Jonathon Nigel Walden v Foodco Group Pty Ltd & Ors [2008] NSWSC 636

New South Wales Supreme Court

CITATION : Jonathon Nigel Walden v Foodco Group Pty Ltd & Ors [2008] NSWSC 636

HEARING DATE(S) : 16/06/2008

JUDGMENT DATE : 19 June 2008

JUDGMENT OF : Rein J at 1

DECISION : At [27].

CATCHWORDS : Application to extend interlocutory relief - Inunctive relief granted on interim basis

CATEGORY : Procedural and other rulings

CASES CITED : Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Australian Broadcasting v Lenah Game Meats [2001] 8 HCA 63; 208 CLR 199

TEXTS CITED : Meagher, Gummow & Lehane; Equity Doctrines and Remedies

PARTIES : Jonathon Nigel Walden (Plaintiff) Foodco Group Pty Ltd (Defendant)

FILE NUMBER(S) : SC 6070/07

COUNSEL : J.J Garnsey QC (with M. Condon) (Plaintiff) B.A. Coles QC (with K. Richardson) (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Rein J

19 June 2008

6070/07 Walden v Foodco Group Pty Ltd & Ors JUDGMENT 1 Rein J: The plaintiff, for whom Mr Garnsey QC, with Mr Condon, appears, is a director of Foodco Group Pty Ltd ("Foodco"), which is a trustee for a unit trust. The plaintiff holds 10% of the units in that trust. The trust runs food-related franchise businesses. 2 In late 2004 there were moves to buy the plaintiff out with informal agreement between Mr James Fitzgerald, a director of Foodco, on a price and process, but which did not lead to any concluding binding agreement. Waker Holdings Pty Ltd ("Waker"), a company then controlled by Mr Fitzgerald or his family, owned 80% of the units. A Mr Infanti, through his company Saher Pty Ltd ("Saher") is said, by the defendants, to have acquired 10% of the units. Mr Coles QC, with Ms Richardson, appears for all of the defendants. 3 The plaintiff was subsequently removed as a director against his wishes, but since he commenced these proceedings he has been reinstated as a director. 4 When the proceedings commenced, the plaintiff complained about a number of steps taken by the trustee and other defendants, relating to his removal as director, drawings by other directors, allocation of the units to Saher and appointment of Mr Infanti and matters which cumulatively could, if established, amount to oppression of a minority shareholder or unit holder. The plaintiff by his originating process seeks in 11(d), an order for the purchase of the shares in the defendant companies. 5 A regime of interlocutory orders were put in place by consent until Monday 16 June at 4pm, extended by consent until today at 5pm to allow for this judgment to be delivered. The plaintiff seeks orders in similar but expanded terms to take into account recent developments to which I shall refer – the defendants do not consent to the continuation of the orders beyond today. 6 The defendant is willing to give undertakings that the defendants submit will adequately protect the plaintiff pending final hearing. 7 To understand the nature of the undertakings, it is necessary to say a little more about the position of the parties. 8 The defendants assert that the trustee is entitled to purchase by way of redemption the plaintiff's units (it is agreed that shares in Foodco follow the fate of the units) but accept that the plaintiff is entitled to a fair price for the units. 9 In this connection, a meeting of directors was recently called to determine whether the plaintiff's shares should be redeemed and if so, at what price and to that end consider a report of an accountant engaged to report on the value of the units. Mr Brad Halligan provided his report and he estimated that all of the units in the trust had a value of between $15.26 million and $16.44 million which would lead to the plaintiff's shares being worth, after applying a discount of the kind that Mr Halligan thought appropriate due to small size of the unit holding, $920,000-$990,000. This report was served on the plaintiffs about 14 days ago. 10 The plaintiff was given notice of the meeting of directors but did not attend. The directors attending the meeting resolved to redeem the plaintiff's units at $1.585 million i.e. a mid-way point between the upper and lower estimate of Mr Halligan and without any discount of the type articulated by Mr Halligan. 11 The plaintiff has not yet determined whether that amount is acceptable but Mr Garnsey points out that it is distinctly possible that it will not be acceptable even if redemption were the appropriate course because of: (1) questions as to the veracity of accounting information relied on by Mr Halligan (2) a question of the approach (Mr Halligan has utilised a capitilsation of earnings approach) (3) the question of whether any alleged wrongdoing by the trustee has reduced the value of the units.