New South Wales Supreme Court CITATION : Vista Capital Developments Pty Ltd & anor v Talmarc Pty Ltd & 7 ors [2008] NSWSC 935 HEARING DATE(S) : 12 August 2008 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 12 August 2008 DECISION : The defendants other than the third defendant on notice of today's proceedings. Judgment that the first, second, fifth, sixth, seventh and eighth defendants pay the first plaintiff $1,081,782. CATCHWORDS : CORPORATIONS – (CTH) Corporations Act 2001, s 1274B – whether plaintiff director of company – whether written consent required pursuant to Corporations Act, s 201D – where ASIC national database records plaintiff as director – whether plaintiff removed as director. - DEEDS – election to sue on deed – where no defence to the deed. - PROCEDURE – whether defendants had notice of proceeding. (CTH) Corporations Act 2001, ss 175, 201D, 1274B LEGISLATION CITED : (CTH) Trade Practices Act 1974 (NSW) Fair Trading Act 1987 (NSW) Uniform Civil Procedure Rules, r 10.14(3) CATEGORY : Procedural and other rulings CASES CITED : Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2001) ACLC 299 Vista Capital Development Pty Ltd (first plaintiff/sixth cross-defendant) Dimitris Amargianitakis (second plaintiff/seventh cross-defendant) Talmarc Pty Ltd (first defendant/first cross-defendant) Financial Wealth Services Pty Ltd (second defendant/second cross-defendant) PARTIES : Metromart International Pty Ltd (third defendant/fifth cross-defendant) Family T Pty Ltd (fourth defendant/cross-claimant) Vic Duncombe Pty Ltd (fifth defendant/third cross-defendant) Maria Duncombe (sixth defendant/fourth cross-defendant) Maurice Terreiro (seventh defendant) Felix Lyle (eighth defendant) FILE NUMBER(S) : SC 2009/08 Mr A F Fernon (plaintiffs/XD6 & XD7) COUNSEL : Mr Terreiro (in person) (D2, D5-D7) Mr D L Cook (D4/cross-claimant) SOLICITORS : Low Doherty & Stratford (plaintiffs/XD6 & XD7) Swaab Attorneys (D4/cross-claimant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BRERETON J Tuesday, 12 August 2008 2009/08 Vista Capital Developments Pty Ltd & 1 Or v Talmarc Pty Ltd & 7 Ors JUDGMENT (ex tempore) 1 HIS HONOUR: The first defendant Talmarc Pty Ltd was incorporated on 6 March 2008 for the purpose of acquiring the old Hampton Court Hotel at Bayswater Road, Potts Point. Upon incorporation there were five issued ordinary shares, one each of which was held by the second defendant Financial Wealth Services Pty Ltd (FWS), the third defendant Metromart International Pty Ltd, the fourth defendant Family T Pty Ltd, the fifth defendant Vic Duncombe Pty Ltd and the plaintiff Vista Capital Developments Pty Ltd. According to an ASIC Company Extract produced from the national database on 10 March 2008, the initial directors were the second plaintiff Mr Dimitris Amargianitakis (who is the principal of the first plaintiff Vista Capital), the sixth defendant Ms Maria Duncombe (who is the principal of the fifth defendant Vic Duncombe), and Mr David Thackray (who is the principal of the fourth defendant Family T). 2 Pursuant to (CTH) Corporations Act 2001, s 1274B, in a proceeding in a Court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence of the matter stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database. In other words, the writing is proof of such a matter in the absence of evidence to the contrary. 3 There is no evidence to the contrary of the proposition that Mr Amargianitakis was appointed a director on 6 March 2008. It has been suggested on behalf of some of the defendants that there is no evidence that he has signed a written consent to act as required by Corporations Act, s 201D. It is far from apparent that the absence of a written consent means that there is no valid appointment, at least where there is in fact consent, albeit not written [See, for example, Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2001) ACLC 299, [22] (Santow J)]. It is quite clear that Mr Amargianitakis in fact consented, even if that consent was not in writing. It may be that the company contravened s 201D, but it does not follow that Mr Amargianitakis was not appointed as a director, even if there was no written consent. However, my decision need not rest on this basis, since in light of the product of the national database, the operation of s 1274B, and the absence of any evidence to the contrary, the evidence establishes that he was so appointed. 4 It is not in dispute that Mr Thackray was appointed as a director, so much being admitted in the point of defence. 5 On 11 March 2008, two forms of Changes to Company Details were lodged with ASIC, certified by Ms Duncombe as correct, recording the following changes as having been made on 6 March 2008 (which, it will be recalled, was the date of incorporation): first, a reduction in the shareholdings of Vista Capital, Metromart and Family T each to nil, and a corresponding increase in the shareholdings of Vic Duncombe to two and FWS to three; and secondly, the removal of Mr Amargianitakis and Mr Thackray as directors, and in the case of Mr Thackray also as secretary, and the appointment of Ms Duncombe as secretary in his place. 6 The evidence establishes that no notice of any meeting of the shareholders of Talmarc at which such changes might have been resolved was ever given, nor any such meeting held. Vista never executed any share transfer in respect of its shareholding. Prior to 13 March, Mr Thackray had signed a document, apparently on behalf of himself and Family T, which recorded: "I, David Thackray, hereby consent to being removed as director and secretary of Talmarc Pty Ltd effective immediately upon execution of this deed", and "With respect to the shares being held by Family T Pty Ltd, I do not raise a claim for those, and agree to execute a transfer of those shares to the remaining shareholder/s". The only other signatory to this document was Ms Duncombe, in what capacity is not apparent. On its face the document is not a share transfer, but an agreement to transfer the shares to the remaining shareholders. It was executed in circumstances which, on the uncontradicted evidence before me, would result in it being voidable, at least pursuant to the (CTH) Trade Practices Act 1974, or its state equivalent, the (NSW) Fair Trading Act 1987, for misrepresentation, if not also on other grounds. In my view, on the uncontested evidence before me, the document ought to be declared void pursuant to the Trade Practices Act or the Fair Trading Act. 7 There is some faint evidence of a meeting held at 9:00am on 13 March 2008, the minutes of which were read at a meeting later that day and which purportedly record resolutions accepting the resignation of Mr Thackray, and removing Mr Amargianitakis, as directors. However, the only notice of any meeting to be held at 9:00am that day was of a meeting of unit holders of a proposed unit trust, and not of shareholders of the company, and any such notice did not include notice of the proposed resolutions for the removal of Mr Amargianitakis. In any event, any such meeting took place days after their purported removal which, according to the Change of Company Details form, lodged on 11 March, was effected on 6 March 2008. 8 It follows that there is no basis for supposing that either Mr Amargianitakis or Mr Thackray ever ceased to be a director or shareholder of Talmarc. The evidence establishes that they were not removed, and did not effectively resign as such. 9 These proceedings were instituted by the plaintiffs Vista Capital and Mr Amargianitakis by Summons filed on 25 March 2008. On 1 April 2008, Talmarc, FWS, Vic Duncombe, Ms Duncombe, Mr Maurice Terreiro and Mr Felix Lyle executed a deed, the other parties to which were Vista and Mr Amargianitakis, which recited that Vista Capital provided $1 million to Talmarc which had been used as a deposit on the purchase of the Bayswater Road property, that Vista Capital and Mr Amargianitakis had commenced these proceedings, and that without admission of liability "the parties agree to settle the proceedings on the terms set out in this deed". Those terms provided that the defendants (defined as Talmarc, FWS, Vic Duncombe and Ms Duncombe), would pay Vista Capital $1,300,000, as to $250,000 upon exchange – that which has been paid – and as to the balance of $1,050,000 on the earlier of the settlement of the purchase of the Bayswater Road property or 5:00pm on 18 April 2008. The deed further provided that upon receipt of the second instalment, the plaintiffs would provide to the defendants signed consent orders in terms attached to the deed, (which provided for the Summons to be "discontinued", with no order as to costs). By clause 5, the payment of the second instalment was jointly and severally guaranteed to Vista Capital by Mr Maurice Terreiro and Mr Lyle. By clause 7, upon receipt of the second instalment, the plaintiffs released and discharged the defendants from all claims that they might have against them by reason or arising out of or in any way relating directly or indirectly to the claims for relief contained in the summons, the purchase of the Bayswater Road property or the affairs of Talmarc. 10 As I have said, the first instalment was paid, but the second instalment was not paid by 5:00pm on 18 April 2008. The purchase of the property has not yet been completed, although I am told by Mr Matthew Terreiro from the bar table that settlement is imminent. In any event, the "defendants" referred to in the deed are in default of the obligation to pay the second instalment. 11 On 12 June 2008, the plaintiffs, pursuant to leave granted on 11 June, filed an amended summons which, inter alia, joined Mr Maurice Terreiro and Mr Lyle as defendants, and added a claim for judgment for the sum of $1,050,000 being the outstanding second instalment referred to in the settlement deed. 12 It seems to me that the effect of the settlement deed, although expressed in terms that the plaintiffs will provide the consent orders "upon receipt of the second instalment", is that if the defendants fail to pay the second instalment in accordance with terms of the deed, the plaintiffs then are entitled either to seek to enforce the compromise, or to revert to seeking the relief which they principally sought in the proceedings. However, as it seems to me, they cannot proceed both to seek the substantive relief originally sought and also to enforce the compromise. By obtaining the principal relief claimed in the proceeding – including the declaratory relief, and rectification of the register to reinstate Mr Amargianitakis as a director and Vista Capital as a shareholder – they would put it beyond their power to discontinue the proceedings, as contemplated by clause 4, upon payment of the second instalment. Thus pursuing the principal claim is inconsistent with enforcing the compromise. 13 Accordingly, I think the plaintiffs must elect between suing to enforce the compromise on the one hand, or suing for the relief principally sought in the proceeding on the other. Their counsel, Mr Fernon, indicated that, if put to that election, they would elect to sue on the deed. In those circumstances, subject to a question of service to which I shall come, there is no apparent defence to their claim for the second instalment and interest on it. 14 So far as service is concerned, service on the seventh defendant Mr Maurice Terreiro is proved. The amended summons has not been personally served on the eighth defendant Mr Felix Lyle. However, on 7 July 2008, M J Woods & Co Solicitors, sent to Vista Capital's solicitors Low Doherty & Stratford enclosing proposed consent orders which Mr Woods had signed, describing himself as "Solicitor for the first defendant, the second defendant, the fifth defendant, the sixth defendant, the seventh defendant and the eighth defendant". When the proceedings were before Austin J on 3 July 2008, Mr Woods appeared on behalf of the first, second and fifth to eighth defendants. Mr Woods has never filed a notice of appearance; however, his appearance on 3 July, without any apparent reservation as to the capacity or basis on which he appeared, involves, in my view, an implied undertaking to file a notice of appearance. In those circumstances, and having regard to the assertion in his correspondence that he executed consent orders as solicitor for the eighth defendant, I am satisfied that the eighth defendant is on notice of the proceeding. For the purposes of (NSW) Uniform Civil Procedure Rules, r 10.14(3), I am therefore satisfied that steps have been taken for the purpose of bringing the amended summons to the notice of Mr Lyle and accordingly, pursuant to that sub-rule, I will direct that the amended summons be taken to have been served on the eighth defendant on 3 July 2008. 15 Mr Woods was present in Court on 3 July, when the proceedings were adjourned to 21 July, but did not appear on 21 July or 4 August 2008 when the matter was set down today. Subsequently, on 6 August 2008, the plaintiffs' solicitor Mr Doherty notified the first, second, fifth, sixth, seventh and eighth defendants by facsimile to M J Woods & Co that the matter was listed for hearing before me on 12 August 2008. Another facsimile notified Ms Duncombe that the proceedings were so listed. 16 In those circumstances, I am satisfied that the defendants, other than the third defendant, are on notice of the proceeding today. The fourth defendant Family T appears. Mr Tony Taylor, whose wife is currently director of the third defendant Metromart and whose son is the nominal shareholder, was in Court and gave evidence that Metromart was on notice of the proceeding and did not oppose the relief sought by the plaintiffs and Family T. Mr Matthew Terreiro was in Court and said that he represented Mr Maurice Terreiro and Mr Duncombe. 17 For the foregoing reasons: (1) I direct that the Amended Summons be taken to have been served on the eighth defendant on 3 July 2008. (2) Upon the undertaking of plaintiffs that upon payment they will deliver to the defendants consent orders in form of Annexure A to the Deed of 1 April 2008 executed on their behalf, I give judgment that the first defendant Talmarc, the second defendant Financial Wealth, the fifth defendant Vic Duncombe, the sixth defendant Maria Duncombe, the seventh defendant Maurice Terreiro, and the eighth defendant Felix Lyle, pay to the first plaintiff Vista Capital the sum of $1,081,782. (3) I order that the said defendants pay the plaintiffs' costs of the proceedings from and including 12 June 2008. 18 On the fourth defendant's cross-claim: (4) I order that the issues raised by the claim for relief in paragraph 8 of the amended cross-summons be determined separately and after the other issues in the proceedings; (5) I declare that the Deed said to have been executed on 12 April 2008, being tab 17 in Exhibit DX04, is void; (6) I declare that the fourth defendant is and has at all time since incorporation of the first defendant Talmarc been the legal and beneficial holder of one of the five issued shares in the first defendant. (7) I order pursuant (CTH) Corporations Act 2001 , s 175, that the share register of the first defendant be rectified to show the fourth defendant as the holder of one of the five issued shares. (8) I order that the first defendant Talmarc, the second defendant Financial Wealth, the fifth defendant Vic Duncombe and the sixth defendant Maria Duncombe pay the fourth defendant's costs of the cross-claim. (9) I adjourn proceedings to Tuesday, 9 September 2008 at 9:30am before me for mention. ********** 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.