FEDERAL COURT OF AUSTRALIA Belfiglio v Jtec Pty Limited [2004] FCA 177 Corporations Act 2001 (Cth) ss 200E & 249G Trade Practices Act 1974 (Cth) s 87 EZIO BELFIGLIO, KEITH MURRAY & JOHN ROBINSON v JTEC PTY LIMITED & PANANSEER LIMITED N138 OF 2004 JACOBSON J 2 February 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N138 of 2004 BETWEEN: EZIO BELFIGLIO FIRST APPLICANT KEITH MURRAY SECOND APPLICANT JOHN ROBINSON THIRD APPLICANT AND: JTEC PTY LIMITED FIRST RESPONDENT PANANSEER LIMITED ACN 010 506 162 SECOND RESPONDENT JUDGE: JACOBSON J DATE OF ORDER: 2 FEBRUARY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: The application be dismissed. 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 N138 of 2004 BETWEEN: EZIO BELFIGLIO FIRST APPLICANT KEITH MURRAY SECOND APPLICANT JOHN ROBINSON THIRD APPLICANT AND: JTEC PTY LIMITED FIRST RESPONDENT PANANSEER LIMITED ACN 010 506 162 SECOND RESPONDENT JUDGE: JACOBSON J DATE: 2 FEBRUARY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application for interlocutory relief to restrain the second defendant ("Pananseer") from putting to a meeting of shareholders a resolution seeking approval under section 200E of the Corporations Act 2001 (Cth) for the payment of a benefit to the plaintiffs. Alternative relief is sought in paragraph 6 of the application. The application was made to me this afternoon that the meeting is due to be held tomorrow in Brisbane at 11 am Brisbane time. 2 A substantial body of evidence was put before me but it is not possible, in the time available, to refer in my reasons for judgment to this evidence. Pananseer is a publicly listed company. The first defendant ("Jtec") is its wholly owned subsidiary. The plaintiffs are former employees of Jtec who were senior management and who negotiated a contract in about November 2000 for the payment to them of certain benefits totalling approximately $1.3 million as consideration for their continued employment with Jtec. 3 The evidence establishes that Mr Bogg, Chairman of Directors of Jtec and another director, Mr Ranson, agreed to the payment of the benefits in order to secure the retention of the plaintiffs as part of senior management at a time when Pananseer was in contractual negotiations with Ericsson for the purchase of a part of Jtec's business. The evidence of Mr Bogg and Mr Ranson is that they agreed to make the payments reluctantly because they considered that it was essential to make the sale to Ericsson in circumstances in which the alternative would have been the appointment of a voluntary administrator to Jtec which was then in financial difficulties. 4 Their evidence is that they regarded the statements made to them by the plaintiffs as threats which would have impeded the sale and that they regarded the sale as essential otherwise, as I have said, a voluntary administrator would have had to have been appointed. The evidence of Mr Bogg and Mr Ranson is that they were not aware in November 2000 of the provisions of section 200E of the Corporations Act which requires the approval of members to the resolution. 5 For reasons which it is unnecessary for me to set out, approval of members was not sought until 2 January 2004 when a notice convening a meeting of shareholders was dispatched. The plaintiffs, who are shareholders of Pananseer, must have received the notice very shortly after 2 January 2004, however, the plaintiffs contend that the disclosures made in the notice of meeting were misleading and that the notice failed to make full and fair disclosure of relevant matters to shareholders. 6 This contention was first made in a letter from the plaintiffs' solicitors, dated 22 January 2004. A response was made to this letter by the solicitors for Pananseer and Jtec on 27 January 2004 and these proceedings were commenced today. The application which was filed in Court this afternoon seeks by way of final relief, damages for breach of contract and certain alternative relief, all of which comprises claims for damages under the Trade Practices Act or at general law. 7 Mr White who appeared for Pananseer and Jtec conceded that there was a serious question to be tried but he did not admit that the notice convening the meeting was misleading. Indeed his contention was that it will be found on a final hearing that the notice was not misleading and that full and fair disclosure was made. Various submissions were made to me on the balance of convenience. Mr Condon who appeared for the plaintiffs submitted that since the evidence established that the cost of convening a further meeting would be approximately $10,000 to $12,000, an injunction should be ordered, notwithstanding the delay, because this is a comparatively small cost and it would avoid the need for litigation. 8 That is to say a further meeting would then be called at which a non‑misleading resolution can be put to the shareholders. But this overlooks the fact that Mr White contends that the present notice is not misleading thus, even if I were to grant an injunction, the trial would have to proceed on a final basis to determine whether the notice was misleading. I have considered all the other discretionary considerations put to me by Mr Condon. 9 It is unnecessary, given the shortness of time available, to deal with all of the submissions but it seems to me that in the exercise of my discretion I should refuse relief for two principal reasons. First, it is plain that damages must be an adequate remedy. This is the substantive relief the plaintiffs seek in the application. Second, the delay in bringing the application has not been adequately explained. There is no reason why a public company should be restrained by an application made at the eleventh hour from proceeding with a meeting which has been convened for tomorrow morning. Even if the resolution is not passed at the meeting the plaintiffs will still have their remedy in damages. 10 Importantly also if on a final hearing the resolution is found to be defective it seems to me that a further meeting will be called either by reason of an order made under section 249G of the Corporations Act or because this relief would be ordered under section 87(1)(a) of the Trade Practices Act 1974 (Cth). I therefore do not consider that the plaintiffs will be in any worse position as a result of the refusal of interlocutory relief. Mr Condon made one further submission which I should record. He put to me that if a further meeting is not ordered, that is to say even if the notice is found to be defective but relief under section 249G or section 87(1)(a) of the Trade Practices Act is not ordered and the plaintiffs are left to their remedy in damages at common law, there would be real difficulty in determining what the measure of damages might be. 11 However, I think that the short answer to this is that I accept Mr White's submission that this further point is answered by a finding that I have already made that if the resolution or the notice of resolution is found on a final hearing to be misleading the course which will inevitably follow will be that a further meeting will have to be convened and that a proper notice of resolution with full disclosure will then be put to the meeting. Accordingly, as I have already said, the plaintiffs are therefore no worse off. Accordingly, for the reasons that I have given above, the order that I propose to make is that the application for interlocutory relief contained in paragraphs 5 and 6 of the application filed this afternoon is dismissed. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.. Associate: Dated: 2 March 2004 Counsel for the Applicant: M Condon Counsel for the Respondent: S T White Date of Hearing: 2 February 2004 Date of Judgment: 2 February 2004