Supreme Court New South Wales Medium Neutral Citation: Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 2) [2019] NSWSC 1753 Hearing dates: 5 December 2019 Decision date: 05 December 2019 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Leave granted to the plaintiffs to make further submissions on one question; plaintiffs' motion otherwise dismissed. Catchwords: CIVIL PROCEDURE – leave to make further submissions as to the proper construction of some provisions of a shareholders agreement – both parties have made all the submissions they would otherwise make – leave granted to make submissions CIVIL PROCEDURE – leave to re-open to make further submissions and to make alternative response to further cross-claim – leave sought after closing submissions – delay not explained – further response not able to be met – evidence goes to responding to an alternative Legislation Cited: Corporations Act 2001 (Cth) Category: Procedural and other rulings Parties: James Angelis as trustee for the Angelis Family Trust (First Plaintiff/Second Cross-Defendant on First Cross-Claim/Sixth Cross-Defendant on Second Cross-Claim) Jitendra Dutt (Second Plaintiff/Third Cross-Defendant on First Cross-Claim) Nathan Brown (Third Plaintiff/Fourth Cross-Defendant on First Cross-Claim) Antony Goldsmith (Fourth Plaintiff/Fifth Cross-Defendant on First Cross-Claim) Copiapo Pty Ltd as trustee for FCK Consulting Trust (Fifth Plaintiff/Sixth Cross-Defendant on First Cross-Claim) Pemba Capital Partners Fund I Partnership, LP (First Defendant/First Cross-Claimant on First Cross-Claim/First Cross-Defendant on Second Cross-Claim) Pemba Capital Partners Pty Ltd as trustee for the Castlereagh St (Swan) Co-Investment Trust (Second Defendant/Second Cross-Claimant on First Cross-Claim/Second Cross-Defendant on Second Cross-Claim) Adrian Christopher Kitchin (Third Defendant/Seventh Cross-Defendant on First Cross-Claim/First Cross-Claimant on Second Cross-Claim) Benjamin James Hastie (Fourth Defendant/Eighth Cross-Defendant on First Cross-Claim/Second Cross-Claimant on Second Cross-Claim) Drue Jonathon Giles Castanelli (Fifth Defendant/Ninth Cross-Defendant on First Cross-Claim/Third Cross-Claimant on Second Cross-Claim) Coverforce Holdings Pty Ltd (Sixth Defendant/First Cross-Defendant on First Cross-Claim/Fourth Cross-Defendant on Second Cross-Claim) AUB Group Ltd (Seventh Defendant/Third Cross-Defendant on Second Cross-Claim) Resilium BidCo Pty Ltd (Fourth Cross-Claimant on Second Cross-Claim) Resilium OpCo Pty Ltd (Fifth Cross-Defendant on Second Cross-Claim) Representation: Counsel: F Corsaro SC with H Pintos-Lopez and E Olivier (Plaintiffs) R A Dick SC with E Bathurst (First and Second Defendants) M R Elliott SC with D Ratnam (Third to Fifth Defendants) Solicitors: Mills Oakley (Plaintiffs) Herbert Smith Freehills (First and Second Defendants) Roberts & Partners Lawyers (Third to Fifth Defendants) Allens (Seventh Defendant) File Number(s): SC 2019/201647 EX TEMPORE Judgment (REVISED) 1. I am part heard in these proceedings which concern, amongst other things, the dispute between the shareholders of the sixth defendant, Coverforce Pty Ltd. Coverforce is Australia's largest unlisted insurance broker. 2. The business now carried on by Coverforce was founded in 1994 by the first plaintiff, Mr James Angelis. Prior to the events with which these proceedings are concerned, the shareholders in Coverforce were Mr Angelis and the remaining plaintiffs, who are three senior employees of Coverforce (the "Angelis Parties") as to 51%, and the first and second defendants (together, "Pemba") as to 49%. Pemba is a private equity investor. 3. There is also a dispute as to whether: 1. the third to fifth defendants (the "Kitchin Parties") are now also shareholders in Coverforce; 2. Coverforce has, through the Kitchin Parties, acquired from Suncorp Insurance Services Ltd the business of Suncorp's then subsidiary, Resilium Pty Ltd; and 3. Pemba may proceed with a sale of its shares in Coverforce to the former seventh defendant, AUB Group Ltd. 1. I heard evidence and submissions over 13 days between 28 October 2019 and 14 November 2019. Yesterday and today I heard further evidence from a Court appointed expert, Dr Hung Chu, about, speaking broadly, the value of the shares in Coverforce and the value of the rights in Resilium that Coverforce has purportedly acquired. 2. By notice of motion filed in Court yesterday, immediately prior to Dr Chu giving evidence, the Angelis Parties seek: 1. leave to make further submissions about whether it is open to me to grant: 1. Pemba and the Kitchin Parties relief in the form of a declaration that the purported issue of shares by Coverforce in itself to the Kitchin Parties was of no effect; and 2. Pemba the relief it seeks concerning the provision by Coverforce and the Angelis Parties of material relevant to AUB's due diligence of Coverforce; and 1. leave to re-open to read a further affidavit of Mr Angelis in support of orders that, assuming Pemba establishes that the Angelis Parties have engaged in oppressive conduct within the meaning of s 232 of the Corporations Act 2001 (Cth) by purporting to issue shares in itself to the Kitchin Parties, Mr Angelis purchase the shares of Pemba and the Kitchin Parties in Coverforce for a figure that Mr Angelis has specified or at a figure to be determined by me. 1. In support of the motion, Mr Mr Angelis has sworn an affidavit dated 3 December 2019. 2. During argument today Mr Corsaro SC, who appears with Mr Pintos-Lopez and Mr Olivier for the Angelis Parties, clarified that what is sought in relation to the order in [5(a)(i)] above is to seek leave to make submissions as to whether it is open to me to grant any relief "reversing" the Resilium transaction (which I will refer to as an "Unwind Order"). This would include declaring void the purported share issue as well as the purported transfer by the Kitchin Parties to Coverforce of its shares in a company established for the purpose of the Resilium transaction, Resilium Opco Pty Ltd. 3. The Angelis Parties have served the submissions they would make, assuming leave were granted. 4. In relation to the issue at [5(a)(ii)] above concerning the due diligence obligations of the Angelis Parties, it is common ground that this gives rise to a short question of construction in relation to identified provisions in the 2017 Shareholders Agreement; and that, as the Angelis Parties and Pemba have, on this motion, put everything they want to put on that question, it is a matter I can deal with in the final judgment. That is what I propose to do. 5. The further submissions that the Angelis Parties wish to make about the issue at [5(a)(i)] (as clarified at [7]) are that I should not make such a declaration, assuming it were otherwise appropriate to do so, because: 1. to facilitate the purported acquisition of Resilium, Coverforce obtained from Macquarie Bank various facilities and granted Macquarie Bank security over its subsidiaries, including, purportedly, Resilium OpCo; 2. the making of an Unwind Order will lead to Resilium OpCo being returned to the Kitchin Parties and is "likely" to lead to Coverforce defaulting under those facilities and to Macquarie Bank enforcing its rights against the Coverforce's other subsidiaries; and 3. Macquarie Bank is not a party, has no notice of these proceedings and has no opportunity to intervene. 1. The question arises as to why this submission has not been made before. I heard final submissions on all questions but one on 13 and 14 November 2019. 2. The one issue not dealt with was the question of the value of the shares in Coverforce and of the Resilium business, assuming it has been acquired by Coverforce. That question is relevant to the relief to which the Kitchin Parties may be entitled. 3. On 22 October 2019, I fixed today and yesterday for the hearing of evidence on that question from the Court appointed single expert, Dr Chu. I have heard that evidence. 4. No other question was reserved for consideration on these past two days. 5. On 13 and 14 November 2019, counsel spoke to written submissions which ran to some 260 pages. One issue that was well and truly agitated during those submissions was whether the issue of shares by Coverforce in itself to the Kitchin Parties was valid, and generally as to whether an Unwind Order should be made. On 14 November 2019, I granted the Angelis Parties leave to make written submissions in reply. They did so. Pemba and the Kitchin Parties responded. The Macquarie Bank question was not raised. 6. In my opinion, the Angelis Parties have had ample opportunity to make the submissions now sought to be made. 7. No explanation is offered as to why the issue is only raised now, save perhaps for misapprehension on the part of those advising the Angelis Parties as to what matters were reserved for consideration yesterday and today. In my opinion, it is too late to raise the issue now. 8. In any event: 1. if an Unwind Order is made, any security given by Resilium OpCo to Macquarie Bank will enure; if that were to cause a problem, it would be the Kitchin Parties' problem; 2. the effect of making an Unwind Order is that Coverforce or its subsidiaries make default under the Macquarie facility, that would doubtless enliven Macquarie Bank's rights; but it will not diminish them; and 3. otherwise the consequence for Coverforce and its subsidiaries will be, in that assumed circumstance, a consequence of the role Coverforce has played in this transaction. 1. For those reasons, I do not propose to grant the leave sought in par 1 of the notice of motion. 2. The application to re-open gives rise to wider questions. 3. The Angelis Parties could have, at any time, sought the orders now contended for. Indeed, it has been pointed out to me today by Mr Corsaro that, to some extent, the Angelis Parties have already argued for the relief now sought. 4. In any event, the question only arises in relation to Pemba's alternative claim for relief under s 233 of the Corporations Act; its primary claim being that the purported share issue to the Kitchin Parties was ineffective. Those issues were debated on 13 and 14 November 2019. 5. No explanation is offered for the Angelis Parties to raise then the precise relief that is sought to be agitated now. 6. In any event, Pemba submits, and I accept, that they are not in a position to deal with the matter. 7. As Pemba submitted: "Pemba would be entitled to test the evidence of Mr Angelis [in his affidavit of 3 December 2019] including in particular the bare assertion at…[16] that Macquarie has provided the Angelis Family Trust with conditional approval for the proposed credit facility it proposes to use to fund the buy-out. Pemba would also carefully have to consider the effect of the Angelis Parties seeking this alternative form of relief in light of the contractual obligations Pemba has under the AUB Share Purchase Deed." 1. I make the following orders: 1. I grant the Angelis Parties leave to make further submissions on the question of whether it is open to the Court to grant relief in the form of an order that Coverforce Holdings Pty Ltd must forthwith provide to Pemba Capital Partners Fund I Partnership, LP and Pemba Capital Partners Pty Ltd the information and documents set out in Annexure A to the Amended First Cross-Claim Cross-Summons dated 26 July 2019. 2. Otherwise the plaintiff's notice of motion filed 4 December 2019 is dismissed. ********** 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. Decision last updated: 09 December 2019