Jax Franchising Systems Pty Ltd as Trustee for the JF Unit Trust [2012] NSWSC 1115

Supreme Court New South Wales

Medium Neutral Citation: Jax Franchising Systems Pty Ltd as Trustee for the JF Unit Trust [2012] NSWSC 1115 Hearing dates: 25 May 2012 Decision date: 20 September 2012 Jurisdiction: Equity Division Before: Davies J Decision: 1. Jax Franchising Systems Pty Limited as trustee of the JF Unit Trust ("JFS") would be justified in defending, and doing all things necessary or reasonably incidental to conducting the defence of, all allegations made against JFS in the Federal Court proceeding No NSD 402 of 2010 ("the Proceeding"). 2. Without limiting Order 1 above, JFS would be justified in taking the following action: (a) resisting the relief claimed or foreshadowed against JFS in the Proceeding (including in any amendment or addition to the existing claims, or in any further interlocutory applications, provided JFS counsel forms and maintains the view that such amendments, additions or interlocutory applications arise out of substantially the same factual matrix), provided that and for so long as counsel maintains the view that JFS has reasonable prospects of so doing; (b) bringing a cross-claim in the Proceeding seeking declarations and any related orders to the effect that JFS is a proper party to the Joint Venture Agreement dated 12 February 2008 between JFS, Quickfit Tyre Service Pty Limited and Jax Quickfit Franchising Systems Pty Limited ("the JV Agreement") and, under that agreement or otherwise, the beneficial owner of 65% of the joint venture assets, provided that and for so long as counsel maintains the view that JFS has reasonable prospects on such a cross-claim; (b1) bringing an application for security for costs or such other interlocutory applications as JFS on legal advice considers appropriate, provided JFS' counsel holds and maintains the view that JFS has reasonable prospects on any such application; (c) maintaining that the application by the plaintiffs in the Proceeding for leave under s 237 of the Corporations Act 2001 (Cth) ought to be determined before JFS is required to plead to the substance of the breach of trust and oppression claims made or foreshadowed against it; (d) defending or resisting the grant of leave to bring, or applying to strike-out or summarily to dismiss, the claims of oppression and misleading and deceptive conduct, provided that and for so long as counsel holds and maintains the view that JFS has reasonable prospects of successfully defending, resisting the grant of leave to bring, or applying for such strike-out or summary dismissal, as the case may be. 3. In respect of the Amended Interlocutory Process dated 14 September 2011 and filed in the Proceeding, JFS would be justified in: (a) opposing the orders sought in the Interlocutory Process insofar as they affect JFS; or, (b) alternatively, if so advised by its legal representatives, consenting to those orders on terms that the relevant plaintiff(s) indemnify JFS for any loss or liability suffered or incurred by JFS in the event the derivative actions commenced in the name of, or against, JFS are unsuccessful. 4. JFS would be justified in taking no active role with respect to the Interlocutory Application filed 11 May 2012 in the Proceeding. 5. JFS would be justified in using the assets of JF Unit Trust (including any receipts or profits from the Jax Quickfit franchising business) for the purpose of taking the action described in Orders 1, 2 and 3 above to the extent that those assets are sufficient, and without prejudice to JFS' entitlement, to the extent that such assets are insufficient, to recoup those costs from other assets or funds. 6. JFS's costs of the present proceedings are to be paid out of the assets of JF Unit Trust (including any receipts or profits from the Jax Quickfit franchising business) to the extent that those assets are sufficient, and without prejudice to JFS' entitlement, to the extent that such assets are insufficient, to recoup those costs from other assets or funds. 7. JFS would be justified, unless and until ordered otherwise in the Proceeding, in acting on the basis that the following agreements: (a) the JV Agreement, (b) the Management and Marketing Agreement dated 12 February 2008 between JFS, Quickfit and JQFS, and (c) the Goodwill Licence Agreement dated 12 February 2008 between JFS and JQFS, are valid and effective. 8. Order that no person is to have access to the Confidential Exhibit marked JB-1 without the leave of a judge of the Court. 9. Grant liberty to JFS to apply on 3 days' notice. Catchwords: TRUSTS AND TRUSTEES - application for judicial advice - Federal Court proceedings commenced against trustees and others - whether and to what extent trustees justified in defending proceedings - what interlocutory steps should be taken - reliance on defence by other defendants Legislation Cited: Corporations Act 2001 (Cth) Trustee Act 1925 Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 Category: Interlocutory applications Parties: Jax Franchising Systems Pty Ltd as Trustee for the JF Unit Trust (Plaintiff) Representation: Counsel: A C Harding (Plaintiff) Solicitors: Dibbs Barker (Plaintiff) File Number(s): 2011/393346