Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 2)

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.

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.

There is also a dispute as to whether:

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.

By notice of motion filed in Court yesterday, immediately prior to Dr Chu giving evidence, the Angelis Parties seek:

In support of the motion, Mr Mr Angelis has sworn an affidavit dated 3 December 2019.

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.

The Angelis Parties have served the submissions they would make, assuming leave were granted.

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.

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:

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.

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.

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.

No other question was reserved for consideration on these past two days.

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.

In my opinion, the Angelis Parties have had ample opportunity to make the submissions now sought to be made.

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.

In any event:

For those reasons, I do not propose to grant the leave sought in par 1 of the notice of motion.

The application to re-open gives rise to wider questions.

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.

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.

No explanation is offered for the Angelis Parties to raise then the precise relief that is sought to be agitated now.

In any event, Pemba submits, and I accept, that they are not in a position to deal with the matter.

As Pemba submitted:

I make the following orders: