FEDERAL COURT OF AUSTRALIA Dyinda Pty Ltd ACN 009 020 526 v First Distribution Services Ltd [2004] FCA 12 REMEDIES – interlocutory injunction – proceedings alleging misleading or deceptive conduct and breach of fiduciary duty by co-joint venturer – joint venturer entering into agreement and acquiring controlling interest from one co-joint venturer without knowledge of others – long delay in commencing proceedings – whether serious question to be tried – balance of convenience – discretionary factors – proposed acquisition of business by third party – claim for interlocutory relief dismissed – conditions attached and directions for disclosure to co-joint venturer made Trade Practices Act 1974 (Cth) s 52 Corporations Act 2001 (Cth) s 1041H Australian Securities and Investment Commission Act 2001 (Cth) s 12DA International Companies Act 1987 (Samoa) s 16(2) United Dominions Corporation Ltd v Brian Pty Ltd (1984) 157 CLR cited Yunghanns v Elfic Pty Ltd (2000) 1 VR 92 cited Brunninghausen v Glavanics (1999) 46 NSWLR 538 cited Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599 cited Port Kennedy Resorts Pty Ltd & Ors v Huat & Ors [2000] WASCA 328 cited Hopkins Professional Services Pty Ltd v Foyster Holdings Pty Ltd (2001) 39 ACSR 519 cited Re Medefield (1977) 2 ACLR 406 cited DYINDA PTY LTD ACN 009 020 526, WINIAM PTY LTD ACN 009 020 277 and GILDEROY PTY LTD ACN 009 020 446 v FIRST DISTRIBUTION SERVICES LTD, BADGERUP NOMINEES PTY LTD ACN 008 821 636 and ANTHONY CARMIGNANI W238 of 2003 FRENCH J 15 JANUARY 2004 (Publication of Reasons) PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W238 OF 2003 BETWEEN: DYINDA PTY LTD ACN 009 020 526 FIRST APPLICANT WINIAM PTY LTD ACN 009 020 277 SECOND APPLICANT GILDEROY PTY LTD ACN 009 020 446 THIRD APPLICANT AND: FIRST DISTRIBUTION SERVICES LTD FIRST RESPONDENT BADGERUP NOMINEES PTY LTD ACN 008 821 636 SECOND RESPONDENT ANTHONY CARMIGNANI THIRD RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 12 JANUARY 2004 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The claims for interlocutory relief against the Second and Third Respondents are dismissed without prejudice to the right of the Applicants to apply to renew those claims. 2. Costs of the claims for interlocutory relief against the Second and Third Respondents are reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W238 OF 2003 BETWEEN: DYINDA PTY LTD ACN 009 020 526 FIRST APPLICANT WINIAM PTY LTD ACN 009 020 277 SECOND APPLICANT GILDEROY PTY LTD ACN 009 020 446 THIRD APPLICANT AND: FIRST DISTRIBUTION SERVICES LTD FIRST RESPONDENT BADGERUP NOMINEES PTY LTD ACN 008 821 636 SECOND RESPONDENT ANTHONY CARMIGNANI THIRD RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 13 JANUARY 2004 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Upon the representatives of the First Respondent on the board of T.C.C. Holdings Pty Ltd, namely David Brian Argyle, Gavin John Argyle and David Anthony Argyle, undertaking, in a form acceptable to the Court, not to permit T.C.C. Holdings Pty Ltd to enter into an agreement pursuant to the offer in confidential exhibit DBA22 unless it is expressed to be conditional upon the obtaining of an independent expert opinion that the proposed consideration is fair and reasonable, the claim for interlocutory relief is dismissed. 2. The said representatives of the First Respondent on the board of T.C.C. Holdings Pty Ltd are to provide Salvatore Iannello, Silvino Cinalli and Anthony Iannello with a copy of the confidential exhibit DBA22 forthwith and any counter-offer made by T.C.C. Holdings Pty Ltd at the time that it is made and a copy of any independent expert opinion obtained by T.C.C. Holdings Pty Ltd pursuant to the undertaking, as soon as practicable after it is received by T.C.C.Holdings Pty Ltd. 3. The provision of the documents to the persons mentioned in the preceding order is to be upon the basis that they treat these documents as confidential and not disclose them to any other person except for the purpose of obtaining legal or accounting advice and then only upon the basis that the persons from whom such advice is sought undertake to treat the information so disclosed as confidential and not disclose it to any other person. 4. Costs of the claim for interlocutory relief as between the Applicants and the First Respondent are reserved. 5. There be liberty to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W238 OF 2003 BETWEEN: DYINDA PTY LTD ACN 009 020 526 FIRST APPLICANT WINIAM PTY LTD ACN 009 020 277 SECOND APPLICANT GILDEROY PTY LTD ACN 009 020 446 THIRD APPLICANT AND: FIRST DISTRIBUTION SERVICES LTD FIRST RESPONDENT BADGERUP NOMINEES PTY LTD ACN 008 821 636 SECOND RESPONDENT ANTHONY CARMIGNANI THIRD RESPONDENT JUDGE: FRENCH J DATE: 13 JANUARY 2004 PLACE: PERTH REASONS FOR JUDGMENT Introduction 1 For more than 20 years, Dyinda Pty Ltd, Winiam Pty Ltd and Gilderoy Pty Ltd, the three applicants, carried on a business of corrosion control including the sand blasting and painting of heavy industrial plant. The business has been conducted on the basis that the applicants and a fourth company, Badgerup Nominees Pty Ltd (Badgerup), which is the second respondent, operated it through a 50% interest while other entities held the remaining 50% interest as 'passive investors'. In 1997, the existing 'passive investors' a group of four companies, sold their interest to First Distribution Services Ltd (FDS) which is the first respondent. The result was that the Operators and FDS had equal interests which were held through a unit trust known as the Aveve Unit Trust. 2 In 1999, the three applicant companies and the fourth member of the operating companies, Badgerup, fell out because of a dispute between its director, Mr Carmignani, and the controllers of the applicants. The applicants say they then entered into negotiations to buy out Badgerup's interests and made an oral agreement reflecting a buy-out on 16 May 2001. That agreement, which included a provision for the transfer of land from Badgerup to the applicants, was never reduced to writing and apart from the transfer to Mr Carmignani of a Holden Calais motor vehicle, was not performed. 3 The applicants say that FDS knew about the agreement and consented to it. Nevertheless on 29 November 2001, FDS entered into an agreement with Badgerup and Mr Carmignani under which it effectively acquired Badgerup's interests. Persons associated with FDS have been appointed as directors of TCC Holdings Pty Ltd (Holdings) and have acquired Mr Carmignani's share in that company. FDS has acquired Badgerup's interest in the land on which the business is operated and has set in train a procedure under which it can acquire at least half of Badgerup's units in the Aveve Unit Trust. 4 Since that time Holdings, effectively controlled by the Argyle interests, has been seeking a purchaser or merger partner for the business. An offer was made on 11 January 2004 by a third party which expires on 26 January 2004. The applicants commenced proceedings against FDS, Badgerup and Mr Carmignani on 10 December 2003 and claim interlocutory relief against each of them. In respect of FDS, the applicants say that it has engaged in misleading or deceptive conduct contrary to provisions of the Trade Practices Act 1974 (Cth), the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). They also allege that FDS has breached its fiduciary duty to them as a co-joint venturer in the business. 5 They claim against Badgerup and Mr Carmignani specific performance of the agreement made on 16 May 2001. 6 The claim for interlocutory relief has only proceeded as against FDS which disputes that it was aware of the agreement of 16 May 2001. It also asserts that the agreement is not enforceable and is in any event, in part, illegal. 7 The questions raised on the claim for interlocutory relief are whether there is a serious question to be tried, where the balance of convenience lies and whether, in any event, in the exercise of its discretion, the Court should decline to grant relief. In the circumstances I have come to the view that although there are arguable questions to be tried between the applicants and FDS, the balance of convenience is not strongly in favour of the applicants and their delay in bringing proceedings militates against the grant of interlocutory relief as a matter of discretion. For those reasons I have decided to dismiss the claim for interlocutory relief subject to an undertaking offered by FDS and certain directions to FDS to make disclosure to the applicants of the terms of the offer which has been made. Factual Background 8 The following factual background is based upon affidavit material filed in connection with the claim for interlocutory relief. Not all of that material would be admissible at the trial of the action. Some of it is contested. To the extent that findings of fact are made at this stage of the proceedings, they are provisional and for the purposes of the claim for interlocutory relief only. 9 Total Corrosion Control Pty Ltd (TCC) carries on the business of sand and grit blasting and painting heavy industrial equipment and plant, erection of scaffolding in relation to such plant and applying rubber linings and other surface treatments. It has been in operation since 1982. Initially TCC carried on the business as trustee of the Aveve Unit Trust constituted by a Deed of Trust dated 25 March 1982. The precise distribution of units across unit holders at that time is not clear from the papers. However, from 6 February 1986 the unit holders under the Trust comprised two groups, one an operating group (the Operators) which provided personnel for the conduct of the business and the other a group of 'passive investors'. The Operators comprised the three applicants and the second respondent. Dyinda Pty Ltd, the first applicant, was controlled by Sam Cinalli and his wife. Winiam Pty Ltd, the second applicant, was controlled by Anthony Iannello and his wife. Gilderoy Pty Ltd, the third applicant, was controlled by Terry Iannello and his wife; and Badgerup, which is the second respondent, was controlled by Anthony Carmignani. The passive investors, so called, were four companies associated with the steel fabrication business of United Construction Pty Ltd. They were Bontempo Nominees Pty Ltd, Giovani Nominees Pty Ltd, Trettel Nominees Pty Ltd and Santino Nominees Pty Ltd. By their participation as unit holders in the Aveve Unit Trust and so, indirectly in the business of TCC, they obtained the advantage of an interest in the grit blasting and painting side of the industries which were activities in which United Construction had never actively been involved. They built facilities at Office Road, Kwinana, title to which was divided into shares held by the unit holders in the same proportion as their holdings. The business of TCC was carried on from those premises and is still carried on there today. The cost of construction of the premises was paid for by TCC performing works for United Construction. The contribution by the Operators was said to be to put up the money to get the business running and to supply personnel to operate it. 10 Terry Iannello was managing director of TCC. Sam Cinalli was an executive director and Anthony Carmignani acted as both director and secretary. The Operators and the passive investors, otherwise known as the United Construction Participants, had equality of control of the business between them. While TCC operated as trustee company of the Aveve Unit Trust, its shares remained in the name of its previous owners, it having been acquired as a shelf company. 11 On 31 October 1989, TCC retired as trustee of the Aveve Unit Trust and Holdings was appointed. Its only directors and shareholders were Calogero Rubino representing the United Construction Participants and Anthony Carmignani representing the Operators. In its new capacity as trustee of the Aveve Unit Trust, Holdings sold the business of Total Construction Control to the former trustee, TCC, in consideration of all of the issued shares of TCC. TCC also paid Holdings cash for other assets comprising stock and work-in-progress, book debts, plant and equipment. The sole asset of the Aveve Unit Trust therefore became the issued shares in TCC which in turn became the owner and operator of the business. Carmignani as the holder of one of the two issued shares in Holdings and as one of two directors of that company represented the Operators' interests while Rubino represented the interests of United Construction Participants. 12 This 'tightly controlled joint venture' operated relatively harmoniously and at times financially successfully until 1997. At that time the United Construction Participants indicated they wanted to sell their interest. On 2 July 1997, they sold their 36 units in the Aveve Unit Trust to the first respondent, FDS. The sale followed inquiries and negotiations conducted by Anthony Iannello and his brother Terry with a view to finding a purchaser for the interests of the United Construction Participants. They were introduced by Michael Perrott, who had been a director of an industrial painting company, Gardner Perrott, to David Anthony Argyle who was associated with FDS. According to Anthony Iannello, Mr Argyle said that he and the persons he represented did not want to be involved in management of the business but would be supportive of it and through his brother, Gavin Argyle, a stockbroker, and his father, David Brian Argyle, they could provide financial support for the business. FDS was proposed as the corporate vehicle by which the Argyle family would buy into the business. The company bought into the business on 2 July 1997 acquiring the 36 units in the Aveve Unit Trust held by the United Construction Participants. This gave the Operators and FDS an equality of Holdings in the Trust. Mr Rubino transferred his share in Holdings to FDS and resigned as a director of that company. 13 According to Anthony Iannello's affidavit, Ron Gajewski was appointed a director of Holdings in place of Mr Rubino as representative of FDS. This however is not borne out by the company records which indicate that Terry Iannello replaced Mr Rubino as a director of Holdings when he resigned. Mr Gajewski was never a director of Holdings but did become a director of TCC on 4 December 2001. 14 In 1999 a dispute arose between the three applicant companies and Mr Carmignani, which led to his resignation as director and secretary of both Holdings and TCC on 19 January 2000. The single share which he held in Holdings on behalf of the Operators remained registered in his name and his company, Badgerup, retained ownership of its eight units in the Aveve Unit Trust and its interest in the land. Sam Cinalli was appointed a director of Holdings in place of Mr Carmignani. 15 According to Anthony Iannello, negotiations then occurred in relation to the buy out of Badgerup's interests in the Aveve Unit Trust and in the factory land and the transfer by Mr Carmignani of the share which he held in Holdings. According to Mr Iannello, following much discussion between himself and Terry Iannello and the Argyles, they orally agreed on 13 March 2001 that the three applicant companies would purchase the Badgerup interests comprising its interests in the Aveve Unit Trust and in the land subject to the applicant companies being able to negotiate terms with Mr Carmignani on behalf of Badgerup. 16 Anthony Iannello says that on 4 May 2001 he and Sam Cinalli met with Mr Carmignani at the Fremantle Esplanade Hotel. At the conclusion of the meeting he put an offer to Mr Carmignani which was to pay Badgerup $50,000 for the acquisition of its interests in the land and the Unit Trust and in consideration of the transfer of Mr Carmignani's share in Holdings to Terry Iannello. He also offered to procure the transfer of title by TCC to Mr Carmignani, or as he might direct, of a Holden Calais which Mr Carmignani had used as his company motor vehicle and to forgive a debt said to be owed to TCC by Mr Carmignani. Mr Carmignani said he would think about the offer and get back to them. According to Anthony Iannello, on 16 May 2001, he spoke to Mr Carmignani on the phone and after some further negotiation Mr Carmignani orally accepted his offer. Mr Iannello says he undertook to get Mr McKenzie, a solicitor with Huston Partners, to finalise a draft formal contract which he had already produced and also a confidentiality and debt forgiveness agreement which he had already drafted whereby TCC would forgive Mr Carmignani for his indebtedness to the company in respect of funds which he had allegedly misappropriated and otherwise. 17 The elements of the oral agreement of 16 May 2001 were said to be as follows. It was an agreement between the three applicant companies on the one hand and Badgerup and Mr Carmignani on the other, that the applicant companies would: (a) pay Badgerup $50,000; (b) cause TCC to transfer to Mr Carmignani or his nominee a Holden Calais motor vehicle for no further consideration; (c) cause TCC to enter into an agreement by which it would forgive Mr Carmignani his indebtedness to TCC on account of or with respect to funds which the applicant companies allege he had misappropriated from TCC. This was to be in return for the transfer of: (d) Badgerup's interest in the Aveve Unit Trust and the land to the applicant companies; and (e) Mr Carmignani's share in Holdings to Mr Terry Iannello. 18 At a board meeting of TCC held on 23 May 2001, Anthony Iannello announced the agreement. None of the Argyles was present. However Giuseppe Leone, the TCC accountant who had been nominated by FDS and who was closely connected with the Argyles, was present. Mr Iannello said that, shortly after 16 May 2001, he had a telephone conversation with Gavin Argyle and also spoke with David Argyle. He informed them of the terms of the agreement reached with Mr Carmignani on behalf of Badgerup. He also said that he was informed by Terry Iannello that he also spoke with those people and told them of the terms of the agreement. According to Anthony Iannello, Gavin Argyle congratulated him on reaching the agreement. Shortly afterwards at the TCC premises on a Saturday morning David and Gavin Argyle met Sam Cinalli, Terry Iannello, Anthony Iannello and Giuseppe Leone. According to Anthony Iannello, at the commencement of the meeting both of the Argyles shook his hand and congratulated him and Sam Cinalli on the 'deal' with Mr Carmignani and expressed their view that it was a deal well done. Anthony and Terry Iannello then left with Mr McKenzie and instructed him to finalise the proposed draft agreement. 19 There was a delay in the preparation of the formal documentation for the agreement which had not been produced to the applicants for execution by 29 November 2001. On that day, Mr Carmignani rang Anthony Iannello and asked whether he could collect some personal documents he had left behind at the TCC premises. Anthony Iannello told him to ring Terry Iannello. He also told Mr Carmignani that the applicants would be in a position to pay Badgerup the $50,000 owing under the agreement by Christmas of that year. Mr Carmignani said that would be fine. 20 In the meantime on 29 November 2001, and inconsistently with the alleged oral agreement, binding Heads of Agreement were entered into between FDS, Badgerup and Mr Carmignani. Under the Heads of Agreement, Mr Carmignani agreed to sell his one share in Holdings to FDS. Badgerup agreed to sell its eight units in the Aveve Unit Trust and its interest in the land to FDS. The following day, three of the Argyle family, David Brian Argyle, Gavin John Argyle and David Anthony Argyle, were appointed as directors of Holdings by Badgerup and Mr Carmignani. A transfer notice was issued under the Aveve Unit Trust by Badgerup to Holdings giving notice that Badgerup desired to transfer eight units in the Trust for $12,500 per unit. On 3 December 2001, a share transfer form was executed between Mr Carmignani and FDS to transfer Mr Carmignani's one single share in Holdings to FDS. 21 A notice of meeting of Holdings was sent out on 4 December 2001 together with a notice of meeting of TCC. At the Holdings' meeting the following resolutions were passed: (a) Gavin Argyle be appointed as chairman; (b) subject to the payment of stamp duty the transfer of Mr Carmignani's share be approved for registration in the Register; (c) upon registration of the transfer the existing share certificates in Holdings be cancelled and a new share certificate for two shares be issued in favour of FDS and that the company secretary be directed to issue the share certificate to the person entitled to it; (d) Holdings cause TCC via a sole shareholder's resolution to appoint David Anthony Argyle and Ron Gajewski as directors of TCC; (e) Holdings procure all unit holders to waive their pre-emptive right provisions in favour of a mechanism by which FDS would be offered four units and the remaining four units would be offered to other unit holders in proportion to be agreed and decided among themselves; (f) Holdings was actively to seek out a purchaser or merger partner for the business carried on by TCC. At a meeting of TCC held on the same day it was resolved that Terry Iannello be appointed as chairman and that TCC allow a potential purchaser or merger partner of the business of TCC to conduct a proper due diligence. 22 On 19 December 2001, a transfer of Badgerup's interests in the property at Office Road, Kwinana was executed in favour of FDS. The Commencement of the Proceedings 23 On 10 December 2003, the applicants commenced the present proceedings. A claim for urgent interlocutory relief was endorsed on the application and came on for hearing on 12 January 2004. The original Application was amended in Court on 12 January 2004. 24 The applicants' claim the following relief against FDS: '1.1 damages and/or other relief arising out of the misleading or deceptive conduct and/or unconscionable conduct in breach of the Trade Practices Act 1974 ("TPA") and/or the Corporations Act 2001 and/or the Australian Securities and Investments Commission Act 2001 ("ASIC Act") engaged in by the first respondent and constituted by acts and omissions of the first respondent in connection with the entry by the second respondent and the third respondent into agreements with the applicants on or about 16 May 2001 for the sale by the second respondent in its capacity as trustee of the Carmignani Family Trust to the applicants of 8 units in the Aveve Unit Trust and of the second respondent's interest in land and premises at 424 Office Road, Kwinana, Western Australia and for the transfer by the third respondent to Salvatore Iannello, to hold on trust for the applicants, of one fully paid ordinary share registered in the name of the third respondent in the issued capital of TCC Holdings Pty Ltd ACN 009 410 913, the trustee of the Aveve Unit Trust ("the Share"), and in connection with: 1.1.1 the partial performance of the said agreements; 1.1.2 the refusal or default by the second respondent and the third respondent in performing their respective obligations under the agreements; and 1.1.3 the transfer by the second and third respondents to the first respondent of assets the subject of those agreements; 1.2 further or alternatively, damages for intentional interference in, and conspiracy with the third respondent to interfere in, the performance by the second respondent of its agreement with the applicants; 1.3 further or alternatively, damages for intentional interference in the performance by the third respondent of his agreement with the applicants regarding the Share; 1.4 further or alternatively, an injunction to prevent or equitable compensation for breach of fiduciary duty arising from the first respondent's conduct as partner of, or joint venturer with, the applicants in preferring its interests to the applicants' interests; 1.5 further or alternatively, an account of the benefit received by reason of the conduct of the respondent referred to in paragraph 1.4 above; 1.6 interest pursuant to s 51A of the Federal Court Act 1976; 1.7 costs.' They also claim relief against Badgerup by way of specific performance of the oral agreement of 16 May 2001 which they say has been partly performed. In the alternative they claim damages for breach of that agreement and further and alternatively, relief analogous to specific performance pursuant to the Trade Practices Act and/or the Corporations Act and/or the Australian Securities and Investments Commission Act. They claim against Mr Carmignani on the basis of his accessorial involvement in contraventions of the Trade Practices Act by Badgerup, damages for intentional inference in, and conspiracy with, FDS to interfere in the performance by Badgerup of its agreement with the applicants by procuring breach of that agreement. They also claim against Mr Carmignani specific performance and alternatively damages for breach of the oral agreement of 16 May 2001 under which he was to transfer his share in Holdings to Terry Iannello. The Claim for Interlocutory Relief 25 Although there were claims for interlocutory relief against all respondents, the claims for such relief against Badgerup and Mr Carmignani were dismissed without opposition at the hearing on the basis that such dismissal would not affect the right of the applicants to renew a claim for interlocutory relief against those respondents if it became necessary to do so. Costs were reserved in that respect. 26 The claim for interlocutory relief against FDS by way of injunction was in the following terms: '(a) An order restraining, until further order, the first respondent, whether by itself, its officers, servants, agents or otherwise from: (i) transferring, assigning, selling or agreeing to do any of the same, to other than the applicants jointly or as they may direct the whole or any of, or any interest in, 8 units in the Aveve Unit Trust, the 8/72 interest in the Land comprised in certificate of title volume 2110 folio 778, volume 2110 folio 779, volume 2110, folio 780 and volume 2110 folio 781 and the Share the subject of a written agreement undated but titled "Binding Heads of Agreement" between each of the respondents and, with respect to the Share, the subject of a purported transfer by the third respondent to the first respondent; (ii) voting the Share; and (iii) causing or permitting its representatives on the board of TCC Holdings Pty Ltd to vote in favour of transferring, assigning, selling or agreeing to do any of the same, the whole or any of, or any interest in, the shares held by TCC Holdings Pty Ltd in Total Corrosion Control Pty Ltd or for any change in the constitution of the board of Total Corrosion Control Pty Ltd, unless with the prior written consent of the applicants.' The usual undertaking as to damages was offered by the applicants. The Causes of Action 27 The applicants contend that FDS has surreptitiously, acquired the interests of Badgerup and Mr Carmignani in the Aveve Unit Trust and in Holdings so giving FDS control of Holdings and TCC and relegating the applicants to a minority position. Anthony Iannello says in his affidavit that about a fortnight ago Brian Argyle spoke with himself, Terry Iannello and Sam Cinalli and advised that FDS wanted TCC to be sold into an ASX listed shell company in conjunction with the acquisition by that shell of another business or associated company called FerroBlast. That is a competitor of TCC and the acquisition would constitute a merger. According to Anthony Iannello this would be a most inappropriate and detrimental step for the business and the applicant companies are strongly opposed to it. One immediate detrimental consequence would be that once the market place becomes aware that TCC has linked itself with FerroBlast, many of the contracts for which TCC is currently tendering would be put at risk. 28 He says he is most concerned that, because FDS and its representatives purport to have control of Holdings at a board level and therefore are in a position to deal with Holdings' assets and because of the enthusiasm with which Brian Argyle put forward the proposition for the merger, there is a distinct risk that unless FDS is restrained steps could be taken by it against the wishes and rights of the applicants to deal with the shares in TCC or to deal with the assets of the business of TCC after making changes to the constitution of its board. Under the Memorandum and Articles of Association of TCC, directors can be appointed and removed by ordinary resolution of the shareholders which, in this case, is Holdings. 29 The applicants say that there is a serious question to be tried whether FDS has engaged in misleading or deceptive conduct in contravention of one or more of s 52 of the Trade Practices Act, s 1041H of the Corporations Act or s 12DA of the Australian Securities and Investments Commission Act. They also say that there is a serious question to be tried as to the availability of the range of remedies available under those statutes to unravel the effect of FDS's conduct and restore the equal interests in Holdings and the Aveve Unit Trust which previously existed between themselves and FDS. Further, and in the alternative, they contend that the applicants and FDS were fiduciary joint venturers. They say the evidence shows a long-standing, tightly held joint venture within a corporate and trust structure. The acquisition of the interests of Badgerup and Mr Carmignani in Holdings and in the Aveve Unit Trust by FDS in the circumstances constituted a preferring by FDS of its interests and a breach of its fiduciary duty. The applicants rely upon the judgment of the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1984) 157 CLR 1 at 10-11 and Yunghanns v Elfic Pty Ltd (2000) 1 VR 92 at 104-105. The former case is invoked for the proposition, in the joint judgment of Mason, Brennan and Deane JJ, that the concept of 'joint venture' is not technical nor defined by a settled common law meaning. Their Honours said: 'As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture … will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.' In Yunghanns, Warren J was concerned with an application by the plaintiffs for an order allowing them to inspect documents in respect of which legal professional privilege was claimed by certain of the defendants. The plaintiffs claimed a joint interest in the relevant communications. It was in this context that her Honour had regard to the UDC judgment. For the purposes of the application before her it was not necessary to determine finally whether or not there was a joint venture between the parties. That was a matter for ultimate determination at trial. There was sufficient evidence to enable her to be satisfied that there was a prima facie case of a joint venture between them and a fiduciary duty owed by each to the other arising from that relationship. 30 The applicants also rely upon Brunninghausen v Glavanics (1999) 46 NSWLR 538. In that case the Court of Appeal held that the office of a director in a proprietary company may, at least for some purposes, be a fiduciary one in relation to the shareholders of the company. A fiduciary duty may arise where there are negotiations for a takeover or acquisition of the company's business requiring the directors loyally to promote the joint interests of all shareholders. In that case the sole effective director and majority shareholder in a proprietary company was said to have taken advantage of his special knowledge of the proposed sale of the company business to acquire shares of the only other shareholders at a gross undervalue without disclosure of the negotiations for sale. 31 As to the balance of convenience, it is submitted that, absent interlocutory relief, the applicants will lose a controlling interest, to the extent that they could block an unacceptable proposal, in a business which they have carried on for more than twenty years. The business, it is said, is likely to be or may be harmed. The applicants will be forced into a minority position in a listed company with their shares held in escrow. They will be unable to vindicate their rights. Many of the remedies they seek will not be available if interlocutory relief is not granted. There is no prejudice to FDS. 32 It is also submitted that where there is a serious question about the control of a company and an alleged agreement regulating that control, the status quo would preserve the allegedly agreed position until trial. Reference was made to Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599 at 605-607; Port Kennedy Resorts Pty Ltd & Ors v Huat & Ors [2000] WASCA 328 at [59] and [60] and Hopkins Professional Services Pty Ltd v Foyster Holdings Pty Ltd (2001) 39 ACSR 519 at 523. In the case of a company operating as a quasi-partnership, the same principle is said to apply and reliance is placed on Re Medefield (1977) 2 ACLR 406 at 409-410. The balance of convenience is said therefore to favour maintaining equality between the applicants and FDS. 33 The applicants argue that damages will be no adequate compensation for loss of control. They also contend that the location of FDS's incorporation is unclear. In the event, this was resolved by an exhibit to the affidavit of David Argyle sworn 12 January 2004 showing that FDS is registered in Samoa as a redomiciled company pursuant to the provisions of s 16(2) of the International Companies Act 1987 (Samoa). Evidence for FDS 34 There is a factual dispute raised on the evidence through the affidavit of David Brian Argyle sworn 12 January 2004 and filed on behalf of FDS. In particular he referred to Anthony Iannello's contention that a meeting took place at which his sons, David Anthony Argyle and Gavin Argyle congratulated Sam Cinalli on the agreement that they had made with Mr Carmignani and expressed the sentiment that it was a 'deal well done'. David Brian Argyle said he was informed by Gavin Argyle and believed that this did not take place and that the primary purpose of the meeting was the discussion of other unrelated business. Anthony Iannello had made a passing reference to an arrangement with Mr Carmignani but did not discuss any terms. Neither of his sons had consented to or objected to the arrangement. Mr Argyle Snr denied that FDS concurred with any agreement with Mr Carmignani. In particular it did not agree to the transfer of the Holden Calais. He said he was also informed by Gavin Argyle and believed that he could not recall any conversation with Anthony Iannello or Terry Iannello in terms deposed to in par 22 of Anthony Iannello's affidavit. That paragraph of Anthony Iannello's affidavit referred to the telephone conversation which he claimed to have had with Gavin Argyle and David Argyle shortly after 16 May 2001 about the agreement with Mr Carmignani. 35 Mr Argyle Snr said it was only after the agreement of 16 May 2001 was entered into that he was informed of its existence. At no stage was he informed of, nor did he participate in, any negotiations with Mr Carmignani which may have led to the agreement. Neither of his sons was present at any board meeting of TCC on 23 May 2001. They informed him and he believed that it was only after the agreement was entered into that they were informed of its existence and, like him, they had not been informed of, or participated in, any negotiations with Mr Carmignani which may have led to the alleged agreement. He said that, on or about 29 November 2001, FDS had entered into binding Heads of Agreement with Badgerup and Mr Carmignani. At the time of execution of the agreement a deposit of $100,000 was paid to Badgerup. A further $50,000 was paid subsequently. At the time the agreement was executed Mr Carmignani was paid $1 for his share in the capital of Holdings. The Heads of Agreement has been lodged for assessment of stamp duty and it has been assessed. The stamp duty has not yet been paid as it is not due until 5 February 2004. There was an objection to the assessment in respect of the transaction. That has been resolved. On 30 November 2001 and pursuant to their powers under the constitution of Holdings, FDS and Mr Carmignani being collectively the registered owners of all the shares in Holdings, appointed Gavin John Argyle, David Anthony Argyle and David Brian Argyle as directors of Holdings. The only other directors at that time were Sam Cinalli and Terry Iannello. At the same time Badgerup issued a transfer notice under the Aveve Unit Trust Deed giving notice to Holdings that it desired to transfer the eight units it held in trust for $12,500 per unit. A copy of the transfer notice was exhibited to Mr Argyle's affidavit. A share transfer form was executed on 3 December 2001 between Mr Carmignani and FDS to transfer Mr Carmignani's share in Holdings to FDS. That form was stamped on 25 January 2002. 36 A notice of a meeting of directors for Holdings was issued on 4 December 2001. A copy was sent to Mr Georgiou of Jackson McDonald, acting for Terry Iannello and Sam Cinalli on 4 December 2001. Anthony Iannello and all the directors of Holdings attended the meeting on 4 December 2001 at which the board passed the resolutions which have been referred to earlier in these reasons. On the same day a meeting of the directors of TCC also took place. Anthony Iannello, Terry Iannello and Sam Cinalli attended the meeting. Terry Iannello proposed a resolution that TCC allow a potential purchaser or merger partner of the business of TCC to conduct a proper due diligence of that business. That resolution was passed unanimously. A resolution was also passed that Terry Iannello would be chairman of that meeting. 37 A transfer of land conveying Badgerup's interest in the premises located at Office Road, Kwinana to FDS was executed on 19 December 2001. A copy of the stamped transfer was exhibited to Mr Argyle's affidavit. It was registered on 14 March 2002. 38 A notice of a directors' meeting was issued for both Holdings and TCC on 31 December 2001 for meetings on 4 January 2002. Neither Terry Iannello nor Sam Cinalli attended those meetings. Those who attended were Gavin John Argyle, David Anthony Argyle and David Brian Argyle. At a meeting of Holdings held on 4 January 2002 it was resolved, inter alia, that: 1. Gavin Argyle be appointed as chairman of the meeting. 2. Holdings cause TCC to appoint Gavin John Argyle as a director of TCC. 3. The resolution in regard to pre-emptive rights passed at the previous meeting be revoked and replaced with resolutions consistent with the procedure set out in the Aveve Unit Trust Deed. 4. Any property of Mr Carmignani in the possession or control of Holdings be returned to Mr Carmignani. 5. Ron Gajewski and David Anthony Argyle be appointed to a sub-committee formed for the purpose of negotiating a sale, partial sale, merger or acquisition of the business of TCC. 39 At the meeting of TCC on the same day it was resolved, inter alia, that: 1. Gavin Argyle be appointed chairman of the meeting. 2. Any property of Mr Carmignani in the possession or control of TCC be returned to him. 3. Ron Gajewski and David Anthony Argyle be appointed to a sub-committee formed for the purpose of negotiating a sale, partial sale, merger or acquisition of the business of TCC. 40 In accordance with these resolutions, David Anthony Argyle and Ron Gajewski worked in conjunction with other members of the board of Holdings to find a suitable participant in the merger or acquisition of the business of TCC. In the event, a written offer was received, which was exhibited as a confidential exhibit to the affidavit of David Brian Argyle. The offer, which was subject to various conditions, requires acceptance by 26 January 2004. Broadly speaking it involves the acquisition of the TCC business by a listed company in consideration of the issue of shares in that company to unit holders in the Aveve Unit Trust. According to David Brian Argyle the consideration in the offer is well in excess of a number of offers which have been made by Anthony and Terry Iannello over the last few years to purchase FDS's units in the Aveve Unit Trust, the premises at Office Road, Kwinana and its shares in Holdings. In giving consideration to the offer, the majority of the board of Holdings intends to obtain an independent valuation by a suitable expert of both the shares Holdings holds in TCC and the shares of the offeror. 41 Senior counsel for FDS advised the Court that FDS would be prepared to give an undertaking to the Court that it would accept the proposed offer only on condition of a prior independent valuation of the TCC business and the proposed consideration. This in effect would constitute a counter offer. 42 The point was made in David Brian Argyle's affidavit, relevant to the interlocutory relief claimed, that the transaction contemplated in the offer did not require FDS to dispose of the share in Holdings which it had acquired from Mr Carmignani, the interest in the Kwinana premises or the units in the Aveve Unit Trust which it had respectively acquired and agreed to acquire from Badgerup. Nor did it require any change to the constitution of the board of Holdings. Further Contentions by the Applicants 43 The applicants' case with respect to misleading or deceptive conduct was formulated in the affidavit of Mr Iannello thus: '32. The fact that the respondents were during 2001 negotiating, and then entered into, the Heads of Agreement by which the first respondent would acquire assets which Carmignani had agreed, with the agreement of the first respondent, that Badgerup would sell and the applicants would purchase (ie the Badgerup Interest) as well as the Share, was not revealed to me by any of the respondents. I first became aware of the Heads of Agreement when I recently found a copy of it. I first became aware that some arrangement had been entered into by the respondents regarding the acquisition by the first respondent of units held by Badgerup in the Aveve Unit Trust and the Share on or about 3 or 4 December 2001. I was in fact told by Gavin Argyle at about that time that the first respondent had acquired all 8 of the Badgerup units in the Aveve Unit Trust but I now note from the Heads of Agreement that this was not the case. I am informed by Sam Cinalli and Terry Iannello and do believe that the first and third applicants had no greater knowledge of the situation than did I.' 44 Anthony Iannello said that he relied on the fact that the applicants' ownership position as unit holders in the Aveve Unit Trust had been strengthened by the agreement with Mr Carmignani to decide to cause his company Winiam Pty Ltd to advance in June 2001 a further $100,000 to TCC for use by it as working capital. Similar amounts were advanced at that time by the two other applicants. He says that the applicants now find that, because of the agreement secretly entered into behind their backs by the respondents for the acquisition by FDS of the Badgerup interest in the Aveve Unit Trust and the land and the Share, the applicants are in a materially worse position than they would otherwise be in. Conclusions 45 In my opinion, on the applicants' evidence, taken at its highest, a serious question may arise that FDS has engaged in misleading or deceptive conduct. Alternatively, it is reasonably arguable, on the applicants' case, that FDS has breached a fiduciary duty to them arising out of what was in substance a joint venture. I emphasise that in so saying I am taking the applicants' case at its highest and assuming in their favour facts which are disputed by FDS. Notwithstanding that view, I am not prepared to grant the relief sought. I am not satisfied that the balance of convenience favours the grant of interlocutory relief. Moreover the delay that has ensued since the applicants became aware of the essential elements of the arrangements of which they now complain, militates against the grant of relief. 46 There has evidently been a serious breakdown in relations between the applicants and FDS. The parties seem to have been stalemated for over two years. The interest which the applicants seek to protect is, at best on their view, an equal interest in a joint venture with FDS. The oral agreement for which they seek specific performance as against Badgerup and Mr Carmignani seems unlikely to proceed. Assuming that it is arguable that the agreement was part performed by the transfer to Mr Carmignani of a Holden Calais motor vehicle, discretionary considerations would affect the grant of specific performance not least, in this case, the lapse of time that has occurred since the agreement was made. 47 As was pointed out in the submissions for FDS the applicants knew: (a) on or about 3 December 2001 that Mr Carmignani had on 30 November 2001 voted his share in Holdings to appoint the Argyles as directors of Holdings; (b) on or about 3 December 2001 that Badgerup, on 30 November 2001, had served a transfer notice on Holdings; (c) on or about 4 December 2001 that: (i) Mr Carmignani transferred his share in Holdings to FDS; (ii) FDS intended to cause Holdings to appoint David Argyle and Ron Gajewski as additional directors of TCC; and (iii) FDS intended to cause Holdings to offer at least four units in the Aveve Unit Trust formally held by Badgerup to FDS. FDS submits that by virtue of these matters the applicants knew or ought reasonably to have known of the existence of some agreement fundamentally inconsistent with the alleged oral agreement and yet took no steps to enforce the alleged oral agreement until the commencement of this action some two years later. As to the balance of convenience, it is said that the applicants are seeking to restrain the entering into of a transaction at a time when they are not in a position to assess whether as unit holders in the Aveve Unit Trust the transaction is in their best interests. Only when a valuation report is obtained will they be in a position to make that assessment. Accordingly, the application is said to have been brought without consideration of the impact of the proposed transaction upon the applicants. The applicants cannot show any harm that will be done to them as a result of the proposed transaction. On the other hand, if the injunction succeeds Holdings would lose the opportunity of accepting an offer for the acquisition of TCC. 48 While the question of benefit or detriment to the applicants is not simply to be measured by the reasonableness of the offer now under contemplation, I am not satisfied, having regard to the legitimate interests of all parties, that it is appropriate to prevent FDS from proceeding to counter-offer on the basis which it has indicated. This will be subject to the undertaking offered on behalf of the representatives of FDS on Holdings being modified to an undertaking that they will not permit TCC Holdings to enter into any agreement unless it is expressed to be conditional upon first obtaining an independent expert opinion as to the fairness and reasonableness of the consideration offered. I will also make directions requiring relevant disclosures to Anthony and Terry Iannello and Mr Cinalli. 49 For the preceding reasons, the claim for interlocutory relief is dismissed upon the undertaking of the first respondent's representatives on Holdings to reply to the offer referred to in Exhibit DBA22 by way of a counter-offer conditioning any agreement upon the obtaining of an independent expert opinion that the consideration offered is fair and reasonable. I will also direct that the representatives of the first respondent on the board of Holdings make disclosure of the offer, the counter-offer and the independent opinion to Messrs Salvatore and Anthony Iannello and Mr Cinalli provided that they will be required to treat such disclosure as confidential save for the purposes of obtaining legal or accounting advice on a confidential basis. The form of orders initially proposed prior to the publication of these reasons has been modified after discussions with the parties and they are the orders that I will now make. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Acting Associate: Dated: 15 January 2004 Counsel for the Applicants: Mr JC Giles Solicitor for the Applicants: Solomon Brothers Counsel for the First Respondent: Mr J Gilmour QC with Mr RM Edel and Mr DKJ Skender Solicitor for the First Respondent: Gadens Lawyers Date of Hearing: 12 January 2004 Date of Judgment: 13 January 2004 Publication of Reasons: 15 January 2004