Rob Brennan Facilitation & Training Services Pty Limited v Brennan [2008] FCA 1719 (30 October 2008)

Last Updated: 27 November 2008

FEDERAL COURT OF AUSTRALIA

Rob Brennan Facilitation & Training Services Pty Limited v Brennan
[2008] FCA 1719

ROB BRENNAN FACILITATION & TRAINING SERVICES PTY LIMITED v ROBERT GEORGE BRENNAN and DEBORAH JANE AVERY
NSD 1400 of 2008

PERRAM J
30 OCTOBER 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1400 of 2008

BETWEEN:

ROB BRENNAN FACILITATION & TRAINING SERVICES PTY LIMITED Plaintiff

AND:	ROBERT GEORGE BRENNAN First Defendant DEBORAH JANE AVERY Second Defendant

JUDGE:	PERRAM J
DATE OF ORDER:	30 OCTOBER 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Order 2 and 3 of the orders made on 23 October 2008 be extended until 6 pm on 11 November 2008.

2. The parties have liberty to apply.

3. The hearing on 1 December 2008 be vacated.

4. Prayers 7 and 8 of Mr Brennan’s interlocutory process filed on 7 October 2008 be fixed for hearing on 10 November 2008.

5. The notice of motion filed by Ms McGuire on 30 October 2008 be fixed for hearing on 10 November 2008.

6. Costs be reserved.

7. Ms McGuire and Mr Kaufline file and serve any evidence on which they intend to rely on the notice of motion filed 30 October 2008 by 4 pm on 3 November 2008.

8. The respondents to that notice of motion file and serve any evidence on which they propose to rely in respect of that motion by 6 November 2008.

9. Ms McGuire and Mr Kaufline and any other interested party file their evidence in response to the application for winding up and provisional liquidation by 5 November 2008.

10. Mr Brennan file any evidence he has in reply to that evidence by 7 November 2008.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1400 of 2008

BETWEEN:

ROB BRENNAN FACILITATION & TRAINING SERVICES PTY LIMITED Plaintiff

AND:	ROBERT GEORGE BRENNAN First Defendant DEBORAH JANE AVERY Second Defendant

JUDGE:	PERRAM J
DATE:	30 OCTOBER 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 The plaintiff, Rob Brennan Facilitation and Training Services Pty Limited ("the Company") commenced proceedings in this Court by way of an application filed on 5 September 2008. That application was accompanied by a statement of claim in which the Company made various claims against Mr Robert George Brennan and Deborah Jane Avery. It is not necessary to recite the precise details of those claims. Mr Brennan, the first respondent, is both a 50% shareholder and a director of the Company. The other shareholder is Ms Glenys McGuire. There are three directors of the Company: Mr Brennan, Ms McGuire and her brother, Mr Kaufline.

2 Mr Brennan and Ms McGuire were formerly in a relationship which has come to an end. It is unnecessary to recite the precise details by which the Company was operated. It suffices, for present purposes, merely to observe that the amicable relationship between Mr Brennan and Ms McGuire has come to an end. Mr Brennan complains that the affairs of the Company are being conducted in a way which is oppressive to him. He says, in particular, that the Company has brought proceedings against him because Mr Kaufline and Ms McGuire have used their position on the board of directors of the Company to outvote him. He further says that the structure of the Company is such that that state of affairs can be expected to continue.

3 In that regard, he has pointed to the provisions of the articles of association which provide that the business of directors is to be resolved by a majority vote, and by pointing to a provision in one of the articles which effectively means that the directorships of the Company may not be altered. To reflect that view, Mr Brennan then filed an interlocutory process in the proceeding which had been commenced by the Company. He sought, in that interlocutory process, a number of heads of relief. Pertinently, for present purposes, he sought the winding up of the Company on the just and equitable ground set forth in s 461(1)(k) of the Corporations Act 2001 (Cth).

4 He also sought, pending that determination, the appointment of a provisional liquidator. That application and the proceeding generally came before me on Tuesday 21 October 2008 at which time the hearing for the appointment of a provisional liquidator was fixed before me on 1 December 2008 later this year. After those directions were made, Mr Brennan applied, ex parte, to me by way of a notice of motion on 23 October 2008. He applied for injunctive relief, restraining Ms McGuire (who was not at that stage a party to the proceeding) and Mr Kaufline from taking certain steps in relation to the conduct of the Company.

5 The steps in respect of which a restraint was sought were the writing of correspondence on behalf of the Company, the making of communications on behalf of the Company and the actions purportedly taken on behalf of the Company in its capacity as the trustee of a superannuation fund known as the Rob Brennan Superannuation Fund. When that application came before me on 23 October 2008, Mr Potts of counsel appeared for Mr Brennan. The basis upon which he put the application was two-fold. First, he suggested that the material then tendered disclosed that the underlying substratum of trust between Mr Brennan and Ms McGuire had collapsed and that this was obvious from the actions which the parties were taking towards each other. It followed, he submitted, that there was a prima facie case or a reasonably arguable case that the Company should be wound up on the just and equitable ground.

6 The second basis upon which he put it was that a single director of the Company did not have authority under the articles to conduct the business of the Company. Mr Potts further submitted that there was evidence which demonstrated that a single director had been writing correspondence on behalf of the Company, that that correspondence was of a particularly malicious kind and that to the extent that there was a resolution of directors on 5 June 2008 which authorised that to take place, the notice of that meeting was deficient with the consequence that the correspondence was done without authority.

7 It is necessary to say a few words about the correspondence in question. There are in evidence as exhibit 2 a number of letters written on the letterhead of the Company and signed by either Ms McGuire or both Ms McGuire and Mr Kaufline. Those letters include, for example, a letter dated 1 September 2008 to Mr Brennan. There is a draft letter which is proposed to be sent to a Ms Trent. That letter seeks from Ms Trent financial details of her ongoing business dealings with Mr Brennan and the Company. The letter finishes with the words:

To clarify this matter, I would be grateful if you could provide me with the information requested above by 5:00pm on Tuesday, 14th October 2008. Should you fail to do so, it will be necessary to approach the Australian Taxation Office and the Department of Immigration directly regarding possible mistakes in financial/other reporting. This will be done at 9:00am on Wednesday, 15th October 2008.

8 There is also in evidence a letter sent by Ms McGuire, purportedly on behalf of the Company, to Mr Brennan of 21 October 2008 which encloses a proposed draft letter to the Department of Immigration. That letter appears at page 12 of exhibit 2 and it seeks information from the department in relation to the department’s dealings with the Company and Mr Brennan. Mr Brennan’s essential complaint in relation to these documents is that Ms McGuire and/or Mr Kaufline are using the Company in an oppressive fashion by either writing letters which are, certainly, unpleasant to former clients of his or to people who have ongoing business relationships with him in circumstances where the existence of the application to wind up the Company is known to Ms McGuire and Mr Kaufline.

9 On 23 October 2008, having heard Mr Potts and upon an undertaking by Mr Brennan, I made orders restraining Ms McGuire and Mr Kaufline from engaging in any communication on behalf of the Company or purporting to act on behalf of the Company in its capacity as the trustee of the Rob Brennan Superannuation Fund. Those orders were drafted in such a way that they did not prevent the plaintiff from conducting the present proceedings. The injunction was continued until Monday 27 October 2008 at noon. The matter came before me in the morning and has been stood over until this afternoon for debate on the question of whether it should be continued.

10 Ms McGuire and Mr Kaufline appeared today to oppose the continuation of the injunction. A number of grounds were advanced in support of that claim. It was said, for example, that there was no demonstrated reason why the injunction against the super fund should continue. It was said, with some force, that article 73 of the memorandum and articles of association of the Company expressly permitted a majority of directors to control the affairs of the Company with the consequence that it could not be said that what had taken place was ultra vires that memorandum of association. The correctness of that proposition may be accepted. However, I do not think that it is an answer to the apparently reasonably arguable issue of whether the Company should be wound up on the just and equitable ground.

11 The questions which arise on an application such as the present one are, first, whether there is an arguable case and secondly, assuming that there is such a case, whether the balance of convenience favours or weighs against the granting of the injunction. I do not think that the argument that the writing of the letters was invalid because the meeting of 5 June 2008 had not been properly notified is a particularly strong argument. I would accept that it is an arguable case but it seems to me it is at the lower end of the spectrum. This is particularly so because even as the Company is currently configured the directors Mr Kaufline and Ms McGuire could ratify the writing of the letters which has occurred.

12 On the other hand, I see no particular reason why my previous conclusion on the ex parte application that there was a reasonably arguable case that the Company should be wound up on the just and equitable ground brings about any different conclusion today. It is apparent from the correspondence between the parties that the relationship between them has entirely broken down. The correctness of that conclusion derives considerable support it seems to me from the existence of proceedings before the ACT Supreme Court in which the intricacies of that relationship are sought to be untangled. It is apparent from the acrimony which exists that there is very little chance of the parties cooperating in a meaningful sense in relation to the affairs of the Company.

13 That absence of cooperation has also been exhibited by the inability of the parties to agree upon the terms of an injunction even for a relatively short period of time. Of course, in an application of this kind, the Court is not concerned with the question of who is responsible for the unhappiness which the parties are visiting upon each other. Rather the Court is concerned with the position of the Company and whether its affairs need to be taken out of the hands of the warring and disputant parties and placed into the hands of an independent third party.

14 When one takes into account the share structure of the Company with its particular feature that Mr Brennan and Ms McGuire each have a 50% share causing them to be deadlocked, and also the unusual feature that Mr Kaufline is a director thereby giving Ms McGuire a constant majority even though he is not a shareholder, it seems to me that there is a reasonably strong case for winding up the Company on the just and equitable ground. It follows that there is a case for the appointment of a provisional liquidator.

15 In those circumstances, Mr Brennan has made good the proposition that there is a reasonably arguable case that an injunction should issue. The question then arises as to what the balance of convenience requires. An examination of that question necessarily involves an analysis of the orders which are sought. The orders which have been sought by Mr Brennan restrain correspondence on behalf of the Company, engaging in communications on behalf of the Company and purporting to act on behalf of the super fund.

16 Ms Porter has submitted that, effectively, if orders of that kind are made, they amount to shutting down the affairs of the Company and that – while that might be an understandable course to take – if the affairs of the Company are to be shut down, it would be inequitable unless the injunction ran in the other direction. By that I mean that she submits that if Ms McGuire and Mr Kaufline are restrained in relation to the affairs of the Company, then it is only fair that Mr Brennan is restrained in relation to the affairs of the Company. In that regard, she submitted that there were assets that were in the possession of Mr Brennan, that these assets were assets of the Company and in that circumstance I should either require an undertaking from Mr Brennan not to deal with those assets or, I think it was submitted, I should make orders that restrain him from dealing with those assets.

17 When Mr Brennan obtained the injunction he gave a cross-undertaking effectively in the same form of the orders which he sought against Mr Kaufline and Ms McGuire. It may be that an application by Ms McGuire and Mr Kaufline to restrain Mr Brennan from dealing with those assets could succeed. However, at the moment, there is no evidence before me as to what the assets in question are, nor is there, in a formal sense, an application by Ms McGuire or Mr Kaufline to restrain those assets. The absence of a formal application does not, it appears to me in circumstances such as the present, pose a particular obstacle to the making of the orders. But one is confronted with a considerable difficulty in identifying particular assets to which a cross-undertaking could be attached as the price for Mr Brennan’s injunction or which could be the object of a specific order against Mr Brennan.

18 That is an impossible task. I do not say that such an application, if made and supported by evidence, would have no prospects. I simply observe that I am not currently in a position to accede to it due to an inability to identify what the assets in question are. Of course, if the assets were identified, there might well be a debate as to whether there was a reasonably arguable case that those assets were, or were not, the assets of Mr Brennan. For that reason, I do not think that, by itself that would be sufficient to swing the balance of convenience in favour of Ms McGuire and Mr Kaufline.

19 It was also said by Ms Porter that the applicant for the orders had not established whether it was necessary to restrain the rolling over of the superannuation fund. That may or may not be correct. Reading the correspondence which has passed between the parties, it seems to me very difficult for a person coming into the matter largely uninformed, to reach concluded views as to the extent to which the affairs of the fund are intertwined with the affairs of the Company. For that reason, at least, on the balance of convenience, I think it would be more appropriate to proceed upon the basis that the affairs of the super fund are bound up in the affairs of the Company.

20 In the circumstances, having regard to the aspects of the correspondence which I have outlined already, and by that I mean those aspects of the letters which were written by Ms McGuire and which appear to contain reasonably serious threats to third parties, it seems to me that the balance of convenience narrowly favours the continuation of the orders. I propose to make orders accordingly.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate:

Dated: 25 November 2008

Solicitor for the Plaintiff:	Ms R Porter of ClarkeKann
Counsel for the Defendants:	Ms JK Taylor
Solicitors for the Defendants:	Watts McCray McGuiness Eley

Date of Hearing:	30 October 2008
Date of Judgment:	30 October 2008