin and Kristina contended that the amount should be only $12,016 made up as follows as shown in their solicitors' letter dated 19 March 1999. Compensation payable $100,000 Less: Loan account said to be owed by the Company to Kevin and Kristina $48,310 Franked dividends said to be owed by the Company to Kevin and Kristina $39,674 87,984 $12,016 9 In the light of the dispute, Neville and Noel filed the present notice of motion on 23 March and it was returnable on 31 March, the date fixed for payment of the balance of the consideration. They sought specific performance of the Heads of Agreement and asked that if possible the motion be heard that day. I indicated that the notion of my giving a final hearing to a proceeding for specific performance on 31 March was an impossibility and, in any event, affidavit evidence by Kevin and Kristina as respondents to the motion had not been filed. The parties informed me that they wished the transaction to be settled that day and that the only dispute was as to the consideration to be shown in the share transfers. I raised the possibility that the consideration be shown as the implementation of the Heads of Agreement. The parties went away and settled the transaction, showing in each of the two share transfers the following as the consideration for the one share being transferred: "Heads of agreement and orders made on 17 December 1998 by the Federal Court New South Wales District in suit no. NG 3042 of 1998." I note that the share transfers have been stamped at the Office of State Revenue with a duty of ten dollars each. On settlement the following amounts were in fact paid: To Kevin $36,500 To Kristina $36,500 $73,000 10 I am informed that any questions of the suggested liability of the company to Kevin and Kristina on loan account and for franked dividends has not been pursued to date. I presume that Kevin's "statutory entitlements … upon his separation from employment with" the Company has been paid to him by the Company. Reasoning 11 Probably the Heads of Agreement document was prepared in circumstances of pressure and a sense of urgency late at night at the end of a lengthy mediation. The document did not identify a consideration for the two shares. In these circumstances, the only reasonable course for either side to take was to state the consideration as, essentially, the implementation of their agreement. Neither party had advocated this course prior to the return date of the motion but, happily, both adopted it on that date. 12 Kevin and Kristina were not entitled to insist that the consideration be shown as $12,016. It may be that all or most of the "consideration" referred to in the agreement was intended to be for the two shares, but I do not know and am not entitled to speculate. Even if the agreement when read with the order was for a sale of the two shares for "the consideration", that is, $100,000 minus Kevin's statutory entitlements, it was inappropriate to show $62,554.31 in each transfer – a total of $125,108.62. Even if each transfer had stated that the consideration stated in it was one and the same as the consideration stated in the other, the amount of $62,554.31 would have been different from the amount of $73,000 that was in fact paid on settlement. 13 It is common ground that in the light of the settlement of the transaction on 31 March, the motion is to be dismissed. But it is not being dismissed for reasons Kevin and Kristina have ever advanced. Nor have I sustained the position advocated by Noel and Neville. In relation to the costs of the motion, including the costs of the present argument on the costs of the motion, the appropriate course to adopt is that there should be no order as to costs to the intent that the parties bear their own costs of the motion. Conclusion 14 There will be an order that the motion be dismissed, and a notation that there is no order as to the costs of the motion. As I understand it, this will enable the proceeding generally also to be dismissed and there will be an order accordingly. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren J. Associate: Dated: 1 June 1999 Counsel for the applicants (respondents to the motion) and cross respondent: Mr M J Cohen Solicitor for the applicants (respondents to the motion) and cross respondent: Brown & Partners Counsel for the respondents (applicants on the motion) and first and second cross claimants: Mr I R Sanderson Solicitor for the respondents (applicants on the motion) and first and second cross claimants: Winston M Readford Date of hearing: 26 May 1999 Date of judgment: 1 June 1999