Alborn & Ors v Stephens & Ors [2011] QSC 341
SUPREME COURT OF QUEENSLAND
CITATION: Alborn & Ors v Stephens & Ors [2011] QSC 341
PARTIES: RICHARD MOLLISON ALBORN
(first plaintiff)
ALBORN FAMILY CORPORATION PTY LTD
ACN 080 955 595
(second plaintiff)
SHAYKAR PTY LTD
ACN 076 868 552
(third plaintiff)
v
RAY STEPHENS
(first defendant)
GLENYS MARGARET STEPHENS
(second defendant)
AS&L PTY LTD
ACN 087 729 048
(third defendant)
FILE NO/S: SC No 7795 of 2006
DIVISION: Trial Division
PROCEEDING: Claim
ORIGINATING
COURT: Supreme Court at Brisbane
DELIVERED ON: 18 November 2011
DELIVERED AT: Brisbane
HEARING
DATES:
8 June 2010; submissions received 3 August 2010, 9
November 2010 and 31 January 2011; exhibits received 9
June 2011
JUDGE: Atkinson J
ORDER: As per minutes of order to be settled.
1. The court declares that the third plaintiff is and has
been the beneficial owner of the Clontarf Subway
business and associated franchise and the Clontarf Baskin
& Robbins business and associated franchise (“the
Clontarf business”).
2. The court declares that the third plaintiff is entitled to
an account of profits of the Clontarf business from 14
August 2000 to the date of this order, 18 November 2011.
3. Mr Paul Vincent is appointed as Special Referee to
take the account, in accordance with these reasons,
pursuant to sub-rule 501(1)(a) of the Uniform Civil
Procedure Rules 1999 (Qld) (“UCPR”). In accordance
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with sub-rules 502(1) and (3) of the UCPR, it is directed
that the Special Referee not hold a trial, but make such
inquiries as he thinks fit to decide the questions in issue.
Without limiting the generality of the preceding order, it
is directed pursuant to sub-rule 502(1) of the UCPR that
the Special Referee:
(a) may require the parties, or any of them, to furnish
to him such documents and information as he
thinks fit;
(b) may receive written submissions from the parties,
in such manner as he thinks fit;
(c) may inform himself of any other fact, matter or
circumstance, in such manner as he thinks fit;
(d) shall make such allowance for the personal
exertions of the first and second defendants as he
thinks fit (so long as it is consistent with these
reasons); and
(e) shall not be bound by books of account and records
to the extent that he considers them to be erroneous
or unreliable.
4. In accordance with rule 506 of the UCPR, the
remuneration of the special referee be on such basis as
the parties may agree with the Special Referee in writing
or, in default of such agreement, as may be fixed by the
Registrar of this court.
5. The account of profits should be calculated by Mr
Vincent in accordance with these reasons and the
following principles:
(a) Shaykar is entitled to an account of the profits
made by AS&L in respect of the Clontarf business
from 14 August 2000 until the date of this order, 18
November 2011;
(b) Shaykar is entitled to the market value of the
Clontarf business from AS&L as at 14 August
2000;
(c) From the sums referred to in 5(a) and (b) should be
deducted:
(i) the cost of the unpaid labour contributed by Mr
and Mrs Stephens from 14 August 2000 to 18
November 2011;
(ii) the proportion of the Subway settlement
attributable to the loss claimed by Shaykar in
respect of the Clontarf business, in the sum of
$100,000.
(d) Mr Alborn should account to Shaykar for the
proportion of the Subway settlement attributable to
the loss claimed by Shaykar in respect of the
Morayfield business, in the sum of $100,000, but
only in so far as it acts as a set-off against any
amount otherwise owing to Shaykar once the
account of profits has been taken.
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6. After the account is taken, any surplus remaining
should be used to repay any outstanding loans made to
Shaykar by its shareholders, as set out in [122] of these
reasons for judgment;
7. Upon payment of any amount owing by AS&L to
Shaykar after the account is taken, the Clontarf business
should be transferred to a nominee of the franchisees, Mr
and Mrs Stephens.
8. Once the steps set out in this order have been
completed, Shaykar should be wound up.
9. The claim and counter-claim is otherwise dismissed.
10. I shall hear submissions on the appropriate form of
order and costs.
CATCHWORDS: EQUITY – EQUITABLE REMEDIES – ACCOUNTS AND
INQUIRIES – BETWEEN PARTICULAR PARTIES –
where the Court of Appeal allowed an appeal in this matter
and remitted it back to this court for further hearing and
determination – where the parties were involved in a business
of acquiring and operating franchised Subway stores – where
the plaintiffs sought declarations that the third plaintiff was
the beneficial owner of certain businesses and associated
franchises and accordingly, an account of profits – where the
defendants claimed they were entitled to an appropriate
allowance for their working contributions in the businesses –
whether such an account should be ordered and on what basis
CORPORATIONS – WINDING UP – OTHER GROUNDS
FOR WINDING UP – CONDUCT OF DIRECTORS –
OPPRESSIVE, UNFAIRLY PREJUDICIAL OR
UNFAIRLY DISCRIMINATORY CONDUCT – where the
defendants counter-claimed that the first plaintiff had caused
shares to be issued in the third plaintiff to the detriment of the
defendants and for the sole purpose of funding litigation –
where the defendants alleged that this was oppressive conduct
and sought an order for the third plaintiff to be wound up
pursuant to s 233 of the Corporations Act 2001 (Cth) –
whether the third plaintiff company should be wound up or
some other order made
Corporations Act 2001 (Cth), s 232, s 233
Uniform Civil Procedure Rules 1999 (Qld), r 501, r 502
Alborn & Ors v Stephens & Ors [2009] QSC 198, cited
Alborn & Ors v Stephens & Ors [2009] QCA 384, followed
Brookes v Ralph & Ors [2009] QSC 416, cited
General Tire & Rubber Co v Firestone Tyre & Rubber Co
Ltd [1975] 1 WLR 819, cited
Paton & Anor v Reck & Ors [1999] QCA 517, cited
Re D G Brims and Sons Pty Ltd [1995] QSC 53, followed
Team Dynamik Racing Pty Ltd v Longhurst Racing Pty Ltd &
Ors (No 2) [2007] QSC 232, cited
Warman International Ltd v Dwyer (1995) 182 CLR 544,
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followed
COUNSEL: A J H Morris QC, with K A M Greenwood, for the plaintiffs
P J Dunning SC, with L J Nevison, for the defendants
SOLICITORS: Londy Lawyers for the plaintiffs
Gateway Lawyers for the defendants
[1] The Court of Appeal allowed in part an appeal against orders made by me on 29
July 2009 in this matter.1 That court then made directions for the filing of further
material and remitted the matter to me for hearing and determination in accordance
with the reasons published by that court.
[2] Those directions were not complied with and the parties sought an extension of time
from me in order to undertake mediation. Those extensions were granted and the
mediation was conducted but was not successful in resolving the dispute. Further
directions were given by me for the exchange of material between the parties. The
parties did not limit their further submissions to the matters about which directions
were given. I intend to confine myself to the task entrusted to me by the Court of
Appeal and to confine the parties to the issues referred to in the pleadings and in the
directions required by the Court of Appeal and subsequently by myself which were
that they make submissions on the form of the orders, precisely state the factual
findings which have not been made and which they contend are relevant to the
content of the proposed orders and to the taking of accounts and identify the
evidence relied on to support each such finding.
[3] In their submissions before me the plaintiffs sought the additional findings of fact:
“1.1 That, in accordance with the „Morayfield Management
Agreement‟ pleaded and asserted by the Defendants at first
instance, and the findings at trial (as upheld on appeal)
concerning the „Morayfield Management Agreement‟, the
First and Second Defendants:
1.1.1 ceased, on or about 30 September 1999, to have any
beneficial interest in any shares in the capital of the
Third Plaintiff held by them (or either of them) or
registered in their names (or the name of either of
them);
1.1.2 have no interest in the Subway settlement which was
negotiated after they had ceased to have an interest
in the Third Defendant; and
1.1.3 have no basis to allege oppression in respect of the
control and management of the affairs of the Third
Defendant after they had ceased to have an interest
in it;
1.2 That:
1.2.1 the trust property, being the Clontarf Subway and
Baskin & Robbins [sic] businesses, was used for the
purpose of establishing and maintaining the
1 Alborn & Ors v Stephens & Ors [2009] QSC 198 (“Alborn v Stephens QSC”); Alborn & Ors v
Stephens & Ors [2009] QCA 384 (“Alborn v Stephens QCA”).
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Defendants‟ Kallangur and Bribie Island Subway
businesses; and
1.2.2 the Defendants so mixed the profits from the
Clontarf Subway and Baskin & Robbins businesses
with their own property as to render the
identification of their gain impossible.”
[4] The plaintiffs then sought the following orders:
“2. The appropriate declaratory orders are:
2.1 Declarations that the Third Plaintiff is, and always
has been, the sole beneficial owner of:
2.1.1 the Clontarf Subway business and associated
franchise;
2.1.2 the Clontarf Baskin & Robbins business and
associated franchise;
2.1.3 the Kallangur Subway business and
associated franchise; and
2.1.4 the Bribie Island Subway business and
associated franchise.
2.2 Declarations that the Third Plaintiff is entitled, in
accordance with the succeeding provisions of this
order, to an account of the profits of:
2.2.1 the Clontarf Subway business and associated
franchise;
2.2.2 the Clontarf Baskin & Robbins business and
associated franchise;
2.2.3 the Kallangur Subway business and
associated franchise; and
2.2.4 the Bribie Island Subway business and
associated franchise.
2.3 A declaration that the First and Second Plaintiffs are,
and have been since 30 September 1999, the
beneficial owners of all shares in the capital of the
Third Plaintiff held by or registered in the names of
the First and Second Defendants (or either of them).
2.4 A declaration that, subject to the execution,
performance and carrying-out of the provisions of
this order, all contractual rights, duties, obligations
and liabilities, as between the Plaintiffs (or any of
them) and the Defendants (or any of them) are fully
executed, discharged and satisfied.
2.5 Declarations that, upon the making over, conveyance
and transfer to the Third Plaintiff or its nominee, of
all of the right to, title and interest in, and benefit of
the said businesses:
2.5.1 the Plaintiffs (and each of them) are entitled
to be indemnified and held harmless by the
Defendants (and each of them) in respect of
all liabilities theretofore incurred by, through
or in connection with such businesses (or
either of them); and
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2.5.2 the Defendants (and each of them) are
entitled to be indemnified and held harmless
by the Third Plaintiff in respect of all
liabilities thereafter incurred by, through or in
connection with such businesses (or either of
them), including (without limiting the
generality of the foregoing) any liabilities
pursuant to all and any guarantees executed
by the Defendants (or any of them) for the
purposes of or in connection with such
businesses (or either of them).
3. It is also appropriate, in the circumstances, to grant a
mandatory injunction to compel the Defendants, and each of
them, by themselves, the directors of the Third Defendant,
and their respective servants and agents, to do all things
necessary to make over, convey and transfer to the Third
Plaintiff or its nominee, all of the right to, title and interest
in, and benefit of:
3.1 the Clontarf Subway business and associated
franchise;
3.2 the Clontarf Baskin & Robbins business and
associated franchise;
3.3 the Kallangur Subway business and associated
franchise;
3.4 the Bribie Island Subway business and associated
franchise; and
3.5 all shares in the capital of the Third Plaintiff held by
or registered in the names of the First and Second
Defendants (or either of them).
4. The order for an account should be in the following terms:
4.1 That an account be taken of the profits received by
the Defendants (or any of them), directly or
indirectly from the following businesses:
4.1.1 the Clontarf Subway business and associated
franchise from 30 September 1999;
4.1.2 the Clontarf Baskin & Robbins business and
associated franchise from 30 September
1999;
4.1.3 the Kallangur Subway business and
associated franchise from the date of
commencement of that business; and
4.1.1 the Bribie Island Subway business and
associated franchise from the date of
commencement of that business.
4.2 That Mr Paul Vincent be appointed as Special
Referee to take the said account in accordance with
sub-rule 501(1) of the Uniform Civil Procedure
Rules.
4.3 That, in accordance with sub-rules 502(1) and (3) of
the Uniform Civil Procedure Rules, it be directed
that the Special Referee do not hold a trial, but make
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such inquiries as he thinks fit to decide the questions
in issue.
4.4 That, without limiting the generality of the preceding
order, it be directed pursuant to sub-rule 502(1) of
the Uniform Civil Procedure Rules that the Special
Referee:
4.4.1 may require the parties, or any of them, to
furnish to him such documents and
information as he thinks fit;
4.4.2 may receive written submissions from the
parties, in such manner as he thinks fit;
4.4.3 may inform himself of any other fact, matter
or circumstance, in such manner as he thinks
fit;
4.4.4 shall make such allowance for the personal
exertions of the First and Second Defendants
as he thinks fit; and
4.4.5 shall not be bound by the books of account
and records of any of the said businesses, to
the extent that he considers the same to be
erroneous or unreliable.
4.5 That, in accordance with sub-rules 502(1) and (3) of
the Uniform Civil Procedure Rules, the remuneration
of the special referee be on such basis as the parties
may agree with the Special Referee in writing or, in
default of such agreement, as may be fixed by the
Registrar of this Honourable Court.”
[5] This compared to the plaintiffs‟ claim as set out in their claim and statement of
claim which was for the following relief:
“1. A declaration that Shaykar‟s Business referred to in the
Statement of Claim is held by the Defendants on trust for
Shaykar.
2. As against the First and Second Defendants:
(a) Damages or alternatively equitable compensation for
breach of fiduciary duty;
(b) Damages for breach of the Shaykar Agreement
referred to in the Statement of Claim;
(c) Compensation pursuant to section 1317H of the
Corporations Act 2001 for breach of section 183 of
that Act.
3. As against the Third Defendant, damages or equitable
compensation in respect of it having been knowingly
concerned in and having benefited from the breaches of
fiduciary duty committed by the First Defendant and the
Second Defendant as pleaded in the Statement of Claim.
4. Alternatively, an order that accounts be taken as to the
profits received by the Defendants as a result of the breaches
of fiduciary duty pleaded in the Statement of Claim, and for
the payment to Shaykar (or such of the other Plaintiffs as the
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Court sees fit) of any such amount as may be found due
upon the taking of such accounts.
5. Such further or other orders, directions, or relief, including
orders for account or enquiries, as the Court thinks fit.
6. Interest over such portion of the Plaintiffs‟ claims, at such
rate and for such period as the Court thinks fit.
7. Costs.”
[6] The defendants sought the following substantive orders:
“1. A declaration that Shaykar Pty Ltd is the beneficial owner of
the Clontarf Subway and Baskin & Robins [sic] business
and associated franchises.
2. An order pursuant to s 232(1)(d) of the Corporations Act
that for the consideration of $1:
(a) on the condition that Shaykar release the Alborn
parties from any claim in relation to the Subway
settlement; and
(b) on the further condition that Shaykar transfer the
Clontarf business to the Stephens parties, or their
nominee;
(c) Mr and Mrs Stephens transfer all of their shares in
Shaykar to Mr Alborn, or his nominee.
3. The claim and counter-claim otherwise be dismissed.”
[7] The defendants‟ claim in the counterclaim had been for the following relief:
“(a) Equitable compensation for unjust enrichment in a sum
equivalent to any amount that may be awarded to the
Plaintiffs on the Claim in this proceeding;
(b) An accounting for the settlement proceeds received by the
Plaintiffs in Proceeding No. 10121/02 in the Supreme Court
of Queensland, including the benefit derived by Shaykar;
(c) An order pursuant to s.233 Corporations Act 2001 (Cth) that
Shaykar be wound up.”
[8] The question of what orders should now be made depends on an analysis of the
pleadings, to show what matters were not in dispute, what findings have been made
and what facts remain to be determined.
Analysis of the pleadings
[9] The plaintiffs were Richard Mollison Alborn, as first plaintiff, Alborn Family
Corporation Pty Ltd ACN 080 955 595 (“Alborn Family Corporation” or “AFC”),
as second plaintiff, and Shaykar Pty Ltd ACN 076 868 552 (“Shaykar”) as third
plaintiff. The defendants were Ray Stephens, as first defendant, Glenys Margaret
Stephens, as second defendant, and AS&L Pty Ltd ACN 087 729 048 (“AS&L”) as
third defendant.
[10] The facts alleged in the statement of claim which were admitted by the defendants
were:
The first plaintiff, Mr Alborn, was and had, at all material times to the
proceedings since on or about 30 September 1999, been the sole director and
secretary of Shaykar and had, at all material times to the proceedings, been the
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director of the second plaintiff, Alborn Family Corporation, and was the brother
of the second defendant, Mrs Stephens, and brother-in-law of the first
defendant, Mr Stephens (see paragraph 1 of the statement of claim, paragraph 1
of the defence and counterclaim and paragraph 1 of the reply and answer);
Shaykar was duly incorporated “at law” on or about 8 January 1997 and
thereafter at all times material to the proceedings had been capable of suing in
its corporate name; and at all times material to the proceedings, had and
continued to have as its shareholders as to 25 “C” class shares and 100 ordinary
shares, the trustee from time to time of the Alborn Family Trust, being Mr
Alborn and his then wife Maree Alborn until on or about 27 January 1998, and
Alborn Family Corporation thereafter, and as to 51 “C” class shares and 100
ordinary shares, Mr and Mrs Stephens as trustee of the Stephens Family Trust
for the benefit of members of their family; and had as its directors from 8
January 1997 until 30 September 1999, Mr Alborn, Mr Stephens and Ms
McLintock and after on or about 30 September 1999 had as its sole director Mr
Alborn (see paragraph 3(a), (b)(i), (iii), (c) and (d) of the statement of claim,
paragraph 3 of the defence and counterclaim and paragraph 1 of the reply and
answer);
Shaykar was acquired by:
(a) Mr Alborn and his ex-wife Maree Alborn, as trustees for the Alborn Family
Trust;
(b) Mr Brendan Alborn and Ms McLintock; and
(c) Mr and Mrs Stephens, as trustees for the Stephens Family Trust (see
paragraph 4 of the statement of claim, paragraph 4 of the defence and
counterclaim and paragraph 4 of the reply and answer);
Mr Stephens at all times material to the proceedings was the sole director,
secretary and shareholder of the third defendant AS&L and controlled AS&L
together with his wife, Mrs Stephens (see paragraph 5 of the statement of claim,
paragraph 5 of the defence and counterclaim and paragraph 1 of the reply and
answer);
AS&L was and had been, at all times material to the proceedings, a company
duly incorporated at law and capable of being sued in its corporate name (see
paragraph 6 of the statement of claim, paragraph 6 of the defence and
counterclaim and paragraph 1 of the reply and answer);
Doctor‟s Associates Inc (“DAI”) at all times material to the proceedings was
and had been a corporation incorporated in the State of Florida in the United
States of America and was and had been the owner of, or otherwise entitled to
exploit in Australia and elsewhere, a system of operating, and franchising other
persons to operate, retail businesses involving the production and sale to the
public of filled bread-rolls known as “Subs” or sandwiches, using certain
recipes and procedures (“the Subway system”) and in that connection was the
owner of, or otherwise entitled to exploit in Australia and elsewhere, the word
“Subway” used as a business name or trademark; and carried on the business, in
Australia and elsewhere, of granting franchises for the operation of Subway
stores and entering into business arrangements with licensees allowing such
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licensees to conduct the business of granting such franchises (see paragraph 8 of
the statement of claim, paragraph 8 of the defence and counterclaim and
paragraph 1 of the reply and answer);
Subway Systems Australia Pty Ltd (“SSA”) was incorporated or acquired by
DAI to conduct DAI‟s business in Australia, was at all times material to the
proceedings a licensee of DAI and as such engaged in the business of granting
franchises to operate Subway stores in accordance with the Subway system (see
paragraph 9 of the statement of claim, paragraph 9 of the defence and
counterclaim and paragraph 1 of the reply and answer);
In and from January 1997, Mr and Mrs Stephens commenced the management
of the fitout of Subway stores at Morayfield and Clontarf, and in mid-February
1997, attended Subway franchisee training conducted by DAI in the United
States of America at the expense of Shaykar and thereafter commenced
managing the operation of the Morayfield and Clontarf businesses (see
paragraph 17 of the statement of claim, paragraph 17 of the defence and
counterclaim and paragraph 1 of the reply and answer);
On or around 30 September 1999, Mr Stephens and Ms McLintock ceased to be
directors of Shaykar and Mr Alborn commenced managing the Clontarf Subway
and Baskin-Robbins store (“the Clontarf business”) in lieu of Mr and Mrs
Stephens (see paragraph 19 of the statement of claim, paragraph 19 of the
defence and counterclaim and paragraph 14(a) of the reply and answer);
On or about 14 February 2002, Mr Stephens sent a letter to Mr Brendan Alborn
which referred to the Clontarf business and said that his company, AS&L, had
taken over the management of that business on 14 August 2000 and concluded
as follows:
“Shaykar, of course will have the option once all the debts are paid to
arrange with me to offset my consultancy fees and debt repayments
made by me against the price of the stores. We hope to settle this
after the mediation, if successful. So in answer to your question
about a possible dividend, you can see it is not possible and besides,
you are not a shareholder of my Company. I hope all this
information brings you up to date with what‟s been happening in the
store and how we plan to continue with our debt repayment.”
(See paragraph 25 of the statement of claim, paragraph 25 of the defence and
counterclaim and paragraph 1 of the reply and answer);
On 20 December 2002 there was a meeting of the members of Shaykar held at
the offices of accountants MSI Taylor at Toowong during which Mr Stephens
asserted to those present (including Mr Alborn and Mr Brendan Alborn) that
because Mr and Mrs Stephens were named as franchisees in the Morayfield
franchise agreement and the Clontarf franchise agreement, they were the
owners of those stores (see paragraph 26 of the statement of claim, paragraph
26 of the defence and counterclaim and paragraph 1 of the reply and answer).
[11] The facts alleged in the counterclaim which were admitted were:
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In or about November 2007, the plaintiffs compromised proceeding No
10121/02 in the Supreme Court of Queensland (see paragraph 3(a) of the
counterclaim and paragraph 3(a) of the reply and answer);
On or about 18 August 2008, Mr Alborn, in his capacity as sole director of
Shaykar, caused shares to be issued in Shaykar (“the share issue”) for the
purpose of funding this proceeding (see paragraph 4 of the counterclaim and
paragraph 4(a) and (b) of the reply and answer).
[12] Various matters were not admitted and others denied. The matters pleaded by the
plaintiffs and not admitted by the defendants were:
That at all times material to the proceedings Alborn Family Corporation, from
on or about 4 December 1997, was a company duly incorporated at law capable
of suing in its corporate name, was controlled by Mr Alborn and acted, from on
or about 27 January 1998, as trustee of the Alborn Family Trust for the benefit
of members of Mr Alborn‟s family (see paragraph 2 of the statement of claim,
paragraph 2 of the defence and counterclaim and paragraph 2 of the reply and
answer);
On or about 27 January 1998:
(a) Mr Alborn and Maree Alborn retired as trustees of the Alborn Family Trust
and were replaced by Alborn Family Corporation pursuant to a Deed styled
“Deed of Appointment and Retirement of Trustee” dated 27 January 1998;
(b) The shares formerly held by Mr Alborn and Maree Alborn in Shaykar were
transferred to Alborn Family Corporation;
(c) Maree Alborn relinquished her involvement in the partnership or joint
venture constituted by the Shaykar agreement;
(d) In the premises, the remaining members of the partnership or joint venture
constituted by the Shaykar agreement (the “investors”) were then:
(i) Alborn Family Corporation as trustee of the Alborn Family Trust
(or alternatively Mr Alborn);
(ii) Mr Brendan Alborn and Ms McLintock; and
(iii) Mr and Mrs Stephens as trustees for the Stephens Family Trust.
(see paragraph 12 of the statement of claim, paragraph 12 of the defence and
paragraph 8 of the reply);
Pursuant to a Deed entered into on or about 11 September 2006 (“the Deed of
Assignment”), Mr Brendan Alborn and Ms McLintock agreed to transfer their
shares in Shaykar and assign their causes of action against the defendants
(pleaded in the statement of claim) to Mr Alborn (see paragraph 7 of the
statement of claim, paragraph 7 of the defence and paragraph 5 of the reply and
answer);
Until the date of the share transfer effected by the Deed of Assignment referred
to in paragraph 7 of the statement of claim, Shaykar had and continued to have
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as its shareholders, as to 24 “C” class shares and 100 ordinary shares, Mr
Alborn‟s nephew Mr Brendan Alborn and Mr Brendan Alborn‟s de facto
partner Ms Karyn Anne McLintock (“Ms McLintock”). That was admitted by
the defendants except to the extent that they did not admit the terms, meaning
or effect of the Deed of Assignment (see paragraph 3(b)(ii) of the statement of
claim, paragraph 3 of the defence and paragraph 3 of the reply);
[13] None of the matters which were not admitted were any longer in dispute during the
trial. There remained a large number of allegations in dispute on the pleadings,
some of which were the subject of findings which were not disturbed on appeal.
The initial agreement
[14] The plaintiffs pleaded that:
Shaykar was acquired in or about early January 1997 for the purpose of
acquiring and operating franchised “Subway” stores by way of an
incorporated partnership or joint venture between Mr Alborn and his ex-wife
Maree Alborn, as trustees for the Alborn Family Trust, Mr Brendan Alborn and
Ms McLintock, and Mr and Mrs Stephens, as trustees for the Stephens Family
Trust, for the benefit of themselves and their respective families, in the
circumstances more particularly described in paragraphs 10 and 11 of the
statement of claim which dealt with the Shaykar agreement (see paragraph 4 of
the statement of claim).
Paragraphs 10 and 11 of the statement of claim stated:
“THE SHAYKAR AGREEMENT
10. In and between December 1996 and January 1997:
(a) Mr Alborn and his then wife Maree Alborn as
trustees of the Alborn Family Trust;
(b) Mr Brendan Alborn and Ms McLintock; and
(c) Mr and Mrs Stephens as trustees for the Stephens
Family Trust;
entered into a contract („the Shaykar Agreement‟) to
conduct, by way of an incorporated partnership or joint
venture, the business of acquiring and operating
franchised Subway stores within the Redcliffe and
Caboolture Shires („Shaykar‟s Business‟), in consideration
of the mutual promises contained therein.
Particulars
(d) The Shaykar Agreement was partly written and
partly oral.
(e) To the extent that the Shaykar Agreement was
entered into in writing, it was contained in,
evidenced by or may be inferred from a document
styled „Shaykar Pty Ltd Business Plan‟ („the
Business Plan‟), undated but prepared on or about 4
January 1997.
(f) To the extent that the Shaykar Agreement was
entered into orally, it was entered into during
conversations taking place during the course of the
following meetings:
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(i) A meeting on 18 December 1996 at Mr
Alborn‟s home at 3 Bernborough Way, Ningi
(„the First Investors‟ Meeting‟), which
meeting was relevantly attended by Mr
Alborn (representing for the purposes of the
meeting himself and the Alborn Family
Trust), Mr Brendan Alborn, Ms McLintock
and Mr and Mrs Stephens; and
(ii) A meeting on 4 January 1997 at Mr Alborn‟s
home at 3 Bernborough Way, Ningi („the
Second Investors‟ Meeting‟) which meeting
was relevantly attended by Mr Alborn
(representing for the purposes of the meeting
Mr Brendan Alborn, Ms McLintock and the
Alborn Family Trust) and Mr and Mrs
Stephens, during the course of which the
Business Plan was prepared.
(g) The substance or effect of such conversations was
that the parties attending such meetings discussed
and agreed upon the matters referred to in the
Business Plan and the other matters referred to in the
succeeding paragraph hereof.
11. The following were terms of the Shaykar Agreement:
(a) A company to be called Shaykar would be
incorporated to conduct Shaykar‟s Business
(paragraph 1.1 of the Business Plan);
(b) Shaykar‟s Business would be the acquisition and
operation of franchised Subway stores within the
Redcliffe and Caboolture Shires (paragraph 1.3 of
the Business Plan);
(c) The first store to be so acquired would be a store at
Clontarf and the second store to be so acquired
would be a store at Morayfield. (Appendix 1 to the
Business Plan);
(d) The parties to the Shaykar Agreement would loan
funds to Shaykar as follows:
(i) Mr and Mrs Alborn as trustees for the Alborn
Family Trust: $180,000.00;
(ii) Mr Brendan Alborn and Ms McLintock:
$40,000.00;
(iii) Mr and Mrs Stephens as trustees for the
Stephens Family Trust: $40,000.00;
(e) It was agreed during the First Investors‟ Meeting that
any dividends payable from profits earned by
Shaykar in carrying on Shaykar‟s Business were to
be distributed in proportion to the „ordinary‟
shareholdings in Shaykar, that is to say:
(i) To the trustee from time to time of the
Alborn Family Trust – 1/3;
(ii) To Mr Brendan Alborn and Ms McLintock –
1/3; and
-- 13 of 42 --
14
(iii) To Mr and Mrs Stephens as trustees of the
Stephens Family Trust – 1/3.
(f) In order to satisfy the requirement of DAI and SSA
that Subway franchisees be natural persons and not
corporations, Mr and Mrs Stephens would enter into
any necessary franchise agreements and leases in
respect of the stores to be acquired and operated by
Shaykar, and would do so for the benefit of Shaykar
(this was agreed during the Second Investors‟
Meeting).
(g) Mr and Mrs Stephens were to be employed by
Shaykar as „General Manager‟ and „Assistant
General Manager‟ respectively to manage the fitout
and continuing operation of the Morayfield and
Clontarf stores on behalf of Shaykar, in return for
which they would be paid a monthly management
fee (this was agreed during the Second Investors‟
Meeting, and also in paragraphs 1.2, 4.3, 5.1, 5.2.2
and 5.2.3 of the Business Plan). The remuneration to
be paid to the General Manager and the Assistant
General Manager formed part of the „salary‟ figures
set out in Appendix 3 to the Business Plan.
(h) Mr Alborn was to be appointed „Chairman‟ of
Shaykar (paragraph 1.2 of the Business Plan).”
(emphasis added)
[15] The defendants denied the allegations in paragraphs 4, 10 and 11 of the statement of
claim and said that Shaykar was acquired for the purpose of managing “Subway”
stores by way of incorporated partnership or joint venture and not for the purpose of
acquiring “Subway‟ stores (see paragraphs 4, 10 and 11 of the defence and
paragraphs 4, 6 and 7 of the reply).
[16] In paragraph 13 of the statement of claim the plaintiffs made the following
allegations which were denied by the defendants:
“13. In and between January 1997 and June 1998 Mr Alborn
and/or AFC caused funds totalling $196,033.00 to be
advanced to Shaykar pursuant to the Shaykar Agreement.
Particulars
(a) $5,000.00 on or about 13 January 1997.
(b) $15,000.00 on or about 14 March 1997.
(c) $40,000.00 on or about 20 April 1997.
(d) $40,000.00 on or about 19 May 1997.
(e) $35,000.00 on or about 6 June 1997.
(f) $50,000.00 on or about 25 August 1997.
(g) $7,585.00 in or about June 1998.
(h) $3,448.00 in or about June 1998.”
[17] In paragraph 13 of the defence, the defendants said those allegations were untrue
and said:
“(a) no monies were advanced by ‘Mr Alborn and/or AFC … to
Shaykar pursuant to the Shaykar Agreement’ because the
Shaykar Agreement as alleged is denied and the Defendants
-- 14 of 42 --
15
repeat and rely on the direct explanation for the denial
contained in paragraphs 4 and 10 of this Defence;
(b) any monies (the quantum of which is not admitted)
advanced by Mr Alborn and/or AFC were advanced to
Shaykar to provide capital in furtherance of its business plan
to manage „Subway‟ stores.”
[18] In reply the plaintiffs joined issue with the denials and repeated and relied on
matters already pleaded and then said in paragraph 9 of the reply:
“(b) deny the allegation that no monies were advanced by Mr
Alborn and/or AFC to Shaykar pursuant to the Shaykar
Agreement on the grounds that monies were so advanced;
…
(d) deny the allegation that any monies advanced by Mr Alborn
and/or AFC were advanced to Shaykar to provide capital in
furtherance of its business plan to manage Subway stores on
the grounds that:
(i) as pleaded in paragraph 13 of the Statement of
Claim, monies were advanced to Shaykar pursuant to
the Shaykar Agreement; and
(ii) at no time did Shaykar have a business plan to
„manage‟ Subway stores”
[19] The plaintiffs alleged in paragraph 14 of the statement of claim that in and between
January and August 1997, Mr and Mrs Stephens as trustees for the Stephens Family
Trust advanced approximately $40,000 to Shaykar pursuant to the Shaykar
Agreement. Those allegations of fact were denied in paragraph 14 of the defence
which were said to be untrue because:
“(a) no monies were advanced by ‘Mr and Mrs Stephens as
trustees for the Stephens Family Trust … to Shaykar
pursuant to the Shaykar Agreement’ because the Shaykar
Agreement as alleged is denied and the Defendants repeat
and rely on the direct explanation for the denial contained in
paragraphs 4 and 10 of this Defence;
(b) all monies advanced by Mr and Mrs Stephens as trustees for
the Stephens Family Trust were advanced to Shaykar to
provide capital in furtherance of its business plan to manage
„Subway‟ stores.”
[20] In paragraph 10 of the reply and answer the plaintiffs:
“(b) deny the allegation that no monies were advanced by Mr
and Mrs Stephens as trustees for the Stephens trust to
Shaykar pursuant to the Shaykar Agreement, on the grounds
that monies were so advanced;
…
(d) deny the allegation that all monies advanced by Mr and Mrs
Stephens as trustees for the Stephens Family Trust were
advanced to Shaykar to provide capital in furtherance of its
business plan to „manage‟ Subway stores, on the grounds
that:
(i) all monies advanced to Shaykar by Mr and Mrs
Stephens as trustees for the Stephens Family Trust
-- 15 of 42 --
16
were advanced pursuant to the Shaykar Agreement;
and
(ii) at no time did Shaykar have a business plan to
„manage‟ Subway stores”
[21] The plaintiffs alleged that in and between February and April 1997 Mr Brendan
Alborn and Ms McLintock advanced $40,000 to Shaykar pursuant to the Shaykar
Agreement by way of a series of instalments. These allegations were denied in
paragraph 15 of the defence on the basis:
“(a) no monies were advanced by ‘Mr Brendan Alborn and Ms
McLintock … to Shaykar pursuant to the Shaykar
Agreement’ because the Shaykar Agreement as alleged is
denied and the Defendants repeat and rely on the direct
explanation for the denial contained in paragraphs 4 and 10
of this Defence;
(b) all monies (the quantum of which is not admitted) advanced
by Mr Brendan Alborn and Ms McLintock were advanced to
Shaykar to provide capital in furtherance of its business plan
to manage „Subway‟ stores.”
[22] In the reply the plaintiffs said with regard to paragraph 15 of the defence that they:
“(b) deny the allegation that no monies were advanced by Mr
Brendan Alborn and Ms McLintock to Shaykar pursuant to
the Shaykar Agreement on the grounds that monies were so
advanced;
…
(d) deny the allegation that all monies advanced by Mr Brendan
and Ms McLintock were advanced to Shaykar to provide
capital in furtherance of its business plan to „manage‟
Subway stores, on the grounds that:
(i) all monies advanced by Mr Brendan Alborn and Ms
McLintock were advanced to Shaykar pursuant to
the Shaykar Agreement; and
(ii) at no time did Shaykar have a business plan to
„manage‟ Subway stores”
[23] In paragraph 16 of the statement of claim the plaintiffs claimed:
“16. In and between January and April 1997, Mr and Mrs
Stephens executed the following agreements pursuant to the
Shaykar Agreement and for the benefit of Shaykar, being:
(a) A written franchise agreement with SSA in respect
of the Morayfield store (DAI Franchise No 19486),
executed on or about 23 January 1997 („the
Morayfield Franchise Agreement‟);
(b) A written sub-lease from Subway Realty Pty Ltd in
respect of the Morayfield store executed on or about
22 April 1997 („the Morayfield Sub-Lease‟);
(c) A written franchise agreement with SSA in respect
of the Clontarf store (DAI Franchise No 19547),
executed on or about 20 February 1997 („the
Clontarf Franchise Agreement‟); and
-- 16 of 42 --
17
(d) A written sub-lease from Subway Realty Pty Ltd in
respect of the Clontarf store, executed in early 1997
(„the Clontarf Sub-Lease‟).”
[24] The defendants denied those allegations because they said they were untrue and
said:
“… in relation to the Morayfield Franchise Agreement, the
Morayfield Sub-Lease, the Clontarf Franchise Agreement and the
Clontarf Sub-Lease executed by Mr and Mrs Stephens (collectively
referred to as „the Franchise and Sub-Lease Agreements‟):
(a) the Franchise and Sub-Lease Agreements were not executed
‘pursuant to the Shaykar Agreement and for the benefit of
Shaykar’ as alleged because the Shaykar Agreement as
alleged is denied and the Defendants repeat and rely on the
direct explanation for the denial contained in paragraphs 4
and 10 of this Defence;
(b) the Franchise and Sub-Lease Agreements were executed by
Mr and Mrs Stephens in their own right for their benefit
with the intention that they would hold the legal and
equitable interest therein absolutely and without notice of
any other interest whether legal or beneficial.”
[25] Those allegations were denied in paragraph 12 of the reply by repeating the
allegations found in paragraph 16 of the statement of claim.
[26] In paragraph 18 of the statement of claim the plaintiffs alleged that in or around
March 1997, it was agreed during a discussion between Mr Stephens (acting on his own
behalf and on behalf of Mrs Stephens) and Mr Alborn (acting on his own behalf and
on behalf of AFC, Mr Brendan Alborn and Ms McLintock) that Shaykar's business
would thereafter include Baskin-Robbins ice-cream stores which would be run as part
of the Subway stores at Morayfield and Clontarf.
[27] Those allegations were denied in paragraph 18 of the defence and the defendants
alleged that:
“(a) in or around May 1997 discussions occurred between Mr
Alborn and Mr Stephens in relation to the operation of a
Baskin-Robbins ice cream store in premises adjoining the
Subway store at Clontarf;
(b) Mr and Mrs Stephens entered into a Franchise Agreement
and Sub-lease Agreement with respect to the Baskin-
Robbins ice cream store at Clontarf in their own right for
their benefit with the intention that they would hold the legal
and equitable interest therein absolutely and without notice
of any other interest whether legal or beneficial;
(c) Mr and Mrs Stephens agreed with Mr Alborn that the
Baskin-Robbins store at Clontarf would be managed by
Shaykar on the same terms and conditions that had been
agreed with respect to the management of the Subway store
at Clontarf.”
[28] In paragraph 13 of the reply, the plaintiffs pleaded in response:
“As to paragraph 18 of the Defence, the Plaintiffs:
-- 17 of 42 --
18
(a) admit that in or around May 1997 discussions occurred
between Mr Alborn and Mr Stephens in relation to the
operation of a Baskin-Robbins ice cream store in premises
adjoining the Subway store at Clontarf;
(b) as to subparagraph 18(b):
(i) do not admit the allegations that Mr and Mrs
Stephens entered into a Franchise Agreement and
Sub-Lease Agreement with respect to the Baskin-
Robbins ice cream store at Clontarf, on the grounds
that having made such inquiries as are reasonable in
respect of such allegations within the meaning of
Rule 166 of the UCPR, the Plaintiffs remain
uncertain as to the truth or falsity of such allegations
and therefore can neither admit nor deny such
allegations; and
(ii) otherwise deny the allegations therein contained, on
the grounds that if Mr and Mrs Stephens entered into
such agreements (which is not admitted), they did so
pursuant to the agreement pleaded in paragraph 18 of
the Statement of Claim and for the benefit of
Shaykar;
(c) as to subparagraph 18(c), and the particulars thereof dated
17 November 2006:
(i) deny that Mr and Mrs Stephens agreed with Mr
Alborn that the Baskin-Robbins store at Clontarf
would be managed by Shaykar on the same terms
and conditions that had been agreed with respect to
the management of the Subway store at Clontarf, on
the grounds that the agreements referred to therein
were never reached; and
(ii) repeat and rely on the allegations contained in
paragraph 18 of the Statement of Claim.”
[29] The allegations with regard to the initial agreement between the co-venturers were
resolved at trial essentially in favour of the plaintiffs2 with the relevant findings not
disturbed on appeal being:3
“The co-venturers agreed that although Mr and Mrs Stephens were to
be Subway franchisees and sub-lessees, Shaykar would beneficially
own and operate the franchises and the franchise businesses. Mr and
Mrs Stephens were to be the franchisees and sub-lessees because of
the franchisor's requirement that the franchisees and sub-lessees be
natural persons. Shaykar was the beneficial owner of the franchises
and of the Clontarf and Morayfield businesses and it received the
income and paid all of the expenses of the franchise businesses
including the costs of purchase. Mr and Mrs Stephens received
consultancy fees for their work in respect of each franchise, which
fees were paid by Shaykar to a company owned and controlled by the
Stephens.
2 See Alborn v Stephens QSC at [5]-[25].
3 Alborn v Stephens QCA at [40]-[42].
-- 18 of 42 --
19
Before the Clontarf store was opened it was agreed between the co-
venturers that Mr and Mrs Stephens would enter into a Baskin-
Robbins franchise in respect of that store on behalf of Shaykar.
Moneys were lent to Shaykar by or on behalf of the co-venturers but
there was no express agreement as to the terms upon which the
moneys were lent „except that it was an interest only loan for a
minimum of two years.‟”
The Morayfield Management Agreement
[30] In paragraph 19 of the defence and counterclaim the defendants alleged that on or
around 30 September 1999 it was agreed between Mr Alborn (representing his own
interests and the interests of Shaykar, including the interests of AFC, Mr Brendan
Alborn and Ms McLintock) and Mr and Mrs Stephens, that AS&L would assume
the management role of the Morayfield store in lieu of Shaykar and, in
consideration of AS&L assuming all liabilities outstanding in relation to the
management of the Morayfield store on any account whatsoever, that Shaykar
would be released from and indemnified against any further liability or obligation
arising with respect to the Morayfield store with the intention that Shaykar would
have no further interest in the Morayfield store on any account whatsoever (“the
Morayfield Management Agreement”).
[31] In paragraph 14 of the reply and answer, the plaintiffs denied the allegations
pleaded in paragraph 19 of the defence and counterclaim on the grounds that the
Morayfield Management Agreement was never entered into.
[32] The finding at trial that the Morayfield Management Agreement was made4 was
upheld on appeal. The Court of Appeal characterised that finding as follows:5
“In summary, the primary judge found that the co-venturers had
entered into an agreement in September/October 1999 in which it
was agreed that Mr and Mrs Stephens or AS&L would become the
beneficial owner of the Morayfield store business and related assets
in consideration of assuming legal responsibility for the liabilities
relating to such business and assets. Under the agreement, Shaykar
remained the beneficial owner of the Clontarf business and the assets
associated with it and Mr Alborn was to manage that business.”
The Clontarf Management Agreement
[33] In paragraphs 20 and 21 of the statement of claim, the plaintiffs alleged that:
“20. In or about August 2000:
(a) The Clontarf store was experiencing financial
difficulties, having made a significant loss in the
financial year ended 30 June 2000;
(b) Accountant Mr Ray Frazer advised Mr Alborn and
Mr Stephens during a meeting at Mr Frazer's offices
that it would be best for Shaykar to close the
Clontarf store;
4 See Alborn v Stephens QSC at [40]-[62].
5 See Alborn v Stephens QCA at [55].
-- 19 of 42 --
20
(c) Following this meeting Mr Stephens told Mr Alborn
that he wanted to re-commence managing the
Clontarf store through his company AS&L;
(d) Mr Alborn disagreed, telling Mr Stephens that he
thought that this was a bad idea; and
(e) Mr Stephens insisted that he wanted to re-commence
managing the Clontarf store.
21. In or about August 2000, following the said meeting and
discussion, Mr and Mrs Stephens re-commenced managing
the Clontarf store on behalf of Shaykar.”
[34] In response the defendants denied the facts pleaded in paragraphs 20 and 21 of the
statement of claim and alleged in paragraph 20 of the defence that on or about 13
August 2000:
“(a) Mr Alborn unilaterally decided that Shaykar could no longer
afford to manage the Clontarf store and that the Clontarf
store was unable to pay its debts;
(b) Mr Alborn (representing his own interests and the interests
of Shaykar, including the interests of AFC, Mr Brendan
Alborn and Ms McLintock) and Mr Stephens agreed that AS
& L would assume the management role of the Clontarf
store in lieu of Shaykar and in consideration of AS & L
assuming all liabilities outstanding in relation to
management of the Clontarf store on any account
whatsoever and that Shaykar would be released from and
indemnified against any further liability or obligation arising
with respect to the Clontarf store with the intention that
Shaykar would have no further interest in the Clontarf store
on any account whatsoever („the Clontarf Management
Agreement‟).”
[35] In paragraph 21 of the defence they alleged:
“that AS & L commenced management of the Clontarf store on 14
August 2000 with the consent of, and in lieu of, Shaykar.”
[36] At trial I did not accept that the Clontarf Management Agreement had been made on
13 August 2000 but rather found that an agreement had been made in October
2001.6 The latter finding was set aside on appeal.7 I remain of the view based on
the evidence before me that there was no Clontarf Management Agreement made on
13 August 2000 and am of the view that therefore, in the absence of any other
agreement between the parties, Shaykar remained the beneficial owner of the
Clontarf business which was a combined Subway and Baskin-Robbins store and is
entitled to a declaration to that effect. Shaykar is entitled to an account of the
profits made by AS&L (including the various entities for which it was the trustee)
from 14 August 2000 when it took over operation of the Clontarf business to the
date of this order, 18 November 2011.
6 Alborn v Stephens QSC at [73] – [86].
7 Alborn v Stephens QCA at [84].
-- 20 of 42 --
21
Further findings of fact sought by the plaintiffs
[37] As previously mentioned, the plaintiffs sought the following additional findings of
fact:
“1.1 That, in accordance with the „Morayfield Management
Agreement‟ pleaded and asserted by the Defendants at first
instance, and the findings at trial (as upheld on appeal)
concerning the „Morayfield Management Agreement‟, the
First and Second Defendants:
1.1.1 ceased, on or about 30 September 1999, to have any
beneficial interest in any shares in the capital of the
Third Plaintiff held by them (or either of them) or
registered in their names (or the name of either of
them);
1.1.2 have no interest in the Subway settlement which was
negotiated after they had ceased to have an interest
in the Third Defendant; and
1.1.3 have no basis to allege oppression in respect of the
control and management of the affairs of the Third
Defendant after they had ceased to have an interest
in it;
1.2 That:
1.2.1 the trust property, being the Clontarf Subway and
Baskin & Robbins businesses, was used for the
purpose of establishing and maintaining the
Defendants‟ Kallangur and Bribie Island Subway
businesses; and
1.2.2 the Defendants so mixed the profits from the
Clontarf Subway and Baskin & Robbins businesses
with their own property as to render the
identification of their gain impossible.”
[38] The plaintiffs submitted that:
“Consistently with the findings at first instance, the Court of Appeal
concluded that the Alborn interests – rather than the Stephens
interests – became, and remained, beneficial owners of all shares in
the Third Plaintiff, pursuant to the „Morayfield Management
Agreement‟; that is to say, the very agreement which the Defendants
themselves set up and relied upon as entitling them to receive the
Morayfield business in consideration for (inter alia) their transfer of
such shares to the Alborn interests.”
[39] It was not part of the findings at the trial, or on appeal, that as part of, or as a result
of, the Morayfield Management Agreement Mr and Mrs Stephens ceased, on or
about 30 September 1999, to have any beneficial interest in any shares in the capital
of Shaykar held by them (or either of them) or registered in their names (or the
name of either of them). No evidence was referred to which would justify such a
finding being made now. The statement made by Mr Stephens to Allied Brands
International on 3 May 2000 referred to at [73] of Alborn v Stephens QSC is not a
sufficient basis to make a finding that from 30 September 1999, Mr and Mrs
Stephens no longer had any beneficial interest in any shares in Shaykar.
-- 21 of 42 --
22
[40] The findings sought in paragraphs 1.1.2 and 1.1.3 cannot therefore be made as they
depend upon there being a finding that Mr and Mrs Stephens no longer had any
beneficial interest in any shares in Shaykar, a finding which I am not prepared to
make on the evidence before me.
[41] The plaintiffs also sought a finding that the trust property (that is the Clontarf
business) was used to establish and maintain the Kallangur and Bribie Island
Subway businesses. They submitted that such a finding was incontrovertible on the
whole of the evidence and especially paragraph 7.6 of the Vincent‟s Report. I will
set out in full paragraph 7.6 from the Vincent‟s Report:
“7.6 The extent to which the establishment and operations of
the Defendants’ Bribie Island Store were funded by
Income or Profits from the other Businesses
7.6.1 AS&L purchased the Bribie Subway franchise as a
going concern for $297,000 (inclusive of trading
stock) and commenced trading on or around 1 May
2007. Acquisition of the Bribie Subway was funded
by:
(i) A variation to AS&L‟s finance facilities with
Westpac Banking Corporation on 4 April
2007 which increased the limit of its business
development loan by $210,000 (refer
Annexure 25 at page 193). $185,000 was
withdrawn on 2 May 2007; and
(ii) Related party loans as follows:
(a) The R&G Morayfield Trust -
$52,000;
(b) R&G Stephens - $55,000;
(c) The Kallangur Subway Partnership -
$10,000.
7.6.2 I have agreed the related party loan balances above,
to the balance sheets of each of the corresponding
related parties. I am instructed by Mr Stephens, that
no formal loan agreements were made between the
Bribie Subway Trust and the related parties (listed in
paragraph 7.6.1(ii) above). However Mr Stephens
advises that the loans are provided on interest free
terms and that the Bribie Subway store will repay the
loans „as and when it can afford [to]‟.
7.6.3 Further, I note that the Bribie Subway Trust received
$11,091 in profit distributions from the R&G
Morayfield Trust during the financial year ended 30
June 2007 (refer Annexure 10 (page 115).
7.6.4 Based on the matters set out above, I would conclude
that $63,091 (i.e. $52,000 + $11,091) in profits from
the Morayfield Subway Store was used in the
acquisition and initial operation of the Bribie
Subway Store.
7.6.5 Furthermore, in my opinion the increase in AS&L‟s
Westpac facilities would only have been possible
due to AS&L‟s net asset base/earnings potential.
-- 22 of 42 --
23
The Morayfield Subway, Clontarf Subway and
Baskin-Robbins franchises businesses contribute to
AS&L net asset base and earnings.
7.6.6 I have therefore included the business value of the
Bribie Subway Trust in my determination of
AS&L‟s entity value (refer Annexure 22 at page
177).”
[42] Since the net earnings of the Clontarf Subway and Baskin-Robbins franchise
businesses were negative at the time of the purchase by AS&L of the Bribie Subway
franchise, I am satisfied that the Bribie Island business was not purchased using the
profits of the Clontarf business. The observation by Mr Vincent in paragraph 7.6.5
of his report is not sufficient to support a declaration that Shaykar is the sole
beneficial owner of the Bribie Island Subway business and associated franchise. As
can be seen nothing in paragraph 7.6 deals with the acquisition of the Kallangur
Subway business out of profits made by the Clontarf franchise business.
Furthermore this was not the subject of such finding at first instance and that was
not the subject of any appeal. The plaintiffs have not demonstrated that the
defendants so mixed the profits from the Clontarf business with their own property
as to render the identification of their gain impossible. The plaintiffs have not
shown that the findings sought with regard to the Kallangur or Bribie Island
Subway businesses should be made.
Account of profits
[43] The claim for an account of profits arose out of paragraphs 22 to 32 of the statement
of claim (insofar as they related to the Clontarf business) for breach of fiduciary
duty and paragraph 4 of the prayer for relief.
[44] The duty to account for profits arose when Mr and Mrs Stephens caused AS&L to
take over the operation of the Clontarf business which was owned by Shaykar when
it was abandoned by Mr Alborn who was operating it on behalf of Shaykar. That
occurred on 14 August 2000. Mr and Mrs Stephens thereafter acted as if the
Clontarf business was beneficially owned by AS&L whereas it was still beneficially
owned by Shaykar.
The relevant law
[45] The remedy of an account of profits is, as the High Court observed in Warman
International Ltd v Dwyer,8 “ancient and notoriously difficult in practice”.
[46] After setting out the principles relating to a fiduciary‟s duty to account for profits,
the court observed at 558 that:
“The assessment of the profit will often be extremely difficult in
practice; accordingly it has been said that „[w]hat will be required on
the inquiry … will not be mathematical exactness but only a
reasonable approximation‟. What is necessary however is to
determine as accurately as possible the true measure of the profit or
benefit obtained by the fiduciary in breach of his duty.” (footnotes
omitted)
8 (1995) 182 CLR 544 at 556; Paton & Anor v Reck & Ors [1999] QCA 517 at [41], [57].
-- 23 of 42 --
24
[47] There are many different types of fiduciary relationships and the breach of duty may
occur notwithstanding that the fiduciary has acted bona fide and the opportunity to
make profit would not, as occurred in this case, have been availed of but for his skill
and knowledge. It is, however, “necessary to keep steadily in mind the cardinal
principle of equity that the remedy must be fashioned to fit the nature of the case
and the particulars facts.”9
[48] With regard to a fiduciary who conducts a business, the High Court said:10
“In the case of a business it may well be inappropriate and
inequitable to compel the errant fiduciary to account for the whole of
the profit of his conduct of the business or his exploitation of the
principal‟s goodwill over an indefinite period of time. In such a
case, it may be appropriate to allow the fiduciary a proportion of the
profits, depending upon the particular circumstances. That may well
be the case when it appears that a significant proportion of an
increase in profits has been generated by the skill, efforts, property
and resources of the fiduciary, the capital which he has introduced
and the risks he has taken, so long as they are not risks to which the
principal‟s property has been exposed. Then it may be said that the
relevant proportion of the increased profits is not the product or
consequence of the plaintiff‟s property but the product of the
fiduciary‟s skill, efforts, property and resources. This is not to say
that the liability of a fiduciary to account should be governed by the
doctrine of unjust enrichment, though that doctrine may well have a
useful part to play; it is simply to say that the stringent rule requiring
a fiduciary to account for profits can be carried to extremes and that
in cases outside the realm of specific assets, the liability of the
fiduciary should not be transformed into a vehicle for the unjust
enrichment of the plaintiff.
It is for the defendant to establish that it is inequitable to order an
account of the entire profits. If the defendant does not establish that
that would be so, then the defendant must bear the consequences of
mingling the profits attributable to the defendant‟s breach of
fiduciary duty and the profits attributable to those earned by the
defendant‟s efforts and investment, in the same way that a trustee of
a mixed fund bears the onus of distinguishing what is his own.
Whether it is appropriate to allow an errant fiduciary a proportion of
profits or to make an allowance in respect of skill, expertise and
other expenses is a matter of judgment which will depend on the
facts of the given case. However, as a general rule, in conformity
with the principle that a fiduciary must not profit from a breach of
fiduciary duty, a court will not apportion profits in the absence of an
antecedent arrangement for profit-sharing but will make allowance
for skill, expertise and other expenses.” (footnotes omitted)
9 Warman International Ltd v Dwyer at 559; Brookes v Ralph & Ors [2009] QSC 416 at [102]; Team
Dynamik Racing Pty Ltd v Longhurst Racing Pty Ltd & Ors (No 2) [2007] QSC 232 at [56].
10 Warman International Ltd v Dwyer at 561-562; Team Dynamik Racing Pty Ltd v Longhurst Racing
Pty Ltd & Ors (No 2) at [45], [57].
-- 24 of 42 --
25
[49] In the Court of Appeal, Muir JA observed that matters that occurred to him as being
in need of addressing in respect of the taking of accounts were the contractual
entitlement of Mr and Mrs Stephens and/or AS&L to consultancy fees, their
entitlement (if any) to just allowances for their work and the entitlement, if any, of
the parties to interest (if any) on their respective loans.11
The defendants’ submissions
[50] The defendants submitted that the critical evidence before the court with regard to
an account of profits were the reports prepared by Paul Vincent of Vincent‟s
Chartered Accountants, the joint expert appointed in this case. Those reports are
exhibit 2 and exhibit 6. In Table 16 of exhibit 2 Mr Vincent set out the income and
expenses (excluding trust distributions) of the Clontarf Subway store and the
Clontarf Baskin-Robbins store between 30 June 1997 and 30 June 2007. Those
figures show that the total profit of the Clontarf Subway store over that period was
$62,047. The total loss suffered by the Baskin-Robbins store at Clontarf was
$66,437. It follows that up to 30 June 2007 the net loss of operating the Clontarf
business was $4,390. The defendants submitted that there was no profit to account
for, at least not in the period to 30 June 2007.
[51] The defendants contended that the first Vincent‟s report at paragraph 4.10
proceeded on the basis, which was not challenged at trial, that $179,880 in Shaykar
debts with regard to the Clontarf business were repaid by the efforts of the
defendants after they took over the operation of the Clontarf business.
[52] The defendants further submitted that Mr Vincent calculated that the unpaid work
that Mr and Mrs Stephens put into the businesses over the period up to June 2007
was in excess of $370,000 as set out in paragraphs 7.4.9 and 7.4.10 and Table 21 of
his first report. That assessment was based on advice given to him by Mr and Mrs
Stephens of the number of hours they contributed to the businesses. Based on those
figures Mr Vincent prepared Table 21 which shows the consulting fees actually paid
by the businesses and compared that to the amount of time actually spent by Mr and
Mrs Stephens at each of the franchise businesses to calculate whether Mr and Mrs
Stephens owed money to the franchise businesses or the franchise businesses owed
money to Mr and Mrs Stephens in respect of their working hours.
[53] The defendants submitted that even if the plaintiffs could point to any significant
profits from July 2007 onwards it was still unlikely that that would justify the cost
and expense of the account. They submitted that given the profits, or lack of them,
made by the Clontarf business in the 10 years up to June 2007, it was unlikely that
in the couple of years following, the business could possibly have made the
hundreds of thousands of dollars that would be needed just to overtop the unpaid
wages and debts repaid in relation to the Clontarf business by the defendants,
without even considering any of the qualitative just allowances for risk and skill
they would be entitled to.
[54] The defendants therefore asked for the following findings to be made:
“(a) In the period through to June 2007 the Clontarf business had
made a net loss so there is nothing to account for.
(b) To the extent the Clontarf business might have made any
profits in the period from July 2007 to whatever date is
11 Alborn v Stephens QCA at [96].
-- 25 of 42 --
26
chosen for ending any account, just allowance would have
to be made for the unpaid work of Mr and Mrs Stephens,
which equates to $138,750.
(c) Further, there would also have to be an allowance for the
extent to which the Stephens interests caused the debts of
the Clontarf business that they inherited in 2000 to be
repaid.
(d) Finally, there would then also be an entitlement to an
allowance; considerable in the circumstances; for the risk
that Mr and Mrs Stephens took and the skill they applied
that lead to the salvage of the Clontarf business and the
repayment of its debts. Without their effort, skill and risk in
taking over the Clontarf business after it was abandoned by
the Alborn parties, the Clontarf business was „substantially
worthless‟.
(e) In those circumstances it is, frankly, inconceivable that the
profit, if any, of the Clontarf business for the period from 1
July 2007 to whatever date is chosen would exceed the
allowances that the Stephens parties would be entitled to.
There is, in those circumstances, simply no point in
continuing with an account, and to do so would be
inconsistent with UCPR r 5. An account being a
discretionary remedy this is a value [sic] basis to refuse
such an order.”
The plaintiffs’ submissions
[55] The plaintiffs submitted that the effect of the judgment of the Court of Appeal is
that the defendants have been in control of the Clontarf business which has
belonged in equity to Shaykar for over 10 years. The plaintiffs are entitled to an
account of profits. They submitted that there is no basis, either in law or on the
substantive merits of the present case, for allowing the defendants to take the full
benefit of the very thing which the Court of Appeal has found that they were not
entitled to, and which they unlawfully arrogated to their own use, the Clontarf
business. A full account should therefore be made, not simply to June 2007.
[56] The plaintiffs submitted that the figures relied upon by the defendants being a net
loss of $4,390, repayment of the debt of $179,880 and unpaid work claimed by the
Stephenses in excess of $370,000 should be rejected. The plaintiffs submitted that
the suggestion that the businesses were unprofitable is contradicted by the
following:
the Morayfield debt was paid off in seven months of trading;
the Clontarf business debt was repaid;
a loan of $12,000 was drawn by the Second Defendant (as yet unpaid at
the date of the statement);
the repayment of the debt of Clontarf was by AS&L assigning store
profits to pay the debt (as Mr Stephens deposed: „AS&L have been able
to repay the debt through Glenys and I continuing to work in our
teaching roles and assigning store profits to repay the debt‟); and
-- 26 of 42 --
27
profits from the Clontarf business were utilised to establish and operate
the Defendant‟s Kallangur and Bribie Island stores (see paragraph 7.6 of
the Vincents Report – especially paragraph 7.6.5).
[57] The plaintiffs further submitted that the net loss of $4,390 from the period June
1997 to June 2007, “based on Clontarf Subway net profit of $66,437 [sic] and
Baskin & Robbins‟ net loss of $66,437” wrongly takes into account deductions
from the revenue of the stores. The figures which it says were wrongly taken into
account are as follows:
“ 31.2.1 $110,078 claimed for the Stephenses paid working
contributions in the Clontarf Subway store in the
relevant period (see table 12 in the Vincents Report);
31.2.2 $11,046 claimed for the Stephenses paid working
contributions in the Baskin & Robbins store;
31.2.3 $18,143.54 for legal fees in regard to this litigation
(see paragraph 7.5.2 of the Vincents Report);
31.2.4 $8,000 in its entirety for „conferences‟ in Hawaii and
on the Gold and Sunshine Coasts attended by the
Stephenses (paragraph 7.5(v) of Vincents Report);
31.2.5 Funding applied to the establishment and operation
of the Defendant‟s Kallangur and Bribie Island
stores from income and profits of the businesses (see
paragraph 7.6 of the Vincents Report – especially
paragraph 7.6.5);
31.2.6 Shaykar‟s debts that were repaid by AS&L entities
and „expensed‟ in the franchise business income and
expenditure statements (see paragraph 7.3.6 of
Vincents Report – particularly 7.3.6 (iv) where Mr
Vincent refers to advice from the Stephenses which
„suggests that the payment of Shaykar debts were
expensed in the franchise business income and
expenditure statements‟, and concludes that „if
repaid Shaykar debts were expensed, the repaid
debts have already been accounted for between the
parties in lower franchise business profits‟.)
31.2.7 interest on related-party loans (see paragraph
7.6.1(ii) and 7.6.2 of the Vincents Report);
31.2.8 the repayment of debts of $179,880 claimed by the
Stephenses (which is a simple matter of double-
counting); and
31.2.9 repayment of the Morayfield debt, which is unrelated
to the Clontarf businesses.
31.3 There are other matters which have to be clarified. These
include remaining amounts unpaid for superannuation, GST
and tax amounts. The statement of the First Defendant
refers to ATO liabilities, super and GST (para 234). The
amount still owing to the ATO in respect of SGIC for
Morayfield staff ought to be credited to the Clontarf
businesses.
-- 27 of 42 --
28
31.4 The claim by the Stephenses for unpaid work, up to June
2007, in excess of $370,000 based on a 37.5% figure, is
outrageous and unsustainable.”
[58] The plaintiffs further submitted that they do not need to prove that the stores have
earned more than „the hundreds of thousands of dollars that would be needed, just to
overtop the unpaid wages and debts repaid in relation to the Clontarf store by the
Stephens interests‟. A fiduciary who has an equitable obligation to provide an
account cannot evade that obligation, they submitted, by attempting to transfer the
onus of proof to the other party to establish that the accounting is likely to arrive at
a positive net figure. The plaintiffs submitted, in any event, there is every reason to
suppose that the figure will be a positive one, once the anomalies, outlined above, in
the Stephens‟ accounting, have been addressed and rectified and the accounting is
brought forward to the present time.
[59] It was accepted by the plaintiffs that the calculation would necessarily be difficult.
They referred to the observation in Warman International Ltd v Dwyer that „[w]hat
will be required on the inquiry … will not be mathematical exactness but only a
reasonable approximation‟. What is necessary however is to determine as
accurately as possible the true measure of the profit or benefit obtained by the
fiduciary in breach of his duty.
[60] The plaintiffs also accepted that the defendants were entitled to an appropriate
allowance for their work. It did not, however, follow, they submitted, that they
ought be burdened with the defendants‟ own extravagant view of what their services
were worth.
[61] The appropriate course, in the plaintiffs‟ submission, was for the court to appoint
Mr Vincent to conduct the account, in accordance with the draft orders they
proposed.
Discussion
[62] In view of the uncertainty of the result until an account is conducted, the account of
profits should be ordered.
[63] There is in my view no reason not to calculate the unpaid contributions of Mr and
Mrs Stephens according to the hours which they said they worked in the franchise
businesses. On the evidence before me, I am satisfied this is the best estimate of the
time they spent.
-- 28 of 42 --
29
[64] In Table 18, Mr Vincent set out the hours worked by Mr and Mrs Stephens in the
franchise businesses. With respect to the Clontarf business they were as follows:
Commercial Remuneration/
Historical Franchisee Working Contributions
Clontarf Subway Clontarf Baskin-Robbins
Hours per week Hours per week
Year Ray Glenys
Stephens Stephens Total
Ray Glenys
Stephens Stephens Total
30 Jun 00 20 5 25 5 5 10
30 Jun 01 20 5 25 5 5 10
30 Jun 02 20 5 25 5 5 10
30 Jun 03 20 5 25 5 5 10
30 Jun 04 20 5 25 5 10 15
30 Jun 05 20 7 27 5 10 15
30 Jun 06 20 7 27 5 10 15
30 Jun 07 15 5 20 5 7 12
[65] In Table 19, Mr Vincent set out the amount of commercial remuneration on an
hourly basis to which Mr and Mrs Stephens were entitled that was as follows:
Commercial Remuneration/
Historical Franchisee Working Contributions
CPI Brisbane Hourly Rate
CPI Year Annual % change
Ended
Year Base Salary % Super Salary + Super
Ended Rate Contribution Rate
1998-99 1.0 30 Jun 00 $19.58 7% $20.95
1999-00 1.7 30 Jun 01 $19.78 8% $21.36
2000-01 5.9 30 Jun 02 $20.12 8% $21.73
2001-02 2.9 30 Jun 03 $21.31 9% $23.23
2002-03 3.2 30 Jun 04 $21.93 9% $23.90
2003-04 2.9 30 Jun 05 $22.63 9% $24.67
2004-05 2.6 30 Jun 06 $23.29 9% $25.39
2005-06 3.2 30 Jun 07 $23.90 9% $26.05
[66] Mr and Mrs Stephens therefore contributed the following value for the hours
worked in the Clontarf business as follows:
Year Ended Total working hours Hourly rate Total
30 June 00 35x52 = 1820 20.95 38,129
30 June 01 35x52 = 1820 21.36 38,875.20
30 June 02 35x52 = 1820 21.73 39,548.60
30 June 03 35x52 = 1820 23.23 42,278.60
30 June 04 40x52 = 2080 23.90 49,712
30 June 05 42x52 = 2184 24.67 53,879.28
30 June 06 42x52 = 2184 25.39 55,451.76
30 June 07 32x52 = 1664 26.05 43,347.20
-- 29 of 42 --
30
[67] The amount of remuneration to which Mr and Mrs Stephens were entitled compared
to what they were actually paid in respect of the Clontarf business is as follows:
Commercial Remuneration/
Adjustment for the Stephens’s Working Contributions
Consulting fees paid by Franchise
Business to Stephens
Year Clontarf Clontarf Total
Subway Baskin-Robbins
Stephens
actual
Working
Contribution
(Tables
18&19)
Additional
amt owed in
respect of
Stephens’
working
contribution
30 Jun 00 0 0 0 $38,129 $38,129
30 Jun 01 705 0 705 $38,875 $38,170
30 Jun 02 600 0 600 $39,549 $38,949
30 Jun 03 0 0 0 $42,279 $42,279
30 Jun 04 16,055 1,091 17,146 $49,712 $32,566
30 Jun 05 20,773 3,409 24,182 $53,879 $29,697
30 Jun 06 34,627 3,273 37,900 $55,452 $17,552
30 Jun 07 37,318 3,273 40,591 $43,347 $2,756
TOTAL 110,078 11,046 121,124 $361,222 $240,098
[68] The additional amount owed to Mr and Mrs Stephens in respect of their unpaid
working contributions from July 1999 to 30 June 2007 was therefore $240,098.
However this will have to be adjusted when the account is taken as the only dates
relevant to the account are from 14 August 2000 to 18 November 2011.
[69] The Kallangur and Bribie Island stores are irrelevant to the account to be taken for
the reasons already given. The $18,143.54 for legal fees paid by the Clontarf
Subway in relation to defending this litigation should not be deducted from the
income of that business. There does not appear to be any reason to suggest that the
conferences attended by Mr and Mrs Stephens were not legitimate business
expenses and should not be taken into account as legitimate expenditure. The
repayment of Shaykar‟s debt by AS&L has already been taken into account in the
net profit and loss statement prepared. Any accounting will have to consider any
amounts outstanding for tax liabilities or after government imposts which the
Clontarf business generated during the period from 14 August 2000 to 18 November
2011.
[70] It remains to determine the effect of the counterclaim on the account of profits.
Counterclaim
[71] The findings in respect of the Clontarf Management Agreement mean that the
counterclaim, which it was not necessary to consider in the original judgment, now
falls to be considered. At [90] in the Court of Appeal judgment, Muir JA observed:
“… the only relief sought in the counter-claim which continues to
have relevance for the present purposes is the claim for an account of
the proceeds of the settlement of other Supreme Court proceedings
and the claim for an order that Shaykar be wound up: the relevance
-- 30 of 42 --
31
being that the [defendants] may have claims that give rise to a set-
off.”
The proceeds of settlement of other Supreme Court proceedings (“the Subway
settlement”) may give rise to a set off because of the nature of the claim Shaykar
made in those proceedings. The future of Shaykar is significant in determining what
is relevant in the account of profits.
[72] The paragraphs of the counterclaim that deal with these matters are:
“3. In or about November 2007, the Plaintiffs:-
(a) compromised Proceeding No. 10121/02 in the
Supreme Court of Queensland at Brisbane (“the
compromise”);
(b) have failed to bring to account the benefit of the
proceeds of the compromise received for the benefit
of Shaykar, full particulars of which cannot be
provided until such time as disclosure has been
made.
4. On or about 18 August 2008, the First Plaintiff, in his
capacity as sole director of Shaykar, caused shares to be
issued in Shaykar („the share issue‟) to the detriment of the
First Defendant and the Second Defendant and for the sole
purpose of funding this proceeding.
5. The share issue was oppressive to, unfairly prejudicial to, or
unfairly discriminatory against the First Defendant and
Second Defendant within the meaning of s 232
Corporations Act 2001 (Cth).
6. The Defendants‟ [sic] claim as against the Plaintiffs:-
…
(b) An accounting for the settlement proceeds received
by the Plaintiffs in Proceeding No. 10121/02 in the
Supreme Court of Queensland, including the benefit
derived by Shaykar;
(c) An order pursuant to s 233 of the Corporations Act
2001 (Cth) that Shaykar be wound up.”
[73] In the answer to the counterclaim, the plaintiffs pleaded as follows:
“3. As to paragraph 3 of the Counterclaim, the Plaintiffs:
(a) admit that in or about November 2007, they
compromised proceedings No 10121 of 2002 in the
Supreme Court of Queensland;
(b) say that, pursuant to the said compromise, no part of
the benefit of the proceeds was paid on account of
Shaykar‟s claim and no proceeds of the compromise
were received by or on behalf of Shaykar; and
(c) in the premises, deny that the Plaintiffs have failed to
bring to account proceeds of the compromise
received for the benefit of Shaykar.
4. As to paragraph 4 of the Counterclaim, the Plaintiffs:
(a) admit that the First Plaintiff did, on or about 18
August 2008, as sole director of Shaykar, cause
Shaykar to issue shares in Shaykar;
-- 31 of 42 --
32
(b) admit that the shares were issued by Shaykar for the
purpose of raising capital to fund the costs of these
proceedings;
(c) say that all shareholders of Shaykar, including the
First and Second Defendants, were given the same
opportunity to take up the shares so issued;
(d) say that the only detriment to the First and Second
Defendants was that the said share issue put Shaykar
in a financial position to pursue this proceeding
against the Defendants;
(e) in the premises, deny that the First and Second
Defendants have suffered any detriment in their
capacity as shareholders in Shaykar as a result of the
said share issue.
5. As to paragraph 5 of the Counterclaim, the Plaintiffs say
further that the said share issue was not unfairly prejudicial
to, or unfairly discriminatory against the First and Second
Defendants, or either of them, either generally or in their
capacity as shareholders in Shaykar.
6. On the grounds contained in paragraphs 1 to 5 hereof, the
Plaintiffs deny that the Defendants are entitled to all or any
of the relief sought in paragraph 6 of the Counterclaim.”
The defendants’ submissions
[74] The defendants submitted that as to the claim pleaded in paragraph 3 of the
counterclaim, the non-accounting of the Alborn parties to Shaykar for the proceeds
of the Subway settlement (that is, compromised proceeding No 10121/02 in the
Supreme Court of Queensland at Brisbane), it could be readily seen to be a claim in
the same species of claim that the Alborn parties had successfully caused to be
brought in relation to the Clontarf business: that is, each is a claim for an interest
that is truly Shaykar‟s that has been appropriated to the use of one of its
shareholders. In the case of the Stephens parties that was the treating of the
Clontarf business as their own from the time the Alborn parties abandoned it, and in
the case of the Alborn parties the non-accounting to Shaykar for the Subway
settlement.
[75] The defendants submitted that other matters of significance arose. Firstly, neither
the Stephens parties, assuming they are vindicated on the counterclaim, nor the
Alborn parties as a result of the decision in the Court of Appeal, are themselves
entitled to anything as a result. In respect of either of these claims, the only party
with an entitlement in respect of it is Shaykar. Secondly, the nature of those similar,
and to some extent cancelling, claims makes relevant the relief that the court ought
appropriately give if satisfied that oppression in contravention of s 232 of the
Corporations Act 2001 (Cth) by the Alborn parties is made out. Put another way,
the court is both entitled and bound to mould an order in relation to the oppression
proceedings which efficaciously and pragmatically deals with those competing
claims.
[76] The defendants submitted with regard to the Subway settlement that
notwithstanding the fact that Mr Alborn chose not to give or call any evidence in the
proceedings, the details and circumstances of the Subway settlement to the extent
-- 32 of 42 --
33
they were accessible to the Stephens parties were proved by certain documents in
the trial bundle.
[77] At document 166 was the statement of claim in the Subway proceedings, in which
Shaykar was the fifth plaintiff. It was relevantly alleged by the Alborn parties that
Shaykar was “substantially worthless” (paragraphs 55(a) and (c)) and had suffered
substantial operating losses (paragraph 57(a)). This matter was emphasised again in
the reply (paragraphs 185 and 187).
[78] As to the claim made by Shaykar in the Subway proceedings they referred in
particular to paragraphs 1(b)(iv), 5, 19(a)(v) and (b)(v), 31-38, 54, 55(a)-(c), 56(a)-
(c), 57(a) and 58 of the statement of claim.
[79] On 12 October 2007 Mullins Lawyers, the solicitors for Subway, offered to settle
with all plaintiffs, including Shaykar. The offer is at document 205 in the trial
bundle. They also referred to the subsequent letter from Mullins Lawyers of 25
October which is at trial bundle document 206.
[80] Londy Lawyers, the solicitors for all plaintiffs, including Shaykar, unconditionally
accepted the offer made by Subway, as is evidenced by the email from Londy
Lawyers to Mullins Lawyers of 25 October 2007, which is document 207 of the trial
bundle.
[81] Mr Alborn sought then to have Subway enter into a deed of settlement that
purported to evidence that the settlement sum of $1,500,000 (being $1,000,000 to
settle the claim and $500,000 for costs) was payable solely to him, as is shown by
the email sent by Mr Londy on 1 November 2007 enclosing a draft deed, and in
particular clauses 1.1 and 1.3 of that draft. The defendants submitted that as is
clear, including from paragraphs 1-6 of the statement of claim in the Subway
proceedings, Shaykar had a separate interest to the Alborn parties.
[82] Throughout November 2007 Subway refused to have anything to do with that
attempt. This started with the response from Subway‟s solicitor on 13 November
2007, which is document 210 of the trial bundle. Notwithstanding, Mr Alborn
persisted with his wish to get Subway to agree in writing that the settlement monies
were to be paid only to him by the email from his solicitor of 13 November 2007,
which is document 211 of the bundle.
[83] As may be seen by the correspondence between Londy Lawyers and Mullins
Lawyers between 19 and 27 November 2007, at documents 212-217 of the trial
bundle, persistent attempts were made to agree which were refused by Subway.
[84] Consequently the defendants submitted that it remains to be determined what part of
the Subway settlement received by Mr Alborn on behalf of, inter alia, Shaykar, was
properly to be accounted to Shaykar.
[85] Because Mr Alborn chose not to give evidence, and because of what the defendants
referred to as his plainly commercially reprehensible conduct at the time of the
Subway settlement – he, after all, had never been a franchisee and plainly Shaykar‟s
interests did not fully align with his, yet he was wishing to take all of the proceeds
of the settlement personally – any measure of a proper apportionment of what he
ought to have accounted to Shaykar must be somewhat rough and ready.
-- 33 of 42 --
34
[86] The defendants submitted that the passages from Warman International Ltd v
Dwyer cited above are equally, if not more, apposite to this matter. They submitted
of particular relevance on this point of the proper approach to the taking of an
account is the High Court‟s adoption of the reasoning of Lord Wilberforce in
General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd12 in these terms:
“Indeed, what is required in the present case is essentially what Lord
Wilberforce described as a „judicial estimation of the available
indications‟.”13
[87] It was submitted that a reasonable way of making such assessment in the
circumstances would be to recognise that the Subway proceedings were brought by
the plaintiffs, including Shaykar, in respect of 10 stores. They were the Clontarf
and Morayfield stores where the claim was made by Shaykar, the claim in relation
to Subway Gold Coast in respect of the Mermaid Beach, Broadbeach, Burleigh
Waters, Robina and Nerang stores and the claim by and in relation to Subway
Brisbane South concerning the Cleveland, Wynnum and Beenleigh stores. On that
basis the claim in so far as it was prosecuted on behalf of Shaykar was in respect of
20% of the stores in question. Therefore, a tolerable means would be to calculate
that 20% of the settlement sum should have been accounted to Shaykar, or
$200,000.
[88] Perhaps a more precise figure could have been calculated, but Mr Alborn,
throughout, chose for that not to be the case. In those circumstances the defendants
submitted that it is fair to infer that there is nothing that Mr Alborn could have said
that would have aided his case in relation to what on the face of the documents can
be inferred should be Shaykar‟s proportion of the Subway settlement.
[89] Thus, it was contended that the finding in relation to the claim made at paragraph 3
of the counterclaim should be that the sum of $200,000 was not accounted by the
Alborn parties to Shaykar in relation to the Subway settlement.
The plaintiffs’ submissions
[90] The plaintiffs argued that the matters raised in the counterclaim were not and could
not be issues outstanding for resolution. They submitted that consistently with the
findings at first instance, the Court of Appeal concluded that the Alborn interests,
rather than the Stephens‟ interests, became, and remained, beneficial owners of all
shares in the third plaintiff, pursuant to the Morayfield Management Agreement.
Discussion
[91] The plaintiffs‟ submissions should not be accepted. As was held at first instance
neither Mr nor Mrs Stephens had any control over Shaykar after the entry into the
Morayfield Management Agreement. Mr Alborn has been the sole director of
Shaykar since 1 October 1999. However, at that time and at all times material to
these proceedings it had, as was admitted on the pleadings, as its shareholders, as to
51 “C” class shares and 100 ordinary shares, Mr and Mrs Stephens as trustee of the
Stephens Family Trust and, as to 25 “C” class and 100 ordinary shares, from 27
January 1998, Alborn Family Corporation. It appears that from 11 September 2006,
Mr Brendan Alborn and Ms McLintock agreed to transfer their shares, being 24 “C”
12 [1975] 1 WLR 819 at 826.
13 Warman International Ltd v Dwyer at 567.
-- 34 of 42 --
35
class shares and 100 ordinary shares, to Mr Alborn. I cannot therefore agree with
the submission made by the plaintiffs that it is consistent with the findings made at
trial which were upheld on appeal that the defendants cannot assert an interest in the
third defendant which entitles them to claim either:
“18.1 An interest in the Subway settlement which was negotiated
after they had ceased to have an interest in the Third
Defendant; or
18.2 Oppression in respect of the control and management of the
affairs of the Third Defendant after they had ceased to have
an interest in it.”
[92] In any event, as the defendants submitted, it is Shaykar, rather than Mr and Mrs
Stephens, that has an interest in the Subway settlement as Shaykar compromised
those proceedings.
[93] The compromise received for the benefit of Shaykar was a result of the settlement
of proceeding SC No 10121 of 2002 in the Supreme Court of Queensland. In that
proceeding there were five plaintiffs being Mr Alborn, Alborn Family Corporation,
Plug Mates (Aus) Pty Ltd ACN 080 955 577 (formerly Rick Alborn & Associates
Pty Ltd), Subway Brisbane South Pty Ltd ACN 079 977 932 and Shaykar. SSA
was the first defendant and DAI the second defendant.
[94] Claims were made in those proceedings on behalf of Shaykar with respect to the
Morayfield and Clontarf franchises. It was alleged that as a result of representations
made by Subway Development of Queensland Pty Ltd (“SDQ”) in December 1996,
Shaykar invested in the acquisition of Subway stores at Morayfield and Clontarf and
the making of the representations was misleading or deceptive or likely to mislead
or deceive or negligent and/or that those representations were made fraudulently. It
was further alleged in paragraph 54 of that statement of claim that the defendants
took unconscientious advantage of, inter alia, Shaykar and as a result, in paragraph
55, it was alleged that Shaykar was substantially worthless and as a result had lost
the whole of its investment in the Morayfield and Clontarf businesses and had
incurred operating losses in respect of those businesses as a result of the defendants‟
conduct.
[95] The claim for relief was for damages (including aggravated, exemplary and punitive
damages) and/or other relief:
“(a) for deceit
(b) further or alternatively, for misleading or deceptive conduct;
(c) further or in the further alternative, for negligence;
(d) further or in the further alternative, for unconscionable
conduct.”
[96] On 12 and 25 October 2007 the solicitors for the defendants in that case, Mullins
Lawyers, made an offer to settle the plaintiffs‟ claim including costs for $1,500,000.
The offer was contained in a letter from Mullins Lawyers to Londy Lawyers dated
25 October 2007 which is document 206 in the trial bundle. By letter dated 25
October 2007 from the plaintiffs‟ solicitors to the defendants‟ solicitors the offer
was unconditionally accepted. The letter of acceptance then asserted:
“We will furnish you with a proposed deed of release for your
consideration. This will include terms discussed today with Mr
Nicholson as to the identity of the payee and the fact that no part of
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the settlement amount is paid in respect of the claim by Shaykar Pty
Ltd, however our clients unconditional acceptance is not subject to
the execution of such a deed (or any deed).”
[97] Mullins Lawyers acknowledged, by email, receipt of the plaintiffs‟ unconditional
acceptance of the defendants‟ offer of settlement. On 1 November 2007, the
plaintiffs‟ solicitors sent to the defendants‟ solicitors a proposed Deed of Release by
which the monies would be paid to Richard Alborn and no part of the settlement
sum was to be paid in respect of the claims of any of the parties other than Mr
Alborn but that all of the plaintiffs would release the defendants from the causes of
action and claims contained in the proceedings. Those terms were not agreed and
correspondence ensued between the solicitors with proposed amendments to the
draft settlement deed throughout November 2007. No deed was able to be agreed
and on 23 November 2007 Mullins Lawyers, the defendants‟ solicitors, paid
$1,500,000 to the trust account of the plaintiffs‟ solicitors in settlement of
proceeding SC No 10121/02.
[98] There has therefore been no determination of what part of the Subway settlement
received by Mr Alborn on behalf of, inter alia, Shaykar was properly to be
accounted to Shaykar. I accept the defendants‟ submission that because Mr Alborn
chose not to give evidence before me at the trial and because of his conduct at the
time of the Subway settlement, “he, after all, had never been a franchisee and
plainly Shaykar‟s interest did not fully align with his, yet he was wishing to take all
the proceeds of the settlement personally”, any measure of a proper apportionment
of what he ought to have accounted to Shaykar must be somewhat rough and ready.
[99] Shaykar‟s interest in the Subway settlement acts as a set–off to the extent to which
Shaykar has already been compensated by that settlement for the loss claimed by
Shaykar in these proceedings. In respect of the Clontarf business that was
approximately one-tenth of the settlement or $100,000; and in respect of the
Morayfield business, $100,000. Mr Alborn, as director of Shaykar, has a fiduciary
duty to Shaykar not to claim all of the settlement monies for himself to the
detriment of Shaykar which compromised those proceedings. This is a matter that
will have to form part of the taking of accounts.
What should happen to Shaykar and the Clontarf business?
[100] The submissions of all parties sought orders that would end any legal or financial
relationship between them. That is clearly a desirable outcome.
The plaintiffs’ submissions
[101] The plaintiffs sought a mandatory injunction to compel the defendants to do all
things necessary to transfer to the third plaintiff or its nominee, all of the right to,
title and interest in, and benefit of, the Clontarf Subway business and associated
franchise, the Clontarf Baskin-Robbins business and associated franchise, the
Kallangur Subway business and associated franchise, the Bribie Island Subway
business and associated franchise and all shares in the capital of Shaykar held by or
registered in the names of Mr or Mrs Stephens. This order was sought in the
context of seeking a declaration that the first and second plaintiffs are, and have
been since 30 September 1999, the beneficial owners of all shares in the capital of
Shaykar held by or registered in the names of Mr and Mrs Stephens.
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[102] As has been previously set out, the plaintiffs have no entitlement to any interest in
the Kallangur and Bribie Island businesses and associated franchises. As I have
already said, no evidence was referred to in support of the factual findings necessary
to support a declaration that the first and second plaintiffs are, and have been since
30 September 1999, the beneficial owners in all shares in the capital of Shaykar
held by or registered in the names of Mr and Mrs Stephens. I decline to make any
such declaration. I shall deal with what should now happen to Shaykar and its
beneficial interest in the Clontarf business.
The defendants’ submissions
[103] The defendants sought an order that Shaykar be wound up or another appropriate
order be made pursuant to the court‟s power conferred by s 232 and s 233 of the
Corporations Act 2001 (Cth). The terms of such an order are relevant to the
question of a set-off against the profits that would otherwise have to be accounted
for to Shaykar.
[104] The defendants referred to the admission in the reply that Mr Alborn caused the
issue of shares in Shaykar in August 2008 and he did so for the purpose of raising
capital to fund the costs of these proceedings against Mr and Mrs Stephens and their
company, AS&L. It was submitted that company funds were thus admittedly raised
for the purpose of prosecuting these proceedings. These proceedings prosecuted
claims not only for Shaykar, but also for Mr Alborn and Alborn Family
Corporation.
[105] Further Mr Alborn caused these proceedings to be commenced not only in relation
to the Clontarf business and in relation to the separate claims of Mr Alborn and
Alborn Family Corporation, which were of no advantage to Shaykar, but also
caused Shaykar to bring the proceedings in relation to the Morayfield business.
That claim was, the defendants submitted, always unlikely to succeed. This can be
seen from the documentary evidence of the Morayfield Management Agreement
and the inevitable inference from the fact Mr Alborn did not himself give or offer
any evidence to try to offer some contrary explanation in the face of those
documents.14
[106] The prayer for relief sought an order that Shaykar be wound up pursuant to s 233 of
the Corporations Act 2001 (Cth). Section 232 having been engaged, however, there
is ample scope for the court to make whichever order it sees fit under s 233. Indeed,
the relief is, by the opening words of s 233 of the Corporations Act 2001 (Cth), a
matter of the discretion of the court not the election of the parties. Once oppressive
conduct is demonstrated the powers conferred on the court by the Corporations Act
2001 (Cth) are plenary in nature, granting flexibility to fashion an order to meet the
circumstances of a particular case.
[107] In the circumstances the defendants submitted that a better order, in the events that
have transpired, is a compulsory buy out order pursuant to subs 233(1)(d). The
basic requirement of the valuation exercise, and consequent orders, in such a case is
that it must be fair on the facts of the particular case.
[108] It was submitted that Shaykar had, by these proceedings, vindicated two
entitlements:
14 Alborn v Stephens QSC at [40]-[63]; Alborn v Stephens QCA at [60]-[65].
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On the one hand, it had vindicated an entitlement to a declaration that it remains
the beneficial owner of the Clontarf business. Mr Vincent at paragraph 2.7 and
Table 3 of his first report (exhibit 2) and Table 3 of his second report (exhibit
6), values the Clontarf business at $103,000. There is, it was submitted, for the
reasons already identified, no reason to think there is any actual profit to be
accounted for by the Stephens interests in relation to the operation of the
Clontarf business over the period.
On the other hand Shaykar has also vindicated a right to its proportion of the
Subway settlement which should be $200,000.
[109] It was submitted that the relations between the Alborn parties and the Stephens
parties is at such a point that they cannot realistically work with each other anymore
and it is undesirable that they continue to have separate interests in the one
company.
[110] Further, it was submitted that the franchisors would be unlikely to accept the Alborn
interests to run the Clontarf business, nor is there any reason to think that the Alborn
interests would be any better ten years later at running the business they abandoned
in 2000.
[111] Consequently, the defendants submitted, the position in relation to Shaykar could be
summarised, and findings should be made, as follows:
“(a) the shareholdings are controlled by two groups, the Stephens parties
and the Alborn interests, who are plainly unable to agree on any
matters of substance;
(b) the shareholding of the Stephens parties was diluted for an unlawful
purpose, viz the prosecuting of a claim with company funds that the
company had no interest in and a claim by the company that plainly
should never have been brought because there was no factual basis
to do so;
(c) the only assets of Shaykar are the Clontarf business and the
entitlement to recoup its share of the Subway settlement from the
Alborn parties;
(d) there is no realistic reason to think that the Alborn interests or
Shaykar (because of the differences between the Alborn interests
and the Stephens interests) could or would be in a position to
successfully run the Clontarf business;
(e) on a practical level the return of the Clontarf business to Shaykar on
the one hand, and the accounting by the Alborn parties of the
Shaykar proportion of the Subway settlement on the other hand,
involves each of those parties paying into Shaykar an asset that it
has an entitlement to an interest in as a shareholder of Shaykar;
(f) a buy out order on the terms set out below would do justice between
the parties because it would involve the Stephens parties being
entitled to keep an asset worth approximately $100,000 and the
Alborn parties being relieved of the obligation of having to pay over
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to $200,000, in circumstances where their shareholdings in Shaykar,
prior to the impugned issue of shares, was 1/3 - 2/3. Further, such a
result is, if anything, favourable to the Alborn interests as it does
not give Shaykar any account for any part of the $500,000 of costs
received under the Subway settlement and calculates the share of
the damages amount in an at least neutral, if not generous, manner
to the Alborn parties.”
[112] In the circumstances the defendants submitted that the appropriate order is that there
be a compulsory buy out order, for nominal consideration, on the following terms:
“(a) on the condition that Shaykar release the Alborn parties from any
claim in relation to the Subway settlement; and
(b) on the further condition that Shaykar transfer the Clontarf business
to the Stephens parties, or their nominee;
(c) Mr and Mrs Stephens transfer all of their shares in Shaykar to Mr
Alborn, or his nominee.”
[113] The defendants submitted this would fairly reflect the success that will ultimately
come to pass on either side and adjust appropriately according to the rights of the
parties.
[114] In light of the findings urged above, and submissions in aid of them, the defendants
submitted that the formal substantive orders should be as follows:
“1. A declaration that Shaykar Pty Ltd is the beneficial owner of
the Clontarf Subway and Baskin & Robins business and
associated franchises.
2. An order pursuant to s 232 (1) (d) of the Corporations Act that for
the consideration of $1:
(a) on the condition that Shaykar release the Alborn parties
from any claim in relation to the Subway settlement; and
(b) on the further condition that Shaykar transfer the Clontarf
business to the Stephens parties, or their nominee;
(c) Mr and Mrs Stephens transfer all of their shares in
Shaykar to Mr Alborn, or his nominee.
3. The claim and counter-claim otherwise be dismissed.”
Discussion
[115] In the circumstances it was, as the defendants submitted, oppressive conduct to
cause Shaykar to raise capital, one of the purposes of which was to bring a claim
which was completely lacking in merit against one of its shareholders.
[116] The application of company funds to prosecute the claims of some of the persons
interested in the company against other persons interested in the company is
oppressive on the basis that it “is unfair and infringes the basal principle that „the
powers, and the funds, of a company may be used only for the purposes of the
company‟”: Re D G Brims and Sons Pty Ltd.15
15 [1995] QSC 53 at 53 per Byrne J; see also Advance Bank Advance Bank Australia Ltd v FAI
Insurances Ltd (1987) 9 NSWLR 464 at 493; ANZ Executors & Trustee Company Limited v Qintex
Australia Limited [1991] 2 Qd R 360 at 370.
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[117] Consequently, it was oppressive conduct to raise capital for Shaykar for it to litigate
not only claims it had an interest in, but also claims that it plainly did not have an
interest in, but rather only Mr Alborn or Alborn Family Corporation had such an
interest in, or in which it had no legitimate interest as they had no realistic prospect
of success, such as the claims in respect of the Morayfield, Kallangur and Bribie
Island franchises.
[118] The oppressive nature of that conduct is underscored by the fact that had Mr Alborn
not failed to take into account Shaykar‟s interests in relation to the Subway
settlement in 2007, Shaykar would have had its own funds to litigate a claim for the
return of the Clontarf business at the time it raised further capital in 2008. As a
result the capital raising was unnecessary.
[119] In those circumstances the statutory requirements of s 232 of the Corporations Act
2001 (Cth) set out below are made out. Section 232 provides:
“Grounds for Court order
The Court may make an order under section 233 if:
(a) the conduct of a company‟s affairs; or
(b) an actual or proposed act or omission by or on behalf of a
company; or
(c) a resolution, or a proposed resolution, of members or a class
of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e) oppressive to, unfairly prejudicial to, or unfairly
discriminatory against, a member or members whether in
that capacity or in any other capacity.”
[120] Section 233 provides:
“Orders the Court can make
(1) The Court can make any order under this section that it
considers appropriate in relation to the company, including
an order:
(a) that the company be wound up;
(b) that the company‟s existing constitution be modified
or repealed;
(c) regulating the conduct of the company‟s affairs in
the future;
(d) for the purchase of any shares by any member or
person to whom a share in the company has been
transmitted by will or by operation of law;
(e) for the purchase of shares with an appropriate
reduction of the company‟s share capital;
(f) for the company to institute, prosecute, defend or
discontinue specified proceedings;
(g) authorising a member, or a person to whom a share
in the company has been transmitted by will or by
operation of law, to institute, prosecute, defend or
discontinue specified proceedings in the name and
on behalf of the company;
(h) appointing a receiver or a receiver and manager of
any or all of the company‟s property;
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(i) restraining a person from engaging in specified
conduct or from doing a specified act;
(j) requiring a person to do a specified act.
Order that the company be wound up
(2) If an order that a company be wound up is made under this
section, the provisions of this Act relating to the winding up
of companies apply:
(a) as if the order were made under section 461; and
(b) with such changes as are necessary.
Order altering constitution
(3) If an order made under this section repeals or modifies a
company‟s constitution, or requires the company to adopt a
constitution, the company does not have the power under
section 136 to change or repeal the constitution if that
change or repeal would be inconsistent with the provisions
of the order, unless:
(a) the order states that the company does have the
power to make such a change or repeal; or
(b) the company first obtains the leave of the Court.”
[121] As part of the account of profits, Shaykar would ordinarily be entitled to the
reconveyance of the Clontarf business to it or the value of the Clontarf business at
the date of this order. However, the stores are run as franchises and there is no
evidence to suggest that DAI or SSA would accept Shaykar (or Mr Alborn or any
company nominated by him) as the franchisee to own and operate the Clontarf
business. The increase in the capital value of the stores from the time AS&L and
Mr and Mrs Stephens took over the business is, in my view, entirely attributable to
the defendants‟ skill and expertise so the increase in value should be deducted from
the present value to fairly represent the loss suffered by Shaykar. Shaykar is
therefore entitled to the market value of the Clontarf business at the date it was
taken over by AS&L being 14 August 2000. The Clontarf business should then be
transferred to a company nominated by the franchisees, Mr and Mrs Stephens.
Shaykar should be wound up pursuant to s 233(1)(a) of the Corporations Act 2001
(Cth).
[122] If there is any excess owing to Shaykar after the account of profits is taken, it
should be used to repay the initial loans made to it by its shareholders with the
exception of the loan of $40,000 made by Mr and Mrs Stephens as trustees for the
Stephens Family Trust, the forgiveness of which was part of the consideration for
the Morayfield Management Agreement. No provision for interest was made with
regard to those loans. No interest rate should be implied.
Orders
1. The court declares that the third plaintiff is and has been the beneficial owner of
the Clontarf Subway business and associated franchise and the Clontarf Baskin &
Robbins business and associated franchise (“the Clontarf business”).
2. The court declares that the third plaintiff is entitled to an account of profits of the
Clontarf business from 14 August 2000 to the date of this order, 18 November
2011.
3. Mr Paul Vincent is appointed as Special Referee to take the account, in accordance
with these reasons, pursuant to sub-rule 501(1)(a) of the Uniform Civil Procedure
Rules 1999 (Qld) (“UCPR”). In accordance with sub-rules 502(1) and (3) of the
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UCPR, it is directed that the Special Referee not hold a trial, but make such
inquiries as he thinks fit to decide the questions in issue. Without limiting the
generality of the preceding order, it is directed pursuant to sub-rule 502(1) of the
UCPR that the Special Referee:
(a) may require the parties, or any of them, to furnish to him such
documents and information as he thinks fit;
(b) may receive written submissions from the parties, in such manner as
he thinks fit;
(c) may inform himself of any other fact, matter or circumstance, in such
manner as he thinks fit;
(d) shall make such allowance for the personal exertions of the first and
second defendants as he thinks fit (so long as it is consistent with
these reasons); and
(e) shall not be bound by books of account and records to the extent that
he considers them to be erroneous or unreliable.
4. In accordance with rule 506 of the UCPR, the remuneration of the special referee
be on such basis as the parties may agree with the Special Referee in writing or, in
default of such agreement, as may be fixed by the Registrar of this court.
5. The account of profits should be calculated by Mr Vincent in accordance with
these reasons and the following principles:
(a) Shaykar is entitled to an account of the profits made by AS&L in
respect of the Clontarf business from 14 August 2000 until the date
of this order, 18 November 2011;
(b) Shaykar is entitled to the market value of the Clontarf business from
AS&L as at 14 August 2000;
(c) From the sums referred to in 5(a) and (b) should be deducted:
(i) the cost of the unpaid labour contributed by Mr and Mrs
Stephens from 14 August 2000 to 18 November 2011;
(ii) the proportion of the Subway settlement attributable to the
loss claimed by Shaykar in respect of the Clontarf business,
in the sum of $100,000.
(d) Mr Alborn should account to Shaykar for the proportion of the
Subway settlement attributable to the loss claimed by Shaykar in
respect of the Morayfield business, in the sum of $100,000, but only
in so far as it acts as a set-off against any amount otherwise owing to
Shaykar once the account of profits has been taken.
6. After the account is taken, any surplus remaining should be used to repay any
outstanding loans made to Shaykar by its shareholders, as set out in [122] of these
reasons for judgment;
7. Upon payment of any amount owing by AS&L to Shaykar after the account is
taken, the Clontarf business should be transferred to a nominee of the franchisees,
Mr and Mrs Stephens.
8. Once the steps set out in this order have been completed, Shaykar should be wound
up.
9. The claim and counter-claim is otherwise dismissed.
10. I shall hear submissions on the appropriate form of order and costs.
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Official source: https://www.sclqld.org.au/caselaw/QSC/2011/341