New South Wales Supreme Court CITATION : Scholten v Mobilesoft Pty Ltd [1999] NSWSC 234 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1719/99 HEARING DATE(S) : 24/03/99 JUDGMENT DATE : 24 March 1999 Gregory John David Scholten (P) Mobilesoft Pty Limited (D1) Technology Ventures Pty Limited (D2) PARTIES : Icon Ventures Pty Limited (D3) Mobilesoft Consulting Pty Limited (D4) Thomas Craig Simms (D5) Brian Simms (D6) Brian Lindsay Simms (D7) JUDGMENT OF : Hamilton J COUNSEL : Mark Ashhurst (P) Robert Reitano (D1-D7) SOLICITORS : Peter Kemp Solicitors (P) Gilbert & Tobin (D1-D7) CATCHWORDS : CORPORATIONS [98] - Management and administration - Directors and other officers - Authority and powers - Of directors individually. EQUITY [350] - Equitable remedies - Injunctions - To restrain breach of contract - Contract of type of which specific performance not granted - Impossibility of supervision by court - Contract requiring continuous supervision. Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 CASES CITED : Hogg v Dymock (1993) 11 ACSR 14 J C Williamson Ltd v Lukey (1931) 45 CLR 282 DECISION : Application for interlocutory injunctions in part granted and in part refused. MJ:MC 2 ~24/03/99 3 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J WEDNESDAY, 24 MARCH 1999 1719/99 GREGORY JOHN DAVID SCHOLTEN v MOBILESOFT PTY LIMITED & ORS JUDGMENT HIS HONOUR: 1 These are proceedings brought by Gregory John David Scholten against Mobilesoft Pty Limited and two associated companies and three individuals who are directors of the defendant companies. The relief sought by the present application is set out in an amended notice of motion filed today and is a restraint of the defendants from treating the purported termination of 12 March 1999 of an agreement for service, or consulting agreement, between the plaintiff and the first defendant as valid. A further injunction is sought restraining the defendants from passing any resolution purporting to terminate that agreement. The principal proceedings in which this interlocutory application is brought are proceedings under the s 246AA of the Corporations Law, which provides for relief to be given in the case of oppression of minority shareholders. The company, Mobilesoft Pty Limited, was formed in about 1995 and at that time the plaintiff invested money in Mobilesoft or associated companies, and the agreement for his services, the subject of the present application, was entered into. 2 The letter of 2 July 1995 which sets out the terms of the agreement is somewhat diffuse in its terms. Indeed it is even difficult to tell from it whether the agreement creates a relationship of employer/employee or constitutes a contract for the provision of services. The parties describe the arrangement by that much abused word "consultancy" and the situation is sufficiently unclear for counsel for both parties not to put firm submissions, as the matter stands, as to whether the relationship is one of employer and employee rather than some other sort of arrangement. I tend to the view, as the matter stands, that an employer/employee relationship was not created. It does appear to me, on the material that has been able to be presented in the short time available, that the relationship is certainly one in which the plaintiff and one or more of the defendants do work closely together in an office in Sydney, the rest of the plaintiff's establishment being in Melbourne. On that material, this is a case in which the contract requires people to work in close proximity and in a close personal relationship. I should say that this situation may change upon more ample evidence being available at a later time; in particular, the defendants have not at this stage filed any affidavit evidence at all. 3 The evidence filed by the plaintiff, whilst leaving uncertainties in some regards, does establish facts from which an arguable case of oppression of a minority shareholder could clearly be inferred if the evidence remained as it is. Perhaps more importantly in the context of the present situation, in my view the plaintiff's evidence shows an arguable case that the purported dismissal of the plaintiff from his contract is invalid as being effected without appropriate authority of the first defendant, from which he was dismissed. The circumstances of the dismissal are that on 12 March this year Thomas Sims, who is a director of the first defendant, handed the plaintiff a letter to the effect that the plaintiff's "services are no longer required". He signed that letter as such director. It has been properly and frankly conceded by Mr Reitano, of counsel for the defendants, that no directors' meeting of the first defendant was held prior to that time, or during the month of March 1999 up to the present time, and there is no suggestion there was a meeting of directors at which the dismissal of the plaintiff from his contract was authorised. Mr Reitano points to the fact that the letter was handed over by Mr Tom Sims in the presence of Mr Brian Sims, who is described in various parts of the evidence as the managing director of the defendant company, but there is no clear evidence as to whether Mr Brian Sims is formally appointed as managing director of the company or, if he is, as to the extent of his authority. In any event it is certainly arguable that the act of dismissal was the sole act of Mr Tom Sims. Without further evidence as to the ambit of his authority, there must be an arguable case that he did not have the authority to effect the dismissal: see Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205. 4 So far as the balance of convenience at this point is concerned, it seems to me that the plaintiff would suffer serious damage if treated as peremptorily dismissed, whereas the first defendant would not suffer great damage by a restraint preventing it from treating this purported act of dismissal as effective. It has been suggested that the injunction, if granted, would be nugatory, since it follows as the night the day that a directors' meeting will be held which will effect the dismissal, and therefore an injunction ought not be granted. However, there are six directors of this company, a meeting has not been held and on the evidence I do not think it may be taken as a foregone conclusion that the dismissal will be persisted in. 5 In those circumstances, I propose to grant an injunction restraining the defendants from treating the purported dismissal of 12 March 1999 as valid. 6 I am asked by Mr Ashhurst, of counsel for the plaintiff, to go further and grant an injunction restraining any dismissal of the plaintiff from his contract. This I am not prepared on the present evidence to do. On the present evidence, the contract may be a contract of employment and in any event it is, as I have already said, so far as I can see on the comparatively thin evidence available, a contract which requires close interaction and co-operation between the plaintiff on the one hand and other directors and staff of the first defendant on the other. At the moment I do not see features that take the case out of the rule long accepted in Courts of Equity that contracts of employment, or that otherwise require the close co-operation of the parties, will in general terms not be enforced by decrees of specific performance or by injunction: see J C Williamson Ltd v Lukey (1931) 45 CLR 282 and Hogg v Dymock (1993) 11 ACSR 14 at 20. For those reasons I refuse to grant an injunction more general than that I have already indicated my intention to grant. 7 Mr Reitano has submitted that the only order that I ought make is that the costs of the application for injunction be costs in the cause, simply by reason of the failure of the plaintiff on one arm of his application for injunctions. However, the defendants appeared to oppose the grant of any restraint. The plaintiff has obtained a restraint from the Court and has therefore in my view been substantially successful in its application and I propose to make the usual order for costs made in favour of a successful applicant for a restraint, namely, that the costs of the application for injunctive relief be the plaintiff's costs in the cause. oOo Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.