A Pty Ltd & Anor and N Pty Ltd & Ors

FAMILY COURT OF AUSTRALIA

A PTY LTD AND ANOR & N PTY LTD AND ORS

[2019] FamCA 1046

FAMILY LAW – CORPORATIONS LAW

Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)

Latimer Holdings Ltd v SEA Holdings NZ Ltd [2005] 2 NZLR 328
Re Five Minute Car Wash Service Ltd [1966] 1 WLR 745
Re London School of Electronics Ltd [1986] Ch 211
Re Tivoli Freeholds Ltd [1972] VR 445
Thomas v H.W. Thomas Ltd (1984) 2 ACLC 610
Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459

1st APPLICANT:

A Pty Ltd (ACN …) as Trustee for The Storrer Family Trust

2nd APPLICANT:

Mr Storrer

1st RESPONDENT:

N Pty Ltd (ACN …)

2nd RESPONDENT:

N Investments Pty Ltd (ACN …) as Trustee for The N Property Trust

3rd RESPONDENT:

R Pty Ltd (ACN …) as Trustee for The Mr O Family Trust

4th RESPONDENT:

T Pty Ltd (ACN …) as Trustee for The Z Family Trust

5th RESPONDENT:

M Pty Ltd (ACN …) as Trustee for The S Family Trust

6th RESPONDENT:

B Pty Ltd (ACN …) as Trustee for The C Family Trust

7th RESPONDENT:

Mr O

8th RESPONDENT:

Ms Z

9th RESPONDENT:

Mr J

10th RESPONDENT:

Mr C

11th RESPONDENT:

Mr O And Ms O as Trustee for The O Property Trust

12th RESPONDENT:

Ms Z and Mr D as Trustee for The E Property Trust

13th RESPONDENT:

N Property Pty Ltd (ACN …) as Trustee for The N Investments Trust

FILE NUMBER:

BRC

7225

2009

DATE DELIVERED:

31 May 2019

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Hogan J

HEARING DATE:

6, 7, 8, 9 and 10 February 2017;
1 & 2 March 2017;
10 & 11 May 2017

REPRESENTATION

COUNSEL FOR THE APPLICANTS:

Mr Page of Queen’s Counsel and with Mr Francis of Counsel on 6,7 & 10 February 2017 and 11 May 2017

SOLICITOR FOR THE APPLICANTS:

Bridge Brideaux Solicitors

COUNSEL FOR THE RESPONDENTS:

Mr Looney of Queen's Counsel with Ms Nicholls of Counsel

SOLICITOR FOR THE RESPONDENTS:

McCullough Robertson Lawyers

Orders

IT IS ORDERED THAT:

The matter is listed for further hearing at 10.00 am on 24 July 2019 for the purpose of hearing the parties about the terms of orders to be made given the findings made in the Reasons for Judgment delivered on 31 May 2019.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym A Pty Ltd as Trustee for the Storrer Family Trust and Anor & N Pty Ltd and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 7225 of 2009

A Pty Ltd (ACN …) as trustee for The Storrer Family Trust

1^st Applicant

And

Mr Storrer

2^nd Applicant

And

N Pty Ltd (ACN …)

1^st Respondent

And

N Investments Pty Ltd (ACN …) as Trustee for The N Property Trust

2^nd Respondent

And

R Pty Ltd (ACN …) as Trustee for The Mr O Family Trust

3^rd Respondent

And

T Pty Ltd (ACN …) as Trustee for The Z Family Trust

4^th Respondent

And

M Pty Ltd (ACN …) as Trustee for The S Family Trust

5^th Respondent

And

B Pty Ltd (ACN …) as Trustee for The C Family Trust

6^th Respondent

And

Mr O

7^th Respondent

And

Ms Z

8^th Respondent

And

Mr J

9^th Respondent

And

Mr C

10^th Respondent

And

Mr O and Ms O as Trustee for The O Property Trust

11^th Respondent

And

Ms Z and Mr D as Trustee for The E Property Trust

12^th Respondent

And

N Property Pty Ltd (ACN …) as Trustee for The N Investments Trust

13^th Respondent

REASONS FOR JUDGMENT[1]

[1] I commence these Reasons with a sincere apology to the parties for the significant delay in finalising this matter. I assure them that I have had particular regard to the extensive contemporaneous notes I took during the hearing and the Transcripts. I have revisited these notes, the Transcripts, the affidavit material, the exhibits and the contents of the parties’ respective submissions, however described; I also note that not all the matters alleged in the submissions prepared on behalf of the Respondents to be “agreed facts” were in fact agreed facts.

Mr Storrer and A Pty Ltd as trustee for The Storrer Family Trust each assert that, in various ways, the Respondents engaged in conduct or an actual or proposed act or omission or a resolution of members that was commercially unfair and, therefore, oppressive to, unfairly prejudicial to or unfairly discriminatory against them.[2]
[2] s 232 Corporations Act 2001 (Cth).
The Respondents[3] do not accept the basis of the application for relief. While they accept that certain of the alleged conduct occurred, they deny that it amounts to oppression.
[3] A grouping term used for convenience only.
The purpose of these Reasons is to express the findings of fact made and the findings about the alleged oppression; following the dissemination of the same, the parties will be heard in respect of the relief and orders which should follow.

Relevant background and understanding of the inter-relationships between the corporate entities and the people who control them

It is clear that, in determining whether, as Mr Storrer and A Pty Ltd allege, each of the Respondents engaged in conduct that was commercially unfair and, therefore, oppressive, unfairly prejudicial to or unfairly discriminatory against them, regard should be had to the context within which such conduct occurred, including the inter-relationships of the corporate entities and the relationships amongst all of the non-corporate Respondents.
A proper focus on such matters will also determine the issue of the standing of Mr Storrer and A Pty Ltd to bring claims under s 233 of the Corporations Act2001 (Cth) (the Act) against each Respondent.

N Pty Ltd, the N Property Trust, N Investments Pty Ltd

N Pty Ltd

A Pty Ltd, in its capacity as trustee of the Storrer Family Trust (the beneficiaries of which include Mr Storrer and Ms Storrer) (A Pty Ltd), owns 207,205 ordinary shares (being 12% of the issued ordinary shares) and one “C” class share[4] in N Pty Ltd. Mr Storrer is the sole director and shareholder of A Pty Ltd.
[4] Issued 5 December 2008.
R Pty Ltd, in its capacity as the trustee of The Mr O Family Trust, owns 897,889 ordinary shares (being 52% of the issued ordinary shares) and one “A” class share[5] in N Pty Ltd. Mr O is the sole shareholder, secretary and only director of R Pty Ltd. Mr O is also the sole director of N Pty Ltd; he is its managing director and, as such, is obliged to manage and administer its business and affairs.[6] I accept he is responsible for the management of its activities and business, the conduct of its affairs, the conduct of its business, its general administration and the day-to-day management of its affairs and that he was so responsible at all material times.
[5] Issued 5 December 2008.
[6] Clause 3, Shareholders’ Agreement dated 22 November 2007.
T Pty Ltd, in its capacity as trustee of The Z Family Trust, owns 207,205 ordinary shares (being 12% of the issued ordinary shares) and one “B” class share[7] in N Pty Ltd. Ms Z is the sole shareholder, secretary and only director of T Pty Ltd. I accept that Ms Z is the secretary of N Pty Ltd and was at all material times.
[7] Issued 5 December 2008.
M Pty Ltd, in its capacity as trustee of The S Family Trust, owns 207,205 ordinary shares (being 12% of the issued ordinary shares) and one “D” class share[8] in N Pty Ltd. Mr J is the sole shareholder, secretary and only director of M Pty Ltd.
[8] Issued 5 December 2008.
B Pty Ltd, in its capacity as trustee of The C Family Trust, owns 207,205 ordinary shares (being 12% of the issued ordinary shares) and one “E” class share[9] in N Pty Ltd. Mr C is the sole shareholder, secretary and only director of B Pty Ltd.
[9] Issued 5 December 2008.
N Pty Ltd operates its business, at least in part, from a property located at 1 F Street.

The N Property Trust (the Property Trust)[10]

[10] Which was established by Deed of Trust dated 16 February 2009: Tender Bundle 118-184/2178.

The Property Trust acquired 1 F Street for $6,502,809.00 on 24 April 2009.
It is uncontentious that, from this time until 2 August 2016, N Pty Ltd paid rent to it for its use of the same; it is also uncontentious that these rental payments were the primary source of income for the Property Trust and that it distributed its nett income to its unitholders.
Mr O and his wife, as trustees for the O Property Trust, hold 52% of the units in the Property Trust; Ms Z and Mr D, as trustees for the E Property Trust, hold 12% of the units in the Property Trust; each of A Pty Ltd, M Pty Ltd and B Pty Ltd hold 12% of the units in the Property Trust.

N Investments Pty Ltd (N Investments Pty Ltd)[11]

[11] In respect of which Mr O, Mr Storrer, Ms Z, Mr J and Mr C signed a Constitution Agreement on 16 February 2009: Tender Bundle 79-117/2178.

It is uncontentious that, until 2 August 2016, N Investments Pty Ltd was the trustee of the Property Trust.
Mr O owns 52% of the shares in N Investments Pty Ltd. Mr Storrer, Ms Z, Mr J and Mr C each own 12% of the ordinary shares in N Investments Pty Ltd.
From 16 February 2009 until 9 October 2013, Mr Storrer, Mr O, Ms Z, Mr J and Mr C were all directors of N Investments Pty Ltd. After Mr Storrer’s removal as a director on 9 October 2013[12], Mr O, Ms Z, Mr J and Mr C remain as directors of N Investments Pty Ltd. As such, they are responsible for managing the business of N Investments Pty Ltd.
[12] Tender Bundle 32/2178.
I accept that, from 16 February 2009 until 2 August 2016, N Investments Pty Ltd had no operations except to hold the legal interest to 1 F Street and receive rental monies from N Pty Ltd with respect to this property. I also accept that it ceased to receive rental income from N Pty Ltd for its use of 1 F Street after 2 August 2016.

N Property Pty Ltd and the N Investment Trust

N Property Pty Ltd (N Property Pty Ltd)

N Property Pty Ltd was incorporated on 14 August 2015. R Pty Ltd owns 55% of the shares in N Property Pty Ltd and T Pty Ltd, M Pty Ltd and B Pty Ltd each own 15% of the shares in N Property Pty Ltd.
Mr O, Ms Z, Mr J and Mr C are all directors of N Property Pty Ltd.
N Property Pty Ltd is the corporate trustee of the N Investment Trust. In that capacity, it holds the legal title to commercial property situated at 3 F Street (adjacent to 1 F Street); it acquired this property in that capacity on 6 January 2016 using funds loaned to it by N Pty Ltd. In the same way as had previously been the case in respect of its use of 1 F Street (beneficially owned by the Property Trust), N Pty Ltd pays rent to the Investment Trust for its use of 3 F Street.

The N Investments Trust (the Investment Trust)

The Investment Trust was established by Deed of Trust dated 21 August 2015.[13] Mr O, Ms Z, Mr J and Mr C are all primary beneficiaries of the Investment Trust.[14]
[13] Tender Bundle 185- 224/2178.
[14] Tender Bundle 189/2178.
The Investment Trust holds the beneficial interest in 3 F Street; in addition, following the implementation of a resolution made on 2 August 2016 that the Property Trust would transfer 1 F Street to it upon receipt by it of funds, it now receives rent from N Pty Ltd for its use of 1 F Street. Consequently, the nett income received by the Investment Trust as a consequence of payments made to it by N Pty Ltd for its use of 16 and 3 F Street is available for distribution to the beneficiaries of the Investment Trust.

Summary of the relevant inter-relationships and consequences of the same for various claim pursuant to the Corporations Act 2001 (Cth) advanced by Mr Storrer and A Pty Ltd

In summary of the matters referred to above:
a)A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd are members of N Pty Ltd; and
b)Mr Storrer, Mr O, Ms Z, Mr J and Mr C are all members of N Investments Pty Ltd; and
c)A Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd are unitholders in the Property Trust; and
d)Mr O is the sole director of N Pty Ltd, a director of N Investments Pty Ltd and with his wife, as trustees for the O Property Trust, a unitholder in the Property Trust; he is a director of N Property Pty Ltd and a beneficiary of the Investment Trust; and
e)Ms Z is the secretary of N Pty Ltd, a director of N Investments Pty Ltd and, with Mr D, as trustees for the E Property Trust, a unitholder in the Property Trust; she is a director of N Property Pty Ltd and a beneficiary of the Investment Trust; and
f)Mr J is a director of N Investments Pty Ltd and a director of N Property Pty Ltd and a beneficiary of the Investment Trust; and
g)Mr C is a director of N Investments Pty Ltd and a director of N Property Pty Ltd and a beneficiary of the Investment Trust; and
h)Mr Storrer is not a member of N Pty Ltd or N Property Pty Ltd and is not a beneficiary of the Investment Trust; and
i)A Pty Ltd is not a member of N Property Pty Ltd and is not a beneficiary of the Investment Trust.
Section 234(a) of the Act is headed “who can apply for order”. It relevantly provides that:
An application for an order under s 233 in relation to a company may be made by:
(a)a member of the company, even if the application relates to an act or omission that is against:
(i)the member in a capacity other than as a member; or
(ii)another member in their capacity as a member.
Given this provision, I accept that Mr Storrer has no claim under the Act against N Pty Ltd or its members, the Property Trust, the unitholders in the same (as they are not members of N Investments Pty Ltd), N Property Pty Ltd and the Investment Trust and can only apply for an order under s 233 of the Act in relation to N Investments Pty Ltd and its members (namely, Mr O, Ms Z, Mr J and Mr C) in their capacity as members.
Given this provision, I accept that A Pty Ltd has no claim under the Act against N Investments Pty Ltd, the Property Trust, the unitholders in the same, N Property Pty Ltd and the Investment Trust and Mr O, Ms Z, Mr J and Mr C in their personal capacity and can only apply for an order under s 233 of the Act in relation to N Pty Ltd and its members (namely, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd) in their capacity as members.

Broad overview of how A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd came to own ordinary shares in N Pty Ltd

I accept that Mr Storrer, Mr O, Ms Z, Mr J and Mr C had all worked together before 2002. I accept that, on around 14 July 2003, Mr O, who then owned 30% of the shareholding in G Pty Ltd[15] and was its CEO and managing director, hired Mr Storrer as sales manager. At that time, Ms Z, Mr J and Mr C were all working for G Pty Ltd.
[15] The balance being owned by an international entity: Tender Bundle 250/2178.
I accept that each of A Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd initially acquired 12 ordinary shares in G Pty Ltd for valuable consideration, which included the $12.00 paid for the same. I accept that, as was the case with Ms Z, Mr J and Mr C, the offer made to Mr Storrer to acquire these shares included the following assertion about the basis on which the offer was made:
In recognition of your contribution to date and the future contribution we are confident that you will make, we are pleased to offer a 12% shareholding in G Pty Ltd which will be renamed N Pty Ltd under the new structure. This 12% shareholding will be transferred to your nominated holding company upon execution of the relevant documentation with G Pty Ltd Australia and G Pty Ltd Germany.[16]
[16] Correspondence dated 28 January 2004.
I accept that, as a consequence of actions facilitative of their management buy-out of G Pty Ltd, which included the execution of a Deed of Debt Forgiveness representing $1,726,609.00, and the issue (on about 19 May 2004) of an additional 1,726,609 ordinary shares and allocation of the same to A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd in accordance with their respective percentages[17] (namely: 52% to R Pty Ltd and 12% to each of A Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd), each company came to own the total number of ordinary shares outlined above and the sum of $1,726,609.00[18] became the paid up share capital of N Pty Ltd.[19]
[17] Tender Bundle 225/2178: Minutes of Meeting of Directors 19 May 2004; Tender Bundle 1187-1191/2178: respective Share Certificates; Tender Bundle 1197/2178.
[18] Tender Bundle 1178-1197/2178.
[19] Renamed from G Pty Ltd on 4 June 2004.
I accept that none of the shareholders in N Pty Ltd paid any substantial cash consideration for the substantial number of additional shares they acquired in May 2004 and that there is no unpaid amount per ordinary share. I also accept that there is no amount unpaid on any of the special class shares issued to each of A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd on 5 December 2008.[20] I accept that, as at 28 June 2012 and 9 July 2012, there was no amount unpaid on any of the ordinary or special class shares held by A Pty Ltd in N Pty Ltd.
[20] Tender Bundle 1240-1244/2178.

26 August 2004: The N Pty Ltd Constitution

I accept that, on 26 August 2004, the members of N Pty Ltd[21] adopted a Constitution as Constitution of the company (the N Pty Ltd Constitution).[22] I accept that the Constitution relevantly provides that:
[21] A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd.
[22] Tender Bundle 41- 78/2178.
a)it has effect as a contract between N Pty Ltd and each member, director and secretary and between a member and each other member pursuant to which each member agrees to observe and perform the Rules within it so far as they apply to the member;[23] and
[23] Tender Bundle 45/2178.
b)unless a member of N Pty Ltd agrees in writing, they shall not be bound by any modification of the Constitution after the date they became a member insofar as the modification imposes or increases restrictions on the right to transfer the shares held by that member;[24] and
[24] Tender Bundle 45/2178.
c)N Pty Ltd may in a general meeting on the recommendation of its directors declare dividends from time to time which vary as between different classes of shares in it;[25] and
[25] Clause 4: Tender Bundle 52/2178.
d)ordinary shares and “A” and “B” class shares entitle the holders to receive notice of meetings and confer the right to cast one vote for each share held, whereas “C”, “D” and “E” class shares carry no voting rights or right to receive notice of meeting;[26] and
[26] Clauses 5.1, 5.2: Tender Bundle 52/2178.
e)if a person entitled to shares because of the mental incapacity of a member gives the directors the information they reasonably require to establish the person’s entitlement to be registered as a holder of the shares, then the person may by giving written and signed notice to N Pty Ltd elect to be registered as the holder of the shares or, by giving a completed transfer form to N Pty Ltd, to transfer the shares to another person and the person is entitled to the same rights as the member and, on receiving an election N Pty Ltd must register the person as the holder of the shares and Rule 15 does not apply to such transfer;[27] and
[27] Clause 14: Tender Bundle 58/2178.
f)by Rule 15:
i)unless otherwise agreed by the members, a member may not sell, transfer, grant an option with respect to or otherwise dispose of an interest in its shares in N Pty Ltd to any person unless the member transfers all of it shares to that person in the manner set out in the Rule; and
ii)if a member wants to sell, transfer, assign grant an option or otherwise dispose of any interest in it shares, it shall give notice (“Transfer Notice”) of the proposed transfer to N Pty Ltd and the other members of the company; and
iii)the Transfer Notice shall specify that all of the members are to be transferred and the price at which the member proposes to transfer them together with sufficiently detailed information about any proposed transferee to enable the other members to determine whether the transferee is acceptable to them; and
iv)a transferring member shall, if requested, produce and/or make available such further information about the proposed transferee or the transaction as may reasonably be required to enable the company or other members to fully and fairly appraise themselves of the proposed transferee and/or the proposed transaction; and
v)irrespective of how the Transfer Notice might be addressed, it shall be construed as an offer to transfer the transferring member’s interest to the non-transferring members in equal shares and/or to any one or more of them; and
vi)the Transfer Notice will become irrevocable 10 days after it is given; and
vii)the non-transferring members have 14 days from the date on which the transfer notice is given to notify of their intention to purchase the shares at the price set out in the Transfer Notice or that the proposed transferee is not acceptable to them as a member of N Pty Ltd; and
viii)if no non-transferring member gives any notice to purchase the shares before the expiry of the 14 day offer period or if they give notice that they have no objection to the transfer to the proposed transferee, then the transferring member may transfer the shares to the person nominated in the Transfer Notice on terms that, in summary, are no more favourable to the proposed transferee than those offered to the non-transferring members; and
ix)if some, but not all, of the non-transferring members give notice to purchase the shares, then the transfer shall be effected to them in equal shares; and
x)if the non-transferring members give notice that the proposed transferee is unacceptable, then the transferring member shall not transfer the shares to that person, but may require the non-transferring members to purchase the shares at the price determined in the manner set out in the Transfer Notice; and
xi)the transfer or purported transfer of shares which contravenes the provisions of Rule 15 shall be void for all purposes unless the members unanimously determine otherwise.[28]
g)the company in general meeting may declare a dividend if and only if the directors of the company have recommended a dividend and the dividend shall not exceed the amount recommended by the directors;[29] and
h)interest is not payable by N Pty Ltd in respect of any dividend;[30] and
i)the directors may before recommending any dividend set aside out of the profits of N Pty Ltd such sums as thought proper as reserves to be applied at the discretion of the directors for any purpose for which the profits of the company may be properly applied;[31] and
j)subject to the rights of persons (if any) entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on those shares in respect of which the dividend is paid;[32] and
k)all dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares;[33] and
l)the directors of the company may deduct from any dividend payable to a member of the company all sums of money (if any) presently payable by the member to the company on account of calls or otherwise in relation to shares in the company.[34]
[28] Tender Bundle 58-61/2178.
[29] Rule 30.1: Tender Bundle 73/2178.
[30] Rule 30.3: Tender Bundle 73/2178.
[31] Rule 30.4: Tender Bundle 73/2178.
[32] Clause 30.7.
[33] Clause 30.8.
[34] Rule 30.10.

Provision of services by A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd to N Pty Ltd

I accept that, from about November 2004, Mr Storrer, Mr O, Ms Z, Mr J and Mr C provided their respective services to N Pty Ltd via their respective companies: A Pty Ltd, R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd. I accept that, from about November 2004, N Pty Ltd paid each company a monthly management fee for the services provided by Mr Storrer, Mr O, Ms Z, Mr J and Mr C respectively.
For example, I accept that, according to a document entitled “Purchases [supplier detail] spreadsheet for July 2004 through 30 June 2005” A Pty Ltd was paid: $9,694.53 on 1 October 2004 (being management fees for the month to 27 September 2004); $7,755.62 on 1 November 2004 (being management fees for that month); $9,694.53 on 1 December 2004 (being management fees for that month); and $8,401.92 per month for the months of January 2005 to June 2005 (being management fees for those months). That is, N Pty Ltd paid A Pty Ltd a total of $77,556.20 by way of management fees between October 2004 and end June 2005.[35]
[35] Tender Bundle 565/2178.
I accept that, by email sent 25 September 2007,[36] Mr O in essence recorded to Mr Storrer, Ms Z, Mr J, Mr C that, in accordance with their agreement, they would proceed with newly agreed management fees from 1 September 2007: the agreement reached was that, from then on, R Pty Ltd would be paid $13,265.00 per month plus GST ($150,000.00 plus 9% superannuation annually)[37] and each of A Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd would be paid $10,900.00 per month plus GST ($120,000.00 plus 9% superannuation annually).[38] Given that this correspondence also recorded that Ms Z would be paid on a pro rata basis in accordance with the percentage of the full working week worked when she returned to work from maternity leave, it is clear that the management fees paid to each entity was the manner by which N Pty Ltd remunerated each of Mr O, Ms Z, Mr J, Mr C and Mr Storrer for their services to it.
[36] Tender Bundle 1203/2178.
[37] Being $150,000 plus 9% superannuation annually.
[38] Being $120,000 plus 9% superannuation annually.
I accept that, thereafter, each of Mr O, Ms Z, Mr J and Mr C continue to provide management services to N Pty Ltd via their respective entities. Mr Storrer, through A Pty Ltd, provided management services to N Pty Ltd through A Pty Ltd until 31 July 2013. The circumstances surrounding the cessation of the services provided by A Pty Ltd and the impact of this cessation on the relationships between Mr Storrer and Mr O, Ms Z, Mr J and Mr C will be the subject of later consideration.

22 November 2007: The Shareholders’ Agreement[39]

[39] Tender Bundle 289- 316/2178.

I accept that, on 22 November 2007, the shareholders of N Pty Ltd and Mr O, Ms Z, Mr Storrer, Mr J and Mr C entered into a Shareholders’ Agreement which, by its terms, continues in full force and effect until a sale of all the shares in N Pty Ltd is completed, or it is terminated by written agreement between all the parties to it, or any shareholder holds all the issued shares. As none of these event have occurred, the Shareholders’ Agreement remains of full force and effect between the parties to it.
Given the documents in evidence, I accept that the shareholders of N Pty Ltd and Mr O, Ms Z, Mr Storrer, Mr J and Mr C entered into the Shareholders’ Agreement so after a number of revisions to the same. For example, in an email sent on 8 November 2007[40] to Ms Z, Mr J, Mr C and Mr Storrer (to which “Shareholders’ Agreement v003c” in marked up form was attached), Mr O said, in response to an earlier proposal that the agreement contain a guaranteed sale value for shares, in essence that this was not reasonable because it was impossible to know whether such a value would be an accurate reflection of the true value of the shares in the future and that, therefore, that section of the agreement had been modified to “basically recognise that shareholders own shares and if in the event they want to sell those shares it would be up to them to negotiate the best price for their shares”. [my emphasis]
[40] Tender Bundle 1207 - 1239 /2178.
I think it particularly relevant to note that the marked up Version 3 of the Shareholders’ Agreement attached to Mr O’s 8 November 2017 email[41] shows that the following definitions had been struck through and, thus, excluded from the final agreed Shareholders’ Agreement:
“Involuntary Departure” refers to the case where an Employee’s employment in N Pty Ltd is terminated:
(a)due to illness, permanent incapacity or death; or
(b)due to redundancy; or
(c)other than as a result of any voluntary resignation, dishonesty, fraud, wilful disobedience, misconduct, bankruptcy or material breach of the terms of employment by that person;
…….
“Voluntary Departure” refers to the case where an Employee’s employment in N Pty Ltd is terminated by reason of voluntary resignation from his or her employment with N Pty Ltd.[42]
[41] Tender Bundle 1207 - 1239/2178.
[42] Tender Bundle 1217/2178.
A further clause that was deleted was a mechanism by which the transfer price of the shares would be calculated in certain prescribed circumstances, which included if an employee made a “Voluntary Departure” and if an employee made an “Involuntary Departure.”[43] Further, a clause inserted into this final version provided for the manner in which an offer to a bona fide third-party for the transfer of a shareholder’s shares was to be dealt with.
[43] Tender Bundle 1230-1231/2178.
This is particularly relevant given that Clause 18 of the Shareholders’ Agreement provides that:
This Agreement contains the entire agreement of the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter.[44]
[44] Tender Bundle 311/2178.
Some other relevant terms of the Shareholders’ Agreement
Recital C to the Shareholders’ Agreement provides that the parties to it wished to “ensure that their relationship as Shareholders of N Pty Ltd is clarified”; Recital D provides that “the Shareholders wish also to set out their expectations that they will develop the Business of N Pty Ltd to a mutually agreed exit strategy”. [45]
[45] Tender Bundle 294/2178.
Clause 2.3 of the Shareholders’ Agreement provides that:
This Agreement is intended by the Shareholders to regulate their relationship as Shareholders in N Pty Ltd. It is the intention (and agreement) of the Shareholders that the terms of this Agreement are paramount and in the event of any inconsistency between the terms of this Agreement and the Constitution, then this Agreement shall prevail to the extent of any inconsistency unless prohibited by law.
Clause 4 c) of the Shareholders’ Agreement provides that “declaring and paying dividends other than in accordance with the Income Distribution Policy by N Pty Ltd” is within those matters that shall be referred to the shareholders for special resolution; it is also a matter in respect of which N Pty Ltd “must not take any action, pass any resolution or make any decision” unless a resolution is approved by at least 75% of the votes cast by shareholders entitled to vote on it. The term “Income distribution policy” is defined to mean “the policy promulgated by the board from time to time concerning the distribution of the net income of N Pty Ltd to the shareholders.”
Clause 6.2 of the Shareholders’ Agreement provides that N Pty Ltd must provide each shareholder as soon as possible (and in any event not later than 90 business days) after the end of each of its financial years, copies of the annual balance sheet, flow of funds statement and profit and loss accounts of N Pty Ltd issued by the company’s approved external accountants.
According to Clause 7.1 of the Shareholders’ Agreement, the shareholders “commit to developing the business and exiting in the manner set out in this Agreement.” The issue of “Disposal of Shares” is governed by Clause 9 of the Shareholders’ Agreement. Pursuant to it, the parties agreed that for the “no sale period” (defined to mean the period of time from the agreement date till the occurrence of a realisation event[46]) no shareholder would sell, transfer, assign or divest their respective shareholdings in N Pty Ltd; that the no sale period would end upon a realisation event happening; but also that the disposal of shares may occur at any time before the no sale period provided that the disposal occurred in accordance with Clause 11.
[46] Tender Bundle 296/2178.
The term “realisation event” is defined to mean “the happening of any of the following events: (a) the expiration of five (5) years from the agreement date; or (b) the time when the gross revenue of N Pty Ltd reaches fifty million dollars ($50,000,000.00); or (c) at any time during the term, shareholders who collectively hold not less than seventy-five per cent (75%) of the Shares in N Pty Ltd agreed to sell N Pty Ltd or the assets and undertakings of N Pty Ltd.”[47]
[47] Tender Bundle 296 and 297/2178.
Clause 10 of the Shareholders Agreement is entitled “Disposal of shares at end of no sale period.” The procedure for sale (which is clearly predicated upon the occurrence of a “realisation event” and which shall apply unless the shareholders by a 75% majority otherwise resolve) is prescribed by Clause 10.1. Clause 10.2 is entitled “sale process”. Its provisions include that shareholders may participate as potential bidders “on the same terms and conditions as independent third-party bidders.”
Clause 11 of the Shareholder’s Agreement is entitled “Disposal of Shares during the No Sale period.” In summary, it provides that, if existing shareholders do not take up the offer to purchase a shareholder’s shares, then the “transferring shareholder” may offer his shares to a bona fide third-party in accordance with Clause 11.2. Clause 11.2 provides, in part, that the transferring shareholder may offer his shares to a bona fide third-party, provided he has first given a Transfer Notice to N Pty Ltd and the other shareholders that he elects to transfer the shares to a bona fide third-party and the transfer of the shares is approved by at least a 75% majority of the remaining shareholders. Clause 11.2(c) provides that, where there transferring shareholder wishes to transfer the shares to a person who is not a party to the Shareholders’ Agreement, the transferring shareholder must ensure that the transferee becomes a party to the Agreement or enters into an Agreement substantially in the same form of the Shareholders’ Agreement. Clause 11.2(d) notes that nothing in the Clause obliges the remaining shareholders to act reasonably in refusing to accept the transfer of shares, nor to approve a transfer to a proposed transferee.
Clause 12 of the Shareholders’ Agreement is entitled “Income Distribution Policy”; it provides that, unless the shareholders resolved to the contrary by 75% majority, there would not be distributions until a “realisation event” occurs.
Clause 19 provides that the Shareholders’ Agreement may be amended only by another agreement executed by all the parties who may be affected by the amendment.[48] I accept that there is no evidence to suggest that the shareholders entered into a written amendment to the Shareholders’ Agreement.
[48] Clause 19.

5 December 2008: N Pty Ltd issues Special Class shares

I accept that, on 5 December 2008, N Pty Ltd issued special class shares to each of its members as outlined above. I accept that the ordinary shares and “A” and “B” class shares entitle the holder to receive Notice of Meetings and confer on any holder, when present in person or by proxy or attorney at any general meeting of the company, the right to cast one vote upon a show of hands and upon a poll to cast one vote for each share held. I also accept that “C”, “D” and “E” class shares carry no voting rights or right to receive Notice of Meeting.[49]
[49] Tender Bundle 52/2178.
I accept that, on 5 January 2012, N Pty Ltd issued one “G” class redeemable preference share. This share has no voting rights and is allowed a distribution only on the decision of the ordinary class shareholders and has no rights to capital on the winding up of the company. I accept it is fully paid and is owned by K Pty Ltd.

16 February 2009: N Investments Pty Ltd is registered and its members adopt a constitution[50]

[50] Tender Bundle 79-117/2178.

I accept that, on 16 February 2009, Mr O, Ms Z, Mr Storrer, Mr J and Mr C in their capacity as members of N Investments Pty Ltd, adopted a Constitution and Rules for the company (the N Investments Pty Ltd Constitution).
Unlike the position provided for in the N Pty Ltd Constitution, any transfer of shares in N Investments Pty Ltd if a person becomes entitled to the same because of the mental incapacity of a member is subject to the constraints imposed upon members’ sale of any interest in their shares as prescribed in Rule 15 (which is, for all intents and purposes, in mirror terms to that in Rule 15 of the N Pty Ltd Constitution).
I accept that the N Investments Pty Ltd Constitution provides that a general meeting can only be convened by giving the members (whom are entitled to notice of meetings) notice of the meeting; that notice of a general meeting must be given at least 21 days before the date of the meeting and must specify the place, the day and the time of the meeting and describe the nature of the business to be transacted at the meeting and contain any other information “required by the Law”. I also accept that the Constitution enables directors to postpone a general meeting or change the venue for the same by giving written notice to all members who received the original notice of meeting at least 48 hours before the appointed time and that the notice must specify the time and place for the proposed meeting.[51]
[51] Rule 19.6: Tender Bundle 102/2178.
I also accept, though, that the Constitution provides that if a member does not receive a meeting notice or the directors accidentally omit to give the member a meeting notice, such omission will not invalidate the proceedings or any resolution passed at the meeting.[52] In addition, if the meeting is to be adjourned for less than 30 days, a new notice of meeting is not required to be given.
[52] Rule 19.6(e): Tender Bundle102/2178.
I accept that, pursuant to the N Investments Pty Ltd Constitution, N Investments Pty Ltd may remove any director, with the same to be effected by ordinary resolution of the company.[53]

Broad overview of what A Pty Ltd was paid by way of management fees and received by way of dividends from N Pty Ltd between 2004 and 31 July 2013

[53] Rule 21.2: Tender Bundle 106/2178.

Management fees

I accept that A Pty Ltd billed N Pty Ltd for management fees as follows:[54]
[54] Tender Bundle 648 – 749/2178; 1246/2178 in respect of January 2009.
a)$9,694.53 (+ GST $969.45) for October 2004; and
b)$7,755,54 (+ GST $775.56) for November 2004; and
c)$9,694.53 (+ GST $969.45) for December 2004; and
d)$8,401.92 (+ GST $840.19) each month from January 2005 to July 2005 inclusive; and
e)$8201.92 (+ GST $820.19) each month from August 2005 to February 2007 inclusive;
f)$8,401.92 (+ GST $840.19) each month from March 2007 to May 2007 inclusive; and
g)$32,727.27 (+ GST $3,272.73) on 13 June 2007; and
h)$8,401.92 (+ GST $840.19) each month for July 2007 and August 2007; and
i)$10,900.00 (+ GST $1,090.00) each month from September 2007 to June 2008 inclusive; and
j)$6,666.67 (+ GST $666.67) each month from July 2008 to April 2013 inclusive.
Dividends
According to the figures contained in Mr L’s report,[55] N Pty Ltd paid A Pty Ltd the following dividends on its shares:
a)FY 2008: $36,000.00; and
b)FY 2009: $173,901.00; and
c)FY 2010: $60,000.00; and
d)FY 2011: $152,400.00; and
e)FY 2012: $300,000.00[56] (being: $60,000.00 on 15 September 2011; $120,000.00 on 27 January 2012; $120,000.00 on 28 June 2012).[57]
[55] Tender Bundle 450/2178; his report does not specify whether these dividends were paid on ordinary shares and only the 2012 figures are separated into ordinary and “C” class shares.
[56] As also recorded in the Spreadsheet provided during the hearing.
[57] From which N Pty Ltd deducted $25,000.00, as will be discussed later in these Reasons.
I accept that, from late 2008, and in addition to the monthly management fees it paid, N Pty Ltd also paid fully franked dividends on a monthly basis on the special class shares to each of the shareholders. I accept that, from 31 July 2010 until 31 July 2013, N Pty Ltd paid A Pty Ltd a fully franked dividend of $3,791.67/$3,792.00 per month on its “C” class share (that is: a total of $140,291.79/$140,304.00 per year).[58] I accept that each of T Pty Ltd, M Pty Ltd and B Pty Ltd were paid the same on their “B”, “D” and “E” class shares respectively.
[58] Tender Bundle 751/2178; 450/2178 in respect of FY2012.

Some relevant findings expressed chronologically

I accept that, as at the start of 2012, Mr Storrer and Ms Storrer had been embroiled in family law litigation since December 2009.

Requests for monthly reports

Because one of the allegations of conduct alleged to constitute oppression is that Mr O imposed the requirement that Mr Storrer and those sales staff who reported to him provide Mr O with monthly sales reports, it is relevant to note that I accept that, in an email sent 18 March 2012,[59] Mr O told Mr Storrer that he wanted to implement a monthly report, with the same to be submitted on the last Friday of each month. The email, which particularised what was required to be included in the monthly report and listed those countries for which Mr Storrer was responsible, specified that the first report should be submitted on Friday, 30 March 2012. The email also included that Mr O thought that they should look at hiring a new salesman to take responsibility for Asia and China to allow Mr Storrer to focus on countries in the North America Free Trade Area (NAFTA) and the Middle East.
[59] Tender Bundle 1247-1249/2178.
I accept that Mr O sent an email in the same terms to a Mr P, who was responsible for various Pacific countries[60] and to a Mr Q.[61]
[60] Tender Bundle 1251 & 1252/2178.
[61] Tender Bundle 1258/2178.
I accept that, on 1 April 2012, Mr O emailed Mr Storrer and Mr Q in relation to their respective reports and noted they were due “last Friday”.[62] I accept that, on 2 April 2012, Mr P provided a report of the sales he had made in the period from 1 July 2011 to 31 March 2012 (said to be in the amount of $3,686,612.66).[63]
[62] Tender Bundle 1247 & 1258/2178.
[63] Tender Bundle 1253 - 1257/2178.
I also accept that Mr Storrer provided a summary of the March activity in a report to Mr O on 1 April 2012.[64] I accept that Mr O replied to that email with requests for further information to be included in future reports. I accept that his reply was copied into Ms U (his assistant), Ms Z, Mr J and Mr C.
[64] Tender Bundle 1259/2178.
I accept that, on 27 April 2012, Mr O sent an email (copied into Ms U and Ms Z) to Mr Storrer, Mr P, Mr V, Mr W, Mr Q and Mr X telling them that “monthly reports due today”.[65]
[65] Tender Bundle 1262/2178.
I accept that, on 1 May 2012, Mr O emailed Mr Storrer to thank him for his monthly report (which he had sent on 30 April 2012);[66] the email (which was copied into Ms U and Ms Z) included that he was keen to see Mr Storrer develop a list of other countries in his territories where N Pty Ltd did not have distributors and develop a plan to find distributors for the key markets where they knew a R Pty Ltd market existed; he also asked Mr Storrer to focus on a particular opportunity.[67]
[66] Tender Bundle 1263/2178.
[67] Tender Bundle 1263/2178.
I accept that, on 28 May 2012, Mr O sent an email (which was copied into Ms U and Ms Z) to Mr Storrer, Mr P, Mr V, Mr W, Mr Q and Mr X telling them that the monthly reports, which were normally due on the last Friday of the month, would be due on Thursday, 31 May 2012 instead.[68]
[68] Tender Bundle 1265/2178.

I think it obvious from the communications outlined above that there is no doubt that, having decided to implement a monthly reporting process for those working the sales aspect of the N Pty Ltd business, Mr O focused on implementing it.

3 May 2012: Ms Storrer’s actions

I accept that, on 3 May 2012, Ms Storrer filed an Amended Further Amended Response in the property settlement proceedings in which she was engaged with Mr Storrer. I accept that the relief she sought in this Response included that Mr Storrer cause A Pty Ltd to transfer 60% of the Storrer Family Trust’s shareholding in N Pty Ltd to her.
I accept that, on 28 May 2012, Ms Storrer sought leave to join N Pty Ltd and its shareholders to the property settlement proceedings and that Mr and Ms Storrer and N Pty Ltd were involved in a hearing in the Family Court that day.

18 & 19 June 2012: N Pty Ltd is invoiced

I accept that, on 18 June 2012, Mr Y (a solicitor engaged by N Pty Ltd following Ms Storrer’s actions) sent N Pty Ltd (via Mr O) an invoice for $4,030.57;[69] I accept that Mr O forwarded this email to Ms Z and asked that she schedule it for payment; I accept he also asked her to keep a good record of all of “our costs” so “we can decide who to recover them from.” I accept this email was copied to Ms U, Mr J and Mr C but not to Mr Storrer.[70]
[69] Incl GST.
[70] Tender Bundle 1266-1270/2178.
I accept that, on 19 June 2012, Mr Y wrote to N Pty Ltd (attention Mr O) to enclose tax invoices from Counsel, the total amount of which was $6,490.00 (incl GST).[71]
[71] Tender Bundle 1271-1273/2178.

28 June 2012: the decision to withhold $25,000.00 from A Pty Ltd’s dividend

I accept that, on 28 June 2012, Mr O emailed Ms Z to say “Let’s withhold $25K from A Pty Ltd’s dividend to cover current and future potential legal fees.” I accept that this email was copied in to Ms U, Mr J and Mr C but not to Mr Storrer.[72]
[72] Tender Bundle 1274/2178.
I accept that N Pty Ltd sent a Tax Invoice,[73] dated 28 June 2012, to A Pty Ltd. Details within the “purchase order number” category are “Storrer case”; the document contains the following under the heading “description”:
Legal fee paid by N Pty Ltd due to Storrer case up to 16 June 2012: AUD $9,564.15
Provision for future legal fee to be paid by N Pty Ltd: AUD 13,163.12
[73] Tender Bundle 566/2178.
Following the addition of GST, N Pty Ltd asserted that $25,000.00 was payable by A Pty Ltd to it.

N Pty Ltd’s financial position and distributions: 1 July 2011 – 30 June 2012

I accept that, according to the Financial Reports for N Pty Ltd for the year ended 30 June 2012,[74] the company’s consolidated revenue for it and the entities it controlled was $41,814,342.00 and its profit after providing for income tax was $8,199,400.00.
[74] Tender Bundle 567 - 593/2178.
I accept that, according to the records, fully franked dividends of $2,371,483.00 had been paid or declared since the start of the financial year and that they had been paid as follows:
a)on ordinary shares: $2,060,000.00; and
b)on the “A” class share: $71,000.00; and
c)on the “B” class share: $43,983.00; and
d)on each of the “C”, “D” and “E” class shares: $45,500.00; and
e)on the “G” class share: $60,000.00.
I accept that, according to the Statement of Comprehensive Income for the year ended 30 June 2012, the consolidated revenue of $41,814,342.00 was up from the $23,250,338.00 (FY2011) and the $8,199,400.00 profit attributable to members had increased from $3,896,232.00 (FY2011); according to the Statement of Changes in Equity, retained profits increased from $15,285,176.00 (FY2011) to $21,113,093.00.
I accept that, according to the Notes to the Financial Statements, the fully franked dividends of $2,371,483.00 paid in FY2012 had increased from the $1,229,521.00 paid in FY2011, which had been paid as follows: $985,621.00 on ordinary shares; $71,000.00 on the “A” class share; $36,400.00 on the “B” class share and $45,500.00 on each of the “C”, “D” and “E” class shares.

Property Trust’s financial position and distributions: 1 July 2011 – 30 June 2012

I accept that, according to the Property Trust tax return for FY2012,[75] it received gross rent of $545,810.00; it achieved a gross profit on rental operations of $178,389.00 and a nett operating profit of $178,389.00. I accept that the O Property Trust was entitled to about $92,906.28 of this and each of the other unitholders were entitled to about $21,406.68.

Summary of A Pty Ltd’s management fees/dividends/distributions from N Pty Ltd and the Property Trust in FY2012

[75] Tender Bundle 594-603/2178.

I accept that, in FY2012, A Pty Ltd received:
a)from N Pty Ltd:
i)$80,000.04 (+GST $8,000.04) by way of management fee of $6,666.67 (+GST $666.67)/month; and
ii)$300,000.00: fully franked dividends on ordinary shares; and
iii)$45,494.40: fully franked dividends on “C” class shares ($3,792.00/month); and
b)from the Property Trust:
i)$21,407.00.

9 July 2012: N Pty Ltd paid dividends and told A Pty Ltd about its decision to withhold $25,000.00 from it

I accept that, on or about 9 July 2012, N Pty Ltd paid dividends to R Pty Ltd, T Pty Ltd, M Pty Ltd, A Pty Ltd and B Pty Ltd on their ordinary class shares.
I accept that, at 10:17 pm on 9 July 2012, N Pty Ltd (by Mr O) sent an email to A Pty Ltd (by Mr Storrer) in the following terms:[76]
Congratulations on the most successful financial year and our business history that finishes tomorrow with sales revenue of greater than $41 million and operating profit before tax of $7.9 million.
As a result I am pleased to advise that A Pty Ltd shareholding in N Pty Ltd received a fully franked dividend payment today of $120,000.00.
We have made a provision to cover legal costs to N Pty Ltd associated with A Pty Ltd’s shareholding in the amount of $25,000.00 including GST.
Therefore $95,000.00 in cleared funds has been paid into A Pty Ltd’s account.
[76] Tender Bundle 1276/2178.
Given that he had not been copied into earlier emails about the withholding of $25,000.00 from A Pty Ltd’s dividend, I accept that this was when Mr Storrer first learned that N Pty Ltd had determined to withhold $25,000.00 from the dividend paid to A Pty Ltd.

18 & 19 July 2012: A Pty Ltd and N Pty Ltd correspond about N Pty Ltd’s decision to retain $25,000.00 from A Pty Ltd’s divided

I accept that, at 8:52 pm on 18 July 2012, A Pty Ltd (by Mr Storrer) emailed Mr O in terms which included the following: [77]
Thank you for this advice however A Pty Ltd does not agree for N Pty Ltd to withhold dividends, to cover legal costs to N Pty Ltd. A Pty Ltd forms part of the joinder application, and I confirm has submitted a points of defence and will proceed with the summary dismissal application separately. A Pty Ltd does not seek financial assistance of N Pty Ltd in this regard.
…
Please reconsider the withholding of A Pty Ltd’s dividends to cover legal costs to N Pty Ltd?
[77] Tender Bundle 1276/2178.
I accept that, at 6:56 pm on 19 July 2012, Mr O emailed Mr Storrer in the following terms:[78]
N Pty Ltd is incurring these legal fees as a result of legal challenges around the ownership of A Pty Ltd shareholding in N Pty Ltd. It is not reasonable for the other shareholders of N Pty Ltd to share this cost burden.
I would also like to point out that your previous dividend was paid in full at a fully franked dividend of $120,000 and $25,000 of this has been withheld to cover these legal costs directly associated with the legal challenge around the ownership of A Pty Ltd shareholding in N Pty Ltd.
It is completely unreasonable for you to suggest that the other shareholders in N Pty Ltd should be burdened with these costs that are directly associated with A Pty Ltd and we are not going to accept any liability for them, they are your responsibility.
In the event your Summary Dismissal Application is successful and costs rewarded in your favour as well and N Pty Ltd’s favour then we will of course reimburse any funds we received to A Pty Ltd.
I warn you to be very careful about how this is further approached as the founding shareholders of N Pty Ltd are not happy with your performance and contribution to the business and we have previously expressed that to you in a Board Meeting.
Your continued failure to achieve sales against your budgeted objectives is not acceptable and we need to see an immediate improvement.
We have tried to be tolerant in relation to the burdens associated with the legal process that you are going through but with the significant lack of performance particular over the last 2 years it can no longer be tolerated.
[78] Tender Bundle 1275/2178.
It was submitted on behalf of N Pty Ltd that the contents of this email establish that Mr O’s issue with Mr Storrer’s performance did not arise in response to N Pty Ltd’s joinder by Ms Storrer to the property settlement proceedings but, rather, was a pre-existing issue which had previously been raised with Mr Storrer. I am not necessarily persuaded by this: I consider that all the email does is establish that, when asked to reconsider his decision that N Pty Ltd had retained $25,000.00 from the dividend declared to A Pty Ltd, Mr O determined to raise the allegation of prior dissatisfaction with Mr Storrer’s performance: an assertion that is incongruous with the contents of the email correspondence he sent on 9 July 2012 in which he expressed congratulations about the “most successful financial year” in the N Pty Ltd’s history and noted its sales revenue of greater than $41,000,000.00.
Whilst Mr O sought to explain away the contents of this congratulatory 9 July 2012 email on the basis that it was a pro forma/generic email sent out to the others as well, I think the most significant aspect of it is its recognition of FY2012 being N Pty Ltd’s most successful year ever, with its highest sales revenue ever – the latter being particularly relevant to Mr Storrer and, given his role, his performance.
I accept Mr Storrer’s evidence to the effect that, given the warning expressed by Mr O on behalf of N Pty Ltd in the 19 July 2012 email, he decided not to press further for the payment of the $25,000.00 to A Pty Ltd; I also accept, given the other terms of the correspondence, as outlined above, that Mr Storrer regarded this email as conveying a direct threat to his “employment” – which I take to mean A Pty Ltd’s engagement by N Pty Ltd. I accept that, given this, he determined not to make any further approach to N Pty Ltd about the $25,000.00 withheld by N Pty Ltd from the dividends paid to A Pty Ltd, despite the fact that he maintained his disagreement with that decision.

August 2012: Mr Storrer alleges he is told to complete leave forms

I accept that, in August 2012, Mr O directed that Mr Storrer submit a leave request form in relation to the alternate Friday occasions on which he left the premises early to collect his daughter from school; I also accept that Mr O directed Mr Storrer not to leave the office without having completed this form.
I accept Mr Storrer’s evidence to the effect that, prior to August 2012, he had not been required to complete this administrative task for these occasions and that he had not previously been told not to leave the premises unless he completed the form.

10 September 2012: Issues about leave entitlements arise

I accept that, at 5:34 pm on 10 September 2012, Mr O emailed Mr Storrer, Mr J, Mr C and Ms Z in relation to “N Pty Ltd Management team leave record.xls.” I accept that this email included the assertions that: Mr H had previously pointed out that they should be taking up accrued annual leave, personal leave and long service leave for the directors and that Ms Z had calculated that in her attached email; Ms Z, Mr J, Mr C and he had all accrued long service leave; Ms Z had reconciled all leave they had all taken since the inception of N Pty Ltd; and that Mr J and Mr Storrer both had negative accruals for annual leave.
I accept that, in this email, Mr O asserted that Mr J and Mr Storrer had both taken more annual leave than their entitlements; he also noted that, as personal leave had not previously been recorded, some of the additional leave he asserted they had taken may have been personal leave. I accept he asserted that, as Mr J had accrued long service leave, his overall leave position was positive; however, because Mr Storrer had not accrued long service leave, he was in the negative. I accept that, in this email, he told Mr Storrer not to apply for, or take, any more annual leave until he accrued 100 hours.[79]
[79] Tender Bundle 1283 & 1284/2178.
I accept that, by email sent on 10 September 2012, Mr J took issue with aspects of Mr O’s assertions about the issue of leave. I accept he reiterated his understanding of the agreement about leave (which was that they had previously agreed on five weeks leave a year, incorporating both annual and personal leave). I accept he took issue with the accuracy of the records (for example, he said that, whilst he had been unwell on certain specified days, the hours he missed appeared to have come off his annual leave). I accept that he asserted that, on his reckoning, he had positive accrued leave (exclusive of long service leave) whereas the latest spreadsheet asserted he had been in negative accrual every year since 2008.[80]
[80] Tender Bundle 1283/2178.
I accept that, after Mr O told him to take this up with Ms Z and have it corrected, he did so. I accept that, in an email sent on 11 September 2012, he noted that the agreement, since the last quarter of 2004, had been that each of them would accrue 200 hours of leave each year, with the discretion to take the same as either annual or personal leave; I accept he maintained he had not taken more leave than he was entitled to; I accept he said that, before Ms Z edited the spreadsheet, he had been shown to have accrued 124 hours of leave as at end September but, after her adjustment, he was shown to have 196 hours of “negative accrual” and that he did not think it was right to retrospectively extinguish 320 hours of leave entitlements (spread over eight years).
I accept that, when she replied, Ms Z acknowledged the accuracy of Mr J’s contention that it had been agreed, from 1 October 2004, that they were each entitled to 200 hours of annual and personal leave per year; she also accepted his contention that, if both leave entitlements were combined, he had not taken more leave than he was entitled to. I note she suggested that they keep 200 hours per annum up to 30 September 2012 and then, from 1 October 2012, proceed on the basis that they were each entitled to 160 hours of annual leave and 80 hours of personal leave per year.[81]
[81] Tender Bundle 1282/2178.
I accept that, after Mr O later contributed his comment that the results of the calculations “must mean” that Mr J and Mr Storrer had been taking annual leave that was originally allocated for personal leave (actions he said did not reflect the intention of the policy) and that they needed everyone jointly focused and sharing the B Pty Ltd of running the business, Mr J replied to set out his assertions about their respective leave entitlements since 2004: namely, that he had 120 hours of leave, Mr Storrer had 216 hours of leave, Ms Z had 472 hours of leave, Mr C had 640 hours of leave and Mr O had 792 hours of leave. I accept he commented that, given email exchange, it was disappointing Mr O thought he was “rorting the system” and not sharing the B Pty Ltd of running the business.[82]
[82] Tender Bundle 1281/2178.

Communications about monthly reports continue

I accept that, on 3 October 2012, Mr O sent an email (copied into Ms U and Ms Z) to Mr Storrer, Mr P, Mr V and Mr Q entitled “monthly report reminder”.[83] I accept he sent a follow-up on 7 October 2012.
[83] Tender Bundle 1285/2178.
I accept that, on 15 October 2012, Mr O sent an email to Mr Storrer and Mr Q in which he thanked Mr Q for his revised monthly report; the email discussed a potential customer and made suggestions about the manner in which Mr Q might engage with and that entity.[84] I also accept that Mr O communicated directly with Mr Q (albeit that Mr Storrer was copied into the communication) in relation to the contents of his monthly report and made suggestions about the manner in which he expected Mr Q to perform his duties.
[84] Tender Bundle 1287/2178.
I accept that, on 8 November 2012, Mr O sent an email to Mr Storrer, Mr P, Mr V and Mr Q entitled “monthly reports” in which he advised them that he had not received their monthly reports and of his expectation that he receive them by close of business on 9 November 2012.[85]
[85] Tender Bundle 1290/2178.

22 November 2012: realisation event

I accept that a “realisation event” as defined by the Shareholders’ Agreement occurred on the five year anniversary from the date of entry into the same. I accept that, despite the terms of the Shareholders’ Agreement, the sale process it provided occur in such a scenario was not commenced by Mr O; I accept that no meeting of shareholders was called to consider a resolution not to commence the sale process provided for in the Shareholders’ Agreement.

20 December 2012: Mr Storrer is unwell

I accept that, at 8:04 am on 20 December 2012, Mr Storrer advised Mr O (by email copied in to Ms Z) that he had been diagnosed with an uncommon strain of influenza and pneumonia and that his doctor had advised two weeks away from work.[86] I accept that Mr O replied by email to agree it would take two weeks for Mr Storrer to fight off fully a serious chest infection; I accept Mr O’s email told Mr Storrer to keep resting and “hopefully” they would see him at the Christmas party on Saturday night from a distance.[87]
[86] Tender Bundle 1291/2178.
[87] Tender Bundle 1291/2178.

21 December 2012: an expression of interest in N Pty Ltd is received

I accept that, on 21 December 2012, AA Pty Ltd submitted a non-binding expression of interest in relation to a potential investment in N Pty Ltd (the AA Pty Ltd proposal).[88] I accept that Mr O forwarded the same to Mr Storrer, Ms Z, Mr J and Mr C at 10:57 pm that evening, with a request that they consider it over the Christmas period.[89]
[88] Tender Bundle 1293-1310/2178.
[89] Tender Bundle 1293/2178.
I accept that the AA Pty Ltd proposal was based on a combined value outcome for N Pty Ltd to shareholders of $80 million, which was expressed to comprise $8 million (equity value of land and buildings) and $72 million (enterprise value of N Pty Ltd).[90] Given N Pty Ltd’s then debt of $8 million, AA Pty Ltd asserted an equity value of $64 million for N Pty Ltd; it offered to acquire shares from existing shareholders at that price, with each shareholder able to choose their level of sell down subject to AA Pty Ltd achieving a minimum equity shareholding of 40%.[91] As AA Pty Ltd anticipated that the current shareholders would prefer to retain 100% of N Investments Pty Ltd, it structured its proposal based on an investment in N Pty Ltd only. The timeframe for its investment, if commenced in mid-January 2013, was expected to be completed by mid-to-late March 2013.
[90] Tender Bundle 1295/2178.
[91] Tender Bundle 1296/2178.
The AA Pty Ltd proposal, which was subject to a number of specified key conditions, also advanced that it was attracted to N Pty Ltd as an investment given, amongst other things, its “track record of profitable growth and expansion into new markets.”[92] AA Pty Ltd also expressed its belief that, in the future, N Pty Ltd would have “a range of attractive exit options including a trade sale to one of the global players or an IPO.”[93]
[92] Tender Bundle 1300/2178.
[93] Tender Bundle 1306/2178.

18 January 2013: AA Pty Ltd’s expression of interest is rebuffed

I accept that, on 18 January 2013, Mr O informed AA Pty Ltd that N Pty Ltd had decided not to pursue their offer at that time; in essence, he outlined that the shareholders considered that: selling up to 50% of N Pty Ltd then would put them on a journey to sell the entire business within five years (something they were not then prepared to start); as they currently had approximately $40 million in back-orders and a high level of confidence their forecast 2013 results would be achieved, N Pty Ltd would then probably be valued at significantly higher than the AA Pty Ltd valuation; once the resultant products from their current research and development programs were commercialised, N Pty Ltd would potentially enjoy “further organic growth to approximately $200 million per annum”; and they did not then need external funding to achieve their current objectives.[94]
[94] Tender Bundle 1311/2178.

Further communications about sales reports

I accept that, on 18 April 2013, Mr O sent an email to Mr Storrer, Mr P, Mr V, Mr CC, Mr W and Mr X to remind them that their monthly sales reports needed to be submitted on the last working day of each month.[95] I accept he repeated this process with an email sent on 6 May 2013 to Mr Storrer, Mr P, Mr CC and Mr V.[96]
[95] Tender Bundle 1316/2178.
[96] Tender Bundle 1317/2178.

The June 2013 Management meeting, its Minutes and follow-up

I accept that, on 24 June 2013, Mr O sent an email to Ms Z, Mr LL Mr C, Mr Storrer and Mr EE to which he attached the Minutes of the Management Meeting held on 21 June 2013.
I accept that this email contains Mr O’s recounting that, during the meeting, they had highlighted the need for an increased effort from their sales team to ensure that the second quarter of the 2013 calendar year remained on budget; he expressed that they were behind budget and their order intake needed to improve and that, given certain market events, there was an opportunity which they needed to implement, to secure a larger global market share.
I accept that Mr O also recounted that he thought there were increasing opportunities in Asia and North America and that they needed to close business there. It is uncontroversial that these were areas for which Mr Storrer was responsible.
I accept that Mr O also recounted that, as the UK office continued to underperform, there was a potential to appoint a nominated person to operate a European sales office and close the UK office. He recorded that they had had an on-budget month of $4.6 million in sales, $1.69 million in gross profit and $1 million in net profit. He also recorded that there was good news because the largest user of the equipment in Australia had awarded N Pty Ltd a 100% exclusivity contract for the next five years: something he described as a “huge win” for N Pty Ltd and something they could all be justly proud of. Mr O outlined that, with the opportunity to close business with certain specified customers, N Pty Ltd would then go close to being able to claim 100% market share in Australia: something he considered to be a significant achievement over a 12 year period.
I accept that Mr O recorded that N Pty Ltd should increase its marketing effort in Australia to ensure that it secured the remainder of available business: he documented that they had discussed giving a particular person the opportunity to take on increased responsibility and close more business. I accept that Mr O also recorded that N Pty Ltd really needed all nine salesmen closing a minimum of $600,000.00 worth of business per month ($7.2 million of business per annum), if they considered the sales staff to include himself, Mr Storrer and seven nominated others.[97]
[97] Tender Bundle 1318/2178.
I accept that Mr O recorded that it was unacceptable that N Pty Ltd had not delivered a new version of software for a particular product that year; he noted they needed to have a more disciplined approach to the testing and release of new software.
I consider it relevant to note that, whilst Mr O voiced criticisms of the sales aspect of the N Pty Ltd business operations during the Management Meeting on 21 June 2013, he was also positive about its achievements. I think it is also relevant to note that his criticism were not confined to the sales aspect of the business operations, but extended to other areas as well.

N Pty Ltd’s financial position and distributions: 1 July 2012 – 30 June 2013

I accept that, according to the Financial Reports for N Pty Ltd for the year ended 30 June 2013,[98] the company’s consolidated revenue for it and the entities it controlled was $42,564,768.00 (up from the $41,814,342.00 in FY2012) and its profit after providing for income tax was $7,870,918.00 (down from $8,199,400.00 in FY2012). I accept it achieved sales of $41,730,972.00, compared with sales of $41,594,551.00 in FY2012.
[98] Tender Bundle 605-630/2178.
I accept that, according to the records, fully franked dividends of $1,863,959.00 had been paid or declared since the start of the financial year and that they had been paid as follows:
a)on ordinary shares: $1,500,000.00 (down from $2,060,000.00 in FY2012); and
b)on the “A” class share: $107,239.00 (up from $71,000.00 in FY2012); and
c)on the “B” class share: $55,220.00 (up from $43,983.00 in FY2012); and
d)on each of the “C” and “D” class shares: $45,500.00 (as in FY2012); and
e)on the “E” class share: $65,500.00 (up from $45,500.00 in FY2012); and
f)on the “G” class share: $45,000.00.
I accept that, according to the Statement of Changes in Equity, retained profits increased to $27,120,052.00 (up from $21,113,093.00 in FY2012).
I consider it more likely than not that the variations in the dividends declared arose because the decision to “equalise” the leave entitlements of Mr Storrer, Mr O, Ms Z, Mr J and Mr C by paying amounts out to Mr O, Ms Z and Mr C resulted in the declaration, in December 2012, of a dividend on the special class shares owned by R Pty Ltd, T Pty Ltd and B Pty Ltd.[99]
[99] For example: $20,000.38 was paid to M Pty Ltd (in respect of Mr C’s leave entitlements) by way of dividend declared on its “E” class share on 3 December 2012 and, when combined with the $45,500.00 otherwise declared on the “B”, “C”, “D” and “E” class shares, resulted in M Pty Ltd being paid $65,500.00 (rounded down); $9,719.88 was paid to T Pty Ltd on 3 December 2012 (in respect of Ms Z’s leave entitlements) and, when combined with the $45,500.00 otherwise declared on the “B”, “C”, “D” and “E” class shares, resulted in T Pty Ltd being paid $55,200.00 (rounded up from $55,219.88).

The Property Trust’s financial position and distributions: 1 July 2012 – 30 June 2013

I accept that, according to the Financial Reports for the Property Trust for FY2013,[100] it received rent of $559,600.00 (up from $544,200.00 in FY2012); it achieved a gross profit on rental operations of $233,135.00 (up from $178,389.00 in FY2012) and a nett operating profit of $229,165.00 (up from $178,389.00 in FY2012). I also accept that, according to the Financial Reports, the Property Trust distributed $119,165.00 to the O Property Trust and $27,500.00 to each of the other unitholders in FY2013 and the O Property Trust’s beneficiary loan was $1,455,655.00 and the beneficiary loan of each of the remaining unitholders was $335,921.00.[101]
[100] Tender Bundle 631-638/2178.
[101] Tender Bundle 637/2178.
I accept that the 2013 Financial Records for the Property Trust also record that the value for 1 F Street of $6,950,000.00 replaced the $7,335,183.00 attributed to the asset for FY2012.

1 July 2013:1 F Street is valued

I accept that, on 1 July 2013, HH Group prepared a valuation report for 1 F Street for N Investments Pty Ltd.[102] According to the report, the purpose of the valuation was for first mortgage security; the basis of the value was market value “as is” with vacant possession. The value ascribed was $6,950,000.00 (exclusive of GST), which was arrived at by applying the capitalisation of rent approach. The valuation noted that the property had been bought for $6.5 million on 14 April 2009 and that the building had been refurbished since then.
[102] Tender Bundle 317-366/2178.

The precursors to and the 4 July 2013 meeting between Mr O and Mr Storrer

I accept that, at 6.24 pm on 3 July 2013, Mr O notified Mr Storrer of a “performance review” to be held at 9:00 am on 4 July 2013.[103] I accept that, at 6:47 pm that night, he also sent an email to Mr Storrer, Mr P, Mr V, Mr CC, Mr W, Mr X and Mr DD to remind them that their monthly sales reports needed to be submitted on the last working day of each month.[104]
[103] Tender Bundle 1334/2178.
[104] Tender Bundle 1333/2178.
I accept that, when Mr O met with Mr Storrer on 4 July 2013, he told him that N Pty Ltd had paid him more money than he had returned to it in gross profits; I accept that, when Mr Storrer asked Mr O whether this measure included payment of dividends to A Pty Ltd or just remuneration, Mr O told him it was all remuneration.
I accept that – as is, I think, consistent with the contents of the email sent on 24 June 2013 to record the discussions during the Management Meeting on 21 June 2013 – Mr O made it clear to Mr Storrer that he wanted to see him improve his sales revenue to around $7.2 million annually. Given my assessment of Mr O’s management style as direct and robust, I think it much more likely than not that he told Mr Storrer during this meeting that he had four weeks “to turn things around” or he would be “looking for another fucking job”.

14 July 2013: Mr O emails Mr Storrer about the monthly sales reports

I accept that, at 8:52 pm on 14 July 2013, Mr O emailed Mr Storrer to ask that he advise about the monthly sales reports not yet received from him and his team. I accept that, in this email, Mr O outlined his expectation that Mr Storrer follow his team up and ensure that they submitted their reports on time; I also accept he advised Mr Storrer that he should agree the format with him if it was not clear and also that he wanted to re-establish a weekly sales meeting to set and review targets on a weekly basis. I accept Mr O asked Mr Storrer to organise for Mr P, Mr CC and Mr DD to attend with him and Mr Storrer at such meetings from 15 July 2013 onwards.[105]
[105] Tender Bundle 1335/2178.

19 July 2013 Management Meeting

I accept that Mr O, Ms Z, Mr J, Mr C, Mr Storrer and Mr EE participated in a Management Meeting on 19 July 2013. I accept that, on 22 July 2013, Mr O sent an email to Ms Z, Mr C, Mr LL, Mr EE and Mr Storrer, to which he attached a copy of the Minutes of that Management Meeting.[106]
[106] Tender Bundle 1336 -1338/2178.
I accept that, in his email, Mr O asked, amongst other things, that the recipients of the same read the Minutes in detail and implement the recommendations contained within, reduce the size of their PowerPoint presentations to include only key data which would help them to make key decisions at future meetings and ensure that they actioned the matters decided by the Board as required to be done. I accept he emphasized that, if they were going to continue to drive and grow the business, they needed to be able to make decisions and rely on each of the “directors” to action the same in their respective departments.
I accept that, in a way that was consistent with the approach he took following the June 2013 Management Meeting, Mr O recorded what he asserted happened during the meeting in his email. I accept he outlined that, during the meeting, there had been a significant discussion about the overall performance of the sales team, which was said to be under budget for the 2013 calendar year. I accept he recorded that this discussion included that it was felt that there were not enough resources being applied in the Asia, Middle East and North American territories. It is uncontroversial that there areas were all areas for which Mr Storrer was responsible.
I accept that Mr O recorded in his email that he had noted that the sales department needed to be split and resources increased so that there was one capable person responsible for each of those territories – with clear budgeted objectives and targets to be met. I accept he recorded that Mr Storrer had been given the task of implementing a revised structure for the sales department (based on this requirement) in the next 30 days.
I accept that Mr Storrer did not take issue during the 19 July 2013 Management Meeting with the course proposed by Mr O. However, I consider that failing to take issue with any aspect of Mr O’s proposal for the future management of the sales areas for which Mr Storrer was responsible needs to be seen in the context of the unmistakeable warning Mr O delivered to Mr Storrer when he took issue with N Pty Ltd’s decision to retain $25,000.00 from the dividends it had paid to A Pty Ltd in mid-2012.
I accept that, in his email, Mr O also recorded the content of discussion about the future of the business’s UK office; that it had been agreed that a Mr MM would be offered the position of Business Development Manager – Europe, with the expectation that he take future responsibility for the UK; that they could not rely simply on those markets (in South America) where they were forecasting very strong order intake and sales revenue for the second half of the year, but needed to increase efforts in all markets to continue to grow the business.
I accept that Mr O also noted in his email that the sales revenue for FY2013 was $42,112,665.00 (up 1% from the $41,667,157.00 sales revenue achieved in FY2012) and that, for FY2013, there had been a 49% increase in net equity to $15,888,853.00 (up from $10,660,728.00 in FY2012). I accept he said:
I believe we can consider the 2013 financial year at $42 million in sales revenue is a significant success and consolidate the $41.6 million from 2012 now we need to look for marketing and sales investment to achieve further growth in 2014.[107]
[107] Tender Bundle 1337/2178.
I accept that, in his email, Mr O also recounted the discussion during the meeting about certain product failure rates and stated that the production engineering needed to focus to ensure the development of that product until it achieved acceptable levels of reliability; he also commented about the relationship between increased reliability, a product warranty and increased market share and customer confidence. He noted that production engineering continued to report “the good, bad and ugly” from each department within it and that focus needed to remain on certain products.
I accept that, whilst Mr O noted in his email that the sales report had presented their lowest order intake in more than a year (at $0.63 million) and a calendar year-to-date order intake of $21.3 million, “on a positive note”, they were expecting to execute contracts with certain customers in Australia over the course of the next three months, which would then give N Pty Ltd a strong claim to 100% market share in Australia – which he described as a “significant achievement.”
Again, I consider it relevant to note that, whilst Mr O voiced criticisms of the sales aspect of the N Pty Ltd business operations during this Management Meeting, he was again also positive about its achievements. As was the case with the June 2013 meeting, his criticisms were not restricted to the sales aspect of the business operations.

The seminal events of 31 July 2013 and the repercussions of the same

I accept that, at 4:27 pm on 31 July 2013, Mr Storrer sent Mr O an email, the subject of which was “A Pty Ltd Termination”. I accept that, in this email, Mr Storrer told Mr O that he had been unable to return to work the last four days due to illness and that this was the third time in six months he had become sick to the point of requiring a doctor’s intervention (at which time stress was remarked upon as a contributing factor). He asserted that “the continual redirection of business from the position of Sales Director” and from A Pty Ltd was a significant contributing stress. He told Mr O to find attached a letter “accepting the termination of A Pty Ltd’s management services, at end July.” He noted that his acceptance of termination did not indicate any acceptance by him of the circumstances of redirection of business from the position of Sales Director or from A Pty Ltd.[108]
[108] Tender Bundle 1354/2178.
I accept that the attached letter (also dated 31 July 2013) referred to by Mr Storrer in his email:
a)referred to their meeting of 4 July 2013; and
b)asserted that Mr O had then issued four weeks’ notice of termination to Mr Storrer; and
c)noted that there had been “no significant change in the circumstances during the subsequent four week period”; and
d)advised that “accordingly” his last invoice for the provision of management services was end of July; and
e)requested that all entitlements, in terms of payments due to him, were paid within seven days; and
f)outlined his expectation that such payment would include all employee entitlements (asserted to have been agreed to apply over the previous 10 years) and all dividends that N Pty Ltd had withheld from A Pty Ltd; and
g)advised that he would arrange for the prompt return of any N Pty Ltd property in his possession.[109]
[109] Tender Bundle 1355/2178.
I accept that this was the first occasion where Mr Storrer had given any indication that he intended on leaving the business operated by N Pty Ltd.
I accept that, at 6:35 pm on 31 July 2013, Mr O sent an email to Mr Storrer (into which Ms Z, Mr J and Mr C were copied), the subject of which was “RE: A Pty Ltd termination”. I accept that, in this email, Mr O told Mr Storrer that he was mistaken in relation to “the months’ notice”; he asserted that Mr Storrer had been provided with one month to improve “your attitude and performance” and that if he did not, “then termination of A Pty Ltd’s contract with N Pty Ltd would be considered.”
I accept that, in his email, Mr O encouraged Mr Storrer to make sure he turned things around; he said he had discussed Mr Storrer’s letter with all shareholders and, if it was “truly” his decision to exit the business, they wanted to develop a plan with him to exit in full, including his shareholding in both N Pty Ltd and N Investments Pty Ltd; he also recommended to Mr Storrer that, whilst the exit process and timeframe was agreed, he return to work, which he said would in turn allow him to exit in a dignified manner over an agreed timeframe.[110]
[110] Tender Bundle 1353/2178.
I accept that, on 31 July 2013, N Pty Ltd made the “usual” monthly distributions on the special class shares such that R Pty Ltd received $5,916.67 (fully franked) in respect of its “A” class share[111] and T Pty Ltd, M Pty Ltd and B Pty Ltd received $3,791.67 (fully franked) in respect of their “B”, “D’ and “E’ class shares respectively.[112] There does not appear to be a distribution statement from N Pty Ltd to A Pty Ltd for the period from 31 July 2013 to 30 June 2014 in relation to its “C” class share.
[111] Tender Bundle 800, 802 /2178.
[112] Tender Bundle 807, 808, 809, 813, 814, 816/2178.

The Agreement and Intellectual Property Protection Deeds dated 1 August 2013

I accept that N Pty Ltd entered into a separate “Agreement and Intellectual Property Protection Deed” (the IP Deed)[113] with each of R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd.
[113] Tender Bundle 367-381/2178.
I accept that each IP Deed is in identical terms; I accept that such terms include that: each of R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd not provide nominated services to any person other than N Pty Ltd; each company and its director acknowledge that N Pty Ltd must be satisfied at all times with the quality of the nominated contract services provided by that entity and, if not, it may terminate the entity’s contract; if N Pty Ltd is not satisfied with the quality of the contracted services provided by the entity, it will endeavour to give the entity not less than one month’s notice (but if it does not, it must pay a sum calculated according to a prescribed formula). Each IP Deed has 1 August 2013 as its start date and an “agreement end date” of 31 July 2023.
Whilst each IP Deed also contains an acknowledgement that the parties to it had had the opportunity to seek legal advice about the agreement, the effect of the exclusivity and other covenants it contained, I note that, when cross-examined, Mr O said that solicitors were not engaged to prepare the Deeds; Mr C indicated that he did not seek legal advice before signing the relevant IP Deed and Ms Z said that she did not receive any advice about the same.
I accept that these Deeds are dated 1 August 2013. However, the evidence given by each of Mr O, Ms Z, Mr J and Mr C about the manner and timing of the entry into these Deeds differs and is as follows. When cross-examined, Ms Z said that, whilst she had seen drafts of the IP Deed before she signed it, she could not remember when precisely the Deeds were prepared; she said, in essence, that she had discussions with Mr O about them; that these discussions occurred very close to the time they were signed: when asked to clarify ‘very close’, Ms Z said that, to the best of her recollection, it was probably months. Ms Z could not confirm that she had signed the IP Deed on 1 August 2103, but said that was the date from which it was to take effect; she said that she signed the IP Deed (which, on its face suggests that it was signed on 1 August 2013) sometime close to the date – which then appeared to mean a month or a few months from then. Ms Z also confirmed the signatures of Mr J and Mr C (which, on the face of the IP Deed suggested that they had signed the same on 1 August 2013 also) and agreed it appeared they had written “1 August 2013” at the time they signed the document.

Allegation that bringing a counterclaim constituted oppressive conduct

As I appreciated it, A Pty Ltd advanced that, by bringing a Counter-Claim (filed 17 February 2014), only abandoning it in an Amended Defence filed on 29 December 2016 and then consenting to an order for its dismissal on 30 January 2017, N Pty Ltd engaged in conduct that was commercially unfair, oppressive to, unfairly prejudicial to or unfairly discriminatory against A Pty Ltd.
I am not persuaded that this is the case.
I accept the submission made on behalf of the relevant Respondents to the effect that, whilst the Counter-Claim was ultimately abandoned, the factual contentions underpinning were not and remained in contention and relevant to the determination of the overall context within which the alleged conduct of all of the parties to these proceedings fell to be considered.
I accept that, in respect of the allegations contained within the abandoned Counter-Claim, Mr Storrer admitted that: he had deleted all folders on the hard drive of his work laptop and information for work; the information held on the laptop did not necessarily correlate with that held on N Pty Ltd’s servers; he did not tell N Pty Ltd he was going to delete the files before he did so and did not give the company the opportunity to check the laptop to determine whether it wanted the information stored there before he deleted it. He also admitted that he had cleaned the phone provided to him before telling N Pty Ltd or his intention to do so and before ascertaining whether the company had an accurate copy on the server of the details on his phone; he also said that he had destroyed or kept business cards, previously kept at home or in the office, which he had obtained from various people over the course of his involvement in the business operated through N Pty Ltd. I note that it was also submitted that Mr O’s evidence that Mr Storrer had deleted everything associated with his email and anything he did for the business since its inception had not been denied by A Pty Ltd or Mr Storrer.
I also accept that, given the manner in which the Counter-Claim was finalised, there has been no decision made about its propriety such that it cannot be concluded that it was improperly brought; I also accept that there is no evidence that the bringing of the Counter-Claim resulted in material cost (amendable to application in any event) or adverse effect to A Pty Ltd.
Given all of the above, I am not persuaded that N Pty Ltd’s actions in respect of this allegation amounted to conduct that was so unfair that reasonable directors would have thought it commercially unfair to A Pty Ltd; I am not persuaded that such conduct was oppressive to, unfairly prejudicial to or discriminatory against A Pty Ltd.

Asserted failure to disclose documents

By way of broad summary, A Pty Ltd asserted that, despite requests, N Pty Ltd failed to disclose to it a significant number of relevant documents which included all documents with respect to: its net profits; the total fully franked dividends paid or likely to be paid to each shareholder in relation to Fy2016 and FY2017; the Property Trust; all financial information relating to the N Group; N Investments Pty Ltd for FY2016; distributions of rust income from the Property Trust; the net profit of and fully franked dividends paid by N Pty Ltd such that it was prevented from and pre-justice to in understanding N Pty Ltd’s conduct and also prevented from properly leading in respect of the same and preparing for the trial. It was also advanced that, as a result of N Pty Ltd’s failure to provide documents and information in a timely way, A Pty Ltd had incurred late payment penalties of $1,700.00 and general interest charges of $207.10 in respect of its late submission of income tax returns for FY2013 – 2015.
It was submitted on behalf of the relevant Respondents that A Pty Ltd had been provided with annual financial reports for N Pty Ltd and the Property Trust and had also obtained further information via the affidavits filed on 3 September 2015. It was submitted that, given the history between the parties in the circumstances of the litigation in which they find themselves, A Pty Ltd had otherwise failed to identify the direct relevance of the documents it sought by reference to the issues in dispute; it was submitted that N Pty Ltd had disclosed information it was required to disclose and that, given A Pty Ltd’s asserted failure to explain the relevance of documents sought and that its application for disclosure had been dismissed by orders made on 14 December 2016 and 30 January 2017, it could not be thought that it had behaved toward A Pty Ltd in a manner that was commercially unfair, oppressive to, unfairly prejudicial to or unfairly discriminatory against it.
It was also submitted that A Pty Ltd had failed to adduce evidence in relation to its late tax returns and the consequences of this and/or that any such consequences were the result of conduct by N Pty Ltd. In so far as it relates to the causation aspect, I accept this submission.
It was submitted on behalf of the relevant Respondents that, even if the allegations about the failure to disclose documents and provide information made by A Pty Ltd were accepted, any conduct that is in respect of a failure to disclose with respect to the Property Trust did not occur in the conduct of N Pty Ltd’s affairs, was not an act or proposed act or omission on behalf of N Pty Ltd and did not involve a resolution or proposed resolution on behalf of the members of N Pty Ltd and, therefore, could not constitute oppression, unfair prejudice to or unfair discrimination against A Pty Ltd for the purpose of s 232 of the Act.
It was submitted that A Pty Ltd’s complaints against N Pty Ltd in this respect failed to establish conduct captured by the terms of s 232 of the Act, particularly given that N Pty Ltd’s conduct in respect of the provision of documents and information to A Pty Ltd needed to be assessed in the context of Mr Storrer having left the business operated through it voluntarily, the manner in which he left, his failure to meet with Mr O to discuss the manner by A Pty Ltd’s separation (and his) from the entities within the N Group would occur and that he had later commenced to work for a competitor to N Pty Ltd.
On balance, I am not persuaded that the manner in which N Pty Ltd approached the issue of the provision of information and documents to A Pty Ltd was conduct which was so unfair that reasonable directors would have thought it to be unfair.

A Pty Ltd’s claims against members of N Pty Ltd other than A Pty Ltd

As I appreciated it, A Pty Ltd asserted that the following actions of other members of N Pty Ltd (R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd), in their capacity as members of the same, were such as to satisfy the pre-requisites provided in s 232 of the Act:
a)entering into the IP Deeds; and
b)the decision not to pay dividends to A Pty Ltd after 31 July 2013; and
c)the rejection on 7 November 2013 of A Pty Ltd’s offer of its interests; and
d)the decision by N Pty Ltd to loan $4.9M to N Property Pty Ltd for the purchase of 3 F Street; and
e)failing to disclose documents and/or information to A Pty Ltd.
I consider that, in entering into the IP Deeds with N Pty Ltd, none of R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd were engaged in the conduct of N Pty Ltd’s affairs or an actual act by or on behalf of N Pty Ltd; from the perspective of N Pty Ltd, the decision to enter into the IP Deeds with each of R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd was one that was made by Mr O.
I accept the submission to the effect that the decision not to pay dividends to A Pty Ltd after 31 July 2013 (other than in 2014) was a decision made by Mr O in his capacity as the sole director of N Pty Ltd and was not the result of any act by R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd on behalf of N Pty Ltd or any resolution of them. I accept that, given A Pty Ltd’s 6 November 2013 offer to dispose of its interest in N Pty Ltd and the Property Trust was made to “Mr O or his nominees”, the rejection of the same on 7 November 2013 was not an act done by the members of N Pty Ltd other than R Pty Ltd. I accept that the decision to loan money to N Property Pty Ltd was a decision made by N Pty Ltd and not by R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd and that the loan was made by N Pty Ltd.
I accept that there is no evidence of R Pty Ltd, T Pty Ltd, M Pty Ltd or B Pty Ltd joining in a resolution that N Pty Ltd would not disclose documents or provide information to A Pty Ltd; I also accept that any non-disclosure or failure to provide information by R Pty Ltd, T Pty Ltd, M Pty Ltd and B Pty Ltd was not an act or omission by or on behalf of N Pty Ltd.

Mr Storrer’s claims against N Investments Pty Ltd

As I appreciated it, Mr Storrer asserted that the following actions of N Investments Pty Ltd were such as to satisfy the pre-requisites provided in s 232 of the Act:
a)failing to agree to redeem or purchase A Pty Ltd’s units in the Property Trust; and
b)failure to agree to buy his shares in N Investments Pty Ltd; and
c)rejecting, on 7 November 2013, A Pty Ltd’s 6 November 2013 offer to sell its units in the Property Trust; and
d)removing him as a director of N Investments Pty Ltd; and
e)executing, in its capacity as trustee of the Property Trust, a transfer of 1 F Street from it to N Property Pty Ltd as trustee for the Investment trust; and
f)failing to disclose documents and information to him.

Failure to agree to redeem or purchase A Pty Ltd’s units in the Property Trust/ failure to agree to buy his shares in N Investments Pty Ltd

It was submitted on behalf of the relevant Respondents that, as the units in the Property Trust are owned by A Pty Ltd, the claim advanced by Mr Storrer in this respect is its and any conduct companied of cannot be oppressive to him and that, in any event, the only potential obligation of N Investments Pty Ltd in relation to A Pty Ltd’s units in the Property Trust arose from the potential operation of Clause 24.4 of the Property Trust Deed, which was only enlivened by A Pty Ltd giving N Investments Pty Ltd a Sale Notice.
I accept that there is no evidence that A Pty Ltd, the unitholder in the Property Trust, gave N Investments Pty Ltd the Notice provided for in Clause 24.2 of the Property Trust’s Trust Deed[297] so as to enliven N Investments Pty Ltd’ election to redeem all or any of its units[298] or, failing that, its obligations to act in respect of the units specified in the Sales Notice in the manner provided for by Clause 24.5 of the Trust Deed. Consequently, I am not persuaded that N Investments Pty Ltd in fact “failed” to agree to redeem A Pty Ltd’s units or “failed” to purchase the same because its opportunity to do so as prescribed by the terms of the Trust Deed had not been triggered.
[297] Prior to the commencement of proceedings which would have triggered the operation of the deemed sale notice provision in Clause 24.15 of the Trust Deed.
[298] Clause 24.4 of the Trust Deed.
I also note that, as outlined earlier, on 28 August 2014, the solicitors for A Pty Ltd and Mr Storrer advised that, despite the relief they sought in the proceedings, (which included winding up and other methods to realise the interests in the N Pty Ltd entities), A Pty Ltd and Mr Storrer had not expressed, nor provided notice of, a desire to divest shares or interests held in N Pty Ltd, N Investments Pty Ltd or the Property Trust and that, on 4 May 2015, they reiterated that A Pty Ltd and Mr Storrer had not expressed an interest to divest their interests or shares in the N Group.
In such circumstances, even if Mr Storrer has standing to bring this claim against N Investments Pty Ltd in respect of the manner in which A Pty Ltd’s units in the Property Trust were dealt with, I am not persuaded that its actions in this respect amounted to conduct that was so unfair that reasonable directors would have thought it commercially unfair to him; I am not persuaded that such conduct was oppressive to, unfairly prejudicial to or discriminatory against Mr Storrer.
I accept, in respect of the allegation of a failure to agree to buy Mr Storrer’s shares in N Investments Pty Ltd, that Mr Storrer had not provided N Investments Pty Ltd or its other members with a Sale Notice as prescribed by Clause 15.2 of the N Investments Pty Ltd Constitution. I also accept that Mr Storrer had advised in respect of his shares, as outlined in paragraph 475.
In such circumstances, I am not persuaded that N Investments Pty Ltd’ actions in this respect amounted to conduct that was so unfair that reasonable directors would have thought it commercially unfair to Mr Storrer; I am not persuaded that such conduct was oppressive to, unfairly prejudicial to or discriminatory against Mr Storrer. If I am wrong in this conclusion, I accept that such conduct was remedied by no later than 27 April 2015 when the Respondents agreed to pay the price Mr Storrer sought for his shares in N Investments Pty Ltd.

Removing Mr Storrer as a Director of N Investments Pty Ltd

It was submitted on Mr Storrer’s behalf that the resolution, on 9 October 2013, by the directors and shareholders of N Investments Pty Ltd other than Mr Stacy to remove him as a director of N Investments Pty Ltd was a resolution that was commercially unfair, oppressive to, unfairly prejudicial to or unfairly discriminatory against him because the implementation of such resolution had the effect of effectively excluding him from involvement in the operations of N Investments Pty Ltd.
I accept that Mr Storrer did not contest the decision to remove him as a director of N Investments Pty Ltd at the time and did not take issue with the proposal.
I do not accept the contention on behalf of the relevant Respondents that Mr Storrer’s removal as a director of N Investments Pty Ltd did not effectively exclude his involvement in the operations of the company because it had none other to hold the legal interest in, and receive rental monies from N Pty Ltd with respect to the 1 F Street property. That its operations only involved this does not diminish the consequences for Mr Storrer of the implementation of the resolution. Irrespective of its operations, once removed as a director he no longer had a right of access to N Investments Pty Ltd’ financial records at all reasonable times and was denied knowledge of what it was doing as trustee of the Property Trust in which A Pty Ltd is a unitholder.
I take into account the submissions on behalf of the relevant Respondents that, given that Mr Storrer left N Pty Ltd on 31 July 2013 and told Mr Storrer that, on 2 August 2013 that the prospect of working to his direction was extinguished for him, there was no utility in Mr Storrer’s appointment as a director of N Investments Pty Ltd; that, given he left N Pty Ltd on 31 July 2013 and refused to work with the others after that, he had demonstrated a desire not to be involved in the operation of the Group, including the operation of N Investments Pty Ltd; that the decision reached by 88% of the shareholders of N Investments Pty Ltd to remove him as a director of the same was not commercially unfair and, therefore, not oppressive to Mr Storrer in his capacity as member of N Investments Pty Ltd or in any other capacity.
Perhaps such submissions might have been more persuasive had I not concluded that the circumstances of this case involve the implementation of a plan, by various steps, by Mr O to ensure that his intention that neither Mr Storrer nor A Pty Ltd received any revenue stream from N Pty Ltd after 31 July 2013 – an intention unequivocally expressed to Mr FF on 4 October 2013 and reiterated to Mr L on 14 October 2013 – was implemented; as with the mechanism of a clock, the actions in this case need to be seen chronologically and in concert and, I think, as the moving pieces of a plan to give effect to such intention. Actions considered in isolation or without the benefit of an appreciation of where they fit in a scheme of events may appear unremarkable until later actions reveal their place in the scheme designed to give effect to the intention.
On balance, I am persuaded that, when considered within this scheme perspective, Mr Storrer’s removal as a director of N Investments Pty Ltd was conduct that was so unfair to Mr Storrer that reasonable directors would have thought it to be unfair; I am persuaded that it was oppressive to or unfairly prejudicial to or unfairly discriminatory against Mr Storrer in his capacity as a member of N Investments Pty Ltd or in any other capacity.

Rejection on 7 November 2013 of A Pty Ltd’s offer to sell its units in the Property Trust in the manner particularised in the correspondence dated 6 November 2013

As noted earlier, the offer made on 6 November 2013 was an offer to dispose of the interests in the N Group made to “Mr Mr O or his nominees.” For the reasons already expressed in considering this contention made against persons other than Mr O and R Pty Ltd, I am not persuaded that N Investments Pty Ltd rejected the offer as it was not made to it; given this, I am not persuaded that its conduct in this respect was conduct which was so unfair to Mr Storrer that reasonable directors would have thought it to be so unfair; I am not persuaded therefore that it was oppressive to, unfairly prejudicial to or unfairly discriminatory against Mr Storrer.

Non-payment of Trust income; non-disclosure of information about the Property Trust

I am persuaded that, whilst Ms Z sent Mr Storrer Property Trust documents as outlined earlier, he was not provided with contemporaneous information by N Investments Pty Ltd that, after all of the unitholders other than A Pty Ltd simultaneously requested, on 1 October 2015, that it, as trustee for the Property Trust pay out their respective unitholder loans and beneficiary entitlements as at 30 June 2015 as soon as possible, it borrowed $3,000,000.00 in order to be able to pay out unitholder loans and beneficiary entitlements. I consider that the failure to provide Mr Storrer with this information was conduct so unfair to him that reasonable directors would have thought it to be unfair; I am persuaded that it was oppressive to, unfairly prejudicial to and unfairly discriminatory against him.

Transfer of the 1 F Street premises

Whilst the transfer of 1 F Street by N Investments Pty Ltd as trustee of the Property Trust (as transferor) and N Property Pty Ltd (as transferee) caused the transfer of the legal ownership in that property from the Property Trust to the Investment Trust, I am not persuaded that the beneficial ownership of the same was validly transferred from the Property Trust to the Investment Trust; I am persuaded that 1 F Street remains registered, under Registered Instrument …43 in the name of the Property Trust. I arrive at this conclusion given that no stamp duty (which I accept would have been in the vicinity of $406,025.00) was paid on the consideration of $7.4 million paid by the Investment Trust to the Property Trust, the mortgage in favour of the Commonwealth Bank of Australia (which secures a loan made to the Property Trust) remains registered as an encumbrance over the title and that the concept of this transfer being an “asset swap” was not referred to in the Notice of Meeting of Unitholders for the Property Trust emailed to A Pty Ltd by Ms Z on 25 July 2016.
It was submitted on behalf of the relevant Respondents that the transfer of 1 F Street was for value and occurred in circumstances where Mr Storrer and A Pty Ltd had left the business conducted through N Pty Ltd on 31 July 2013 and the relevant Respondents had offered to purchase their interest in the Property Trust on “numerous” prior occasions. Given my findings about Mr O’s intention that neither A Pty Ltd nor Mr Storrer receive any future revenue stream form N Pty Ltd and, I consider, the N Group, it seems more likely than not to me that the decision to take steps to transfer 1 F Street out of the Property Trust into the Investment Trust in which neither Mr Storrer nor A Pty Ltd have an interest was done as a result of what was perceived to be a refusal to enter into discussions about the acquisition of the units in the Property Trust.

I consider that, in such circumstances, the resolution to execute a transfer for 1 F Street from N Investments Pty Ltd as trustee for the Property Trust to N Property Pty Ltd as trustee for the Investment Trust was conduct that was so unfair that reasonable directors would have thought it unfair; it was commercially unfair, oppressive to, unfairly prejudicial to and discriminatory against Mr Storrer.
If I am wrong I my conclusions about the effect of the transfer executed by N Investments Pty Ltd as trustee for the Property Trust, I am not persuaded that the transfer was not commercially unfair and therefore not oppressive by virtue of the payment by the Investment Trust to the Property Trust of the amount referred to earlier; I arrive at this conclusion because the transfer was to an entity in respect of which only Mr Storrer and A Pty Ltd are the only parties who are not both unitholders and beneficiaries and amounted to conduct which I consider was commercially unfair and therefore oppressive, prejudicial to and discriminatory.

Mr Storrer’s claims against the members of N Investments Pty Ltd other than himself

As I appreciate it, Mr Storrer’s claim in this respect encompassed that the following conduct was commercially unfair to him and oppressive to, unfairly prejudicial to or unfairly discriminatory against him: failing to agree to purchase his shares in N Investments Pty Ltd; rejecting (on 7 November 2013) A Pty Ltd’s offer to sell its units on the terms proffered in the correspondence dated 6 November 2013; resolving to remove him as a director of N Investments Pty Ltd; resolving to lend $4.9 million to N Property Pty Ltd for its purchase of 3 F Street and failing to disclose information and documents.
I accept that the rejection on 7 November 2013 of the offer made on 6 November 2013 was not by the other members of N Investments Pty Ltd because the offer was not made to them but, rather, made to Mr O or his nominee; I accept that the decision to loan $4.9 million to N Property Pty Ltd was undertaken by N Pty Ltd; I accept that there is no evidence that the members joined in a resolution that N Investments Pty Ltd not disclose or not provide full disclosure to him.
For the reasons outlined in respect of my conclusion about Mr Storrer’s removal as a director of N Investments Pty Ltd, I am persuaded that the resolution to remove Mr Storrer as a director of N Investments Pty Ltd was conduct that was so unfair to Mr Storrer that reasonable directors would have thought it to be unfair; I am persuaded that it was oppressive to or unfairly prejudicial to or unfairly discriminatory against Mr Storrer in his capacity as a member of N Investments Pty Ltd or in any other capacity.

I certify that the preceding four hundred and ninety-three (493) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 31 May 2019.

Associate:

Date: 31 May 2019

[2019] FamCA 1046

31 May 2019

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