FEDERAL COURT OF AUSTRALIA

MVRFT Pty Ltd v GPO No 1 Martin Place Pty Limited [2018] FCA 643

ORDERS

THE COURT ORDERS THAT:

1.    The Defendants’ interlocutory application filed 15 February 2018 be dismissed with costs.

2.    The parties are to hold a mediation on or before 8 June 2018.

3.    Stand over for a further case management hearing on 19 June 2018 at which a timetable for amendments, evidence and the fixing of a trial date will occur.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1    This is an application by the Respondent (‘GPO No 1’) that proceedings brought against it by MVRFT Pty Ltd (‘MVRFT’) and its controller, Mr Robert Van Meer, be permanently stayed or, alternatively, temporarily stayed.

2    The basis for the stay application is a dispute resolution clause (cl 10) in a Shareholders Agreement dated 26 November 2003. The Shareholders Agreement concerns the well-known food court and restaurant precinct within the former GPO on 1 Martin Place in Sydney’s central business district known as No 1 Martin Place. Although this enterprise is more than a food court for the sake of convenience I will refer to it as such.

3    Leaving aside corporate forms, the Shareholders Agreement appears to have been intended to embody an arrangement between Mr Van Meer and a Mr Petroulas. Prior to Mr Van Meer’s involvement, Mr Petroulas had operated the food court through two entities:

    GPO No 1 itself which held the leases (strictly sub-leases) of the premises from which the food court operated; and

    GPO Restaurants and Bars Pty Ltd (‘GPO Restaurants and Bars’) which was the trading entity that conducted the various restaurants, bars and food stalls.

4    Under the proposed arrangement between Mr Van Meer and Mr Petroulas, the former was to have allotted to him 30% of the share capital in both of these entities in return for a payment of $1,250,000. In the case of GPO No 1 this would involve the allotment to him of 428,428 fully paid ordinary shares and, in the case of GPO Restaurants and Bars, it would involve the allotment of 43 fully paid ordinary shares.

5    The deal between Mr Van Meer and Mr Petroulas proceeded by means of the Shareholders Agreement to which brief reference has already been made. There is some dispute about this but the Shareholders Agreement appears to have assumed, if not actually stipulated, that Mr Van Meer and Mr Petroulas would both have board representation in respect of GPO No 1 (perhaps equal, perhaps not; in at least this aspect the Shareholders Agreement is obscure). No provision as to the composition of the board of GPO Restaurants and Bars was made in the Shareholders Agreement and, indeed, that entity was not even a party to the agreement.

6    In any event, regardless of the composition of the board of GPO No 1, the fact is that Mr Van Meer decided not to become a director of GPO No 1. He did so because he had, apparently, been advised by a solicitor that not being a director of a company was less risky than being a director.

7    The effect of Mr Van Meer taking this position was that it was Mr Petroulas who then appeared to exercise the executive functions of the business in relation to the food court.

8    No doubt, if this litigation continues through to its end what happened next will be the subject of controversy involving explanation and counter-explanation. To avoid, therefore, trespassing on the eventual adjudication of those matters, the events should be neutrally stated.

9    At some point, although the timing is not currently altogether clear, Mr Petroulas caused GPO No 1 to cease holding the relevant leases that related to the food court. By the time the matter came before this Court on the hearing of the stay application that single leaseholding had split into leases of different parts of the food court and these, in turn, had devolved on a number of new entities. The areas and entities are as follows:

10    It is convenient to refer to these new corporations as the ‘new leaseholding entities’. The critical feature of the new leaseholding entities is that Mr Van Meer did not know of them (allegedly) and, prior to 22 January 2018, was certainly not issued with a 30% interest in any of them.

11    But it was not only the leaseholding which was devolved on new entities. There was also a devolution from the entity providing the food and beverage services. New entities were now introduced in substitution for it as follows:

12    It is convenient to refer to these as the ‘new operating entities’. As in the case of the new leaseholding entities, the new operating entities were not owned to any extent by Mr Van Meer.

13    Mr Van Meer’s complaints, at a high level of abstraction, are that: first, this restructuring occurred without his knowledge or permission; secondly, the effect of it has been to deprive him of his 30% stake in the food court business for which he had paid $1,250,000 and; thirdly, that he has been deprived of income as the entities in which he holds 30% no longer trade. In fact, the original operator, GPO Restaurants and Bars, no longer even exists having been deregistered.

14    I should say for completeness that Mr Petroulas says that the restructuring took place as part of a plan to relocate in non-trading entities the leases, furniture and fittings and to keep the trading entities associated under the different leases separate. He says that he discussed this with Mr Van Meer and that the process has taken quite some time. He also says that Mr Van Meer has not missed out on any income because no dividends had in fact ever been declared by any of the new leaseholding entities or the new operating entities.

15    Mr Van Meer commenced this proceeding on 22 December 2017 after apparently becoming aware of the existence of the new entities. In an amended statement of claim filed on 19 March 2018 he alleges broadly, first, that there was a joint venture between himself and Mr Petroulas which generated fiduciary and equitable obligations; secondly, that Mr Petroulas has acted in breach of those duties and in breach of the Shareholders Agreement by causing the joint venture property to be transferred to the new entities; thirdly, that the new entities hold the leases and businesses on constructive trust for Mr Van Meer, and; fourthly, that the affairs of GPO No 1 have been conducted oppressively to Mr Van Meer.

16    On 22 January 2018, Mr Petroulas acted, in part, to put some balm on Mr Van Meer’s wounds. He caused to be issued to him 30% of the share capital in three of the new leaseholding entities. This, subject to the question of income, partly restores Mr Van Meer to the situation he was in when GPO No 1 held the lease although it was a party to the Shareholder Agreement whereas the new leaseholding entities are not.

17    On the other hand, Mr Petroulas has not caused 30% of four of the new leaseholding entities and the three new operating entities to be transferred to Mr Van Meer. So, at least in relation to them, his complaint remains unanswered. According to Mr Petroulas’ affidavit, it was never his intention to deprive Mr Van Meer of his 30%.

18    As I have said, Mr Van Meer currently seeks to wind up GPO No 1 on the basis that its affairs have been conducted oppressively to him. However, it is only very recently – on 29 March 2018 in fact – that Mr Petroulas has revealed to Mr Van Meer the other entities and their financial activities in very great detail. It may be that eventually this information will give Mr Van Meer some peace of mind but it does not appear yet to have done so.

19    It is against that backdrop that Mr Petroulas’ application for a stay falls to be decided. It is based upon cl 10 of the shareholder agreement which is in these terms:

‘10 Dispute Resolution

10.1    If a dispute arises out of, or relates to, this Agreement the parties will endeavour to settle the dispute by mediation administered by a mutually acceptable mediator. If the parties are unable to agree as to a suitable mediator, the mediation will be administered by Mediate Today Pty Limited A.C.N. 065 563 760 (“Mediate Today”).

10.2    If the dispute has not been settled within twenty eight (28) days (or such other period as is agreed in writing by the parties) after the appointment of the mediator, the dispute will be submitted to expert determination administered by, and subject to the Rules for Binding Expert Determination of, Mediate Today.

10.3    The parties will accept the determination of the expert as final and binding. The expert will be a person agreed between the parties but, failing agreement, the expert will be a person appointed by Mediate Today. The expert will not be the same person as the mediator.

10.4    Any disputes regarding this Agreement will be heard in Sydney, New South Wales.

10.5    The costs of any dispute resolution will be borne by the parties to that dispute as agreed at the mediation or as determined by the expert (as applicable).

10.6    Until a party has complied with the preceding provisions of this clause that party may not commence court proceedings relating to the dispute except that nothing in this clause precludes a party seeking injunctive relief from an appropriate court where failure to obtain that relief would cause irreparable damage to the party concerned.’

20    It is common ground that no mediation under cl 10.1 has yet occurred. Mr Petroulas’ entity, GPO No 1, now says that the proceedings against it should be stayed and the process of mediation and expert determination referred to in cll 10.1 and 10.2 be permitted to take its course.

21    The parties to the Shareholder Agreement are Mr Van Meer’s entity MVRFT, Mr Petroulas’ entity Swaze Pty Limited (‘Swaze’) and GPO No 1 itself.

22    I accept the submission of Mr Bedrossian of counsel, who appeared for the various defendants including GPO No 1, that the scope of the dispute resolution clause is very broad. The requirement of cl 10.1 is that the dispute ‘arises out of, or relates to, this Agreement’. Of course, one feature of the present dispute is that it extends beyond the parties to the Shareholders Agreement and potentially takes in the new entities, some of whom are alleged now to be constructive trustees. This creates a risk that cl 10 may cause the dispute to be bifurcated with those parts involving GPO No 1 being dealt with under cl 10 and the rest of the claims being dealt with in the oppression suit. The Plaintiffs did not submit that a dispute resolution clause such as cl 10 should be construed against ‘the sensible presumption (in effect a rational assumption of reasonable people) that the parties do not intend the inconvenience of having possible disputes being heard in two places’: Hancock Prospecting Pty Ltd v Rinehart [2017] FCAFC 170 at [166]; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165-166. So construed, it may have been arguable that the word ‘dispute’ in cl 10 should be construed to mean a dispute only between the parties to the agreement. However, I do not think it appropriate to decide the matter by reference to this issue which was not the subject of argument.

23    Assuming then, in the Defendants’ favour, that the word ‘dispute’ does extend to cover a dispute which includes persons or entities who are not party to the agreement containing the dispute clause, there seems to me to be a significant problem with allowing cl 10 to take its course.

24    This is because it is now clear, in the light of Mr Petroulas’ recent revelations about the entities in fact conducting the businesses, that Mr Van Meer’s allegation of oppression potentially leads not just to a winding up of GPO No 1 but also to a winding up of all of the new leaseholding and operating entities. Not all of these are yet parties to the proceeding (although some are) but this is unsurprising since the detailed information about their existence only became available on 29 March 2018. Even assuming that an expert determination could result in Mr Van Meer and Mr Petroulas agreeing to place GPO No 1 in a members voluntary winding up, this solution would not work in relation to the new entities, none of which are parties to the Shareholders Agreement. That problem might itself be surmountable so long as there were no third parties on the share registers of the new entities. But there is no mechanism to prevent such shareholdings arising in the future (even assuming they do not exist now). Further, the winding-up of these entities may well have the capacity adversely to affect creditors and I do not think that such a matter should be left to an expert determination.

25    It seems, therefore, that the resolution by expert determination of the oppression allegations made about the affairs of GPO No 1 would leave Mr Van Meer largely free to run the same case against the new entities in this Court. Since it is those entities that are the asset and business owners it may be that their winding up is a much more important matter than the winding up of GPO No 1. Furthermore, the allegation that the new entities are constructive trustees would still need to be determined in this Court.

26    This is thus one of those cases where granting a stay would lead to a multiplicity of proceedings. It is accepted that such a risk may make it unjust to deprive a plaintiff of the right to have its case determined judicially. In such cases, a stay may be refused even if it would otherwise be available: Dance with Mr D Limited v Dirty Dancing Investments Pty Ltd [2009] NSWSC 332 at [53]-[54] per Hammerschlag J which was followed in Buurabalayji Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd [2017] FCA 1240 at [53] per McKerracher J.

27    I do not think, therefore, that it would be appropriate to stay these proceedings. It may be accepted that the pleadings have not yet been amended to reflect the winding up of the new entities (or in some cases, even their joinder). However, it seems very likely that will occur.

28    As a final note, however, I would observe that this case would very much, in fact, benefit from a mediation even if it be not under cl 10. Mr Petroulas appears willing to cede much already. Mr Van Meer is understandably wary but did not object to mediation at my suggestion. The parties who, in this genre of litigation, are still very much in the relatively inexpensive shallows, would be wise to see if they cannot work this out between them.

29    I will make the following orders:

1.    The Defendants’ interlocutory application filed 15 February 2018 be dismissed with costs.

2.    The parties are to hold a mediation on or before 8 June 2018.

3.    Stand over for a further case management hearing on 19 June 2018 at which a timetable for amendments, evidence and the fixing of a trial date will occur.

Associate:

Dated:    11 May 2018

SCHEDULE OF PARTIES