Aalders v Anzax Finance Australia Pty Limited [2010] NSWSC 699 (29 June 2010)

Last Updated: 30 June 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Aalders v Anzax Finance Australia Pty Limited [2010] NSWSC 699


JURISDICTION:
Equity

FILE NUMBER(S):
2010/29032

HEARING DATE(S):
16 June 2010

JUDGMENT DATE:
29 June 2010

PARTIES:
Plaintiff: Adrian Emile Francois Aalders
1st Defendant: Anzax Finance Australia Pty Limited
2nd Defendant: Paul Anthony Aalders
3rd Defendant: Suzanne Maree Aalders

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff: J Richards
Defendants: D Pritchard SC

SOLICITORS:
Plaintiff: Cordato Partners
Defendants: Shaw Reynolds Bowen & Gerathy Lawyers


CATCHWORDS:
CORPORATIONS – application for injunctive relief – where defendant company was financier and entered into rental agreements with customers in respect of motor vehicles – plaintiff a shareholder and claimed to be a director of company - application by plaintiff for orders to restrain defendant company’s repossession of motor vehicles – serious question to be tried whether defendant entitled to repossession without plaintiff’s consent – serious question to be tried whether plaintiff has ceased to be director of defendant and entitled to participate in decision to repossess – balance of convenience favours grant of injunctive relief – no question of principle – order that defendant be restrained from repossessing vehicles without plaintiff’s written consent.
CORPORATIONS – where dispute regarding plaintiff’s oral representations to customers to purchase vehicles at end of lease and customers’ rights to purchase – application by defendant for orders for plaintiff’s delivery up of vehicles application and restraining plaintiff’s contacting customers to discuss terms of rental agreement – no orders made

LEGISLATION CITED:
Corporations Act 2001 (Cth)


CASES CITED:
Latchford Premier Cinema Limited v Ennion [1931] 2 Ch 409
Knight v Bulic (1994) 13 ACSR 553

TEXTS CITED:


DECISION:
1. Upon the plaintiff by his counsel giving the usual undertaking as to damages, order that until further order, the first defendant by itself, its employees, directors or agents and the second defendant be restrained from taking possession of vehicles in the possession of customers of the first defendant without the consent in writing of the plaintiff.
2. Order that the plaintiff’s interlocutory process filed on 13 May 2010 be otherwise dismissed.
3. Upon the first and second cross-claimants by their counsel undertaking to the court that they will pay, bear and indemnify the first defendant against all costs, charges and expenses of and incidental to the bringing and continuation of the amended first cross-claim, including any adverse costs orders that may be made on that cross-claim against the first defendant as fourth cross-claimant, grant leave to the first and second cross-claimants to bring the amended first cross-claim in the form which is exhibit 2 on the application in the name and on behalf of the first defendant as fourth cross-claimant as well as in their own right.
4. Order that the defendants’ interlocutory process filed on 14 May 2010 be otherwise dismissed.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


WHITE J

Tuesday, 29 June 2010

2010/29032 Adrian Emile Francois Aalders v Anzax Finance Australia Pty Limited & 2 Ors

JUDGMENT

1 HIS HONOUR: I am dealing with two interlocutory processes. The first is an interlocutory process filed by the plaintiff on 13 May 2010. He sought an order for the appointment of a provisional liquidator to the first defendant or, in the alternative:

“3. ... an order until further order restraining the first defendant (by itself, its employees, directors or agents) and the second defendant from taking possession of vehicles in the possession of customers of the First Defendant without first offering those customers the option to purchase that vehicle at the price described as the ‘Envisaged Minimum Trade Price’ in that customer’s ‘Upgrade Discount’ advice received upon entry of the rental agreement with the First Defendant.

4. The first defendant and the second defendant provide a copy of the orders made pursuant to this interlocutory process to each person to whom either of them gave notice (whether orally or in writing) that at the end of their rental agreement with the first defendant that person was required to return their vehicle to the first defendant.”

2 By their interlocutory process of 14 May 2010 the defendants seek an order pursuant to s 237 of the Corporations Act 2001 (Cth) that they have leave to commence proceedings in the name of the first defendant against the plaintiff and Alders Finance Pty Limited (“Alders Finance”), a company of which the plaintiff is the sole director and shareholder. Some amendments were made to the proposed cross-claim during the course of the hearing. The cross-claim for which leave is sought pursuant to s 237 is by way of amendment to an existing cross-claim to add additional claims on behalf of the first defendant. The cross-defendants consent to the making of the order under s 237.

3 By their interlocutory process of 14 May 2010 the defendants also seek the following orders:

“3. (i) an order that the First Cross-Defendant deliver up the Holden Astra Motor vehicle registration number [XXYYXX], which vehicle is the property of the First Defendant, to the Second Defendant at [xx] [yyy] Street, [xxx] on or before 5pm on Friday 14 May 2010;

(ii) an order that the First Cross-Defendant deliver up the Mercedes C180 motor vehicle registration number [XXXYYX] which vehicle is the property of the First Defendant, to the Second Defendant at [xx] [yyy] Street, [xxx] on or before 5pm on Friday 14 May 2010;

...

6. an order that the First Cross-Defendant be restrained from contacting customers of the First Defendant and Anzax Custodians Pty Limited;

7. an order that the First Cross-Defendant be restrained from discussing the terms of Rental Agreements of the First Defendant and/or Anzax Custodians Pty Limited with any customer of Anzax Finance Australia and/or Anzax Custodians Pty Limited or from discussing the terms of Rental Agreements of the First Defendant and/or Anzax Custodians Pty Limited with any person on behalf of a customer of the First Defendant and/or Anzax Custodians Pty Limited.”

4 The proceedings have been given an early final hearing date in July. The plaintiff did not press his claim for an order for the appointment of a provisional liquidator. He did press his claim for injunctive relief.

5 The first defendant (Anzax Finance Australia Pty Ltd) carries on business as a financier. In May 2001 it entered into a Principal and Agency Agreement with St. George Bank whereby it borrowed funds from St. George Bank to purchase motor vehicles or equipment to be hired to its customers. That agreement provided that when the first defendant entered into rental agreements with its customers it did so as agent for St. George Bank as an undisclosed principal. However, the rental payments made to the first defendant by its customers were more than the payments the first defendant was required to make to St. George Bank. Upon payment of all of the rent due to St. George Bank at the end of the term of each lease, the interest of St. George Bank in the relevant assets and in the rental agreement to the customer vested in the first defendant. After St. George Bank has been paid out, any further payments made by a customer, whether by way of further rental or the purchase of the motor vehicle or equipment, is received by the first defendant beneficially and with no obligation to account or make further payments to St. George Bank. Such rent is called “inertia rent”.

6 At least until 27 November 2009 the plaintiff (Adrian Aalders) and the second defendant (Paul Aalders) were directors and shareholders of the first defendant. Adrian Aalders and Paul Aalders are brothers. Paul Aalders contends that at a meeting on 27 November 2009 Adrian Aalders orally resigned his directorship of the first defendant and agreed to sell his shares in the first defendant for $50. Adrian Aalders denies this.

7 Up to 2006 Adrian and Paul Aalders carried on business together through three further companies: Anzax Finance Pty Limited (“Anzax Finance”), Anzax Custodians Pty Limited (“Anzax Custodians”), and Alders Finance. In 2006 Paul Aalders became the sole director and shareholder of Anzax Finance and Anzax Custodians, and Adrian Aalders became the sole director and shareholder of Alders Finance.

8 Alders Finance acts as a finance broker. It introduced to the first defendant customers willing to enter into rental agreements with it.

9 Adrian Aalders deposed that in about October 2007, Paul Aalders said that, for family reasons, Paul did not wish to write new loans and said that Anzax Finance would be running down its books. Paul Aalders deposed that he said he would like a pause from writing new deals effective from 31 December 2007. On 17 December 2007 a new Principal and Agency Agreement was entered into between St. George Bank and Alders Finance.

10 The current dispute appears to have been precipitated in November 2009 when Paul Alders received an email from Adrian Aalders at Alders Finance requesting a payout figure for a vehicle of a customer of the first defendant. Paul Aalders perceived from the email exchange that Adrian Aalders was actively soliciting customers of the first defendant to refinance through Alders Finance. Adrian Alders has denied soliciting customers of the first defendant to refinance their loans through Alders Finance. He says that he responds to requests to provide refinance for customers who have left, or wish to leave, the first defendant.

11 Paul Aalders considered that his brother was actively soliciting customers to terminate their rental agreements with the first defendant and enter new rental agreements through Alders Finance. Paul Aalders considered this to be a breach of an agreement he says was made with his brother in June 2006. Paul Alders contends that at that time, Adrian Aalders promised that he would not contact any clients of the first defendant or Anzax Custodians to try to persuade such customers to upgrade or terminate existing rental agreements. According to Paul Aalders it was also agreed in December 2005 and confirmed in June 2006 that in return for a change in arrangements for the payment of brokerage to Adrian Aalders, Adrian Aalders relinquished his right to “inertia income”, except for deals that Adrian Aalders or another employee introduced before the new brokerage program was activated. “Inertia Income” is the rental payments received by the first defendant after the original term of the lease has expired, but where the customer continues to rent the vehicle. Such payments represent profit to the first defendant, as, by that time St. George Bank has been fully paid out. Paul Aalders considered that by soliciting customers for refinance through Alders Finance, Adrian Aalders was breaching an agreement they had made and depriving him of income.

12 From at least late November 2009 conflicts arose in respect of customers who wished to terminate their rental agreements with the first defendant and enter into new rental agreements through Alders Finance, usually, if not always, in respect of an upgraded motor vehicle. Paul Alders took the position that the first defendant was not willing to agree to an early termination of the lease unless that was done in conjunction with the customer’s entering into a new rental agreement for a new vehicle through the first defendant.

13 The issue is exacerbated by a conflict between Paul Aalders and Adrian Aalders as to the customers’ rights when a rental agreement comes to an end to purchase the vehicle at ten per cent of the original purchase price. Adrian Aalders deposes that with the full knowledge of Paul Aalders, he told customers or other introducers of business directed to the first defendant that at the end of the term of a rental agreement the customer would have the option, amongst other things, to renegotiate a new lease of the vehicle for a further term with a “loyalty discount” based on ten per cent of the original purchase price. By that he meant that rental under a new rental agreement would be calculated on the basis of the vehicle having a value of ten per cent of the original purchase price. He also said that he offered to customers and told introducers of business to the first defendant that a customer could purchase the vehicle at the end of the term of the lease for ten per cent of the original purchase price. Adrian Aalders deposed that in 2001 Paul Aalders had proposed that the company use a “10 percent position” at the end of each rental agreement to be called an “Envisaged Market Value” or “Envisaged Minimum Trade Value”. According to Adrian Aalders, Paul Aalders said words to the effect:

“Paul: This 10 percent position or EMV is what is going to make our rental agreement so attractive to clients. Say for example the car is purchased for $40,000.00, the EMV is therefore $4,000.00. At the end of the rental payments, our finance with St George has been repaid in full. If the client wants to continue with the same car, a new rental agreement can be entered into with the rental payments calculated based on the ‘10% position’ or EMV. They can choose a term of say 12 to 24 months.

Adrian: It sounds brilliant as long as St. George isn’t owed anything at the end of the rental term. The 10% position ends up being pure profit. The thing is the clients will love it too! What happens where the client upgrades?

Paul: Let’s say they have one payment left to make on their vehicle. The client wants to upgrade to a new vehicle with a purchase price of $50,000.00. They tell us the trade-in value of their current vehicle, say its $20,000.00. We subtract the EMV plus the final payment from $20,000.00. We subtract that amount from the value of the new vehicle, and start a new rental. That’s a good incentive for them to go with us again with a new vehicle.

[Adrian]: What if they don’t want to rent anymore but they want to purchase the car.

Paul: They can make us an offer to purchase the vehicle at the 10% position.

[Adrian]: Let me just revise this, so that I have it clearly in my head. We give the client rental payment calculations based on our loan from St George being repaid in full by the end of the initial agreement. We advise the client that the payment calculations are based on a 10% position at the end of the agreement. This is all profit for you and me. Clients can continue to rent the vehicle at a reduced monthly or quarterly amount based on the 10% position, upgrade the equipment by subtracting the final repayment and the 10% EMV from the current trade in value of the vehicle, and then start a new rental agreement on the new vehicle based on the purchase price after the above deductions have been made from the trade-in value. If they want to purchase their vehicle, they can pay out the 10% position.

Paul: Yes, you’ve got it. Remember when you or Ken are speaking with a client that you put on the proposal sheet that an EMV has been discussed with the client so that we can honour these offers that we are making at the end of the agreement. If we do not discuss end of term options then you do not need to put any EMV on the proposal sheet.”

14 According to Adrian Aalders, he made representations to this effect to customers. There was also evidence that he made representations to this effect to intermediaries such as accountants or employees responsible for arranging salary packages for employees, and they in turn passed the representations on to potential customers.

15 Many customers were provided with a letter described as an “Upgrade Discount Offer”. The letters were in a standard form. They did not confirm that the customer had an option to purchase the vehicle at the end of the term of the lease for the “position” of ten per cent. But the letters are consistent with the position described by Adrian Aalders in the case of a customer who wished to upgrade a vehicle through the first defendant and take a lease of a new vehicle from the first defendant. The Upgrade Discount Offer stated an “Envisaged Minimum Trade Price” for the vehicle, being ten per cent of the original purchase price. The letter offered that if the customer upgraded to a new vehicle, the price on which rental instalments for the new upgraded vehicle would be calculated by deducting from the price of the new vehicle the trade-in price of the old vehicle, less ten per cent of the original purchase price of the old vehicle and less the discounted value of future rental instalments due under the lease of the old vehicle. The customer would have the benefit of the difference between the trade-in value of the old vehicle and ten per cent of the original purchase price of the old vehicle.

16 The terms that Adrian Aalders deposed were offered to customers of their being entitled to purchase the vehicle at the end of the term of the lease for ten per cent of the original purchase price and otherwise to have the benefit at the end of the lease of the difference between the value of the vehicle and ten per cent of the original purchase price on any new leasing arrangement were not reflected in the signed rental agreements with customers. Those agreements contained the following term:

“18. OWNERSHIP OF EQUIPMENT

The Renter acknowledges that, upon entering into the Agreement, the Equipment belongs to the Owner. The Renter acknowledges that nothing herein contained shall confer on the Renter any property or interest in or to the Equipment and it is agreed that no agreement or representation has been made which will entitle the Renter to acquire the Equipment at a later date. The Owner retains sole ownership of and title to the Equipment at all times and does not purport at any time during or after the term of the Agreement to sell the Equipment to the Renter.”

17 Adrian Aalders gave evidence that the reason the terms that he says were offered to customers were not included in the rental agreements they signed was that to do so might have tax implications for the customers. If the vehicle in question were used by a hirer for the purposes of earning assessable income, prima facie he or she would not be entitled to claim a deduction for “rental” payment (or the full amount of the “rental” payment) if the payment were made as consideration for the right to acquire the asset at the end of the term, at least if the price of ten per cent of the original purchase price was less than the market value of the vehicle at the end of the term. According to Adrian Aalders the value of the vehicle at the end of the term of the lease was always more than ten per cent of the original purchase price.

18 One would expect the same considerations to apply where a customer was entitled to a reduced rent on the hire of a new vehicle based upon the customer’s being credited with the difference between the trade-in value of the original vehicle and ten per cent of the purchase price. In such a case it could equally be said that the rental payments of the original vehicle were made not only for the use of the car, but also for the right to acquire the property in the car, reflected in the customer’s being credited with the difference between the value of the car at the termination of the lease and ten per cent of the original purchase price.

19 It is a disturbing feature of this case that neither the terms of the upgrade discount offer, nor the oral representations as to the customers’ rights which Adrian Aalders deposes he made, were recorded in the contracts the customers signed.

20 Paul Aalders denies that it was agreed between him and his brother that customers would be offered the opportunity to purchase the vehicles at the end of the term of the lease for ten per cent of the original purchase price. He denies knowledge of such representations having been made.

21 Paul Aalders has refused requests by customers who wish to refinance through Alders Finance to sell the vehicles to them at the end of the term. If a customer has not returned the vehicle at the end of the term, Paul Aalders requires payment of continuing rent. He denies that a customer is entitled to purchase the vehicle by paying ten per cent of the original purchase price. In taking this position he is acting in accordance with the terms of the rental agreement entered into with each customer, but apparently contrary to the representations that the customers say were made to them by Adrian Aalders, and which Adrian Aalders confirms.

22 Paul Aalders deposes that the Envisaged Minimum Trade Price for the vehicle of ten per cent was only an “internal accounting position used in calculating brokerage and estimating future tax”. He does not deny that it was also used in calculating future rental payments when an existing vehicle subject to a rental agreement was traded in and a new vehicle acquired and leased to the customer.

23 Paul Aalders deposes that in early April 2010, 31 rental agreements were in default. In most cases the customers were in dispute with Paul Aalders as to their right to acquire the vehicle at the end of the term of the lease for ten per cent of the original purchase price. Some customers have referred matters to the Office of Fair Trading and some proceedings have been commenced in the Consumer, Trader and Tenancy Tribunal.

24 Paul Aalders gave an undertaking not to repossess vehicles until the determination of the application. He is concerned that customers are less likely to care for a vehicle or will abandon it if they believe it will be repossessed, and may not continue to regularly service the vehicles or maintain insurances or registration. He says that it is always difficult to recover outstanding rent and it is not cost-effective to commence proceedings for that purpose, having regard to the amounts involved. He says that if the first defendant is restrained from taking steps to issue notices of default and notices of termination and from repossessing assets, the cashflow and assets of the first defendant will be depleted.

25 On 16 June 2010 Paul Aalders deposed that 24 motor vehicle rental agreements were currently in default. He calculated that if the first defendant repossessed the vehicles and sold them at the prices indicated in a price guide contained in a “Red Book” (which he describes as a publication based on actual sales of vehicles used as a price guide in the industry), the first defendant would probably receive between $335,000 and $483,000 upon the sale of the vehicles, compared with approximately $91,000 if the vehicles the subject of the defaults were sold at ten per cent of their total original cost. The longer the first defendant is restrained from repossessing and selling vehicles the greater the potential loss.

26 Paul Aalders accuses Adrian Aalders of encouraging customers to breach their rental agreements by ceasing to make payments with a view to refinancing through Alders Finance.

27 The question to be decided is not whether the first defendant is required to allow customers to terminate their leases early by calculating a payout figure which allows a customer to acquire the vehicle for ten per cent of the original purchase price. Nor is the question whether a customer is entitled to purchase a vehicle at the end of the term of a lease for ten per cent of the purchase price. Those questions would arise in proceedings between the first defendant and its customers. These are not such proceedings. In proceedings between the first defendant and a customer asserting such rights, questions would arise not only as to what representations were made to the customer, but what reliance the customer placed upon representations as to the customer’s rights which were not reflected in the rental agreements.

28 The relevant question for the present application is whether Paul Aalders alone should be entitled to take action to repossess vehicles in the exercise of what he says are the first defendant’s rights without the concurrence of Adrian Aalders. Prima facie at least, that question depends on whether Adrian Aalders has ceased to be a director of the first defendant. It was not submitted for Paul Aalders that even if Adrian Aalders had remained a director, the directors had earlier conferred authority on Paul Aalders to make such decisions.

29 Paul Aalders pleads that in June 2006 it was agreed between him and his brother that he would be responsible for managing the affairs and conducting the business of the first defendant. This allegation is denied by Adrian Aalders. No submissions were advanced on the basis that the alleged 2006 agreement conferred sufficient authority on Paul Aalders to enforce what he says are the first defendant’s rights against its customers despite the representations admittedly made to the customers by Adrian Aalders. Rather, counsel for Paul Aalders contended that Adrian Aalders had resigned as a director on 27 November 2009.

30 Paul Aalders deposed that during the course of a five and a half hour meeting on 27 November 2009 he said to his brother words to the effect:

“I’d like you to resign as director of Anzax Finance Australia. You’ve never directed anyway and you’ve got these conflicts of interest that have to be resolved. Something’s got to give. You’ll still be able to receive your inertia entitlements. Will you resign as director?”

31 He deposed that Adrian Aalders replied with words to the effect:

“Yeah OK. I don’t want to get caught up with all that Department of Fair Trading shit anyway, that’ll only eat up my time when I could be earning money doing deals. ...”

32 Paul Aalders said that Adrian Aalders was there referring to a complaint made by a customer to the Department of Fair Trading. He deposed that he said words to the effect “I accept your resignation.”

33 Adrian Aalders denied this conversation.

34 Article 55 of the Constitution of the first defendant provides that the quorum necessary for the transaction of the business of directors may be fixed by the directors, and unless so fixed, shall be two persons. Article 42 provides that the office of directors shall become vacant if, amongst other things, the director resigns his office by notice in writing to the company.

35 There is no evidence of any formal resolution that the directors fixed a quorum fewer than two. Adrian Aalders did not give notice of resignation in writing.

36 Shortly after the meeting of 27 November 2009 Paul Aalders prepared a minute of the meeting which included a statement that Adrian Aalders offered to resolve a conflict of interest by resigning as company director and that it was resolved that the board accept that resignation. The minute was signed by Paul Aalders. It has not been signed by Adrian Aalders and he has not acknowledged the correctness of the minute. To the contrary, through his solicitors, he has denied its accuracy.

37 There is a serious question to be tried as to whether Adrian Aalders resigned as a director. It is clear that even when the constitution of a company provides for a director’s resignation to be given in writing a binding agreement for resignation can be reached by the director’s tendering his or her resignation orally and by the company’s accepting that resignation (Latchford Premier Cinema Limited v Ennion [1931] 2 Ch 409; Knight v Bulic (1994) 13 ACSR 553). On Paul Aalder’s case it is arguable that the company, through Paul Aalders, accepted Adrian Aalder’s oral resignation. It is also arguable that if Adrian Aalders resigned as deposed to by Paul Aalders, the directors might be impliedly taken to have fixed a quorum of fewer than two persons. Paul Aalders also pleads that the effect of the 2006 agreement he alleges was made is that the quorum for directors’ meetings of the first defendant should be taken to have been fixed then by the directors as one director.

38 There is a serious question to be tried as to whether Paul Aalders is entitled to repossess vehicles of customers without the consent of Adrian Aalders. It is not possible on this application to assess the strength of that claim. It depends upon disputed accounts of conversations.

39 The question then is whether the balance of convenience favours granting the injunctive relief sought by Adrian Aalders. Counsel for Paul Aalders submitted that it would not be in the company’s interests for it to be restrained from exercising its contractual rights against the customers as that was likely to lead to a loss to the plaintiff whilst debts continued to be incurred by customers which would not be paid. Moreover the vehicles would lose value as time passed, particularly if they fell out of repair because the customers did not have the incentive to keep them in repair and insured. It was said that it was not cost-effective for the first defendant to pursue claims against customers to recover debts owed to it.

40 There is force in these submissions if the first defendant does have the rights against its customers for which Paul Aalders contends. There is much less force in the submission if the customers’ defaults have been triggered by Paul Aalder’s refusal to honour representations made to customers by Adrian Aalders. Prima facie, the latter is the case in respect of many of the customers allegedly in default.

41 It is not obvious that it is in the commercial interest of the first defendant for it to expose itself to the risk of adverse findings in litigation with its customers by refusing to honour representations made to customers, even though the representations were not incorporated as terms of the rental agreements.

42 As counsel for the defendants submitted, whether or not to pursue repossession is a commercial decision with which the court should not interfere. But the question is whether the commercial decision should be undertaken by Paul Aalders alone. I do not think the balance of convenience clearly favours one course or the other on the question whether it is in the best interests of the company that Paul Aalders be allowed to give instructions that vehicles be repossessed.

43 Given the early final hearing, the better course is to preserve the status quo. What is the status quo? In one sense, the status quo is that from the middle of 2006, Paul Aalders has been in de facto control of the management of the first defendant. That may suggest that the proper course is to refuse the injunction so as to allow that position to continue. But Paul Aalders was allowed to have de facto control of the management of the first defendant when he was not pursuing the present controversial course. In a wider sense, the status quo up to November 2009 was that Paul Aalders was in de facto control of the management of the first defendant, but he did not dispute that customers could refinance vehicles through Alders Finance having the benefit of the “10 percent position”.

44 In the altered circumstances that have obtained since November 2009, the status quo would not be preserved by allowing Paul Aalders unilaterally to enforce what he contends to be the first defendant’s rights against its customers.

45 On balance I consider that the balance of convenience favours granting the injunctive relief sought by the plaintiff. The first defendant will have two avenues of recourse to recover any financial loss it thereby suffers. Where rental agreements have not been terminated, it will have a prima facie right to rental payments from its customers. If it is held on a final hearing that Adrian Aalders is not entitled to final injunctive relief (or other orders that give effect to his alleged entitlement to participate in the making of decisions for the management of the first defendant including decisions as to how the first defendant should deal with its customers, such as an order for winding-up on the just and equitable ground), then the first defendant will be entitled to enforce the undertaking as to damages that Adrian Aalders proffers. There is no reason to doubt that Adrian Aalders will be able to satisfy the undertaking as to damages.

46 Counsel for Paul Aalders raised questions as to the width of the order sought. It was submitted that there should be no restraint upon the first defendant’s enforcing its rights against customers where, for example, there had been a simple default in paying moneys due under the lease and where the first defendant remained liable to pay rental instalments to St. George bank which the customers did not make.

47 In my view, reflecting the grounds upon which I consider an interlocutory injunction should be given, the order should not be expressed in terms of the first defendant and the second defendant being restrained from taking possession of vehicles in the possession of customers without offering those customers the option to purchase the vehicle at the Envisaged Minimum Trade Price. Rather, there should be an order restraining those defendants from taking possession of vehicles in the possession of customers of the first defendant without the plaintiff’s consent. Such an order would recognise that prima facie the plaintiff’s consent to such a course of action is required as a director of the first defendant unless (which is still to be determined) the plaintiff has resigned his position as director. To avoid future argument, the order will provide for such consent to be in writing.

48 Paul Aalders complains that Adrian Aalders has taken the position he has in order to solicit customers from the first defendant and that if, as Adrian Aalders contends, he is a director of the first defendant, he is breaching his duties as a director by seeking to damage the first defendant. He is also acting where there is a conflict between his interest and duty. The orders to be made will not allow Alders Finance to refinance a customer by compelling the first defendant to honour the representations Adrian Aalders says he made. Paul Aalders will not be compelled to allow a customer to purchase a vehicle at the Minimum Envisaged Trade Price or at all, or otherwise to refinance through Alders Finance. The only restraint will be on repossession.

49 I do not consider that Adrian Aalders should be restrained from contacting customers of the first defendant or of Anzax Custodians, or from discussing with customers or any person on behalf of a customer the terms of rental agreements. The relief sought in paragraphs 6 and 7 of the defendants’ interlocutory process of 14 May 2010 goes beyond the relief that those defendants could obtain if successful at a final hearing in establishing the allegations in the proposed amended cross-claim. The cross-claim alleges, inter alia, that Adrian Aalders has recently made misrepresentations to customers of the first defendant as to their entitlement to purchase equipment they rent from the first defendant and as to the alleged rights of the customers to deduct payments made after completion of the minimum rental term from the ten per cent amount for which they are allegedly entitled to purchase the equipment. Even if it is established at a final hearing that the making of those representations was misleading or deceptive, it would not justify a final injunction in the terms sought in the interlocutory process. The defendants also allege that if Adrian Aalders remains a director of the first defendant he is acting in breach of his duty as a director in soliciting clients. Again, the orders sought go beyond the final relief to which the defendants would be entitled. Moreover, the defendants deny that Adrian Aalders remains a director of the company after 27 November 2009. On the defendants’ primary case Adrian Aalders would not be breaching his duties as a director in soliciting customers.

50 Moreover, the balance of convenience does not justify an order restraining Adrian Aalders from contacting customers or discussing their rental agreements or their rights against the first defendant. I see no reason that in litigation between customers of the first defendant and the first defendant, the customer should not know the position taken by Adrian Aalders. I will refuse the claims relief sought in paragraphs 6 and 7 of the defendants’ interlocutory process.

51 The defendants seek orders for the return of two motor vehicles in the possession of Adrian Aalders. Adrian Aalders claims to have purchased one of the vehicles by paying ten per cent of the original purchase price. He did so by direct debit knowing that Paul Aalders denied that the first defendant is obliged to sell the vehicle on payment of that price. Adrian Aalders did not advance any ground as to why he was entitled to possession of the second motor vehicle adverse to the first defendant. It appears to me that the first defendant is entitled to possession of both vehicles. But that does not mean delivery should be made by Adrian Aalders to Paul Aalders. One or other of the brothers must have possession of the vehicles for the company. Adrian Aalders cannot sell either vehicle without the consent of his brother. Given that there is a serious question to be tried that both brothers are directors, I see no reason to order that possession be transferred from Adrian Aalders to Paul Aalders.

52 Both brothers are agreed that one of the vehicles should be sold, but they have not agreed as to how the vehicle should be sold. I see no reason for the court to intervene. If the first defendant suffers loss as a result of Adrian Aalder’s detention of the vehicle and it is ultimately held that he was not entitled to possession of them, he will be liable to compensate the first defendant for that loss. Damages will be an adequate remedy. I therefore refuse the relief sought in paragraph 3 of the defendants’ interlocutory process.

53 The cross-defendants to the cross-claim consent to the orders sought pursuant to s 237 of the Corporations Act. I am satisfied that each of the requirements of s 237 is established. It should be a condition of the leave that the first and second cross-claimants (being the only cross-claimants with standing under s 236(1)(a) to bring the derivative proceedings on behalf of the first defendant) should bear the costs of the proceedings rather than the company. The leave should also be on terms that those cross-claimants indemnify the first defendant against costs or expenses incurred by it in pursuit of the cross-claim and against any adverse costs orders made against the company on the cross-claim.

54 For these reasons I make the following orders:

1. Upon the plaintiff by his counsel giving the usual undertaking as to damages, order that until further order, the first defendant by itself, its employees, directors or agents and the second defendant be restrained from taking possession of vehicles in the possession of customers of the first defendant without the consent in writing of the plaintiff.

2. Order that the plaintiff’s interlocutory process filed on 13 May 2010 be otherwise dismissed.

3. Upon the first and second cross-claimants by their counsel undertaking to the court that, subject to any further order of the court, they will pay, bear and indemnify the first defendant against all costs, charges and expenses of and incidental to the bringing and continuation of the amended first cross-claim, including any adverse costs orders that may be made on that cross-claim against the first defendant as fourth cross-claimant, grant leave to the first and second cross-claimants to bring the amended first cross-claim in the form which is exhibit 2 on the application in the name and on behalf of the first defendant as fourth cross-claimant as well as in their own right.

4. Order that the defendants’ interlocutory process filed on 14 May 2010 be otherwise dismissed.

55 Prima facie costs of both interlocutory processes should be costs in the proceedings. I will hear the parties on costs if any party seeks a different order.

56 I am concerned with the issues raised on the evidence in this application that by offering finance by way of rental agreements to prospective customers that do not reflect the terms offered to customers orally or by way of a side letter, the parties may be allowing customers to obtain deductions against their income tax to which the customers are not entitled and in doing so, the first defendant and Alders Finance may be obtaining a competitive advantage over other providers of finance. I have considered whether I should refer the papers to the Australian Taxation Office. However, the facts have not yet been fully ventilated. This will no doubt be a matter that will be considered by the trial judge.

57 It is surprising that the parties should have been able to incorporate companies using the name “Anzax” under which they carry on business as financiers or finance brokers. The consent of the Minister for Veteran Affairs is required for the registration of a name that uses or includes the word “Anzac” or another word or expression that is of like import. (Corporations Regulations 2001 (Cth) 2B.6.02(1)(b)(ii) and column 2 of part 4 of schedule 6 to the Corporations Regulations). The word “Anzax” is pronounced the same as the plural “Anzacs” and may thus be of like import to the word “Anzacs”. I understood from counsel for the parties that the consent of the Minister for Veteran Affairs had not been given. I will hear submissions as to whether I should direct the Registrar to provide a copy of these reasons to the Australian Securities and Investments Commission and draw the Commission’s attention to this paragraph.

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LAST UPDATED:
29 June 2010