New South Wales Supreme Court CITATION : Sassine v Ray & Sons Constructions Pty Ltd [2009] NSWSC 1135 HEARING DATE(S) : 24/09/09 JUDGMENT DATE : 24 September 2009 JURISDICTION : Equity JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 24 September 2009 DECISION : Refer to paras 22-24 of judgment. CATCHWORDS : EQUITY – equitable remedies – injunctions – injunction sought to restrain plaintiff from exercising voting right attached to share at meeting of company – whether serious question to be tried – balance of convenience does not warrant interfering with proposed meeting – interlocutory process dismissed Plaintiff: George Sassine 1st Defendant: Ray & Sons Constructions Pty Ltd PARTIES : 2nd Defendant: Charlie Sassine 3rd Defendant: Milaad Sassine 4th Defendant: John Sassine FILE NUMBER(S) : SC 5830/07 COUNSEL : Plaintiff/Respondent: M Pesman 3rd Defendant/Applicant: D R Meltz SOLICITORS : Plaintiff: HWL Ebsworth Legal 3rd Defendant: Veritas Legal IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Thursday, 24 September 2009 5830/07 George Sassine v Ray & Sons Constructions Pty Ltd & 3 Ors JUDGMENT 1 HIS HONOUR: The applicant is the third defendant in these proceedings and one of the cross-claimants to a cross-claim brought against the plaintiff. 2 It appears to be common ground that there are five issued shares in the first defendant, Ray & Sons Constructions Pty Ltd. Prior to late 1999 or early 2000, each of five brothers held one of those shares. The present applicant, Milaad Sassine, alleges that in about late 1999 or 2000 one of the brothers, Michael Sassine, agreed that in consideration of being paid $300,000 by Ray & Sons Constructions Pty Ltd, his share would be bought back by the company and cancelled, leaving each of the other four brothers holding one share each. 3 In his cross-claim against the plaintiff, George Sassine, the applicant alleges that George Sassine caused the company to pay $300,000 to Michael Sassine, but instead of the company cancelling Michael's share, the share was transferred to the plaintiff, George. By his cross-claim, the applicant alleges that that share is held by George on trust for three of the cross-claimants, namely, the present applicant, Milaad Sassine, and for two other cross-claimants, Charlie Sassine and John Sassine, and for himself (i.e. George Sassine) in equal shares. Alternatively, the applicant alleges that the share is held by George Sassine on trust for the company; or alternatively, that the share should be cancelled. 4 George Sassine denies the allegations in the cross-claim that there was an agreement for the cancellation of the share as contended by the applicant. He admits that the one share in question is held by him on trust for each of himself, the applicant, John Sassine and Charlie Sassine in equal shares. 5 No evidence has been read on this application to establish that there is a serious question to be tried that the facts are as alleged in the cross-claim. That is so notwithstanding that the cross-claim was filed on 20 March 2008. 6 A meeting of shareholders of the company has been convened to be held tomorrow at 11am. I was advised, without objection, that the meeting was convened by John Sassine, one of the cross-claimants. The notice convening the meeting states that the resolutions sought to be passed are for the appointment of George Sassine as a director and secretary of the Company, for the removal of the applicant Milaad Sassine as a director and secretary, for the National Australia Bank to be informed that only the directors of the company are authorised to operate the company's bank accounts, that Milaad Sassine and Michael Sassine are not directors of the company and are not authorised to operate any company bank accounts, and that the company instruct its solicitors to commence proceedings in the name of the company against Milaad Sassine and the National Australia Bank in respect of an alleged unauthorised withdrawal by Milaad Sassine of $260,000 from the company's bank account and related matters. The last resolution proposed is that the company file a submitting appearance in the existing Supreme Court proceedings. 7 On 16 September 2009 the solicitors for the applicant wrote to George Sassine's solicitors. They asserted that Mr George Sassine is not entitled to exercise anything other than one vote for his share, noting his admission that the second share is held in trust either for the company as a whole or equally for the brothers. Mr George Sassine's submission is that the second share is held on trust equally for all brothers. 8 Yesterday, George Sassine's solicitors responded to that correspondence. They said: " We note ... that you are mistaken with regards to our client's voting entitlements with respect to our client's second share which is held on trust for both the brothers equally in the Company as a whole. We note that our client can exercise a vote with respect to both his shares and the above second share. Should our client choose to exercise his vote with respect to the second share, such a vote shall be made in circumstances where it is deemed appropriate and where the exercise of such a vote is made in good faith and in the best interests of the Company. However, given the above court proceedings, we confirm that our client shall not be exercising his right to vote with respect to the above second share in relation to resolutions 3, 4 and 6 as outlined in the Notice of General Meeting. " 9 Resolutions 3, 4 and 6 are resolutions for the removal of Milaad Sassine as a director and secretary of the company, and for the institution of proceedings against him and the National Australia Bank. 10 Milaad Sassine now seeks an interlocutory injunction pending the determination of the cross-claim to restrain George Sassine from voting at a meeting of the company in respect of the share which he admits holding on trust. 11 The first question is whether there is a serious question to be tried that George Sassine could, at a final hearing, be restrained from exercising a voting right attaching to the second share. 12 The claim was put on two bases. First it was said that there was an agreement whereby the share should be cancelled. However, no evidence has been adduced on this application of such an agreement. There is no admission that there was an agreement for the cancellation of the share. On the evidence adduced today, there is no serious question to be tried in relation to that matter. 13 The second basis upon which a claim was put is that George Sassine has a conflict between his duty to the beneficiaries of the trust, which he admits, and his personal interest in voting on the resolutions for his own appointment as a director and secretary of the company, and on the resolution in relation to the giving of notice to the National Australia Bank. 14 It was also submitted that where two of the four beneficiaries have indicated their objection to the trustee exercising his voting rights in respect of the share, the trustee should be restrained from exercising the voting rights in relation to the share in the context of the present proceedings. 15 It seems to me that if, as George Sassine admits, the second share is held on trust for himself and three other brothers, that that in itself does not prevent his exercising the vote attaching to the shares provided that the vote is exercised in a way which he considers in good faith to be in the interests of all of the beneficiaries considered as a whole. 16 I will assume that such a trustee could not, without the informed consent of all the beneficiaries, exercise the voting rights attached to the shares where he was in a position of conflict, or a sensible possibility of conflict, between his duty to the beneficiaries and his personal interest. However, it is not self-evident that by voting on a resolution for the appointment of himself as a director and secretary of the company, George Sassine is in a position of conflict between his interests and his duty to the beneficiaries. This question is being considered very much in a vacuum of evidence. But prima facie, George Sassine would be assuming burdens by accepting appointment as a director of the company, without necessarily receiving any personal benefits from that appointment. I do not see how the resolution to inform the National Australia Bank that only the directors of the company are authorised to operate the company's bank accounts, if passed, would put George Sassine in a position of conflict between his duty and his interest. 17 However, assuming that there is a serious question to be tried that George Sassine's exercise of his voting rights in respect of the second share could be impugned, the balance of convenience does not favour the grant of the injunction. 18 I am told that at present there are three directors on the board, namely, Milaad, Charlie and John Sassine. Leaving aside the disputed fifth share, there are four equal shareholders. It is not self-evident that any detriment would be caused either to the applicant or to the company by the fourth shareholder assuming the office of director. 19 I am told that it seems likely that there will be a split between the brothers on the proposed resolutions with Charlie being in the applicant's camp, and, it is assumed, George being in John's camp. Assuming that to be so, and on the basis of advice given by George's solicitors, the likely outcome, if the fifth share is voted, is that George will be appointed to the board, and there will be four directors, two in each camp. 20 Although there is no evidence about this, I was told that Milaad Sassine has acted as the chairman of the board, and I am told that the articles give the chairman a casting vote at meetings of directors. In those circumstances, there is even less reason to apprehend that the interests of the company or the applicant will be prejudiced by the appointment of George Sassine to the board, let alone prejudiced in a way which cannot later be compensated for by damages or equitable compensation if George were to act in breach of the duty he would owe to the company as a director. 21 Milaad Sassine proffers the usual undertaking as to damages. There is no evidence as to the worth of that undertaking. I will assume that the undertaking as to damages would be worthwhile. Nonetheless, it does not seem to me that the balance of convenience warrants an interference with the proposed meeting. 22 For these reasons I order that the interlocutory process be dismissed. I will hear the parties on costs. [Parties address on costs.] 23 I order that the applicant pay the respondent's costs of the interlocutory process. I will keep the exhibits for the file. 24 I note that the undertaking of the third defendant to the Court of 17 July 2009 is discharged. I vacate the listing of this matter in the Corporations List on 28 September 2009. I note that the matter is listed for directions on 9 November 2009 in the Registrar's list. ****** 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.