Federal Court of Australia Romanovski v RCG (Aust) Pty Ltd [2023] FCA 210 File number: VID 85 of 2023 Judgment of: MOSHINSKY J Date of judgment: 7 March 2023 Catchwords: CORPORATIONS – oppression – application for interlocutory injunction to restrain removal of the first plaintiff as a director – application for access to books or financial records of a company – application for discovery Legislation: Corporations Act 2001 (Cth), ss 198F, 247A, 290 Cases cited: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236 Re Medical Training and Development Pty Ltd [2021] NSWSC 981 Re Tai-Ao Aluminium (Australia) Pty Ltd (2004) 51 ACSR 465 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 36 Date of hearing: 6 March 2023 Counsel for the Plaintiffs: Mr A McClelland KC with Mr AR Kirby Solicitor for the Plaintiffs: Kennedys (Australasia) Partnership Counsel for the Fourteenth, Fifteenth, Sixteenth and Seventeenth Defendants: Dr COH Parkinson KC with Mr JWG Grant Solicitor for the Fourteenth, Fifteenth, Sixteenth and Seventeenth Defendants: HWL Ebsworth Lawyers Counsel for the First to Thirteenth Defendants: The First to Thirteenth Defendants did not appear ORDERS VID 85 of 2023 BETWEEN: BLAGOJCE (BILL) ROMANOVSKI First Plaintiff LEAROM PTY LTD (ACN 083 094 937) Second Plaintiff AND: RCG (AUST) PTY LTD (ACN 634 250 927) First Defendant CBS NSW (AUST) PTY LTD (ACN 634 390 962) Second Defendant CBS VIC COMMERCIAL PTY LTD (ACN 123 772 118) (and others named in the Schedule) Third Defendant order made by: MOSHINSKY J DATE OF ORDER: 7 MARCH 2023 THE COURT NOTES THAT: Counsel for the plaintiffs, on behalf of the plaintiffs, have given the usual undertaking as to damages. THE COURT ORDERS THAT: 1. Until the hearing and determination of this proceeding or further order of the Court: (a) the defendants must reinstate the first plaintiff's monthly payments of $54,500, with the balance of the February 2023 payment and the March 2023 payment to be paid by 15 March 2023; (b) the tenth and eleventh defendants by their servants, agents and howsoever otherwise are restrained from taking any step, or further step, to incur any further debt in respect of the Johnston Street and Clarendon Street Properties; (c) the first to thirteenth defendants (the Companies) by their servants, agents and howsoever otherwise are restrained from making any further use of the first plaintiff's registration as a building surveyor (including by the application of his signature on any documentation) in connection with any permit that any of those defendants and related Checkpoint entities (including those which are not defendants in the proceeding) are engaged to issue anywhere in Australia. 2. By 4.00 pm on 10 March 2023, the defendants provide the following documents to the plaintiffs: (a) a copy in native format of the data and documents held in the Companies' MYOB accounting software as at that date; (b) copies of any current insurance policies in the name of: (i) the first plaintiff; and/or (ii) one or more of the Companies naming the first plaintiff as an insured; (c) copies of all communications between one or more of the defendants and any insurance broker or insurer concerning any extant or new insurance claim or insurance notification concerning the first plaintiff; (d) copies of the constitutions for each of the Companies; (e) a copy of all historic emails in the email boxes for the email accounts: (i) diorg@check-point.com.au; (ii) naomir@check-point.com.au; (f) copies of the bank statements for each bank account or finance facility in the name of one or more of the Companies from 1 July 2021 to date. 3. By 4.00 pm on 17 March 2023, the defendants provide the following documents to the plaintiffs: (a) quotations, invoices and receipts in connection with the fit out of the Clarendon Street property; (b) documents relating to the finance facilities for the vehicles with the registration numbers ANW555, VJRB, AOS804 and JRB-03; (c) documents recording or evidencing the use, since 9 February 2023, of the first plaintiff's registration as a building surveyor (including by the application of his signature on any documentation) in connection with any permit that any of the Companies and related Checkpoint entities (including those which are not defendants in the proceeding) are engaged to issue anywhere in Australia; (d) a list of all proceedings to which the first plaintiff is a party in respect of projects of the Companies; (e) copies of all communications with Davidson Advisory and/or Lisa Brooks since 1 July 2022 concerning the removal of the first plaintiff as a director of, or from the management of, the Companies. 4. The Companies shall further provide the following documents to the plaintiffs by 4.00 pm on 17 March 2023 and the 15th day of each month thereafter (or the next business day if the 15th day is not a business day): (a) a copy in native format of the data and documents held in the Companies' MYOB accounting software as at that date; (b) the then most recent bank statements for each bank account or finance facility in the name of one or more of the Companies that have not already been provided; (c) any actual or projected cashflow and budgets prepared by that date and not already provided; (d) any month to date and year to date reports prepared in or for the foregoing month; (e) any management reports prepared in or for the foregoing month; (f) any distribution calculations prepared in or for the foregoing month. 5. For the avoidance of doubt, paragraph 4 above is intended to satisfy the Companies' obligation to make continuing discovery of the matters covered by paragraph 6(a) to (d) of the orders made on 24 February 2023. 6. In relation to paragraph 6 of the orders made on 24 February 2023 and paragraphs 2 to 4 above, the defendants provide a list of documents, verified by an affidavit, in accordance with rr 20.16 and 20.17 of the Federal Court Rules 2011. For the avoidance of doubt, it is sufficient for the list to identify categories of documents where it is impractical to list particular documents. 7. The parties seek to agree, by 4.00 pm on 17 March 2023, upon an independent valuer to value the plaintiffs' interest in the Companies. The parties notify the chambers of Justice Moshinsky of the details of any agreed valuer. If the parties are unable to agree, an independent valuer will be selected by a Registrar of the Court. 8. The parties confer and seek to agree orders for the conduct of an independent valuation, and provide any agreed orders to the chambers of Justice Moshinsky by 4.00 pm on 17 March 2023. 9. The matter be listed for a case management hearing on a date to be fixed. 10. The further hearing of the plaintiffs' interlocutory application be adjourned to a date to be fixed. 11. Costs be reserved. 12. There be liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MOSHINSKY J: Introduction 1 This is an application for interlocutory orders in a proceeding in which the plaintiffs allege oppression by the fourteenth to seventeenth defendants. The dispute concerns the affairs of the first to thirteenth defendants (the Companies). 2 The first plaintiff is Blagojce (Bill) Romanovski. He is the sole director of the second plaintiff, which is the trustee of his family trust. Mr Romanovski is a registered building surveyor. 3 The directors of most of the Companies are Mr Romanovski, Clement Giambattista (who is the fourteenth defendant) and Gavin Casey (who is the fifteenth defendant). Mr Romanovski, Mr Giambattista and Mr Casey, or their family trusts, are equal shareholders in most of the Companies. The sixteenth and seventeenth defendants are the trustees of family trusts of Mr Giambattista and Mr Casey. 4 In 1997, Mr Romanovski started a business that has grown into the group of companies that is known as Checkpoint Building Surveyors. Mr Giambattista joined the business in about 2001. Mr Casey joined the business in about 2005. 5 The Checkpoint Building Surveyors group operates a financially successful business across Australia. In the 2022 financial year, the group's revenue was approximately $33 million. The cash balance of the group as at 8 February 2023 was approximately $4.2 million. 6 Until 9 February 2023, Mr Romanovski was the Managing Director of and employed by CBS Administration (Aust) Pty Ltd, one of the companies in the group. 7 At about 5.30 pm on Thursday, 9 February 2023, Mr Giambattista and Mr Casey emailed a letter to Mr Romanovski, which alleged improper conduct by him. The letter stated that all of his authorities as Managing Director and his authority to act on behalf of the group of companies were revoked with immediate effect. The letter stated that he was summarily dismissed from his employment and that he no longer had permission to enter the business premises or access the business's computer systems, including accounting and banking records. 8 On 10 February 2023, a resolution was passed removing Mr Romanovski as a director of four of the Companies, referred to in the materials as the RCG-owned entities. 9 Mr Romanovski remains a director of the remaining Companies. However, meetings are scheduled to take place on 8 March 2023 (that is, tomorrow) to remove Mr Romanovski as a director of those Companies. 10 On 17 February 2023, the plaintiffs commenced this proceeding by originating process supported by an affidavit of Mr Romanovski dated 16 February 2023, prepared in accordance with the Court's Commercial and Corporations Practice Note (C&C-1). 11 The originating process included an application for interlocutory orders. 12 On 24 February 2023, the matter came before me (as Commercial and Corporations Duty Judge) for case management. On that occasion, I made timetabling orders for the hearing of the plaintiffs' application for interlocutory orders. I also made an order for production by the Companies of certain initial categories of documents. 13 The hearing of the plaintiffs' application for interlocutory orders took place yesterday, that is, Monday, 6 March 2023. In the lead-up to the hearing both sides provided a draft outline of submissions and proposed orders. The hearing occupied the whole of the day. Material before the Court 14 The plaintiffs rely on the following material in support of the interlocutory orders that they seek: (a) five affidavits of Mr Romanovski; and (b) a letter from HWL Ebsworth Lawyers (the solicitors for the fourteenth to seventeenth defendants) dated 5 March 2023 and an extract from the attachment to the letter. 15 The fourteenth to seventeenth defendants rely on the following material: (a) two affidavits of Mr Casey; (b) an affidavit of Jessica Minter, a solicitor; and (c) a bundle of professional indemnity insurance policies taken out by the Companies with Liberty Specialty Markets. Consideration 16 There are a number of discrete issues between the parties. I will consider each in turn. 17 It is convenient to start with the injunction orders that are sought by the plaintiffs. There is no dispute between the parties as to the applicable principles for the grant of an interlocutory injunction. It is necessary for the plaintiffs to establish a prima facie case to relief and that the balance of convenience favours the making of an interlocutory injunction: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623 per Kitto, Taylor, Menzies and Owen JJ; Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [19] per Gleeson CJ and Crennan J, at [65] per Gummow and Hayne JJ. 18 The first injunction order sought by the plaintiffs is an order that the defendants reinstate the first plaintiff's monthly payments of $54,500. (There is a slight discrepancy in the figures in the material – this is the figure that appears in Mr Casey's second affidavit at paragraph 60.) The evidence shows that there were regular payments of this amount to each of the three directors. The payments were suspended (for all three directors) on 9 February 2023. Mr Giambattista and Mr Casey indicate in their affidavit material that they are now prepared to resume these payments. Accordingly, there is no practical difficulty in the Companies making these payments. 19 The fourteenth to seventeenth defendants contend that the plaintiffs have not made out a prima facie case for the relief that they seek. Further, they submit that where an interlocutory injunction is sought in respect of private rights, it is necessary as the starting point to identify the legal or equitable rights which are to be determined at trial and in respect of which final relief is sought: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [8]-[21] per Gleeson CJ, [59]-[61] per Gaudron J, [86]-[92], [98]-[100] per Gummow and Hayne JJ. They submit that the interlocutory relief sought is not sufficiently connected with the final relief that is sought. I do not accept these submissions. In my view, the plaintiffs have established a prima facie case for the relief sought in the originating application. The material discloses a prima facie of oppression. In particular, the material establishes (on a prima facie basis) an expectation on the part of Mr Romanovski that he would remain involved in the management of the Companies while he continued to have an equity interest in the Companies. This is apparent, for example, from paragraphs 8 and 9 of Mr Romanovski's fifth affidavit. Further, I consider that the injunctive order sought is in aid of the final relief sought in the proceeding. If the payments are not resumed, then this will increase the amount claimed by Mr Romanovski for his share of the Companies. Further, if the payments are not resumed, this may well affect Mr Romanovski's ability to fund the litigation in which he contends he has been oppressed. 20 The fourteenth to seventeenth defendants further contend that there is no need to make such an order because they have agreed to resume the payments. However, in circumstances where the payments were stopped on 9 February 2023, I consider it appropriate for this matter to be the subject of an injunction order. Of course, if circumstances change, the defendants can apply to the Court to revisit this order. I will therefore grant an injunction as sought by the plaintiffs regarding the monthly payments of $54,500. 21 The next order sought is that certain of the Companies immediately make a profit distribution of $500,000 to the second plaintiff. There is evidence about the past practices of the Companies regarding profit distributions and as to whether it is prudent for the Companies to make a distribution of this amount now. In my view, the balance of convenience does not favour the making of such an order, having regard to the evidence in Mr Casey's second affidavit, particularly at paragraphs 47 to 59, to the effect that he does not consider it prudent to make such a distribution now. 22 The next order sought concerns a profit distribution of $1,107,501. The plaintiffs wish to defer this aspect of their application, so it is not necessary to deal with it now. 23 The next order sought is an injunction to prevent the removal of Mr Romanovski as a director of the remaining Companies (that is, the Companies in respect of which he has not already been removed as a director). The Companies are identified in paragraph 3 of Mr Romanovski's fourth affidavit. As noted above, meetings are due to take place tomorrow to remove Mr Romanovski as a director of these companies. In support of the injunction order, Mr Romanovski relies on two main matters. The first is that, if removed, he will lose coverage under the Companies' insurance policies. The second is that his removal from two of the Companies (namely Johnston Enterprises Pty Ltd and Clarendon Holdings (Aust) Pty Ltd) may constitute a "Review Event" under facilities with the Macquarie Bank, in respect of which he has given personal guarantees. Notwithstanding these points, I am not satisfied that the balance of convenience favours making the injunction order sought. In relation to insurance, it appears from the policies that have been tendered that they cover former directors. In relation to the "Review Event" submission, I accept that it is quite possible that the removal of Mr Romanovski may constitute a "Review Event" under the facilities. This is a matter that should be considered by the directors or shareholders acting prudently before deciding whether to remove Mr Romanovski as a director of these Companies. However, I am not persuaded that the Court should grant an injunction on this basis. As a matter of practicality, given the events that have happened, there is no realistic prospect of the three individuals being able to work together. This presents a practical difficulty in conducting board meetings. It is not suggested that there is any defect in the notice of meeting or any lack of power to remove Mr Romanovski as a director. In these circumstances, I decline to grant an injunction to restrain his removal as a director from the remaining Companies. 24 The next order sought is that the tenth and eleventh defendants, that is, Johnston Enterprises Pty Ltd and Clarendon Holding (Aust) Pty Ltd, be restrained from drawing down any further debt in respect of the Johnston Street and Clarendon Street Properties. The order is sought in circumstances where, as noted above, Mr Romanovski has given personal guarantees in respect of the facilities. The fourteenth to seventeenth defendants in their material indicate that the facilities are fully drawn and there is no intention of incurring further debt. They submit that there is no need for the order. In my view, notwithstanding that material, it is appropriate to grant an injunction as sought by the plaintiffs to protect their position. I consider that the interlocutory relief sought is in aid of the final relief sought, as the incurring of additional debt may affect the plaintiffs' ability to recover an amount for their share of the Companies. The balance of convenience favours granting the injunction. I note that the fourteenth to seventeenth defendants do not point to any practical difficulty if such an order were made. 25 The next order sought is an injunction to restrain the fourth defendant from taking possession of certain vehicles that are used by Mr Romanovski and his family. The fourteenth to seventeenth defendants in their affidavit material state that they agree to Mr Romanovski retaining possession of the vehicles on an interim basis: see paragraphs 74 and 75 of Mr Casey's first affidavit. I am not satisfied that the order sought is in aid of, or sufficiently connected with, the final relief sought in the proceeding. I therefore decline to make this order. 26 The plaintiffs seek an order that the Companies be restrained from making any further use of Mr Romanovski's registration as a building surveyor (including by the application of his signature on any documentation) in connection with any permit that any of the Companies and related Checkpoint entities are engaged to issue anywhere in Australia. The material shows that, since 9 February 2023, and notwithstanding the removal of Mr Romanovski from the management of the Companies, the Companies have continued to affix his electronic signature to documents without his authority. This is highly problematic. I consider it appropriate to grant an injunction as sought by the plaintiffs. While the interlocutory order is not directly in aid of the final relief sought in paragraphs 1 to 4 of the originating process, paragraph 5 of the originating process seeks such further or other orders as the Court sees fit. The complaint about the unauthorised affixing of Mr Romanovski's signature is squarely raised in the affidavit material and undoubtedly would form part of the final relief sought in the proceeding. 27 I turn now to consider the orders sought in relation to access to documents. I note that the fourteenth to seventeenth defendants accept that there should be some discovery of documents, as set out in their proposed orders. 28 The plaintiffs seek access to documents pursuant to ss 198F, 247A and 290 of the Corporations Act 2001 (Cth). In the alternative, they seek discovery of the categories of documents set out in their proposed orders. 29 At the hearing yesterday, the fourteenth to seventeenth defendants made submissions about the scope of the provisions of the Corporations Act relied on by the plaintiffs. In this regard, the defendants relied on Re Medical Training and Development Pty Ltd [2021] NSWSC 981 at [12]; Re Tai-Ao Aluminium (Australia) Pty Ltd (2004) 51 ACSR 465 at [2]; and Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236 at [36]-[40]. The plaintiffs handed up a table setting out extracts of other relevant cases. 30 I consider that it is preferable to approach the question of access to documents as a matter of discovery rather than under the provisions of the Corporations Act. This avoids the issues concerning the limitations on the availability of the Corporations Act provisions identified in the cases relied on by the fourteenth to seventeenth defendants. In any event, there is a discretionary element to some of the Corporations Act provisions, and on this basis I would confine the extent of access to documents. 31 Having considered the parties' submissions on the various categories of documents in issue, I consider it appropriate to make orders for the provision of certain categories of documents by this Friday (10 March 2023), further categories by the following Friday (17 March 2023), and then ongoing provision of documents in the middle of each month thereafter. The orders I propose to make regarding access to documents by way of discovery are as follows: 2. By 4.00 pm on 10 March 2023, the defendants provide the following documents to the plaintiffs: a. a copy in native format of the data and documents held in the Companies' MYOB accounting software as at that date; b. copies of any current insurance policies in the name of: i. the first plaintiff; and/or ii. one or more of the Companies naming the first plaintiff as an insured; c. copies of all communications between one or more of the defendants and any insurance broker or insurer concerning any extant or new insurance claim or insurance notification concerning the first plaintiff; d. copies of the constitutions for each of the Companies; e. a copy of all historic emails in the email boxes for the email accounts: i. diorg@check-point.com.au; ii. naomir@check-point.com.au; f. copies of the bank statements for each bank account or finance facility in the name of one or more of the Companies from 1 July 2021 to date. 3. By 4.00 pm on 17 March 2023, the defendants provide the following documents to the plaintiffs: a. quotations, invoices and receipts in connection with the fit out of the Clarendon Street property; b. documents relating to the finance facilities for the vehicles with the registration numbers ANW555, VJRB, AOS804 and JRB-03; c. documents recording or evidencing the use, since 9 February 2023, of the first plaintiff's registration as a building surveyor (including by the application of his signature on any documentation) in connection with any permit that any of the Companies and related Checkpoint entities (including those which are not defendants in the proceeding) are engaged to issue anywhere in Australia; d. a list of all proceedings to which the first plaintiff is a party in respect of projects of the Companies; e. copies of all communications with Davidson Advisory and/or Lisa Brooks since 1 July 2022 concerning the removal of the first plaintiff as a director of, or from the management of, the Companies. 4. The Companies shall further provide the following documents to the plaintiffs by 4.00 pm on 17 March 2023 and the 15th day of each month thereafter (or the next business day if the 15th day is not a business day): a. a copy in native format of the data and documents held in the Companies' MYOB accounting software as at that date; b. the then most recent bank statements for each bank account or finance facility in the name of one or more of the Companies that have not already been provided; c. any actual or projected cashflow and budgets prepared by that date and not already provided; d. any month to date and year to date reports prepared in or for the foregoing month; e. any management reports prepared in or for the foregoing month; f. any distribution calculations prepared in or for the foregoing month. 32 In formulating these orders, an important consideration has been giving Mr Romanovski access to all documents that may be relevant to the allegations that have been made against him, so that he has the opportunity to refute those allegations (noting that a considerable number of documents have already been provided). A further important consideration is giving Mr Romanovski access to documents relating to the financial position of the Companies to enable him to obtain advice on the value of his share of the Companies. This should occur expeditiously, as this may assist the timely resolution of the dispute. 33 One particular issue between the parties was whether Mr Romanovski should be given "real time, read only, electronic, remote access" to the MYOB accounting software, as sought in the plaintiffs' proposed orders. I am not persuaded that this is appropriate. I am concerned that in the adversarial situation that exists between the parties, it may not be appropriate to permit Mr Romanovski to monitor the affairs of the company minute-by-minute in this way. However, I do consider it appropriate for Mr Romanovski to be given a copy of all the data and documents held in the Companies' MYOB accounting software and for this to occur in the very near future. This is important for the reasons already given. It is also important, in my view, to ensure the integrity of the material that is provided. 34 To the extent that the proposed orders set out above do not include aspects of the plaintiffs' proposed orders, I do not consider it appropriate to provide access to the documents. 35 I will give the parties the opportunity to make submissions about the form of the orders for access to documents. 36 The final issue between the parties concerns valuation of the business and the plaintiffs' share of the Companies. The plaintiffs propose the appointment of an independent valuer to prepare a valuation. The fourteenth to seventeenth defendants oppose this and submit that each side should appoint its own valuer to prepare a valuation. On balance, I consider the preferable approach to be the appointment of an independent valuer. I consider that this may well be a useful exercise in that it may provide a basis for resolution of the dispute. I will therefore make orders to the effect that: the parties seek to agree, by 4.00 pm on 17 March 2023, upon an independent valuer to value the plaintiffs' interest in the Companies; if the parties are unable to agree, an independent valuer will be selected by a Registrar of the Court; the parties confer and seek to agree orders for the conduct of an independent valuation, and provide any agreed orders to my chambers by 4.00 pm on 17 March 2023. [Discussion took place with counsel about the form of orders and costs.] I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky. Associate: Dated: 10 March 2023 SCHEDULE OF PARTIES VID 85 of 2023 Defendants Fourth Defendant: CBS ADMINISTRATION (AUST) PTY LTD (ACN 634 250 954) Fifth Defendant: CBS PLUS (AUST) PTY LTD (ACN 644 459 147) Sixth Defendant: BCG (AUST) PTY LTD (ACN 114 332 017) Seventh Defendant: BCG (INTL) PTY LTD (ACN 138 809 711) Eighth Defendant: ACCESS EQUALITY PTY LTD (ACN 138 809 702) Ninth Defendant: PLATINUM PLANNING SOLUTIONS PTY LTD (ACN 618 271 257) Tenth Defendant: JOHNSTON ENTERPRISES PTY LTD (ACN 637 513 332) Eleventh Defendant: CLARENDON HOLDINGS (AUST) PTY LTD (ACN 657 388 648) Twelfth Defendant: ONLINE BUILDING PERMITS PTY LTD (ACN 128 982 801) Thirteenth Defendant: ONLINE BUILDING APPROVALS PTY LTD (ACN 128 982 810) Fourteenth Defendant: CLEMENT GIAMBATTISTA Fifteenth Defendant: GAVIN JAMES CASEY Sixteenth Defendant: INNOVATIVE REGULATORY DESIGNS PTY LTD (ACN 100 697 434) Seventeenth Defendant: C & R GIAMBATTISTA PTY LTD (ACN 096 578 880)