Campbell & Anor v Backoffice Investments Pty Ltd & Anor

[2009] HCATrans 6

[2009] HCATrans 006

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S435 of 2008

B e t w e e n -

DOUGLAS RONALD CAMPBELL

First Applicant

SENTINEL CONSTRUCTION MANAGERS PTY LTD

Second Applicant

and

BACKOFFICE INVESTMENTS PTY LTD

First Respondent

TIMOTHY ANDREW WEEKS

Second Respondent

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 4 FEBRUARY 2009, AT 10.16 AM

(Continued from 3/2/09)

Copyright in the High Court of Australia

FRENCH CJ:   Yes, Mr Bannon.

MR BANNON:   Your Honour, the only additional matter I wanted to advert to was to seek leave to file the amended notice of appeal which added the alternative ground of relief discussed with Justice Heydon yesterday, which appears in paragraph 6 of the document I am about to hand up a number of copies of.

FRENCH CJ:   Thank you, Mr Bannon.

MR BANNON:   May it please the Court.

FRENCH CJ:   You have no objection to the amendment, Mr Gleeson?

MR GLEESON:   No, your Honour.

FRENCH CJ:   The amendment is allowed.  Yes, Mr Gleeson.

MR GLEESON:   Your Honours, I wish to start with a conspectus of the case which Mr Weeks presented at trial in proposition form and then go to the technical legal framework within which that case can succeed.  The first proposition is that Mr Weeks paid $850,000 to acquire one of two shares in this company on the basis that he would become a joint managing director, he would have authority over finance and administration, there would be equal power at board and shareholding level and he would have a minimum two‑year service agreement worth $150,000 a year.  Mr Weeks mortgaged his home to borrow the $850,000 and it was critical to him that this business would earn enough profit for him to service his debt. 

In support of that proposition could I refer your Honours to volume 4.  At pages 1912 to 1915 your Honours will see the critical provisions of the shareholders’ agreement which provided for that equal sharing of power.  I mention clauses 5.1, 5.5, 5.7, particularly 6.1 to 6.3.  The second critical agreement supporting that proposition is at pages 1998 to 1999, which is the services agreement with his company confirming he would be joint managing director – clause 2.1 – for a minimum two‑year term, remuneration under clause 5 and bonuses under clause 6.  I will simply give the reference to the need to pay the debt on his loan, volume 8, 3466.  The second proposition is that Mr Weeks, to the knowledge of Mr Campbell, based his offer on a valuation of the company of a multiple of four times an estimate of earnings of $400,000 for the 2004/2005 year.

Your Honours have seen that from volume 5 at page 2477.  Particularly at line 30, the estimated earnings of $400,000, using a conventional methodology, multiplied by four, give a value of $1.6 million, and Mr Weeks says that is his basis in the first bullet point.

The third proposition is that one of the critical integers in coming to that stated valuation is information provided by Mr Campbell which was incorrect in three respects.  The information is found, as your Honours know, at pages 2453 to 2454.  In summary, the three respects in which it is correct are as follows –

HEYDON J:   Incorrect.

MR GLEESON:   Incorrect.  On page 2454, the EBIT at the bottom, which is adjusted up from $67,000 to $163,000, is overstated by between $8,000 and $9,000 for the five-month period.  The second respect is that in the second column on the document, the estimated December results, the sales estimate of $100,000 was falsified as to $8,000 by the actual results which became known to Mr Campbell in early January.

The third respect in which it is inaccurate information, which has not come out clearly yesterday, is the dropping down to the EBIT estimate for December of $37,500.  The actual management accounts for December which became known to Mr Campbell in January disclosed that that amount very greatly overestimated EBIT because of cost blow‑outs.  Those three respects in which the information was inaccurate cannot be dismissed as trivial or as objectively unlikely to matter to a person in Mr Weeks’ position.

The first matter, which is the $8,000 EBIT overstatement, translated into a full‑year performance has a $20,000 impact and, using a multiple of four as Mr Weeks did, has an $80,000 impact on the valuation.  The second matter, that the December sales were not achieved by $8,000, is significant because, if your Honours compare the sales for the five months of $404,000, the business was said to be averaging about $80,000 a month and Mr Campbell had estimated December would see an increase of $20,000 in sales and then Mr Campbell was estimating that sales for the second half of the year – see the last column – would rise even further.  The effect of the information known to Mr Campbell was that 40 per cent of the December expected increase had not been achieved – eight divided by 20.  That was significant for its own impact and because it cast doubt upon the optimistic projections Mr Campbell gave for the second six months.

The final matter, which is that the EBIT for December was overstated because of both lower sales and increased costs, and I will come to the detail of it later, is also clearly material to a purchaser.  The importance of it to Mr Weeks of those three inaccuracies is twofold.  The first is that his valuation using four times earnings would have been significantly less.  The second is that if the business was not making sufficient earnings it would not be able to afford to pay him the fees which he needed to service his debt.  Those matters were realistic and not fanciful. 

As your Honours know from the oppression case, Mr Campbell, from the day Mr Weeks came in, denied him any fees on the ground there were not enough earnings in the business.  Your Honours, that is the third proposition.  The fourth proposition is that Mr Weeks was denied access to supporting information for the document at page 2453, not on the ground that it did not exist, but on the ground that Mr Campbell did not want it placed in the public domain.  The reference for that is volume 5, page 2131.  As the Court of Appeal correctly held, the warranty was proposed as a substitute for access to the information which was refused but not as a substitute for the underlying information being suitable for Mr Weeks to rely upon.

HAYNE J:   I do not follow that, largely because it is cast in the passive voice.

MR GLEESON:   In the active voice, the information which was provided was provided for a purpose of Mr Weeks acting upon it in order to formulate an offer.  He so acted.  He continued to believe in that information and act upon it by translating his offer into a binding contract.  To the extent that he would have liked more, namely, his own ability to check the underlying material which was denied to him, he received something in exchange for that; a warranty.  But taking that warranty was not to defeat or destroy the suitability of this material for him to base his offer and his contractual decision.  I hope I put that in the affirmative, your Honour.

The fifth proposition is this.  Contrary to much of what your Honours heard yesterday, no question was put to Mr Weeks at trial that the precise qualifications or limitations on the warranties meant he did not rely upon the information.  Nor was any question put to him that the disclaimer in clause 7.4(a) or the entire agreement clause in clause 9.1 meant he did not rely on the information.  There was no submission to the trial judge to that effect.  There are no findings of fact on that topic for that reason.  The matter was raised at best belatedly and partially in the Court of Appeal and that factual case is not one this Court should permit to be raised, as that factual case is at the centre ‑ ‑ ‑

HEYDON J:   Why not?  Because of Suttor v Gundowda principles?

MR GLEESON:   Browne v Dunn and Suttor v Gundowda.  The relevant propositions of fact were never put to Mr Weeks.  I might also add, were never flagged in the defence as factual matters going to destroy causation.  Your Honour Justice Kiefel referred to a plea invoking clause 9.1 which was made in response to the contract case.  There was no plea of fact in response to the Fair Trading Act case invoking any of these matters.  So it not being put to the witness, there being no exploration of those matters at trial, the matter was properly put to one side by the Court of Appeal, even in the belated and partial fashion it was raised.  We submit that as that point is at the centre of this appeal, the matter I have just raised, the fifth proposition is sufficient to revoke special leave.

GUMMOW J:   What is the fifth proposition?

MR GLEESON:   That the critical matters of fact were not explored at trial or put to Mr Weeks in relation to the limitations on the warranties, the existence of the disclaimer in clause 7.4(a) or the entire agreement clause in clause 9.1.

HEYDON J:   It might have been more economical if someone had been there to prevent special leave being granted in the first place.

MR GLEESON:   I agree entirely, your Honour, with respect.  The sixth point is that Mr Weeks gave evidence of his decision‑making process and what level of inaccuracy would have deterred him from the purchase on which there was no cross‑examination.  That evidence is found at volume 6, page 2679 through to page 2683.

GUMMOW J:   Whose document is this?

MR GLEESON:   This is Mr Weeks’ supplementary affidavit, paragraphs 80 through to 93.  This is not simply hypothetical, after the event, self‑serving evidence.  It is partly that, but partly positive evidence as to the actual decision‑making process he went through and what mattered to him.  For example, your Honours see in paragraph 83 a positive assertion of the matter I adverted to earlier, that cash flow was critical to ensure he would receive his payments from the company so that he could fund his debts, therefore, this was not a case where he would simply have lowered his price.  At the levels of materiality he mentions, he would not have purchased.  The critical paragraphs to that effect are then paragraphs 87, 91 and 93.  There was no cross‑examination on that material.  See volume 9, 3817.

FRENCH CJ:   Your annualised figure in your submission I think is $21,000, is it not?

MR GLEESON:   Yes.  As a guide that these matters would have deterred him we submit the evidence is persuasive.

HAYNE J:   But the proposition is that these factors would have deterred him from making any contract.  Is that right?

MR GLEESON:   Yes.

HAYNE J:   The point I think you need to address is:  he did make a contract in which there were stipulations which bear upon the accuracy of the information that had earlier been given.  Let it be assumed that you are right to say that material is presented to a purchaser which can be demonstrated to be incorrect.  If no more is known than that a contract is made and the purchaser says, “Had I known the true position I would not have bought it”, the question resolves relatively easily.  What is the significance for this case where the parties stipulate in their agreement for what it is that is the level of accuracy or warranty given about these matters?

MR GLEESON:   There are a number of answers to that, your Honour.  The first is that to the extent the remedy to be pursued is a damages remedy for breach of warranty, obviously the limitations have to be respected as a matter of contract law.  Secondly, if, as is this case, the purchaser has been induced to enter the whole of the contract including those stipulations which may have limiting effect in contract, under the influence of an operative misrepresentation as we submit occurred ‑ ‑ ‑

HAYNE J:   But you thereby conclude the question by that expression “operative misrepresentation”, Mr Gleeson.

MR GLEESON:   If that be the case, then section 68 of the Fair Trading Act provides a remedy and the contractual clause cannot limit it.  The third answer is why I mentioned my earlier point.  If what is really sought to be done, as your Honour the Chief Justice mentioned conceptually yesterday, which is to say that the limitations in the warranties either modify the conduct so there is no contravening conduct at all or they break the chain of causation as a matter of fact, both of them are factual inquiries which require exploration at the trial if a defendant wishes to defeat contravening conduct or causation by reason of the precise terms of those stipulations.  Since that inquiry was never embarked upon ‑ ‑ ‑

GUMMOW J:   No.  You have to prove your case.

MR GLEESON:   We have to prove our case, and we prove the case, I submit, by the affirmative evidence ‑ ‑ ‑

GUMMOW J:   That is the question.  How do you prove the case in the face of the contract?

MR GLEESON:   With respect, your Honour, we prove the case by ‑ ‑ ‑

GUMMOW J:   I mean the section 52 case.

MR GLEESON:   Yes – by identifying a date and an occasion upon which conduct occurred, which may be representation or other conduct, which is contravening.  The next proposition I wanted to come to is that it was critical to the pleaded case and the case made out that the contravening conduct occurred on two dates.

The first date was 11 December 2004 when the two pages were handed over.  If I can just give the second date, your Honour:  the second date is about 11 January 2005 when the information becomes known to Mr Weeks that the previous document is wrong and he deliberately omits to provide the true information to Mr Weeks, that being conduct ‑ ‑ ‑

FRENCH CJ:   Mr Campbell.

HEYDON J:   Mr Campbell learned the information.

MR GLEESON:   That being conduct, within the definition in section 4 of the Fair Trading Act, a deliberate omission to provide information in this case.  So they are the two dates we seize upon as contravening conduct occurred.  If there is contravening conduct on those two dates – and we submit that viewed at that date all we know on the facts of the case is that there are going to be warranties.  We know nothing else at those two dates as to what the terms of them will be and there is no exploration of that issue, for the reason I have mentioned earlier.  If we have contravening conduct on that date the question then is whether, under section 68, the fact that the final contract contains warranties in particular terms destroys what is otherwise a causal connection which is established and at work.

GUMMOW J:   No.  You keep talking about contravening conduct.  It does not float from the sky.  It has to be attached always to some remedy that you seek.

MR GLEESON:   Yes, and we identify that we have contravening conduct on certain dates.  We assert positively that ‑ ‑ ‑

GUMMOW J:   That means nothing.  It means nothing, unless you want to attach a remedy to it at that date.

MR GLEESON:   Yes.  Can I come back to your Honour’s question from yesterday.  The case at trial invoked both the equivalent of section 82 and the equivalent of section 87.  The section 87 remedy was sought by way of effectively rescission.  That remedy was denied by the Court of Appeal.  That issue has not been reagitated in the cross‑appeal.  Therefore the remedy to which we seek to attach to the conduct is a remedy saying that by that contravening conduct Mr Weeks suffered loss or damage, the loss or damage being the entry of a contract under which he paid $850,000.

GUMMOW J:   And under which there were other provisions too.

MR GLEESON:   Provisions which ‑ ‑ ‑

GUMMOW J:   The reason why I am taking you to this, Mr Gleeson, is that this is a contract about acquiring some property, is it not?

MR GLEESON:   Yes.

GUMMOW J:   The common law was criticised about it from time to time but the common law rule was, in Seddon’s Case, that these anterior matters did not outlive the conveyance.  Do you see what I mean?  In a way there is an analogy to that here.  You say, “We don’t have a rescission case.  We’ve got a section 52 case and our damage was we entered into the contract.  Just look at this bit of the contract; don’t look at the other bit”.

MR GLEESON:   With respect, your Honour, we do not put it that way.  The damage we assert, Mr Weeks asserts, is that by reason of that conduct he exposed himself to the entirety of the legal obligations, rights and remedies and otherwise, under a contract.  It is true that if one is then assessing the damage, your Honour, one must look at the whole of the detriment and any benefit he has obtained under that contract.  We know on the detriment side he pays away $850,000 for a share which is worth $410,000 at the date of purchase and within eight weeks is worth zero.

Prima facie he has suffered $850,000 worth of loss.  I interpolate there that, as Justice Giles correctly held, there was no practical means available to him to get out of the effect of this contract within that eight‑week period.

HAYNE J:   That was because he bought a share in a deadlocked company.  I understand that.

MR GLEESON:   With respect, your Honour, he bought a share in a company pursuant to which he was promised he would be given the status of a quasi‑equal partner.

HAYNE J:   Just so.He had an unanswerable case to adjust an equitable winding up, the moment the disputes broke out.  I understand that.

MR GLEESON:   He was denied the status to which he was promised as a quasi‑partner and under oppression, we submit, that activates the section and the question under oppression, which Justice Basten correctly identified, was where the oppressive conduct has destroyed your ability to function as a quasi‑partner and has reduced the value of your shareholding to nil, is it a proper purpose of a buyout remedy to relieve you from that effect of oppression?  So I will come to that later.  But to answer your Honour Justice Gummow’s question fully, it is true that in the working out of the damages, if under this contract he obtained ‑ ‑ ‑

GUMMOW J:   He sought and obtained warranties and the warranties required deceit, in effect, and it seems there was not deceit.  That seems to be the finding.  What is the significance of that?

MR GLEESON:   The significance is ‑ ‑ ‑

GUMMOW J:   To a common sense observer, it might seem to be considerable.

MR GLEESON:   When I come to the warranty case I will show that her Honour did, in fact, find breaches of the warranty.  She did find the equivalent of deceit in relation to the balance sheet representation, not the earnings representation.  So that is why the warranty case has been found as a matter of liability but the damage is not to be assessed.  What I wished to add was, that in the assessment of the damages under section 82 one would take into account the whole of the position under the contract.  The detriment we know is $850,000 in the working out of that contract.  If under that contract he obtained any benefit, for example, a good and enforceable warranty claim, that would have to be a reduction against the $850,000, and in that sense, common sense is respected.  The contractual remedy, if available, will reduce the overall loss he has suffered from the transaction.

One of the points Justice Young made was, in a sense, it might have been better in this case to fully assess the contractual warranty damages because they may be a deduction from the section 52 type damages.  So we fully accept that.  At present we do not have any assessment of the contractual damages, so we have nothing to reduce from the 850,000.  So, in that sense common sense is respected.  All that is left, we would submit, is the sort of analysis where, were the precise terms of those warranties and the disclaimer and the entire agreement and clause such that as a matter of fact they destroyed the connection you assert, Mr Weeks, between conduct you claim is contravening and your active reliance and detriment, namely, the entry of the contract, that matter never being explored at that factual level, we submit this is not a suitable vehicle to entertain it.

So one comes back to the question, if a person is given this information as a buyer, if the person acts upon it, as we see in the offer, if the person says, “I want more” and the more that they are given is a warranty, if they be the bare facts that are known – and that is what this case was about – the mere fact that the something more is obtained would not as a matter of law and ordinarily would not as a matter of fact sever the causation between the reliance on the information and the ultimate entry of the contract.

GUMMOW J:   Why not?

MR GLEESON:   Because the person is saying, “The fact that I’ve got the warranty gives ‑ ‑ ‑

GUMMOW J:   These notions of severance and so on, they are all metaphors.

MR GLEESON:   Yes, “The fact that I’ve got a warranty is only more confirmation that what this person has given me, information within their possession, is proper information, sound, reliable, accurate, something I can base my decision upon”.  Now, were it otherwise, every time a person provides information which is inaccurate and contravenes the Act, the mere proffering of a warranty, whatever it be, would be taken to defeat the remedy under section 82 and we submit that would be contrary ‑ ‑ ‑

HAYNE J:   No, it is not the proffering, it is the stipulation for, Mr Gleeson.  It is the agreed stipulation in the agreement.

FRENCH CJ:   There is an implicit reversal of onus in some of what you are saying, is there not?  You have to show causal connection between misleading and deceptive conduct and loss.  It is not a question so much of something severing as to whether the causal connection exists.

MR GLEESON:   And putting it affirmatively, the causal connection we assert – and we set out the steps for your Honours in our written submissions at paragraph 30 – is that the inaccurate information has induced the non‑binding contractual offer.  The inaccuracies are never pointed out to Mr Weeks.  He remains labouring under the effect of the false information.  The stipulation for the warranty is taken instead of being able to see the supporting material.  It confirms that he is still believing in the correctness of the material.  He enters the contract.

FRENCH CJ:   This is really, as you are presenting it, a case not involving a question of modification of misleading or deceptive conduct but simply focusing on the word “by” in the section 82 equivalent.  Because it strikes me that a question of characterisation of conduct on a holistic basis, as I think Justice McHugh mentioned in the case referred to yesterday by Justice Gummow, can be sensibly talked about, say, in the context of silence and you look at all the circumstances to determine whether it is misleading or deceptive and that they are contemporaneous circumstances in the way that here you have a misleading or deceptive representation so asserted and then something happening subsequently.  I doubt that that would deprive it of the character that initially he had of misleading or deceptive conduct.  The question would be whether the “by” was there in terms of any loss that you suffer.

MR GLEESON:   That is how we put it, your Honour, and we particularly focus upon the second aspect of the contravening conduct which is occurring on 11 January at about the very time, as far as we know, the contract is being drafted.  On that date the conduct is the deliberate omission to tell Mr Weeks that Mr Campbell now knows the December material is false.

Now, that is conduct which has that deliberate and mental element to it, and that is conduct calculated to do what?  It is calculated to induce Mr Weeks to believe that everything is still on track, the information is sound and he should proceed to complete the contract.  That is the very effect it has.  So everything that Mr Weeks does in the short period between 11 and 24 January where he binds himself to this contract is done under the influence of that second aspect of contravening conduct.

HAYNE J:   Can I put two steps to you, Mr Gleeson.  Vendor says to prospective purchaser here are the five‑month results and future estimates.  Stop the clock at that point.  The Fair Trading Act might examine whether those results and estimates are in fact true.  When you add to that event, vendor tells purchaser here are the results and estimates.  Vendor expressly promises only, perhaps in respect of all, perhaps in respect of some of those items, “I do not know they are false” and that is the explicit contractual stipulation.  Your proposition has to be, does it not, that despite the explicit contractual stipulation, all I am promising you is I do not know they are false, that objective falsity grounds a remedy in the Fair Trading Act.  That is your case, is it not?

MR GLEESON:   Not quite, your Honour, because, as I have sought to demonstrate in the chronology under the “by” question, all we know at the stage of the contravening conduct is there will be some warranties to make up for the lack of access to supporting material.  We do not know what limitations will be on the warranties until we have the final contract. 

Secondly, as I have said, at the very time that the warranties are now to be negotiated there is the further aspect of contravening conduct which is the deliberate refusal to give Mr Weeks the very document which would tell him; you should not be going anywhere near Mr Campbell, you should not be asking for warranties, you should not be even contemplating this contract because he now knows December is far worse than he had told you one month earlier.  That piece of second contravening conduct we would respectfully ask your Honours to also bring to account in answering the “by” question. 

The proposition which we are contending is put well, we submit, by Justice Burchett at first instance in Burg Design v Wolki (1999) 162 ALR 639, which we have handed to your Honours. The relevant paragraphs are paragraphs [21] to [24]. In that case the argument put in paragraph [21] was the fact that you were so industrious in checking the material you provided indicated you were not relying upon it.

His Honour rejected that at about line 10 on the basis that that this conduct was a demonstration of the importance which the representee was in fact placing on the document actually represented.  We submit, similarly, the stipulation for the warranty demonstrated the importance, confirmed the importance to Mr Weeks of relying upon this information.  As his Honour said between lines 20 to 25, when all the checking was done he remained significantly influenced by the claims.  Then his Honour refers to a disclaimer clause.  The position is then as per Justice Heerey in Bowler v Hilda, which we submit accurately states the law.  At paragraph [23] his Honour turned to what is the parallel to the present argument.

GUMMOW J:   Just a minute.  I am just looking at Bowler v Hilda.  It cannot override the statutory prohibition.

MR GLEESON:   But can as a matter of fact in a particular case have significance.  That, we submit, is the balance between – they do not as a matter of law deprive you of the remedy.  As a matter of fact it might be relevant.  Then his Honour, at paragraph [23], in the passage extracted, said in the middle:

A disclaimer or qualification will frequently have little or no effect on the impact of a misrepresentation . . . Once misrepresentation has been shown, the statute prevails over a formal disclaimer.  If such a clause is to be effective, it must be by enabling the conduct as a whole . . . to be seen as not misleading.

Or, we would add, to break the connection imposed by the word “by”.  Paragraph [24], we submit, is our case.  I do not need to rely upon the Shakespeare but I would rely upon the rest of paragraph [24].

Your Honours, in terms of the Full Federal Court authorities which have dealt with a similar issue, we have given your Honours three on the list of authorities, commencing with Keen Mar Corporation v Labrador (1989) ATPR (Digest) 46-048. The relevant passage is at page 53,146, the second column in the middle and over the page. This is an example of the factual exercise being conducted. The disclaimer statement is set out on 53,147. It was initialled by the purchaser. He was challenged on its effect in cross‑examination and his explanation was rejected.

GUMMOW J:   What was the clause they were construing in Keen Mar?

MR GLEESON:   At 53,147, being the first column, it was a clause saying, “The following statements represent what I have relied upon” and then beneath it it was filled in, “No statements”.  So he has acknowledged it; he is cross‑examined on it, his explanations are rejected and the court then, in the second column, took into account other matters, including, about 10 lines down, that he never made a complaint about the very fact which he said would have been material to him.  That combination of factual matters led to the case failing.

HEYDON J:   This is not a very good authority then, from your point of view.  It may not be against you ‑ ‑ ‑

MR GLEESON:   Our position is simply that the tenor of the authorities in the Full Federal Court is that there is no proposition of law that a disclaimer defeats your cause of action.  At best it is a question of whether as a matter of fact the actual impact that it had in all the circumstances of the case was either to deprive the conduct of contravening character or to deny the existence of by causation, and in the cases where it has been successful – and these are in a sense the strongest cases, one might say, against us – in every case there has been a factual exploration of whether the clause had those effects because of its particular terms in all the circumstances of the case.  That is the exploration which was never undertaken in this case. 

HEYDON J:   Let me get one thing straight.  You are not actually applying for special leave to be revoked on this ground?

MR GLEESON:   No, your Honour.  I will give the other two references without going to them.  They are to the same effect.  Leda Holdings v Oraka Pty Limited, (1997) ATPR 41‑601. I will give the page reference, 40,516 to 40,517.

FRENCH CJ:   There is no authority which has ever suggested to the contrary, is there?

MR GLEESON:   No. Poulet Frais Pty Limited v the Silver Fox Company Pty Limited, 220 ALR 211 at [54] to [88]. Your Honours, that allows me to compare the critical paragraphs in Justice Bergin’s reasons on this question with the Court of Appeal.

FRENCH J:   Sorry, just before you get to that point, can I just ask you how the non‑disclosure element was pleaded.  It seems to come in towards the end, I think, of the ‑ ‑ ‑

MR GLEESON:   Yes.  It is a combination of – volume 1.

FRENCH CJ:   Paragraph 57 of the statement of claim.

MR GLEESON:   That is correct, your Honour, that those matters actually came to his knowledge and it is the failure to revise the estimates in the light of those matters.

FRENCH CJ:   That is the falsification plea, is it not?  Paragraph 57 invokes section 41, which is the 51A equivalent, and then in any event makes a positive assertion, notwithstanding the owner’s reversal of the effects, that these matters were or ought reasonably to have been known to Campbell, et cetera.

MR GLEESON:   Yes, it appears to be an implicit invocation of the benefit of section 41.  But we are pressing it on the higher basis that because there was a finding of fact that the falsity of the estimate actually came to his knowledge and he deliberately refused to reveal that matter, that is the critical conduct.

FRENCH CJ:   Well, where is the representation that he knew nothing to the contrary?  I just want to get straight how you are actually using his stated knowledge.

MR GLEESON:   Yes, if your Honours could read it in the context commencing at paragraphs 51 to 52 - that is the provision of the document with the December estimates in it, 54 is the critical paragraph, particularly 54(c) and (d).  That is what is falsified by his actual knowledge.  On that topic can I then go to the findings of fact?  In volume 8 at page 3571, paragraph 239, her Honour summarised the case we have just seen.

GUMMOW J:   Was it ever put to your client that if these representations were so critical to him why did he not insist upon their repetition in proper form in the written agreement?

MR GLEESON:   Your Honour’s question raises this matter.  In fact, a warranty did cover these matters in the agreement although for reasons I cannot explain a warranty not sued upon a trial.  Can I give your Honour that warranty?  So he did actually get protection for them.  If your Honours could keep that open, but go to the sale contract at volume 4, the share sale agreement page 1900, clause 10.1.

FRENCH CJ:   That is qualified by “To the best of its knowledge”.

MR GLEESON:   Yes, and as the evidence fell out that warranty was breached. 

KIEFEL J:   You do not rely upon that warranty as itself a misrepresentation?

MR GLEESON:   I cannot.

KIEFEL J:   Why?

MR GLEESON:   Because it was not ‑ ‑ ‑

KIEFEL J:   It was not pleaded?  Was it not pleaded, Mr Gleeson, rather reliance was placed upon the rather circuitous view of section 41’s operation?

MR GLEESON:   The pleaded case which relied upon the ‑ ‑ ‑

KIEFEL J:   The further information coming to Mr Campbell’s knowledge.

MR GLEESON:   Yes, was not invoked – I believe this is correct – either as a direct breach of the contractual warranty, although it was a breach clearly, and was not invoked as part of the alternative section 42 case which relied upon the warranties as themselves contravening conduct.  I just want to check that.

HEYDON J:   Clause 10.1 is part of Schedule 1 – is that right – and according to page 16 of volume 1, which is paragraph 33(e) of the pleading, there is a reliance on a warranty given in clause 10.1 of Schedule 1 that all information is substantially accurate and complete and not misleading.

MR GLEESON:   Clause 10.1 is invoked, certainly, in that clause.  The difficulty at a pleading level is that the matters that then follow in paragraph 34 to 36 ‑ ‑ ‑

HEYDON J:   No breach alleged.

MR GLEESON:   That do not pick it up.

FRENCH CJ:   I would have to say it was not to the best of the knowledge.  Paragraph (e) is not qualified by the “To the best of their knowledge” qualification that is in the chapeau at clause 10.

MR GLEESON:   That qualification would have to have been accepted because clearly it is in the warranty itself.

FRENCH CJ:   It would have to have been – a breach of that - the fact that statements were not made to the best of the knowledge would have to have been established.

MR GLEESON:   The position, as I have ascertained it, as best I can, is that the proposition that no warranty was obtained for this information is incorrect in fact but the warranty was not sued upon at trial either as a warranty or as a section 42 conduct.  What we are left with is the case which we submit gets to the same result, which is, taking volume 8 at ‑ ‑ ‑

HEYDON J:   What about paragraph 61 on page 24 of volume 1:

the December 2004 Estimates were not substantially accurate complete and not misleading with the consequence that their provision was contrary to clause 10.1 of Schedule 1 and caused loss and damage ‑ ‑ ‑

FRENCH CJ:   The trouble is that leaves out the chapeau.

MR GLEESON:   What that appears to invoke is the express representation in 53, in five representations in 54.  It invokes clause 10.1.

GUMMOW J:   There was a denial at page 40, paragraph 46.

HEYDON J:   Did this dissolve before the trial was completed perhaps?  Was it abandoned or ‑ ‑ ‑

MR GLEESON:   I will make such further inquiries as I can.

GUMMOW J:   At the moment there is an issue – there is an issue on the pleadings that did not go trial.  The defence does not say, “Paragraph 61’s crook because it ignores the opening words in paragraph 10”.

MR GLEESON:   And the whole of the case based on section 42 relying upon the contract ‑ ‑ ‑

GUMMOW J:   It would have been a false issue on the pleadings.

MR GLEESON:   The precontractual case may have been in a different category but, your Honour, in the Accounting Systems Case, discussed with Justice Lockhart use of the contractual clauses as conduct which might contravene the Act, consistent with section 4.  That case was invoked here.  The contract itself was relied upon and that case has never been resolved yet because the judges below thought it was not necessary to get to it.

FRENCH CJ:   Incidentally, I notice that you are raising breach of 10.1 in both your notice of contention and notice of cross‑appeal.

MR GLEESON:   We are certainly invoking 10.1.  The question is whether it is proper for us to do it, only on the Schedule 3 deficiencies being the balance sheet problems, or whether it can properly extend to this matter.  Your Honours, I will have to come back to that.  Could I just deal with the factual findings so that is cleared away?  At 8, 3571, paragraph 239 the case was summarised.  The critical defence which emerged on the facts is found at page 3582, paragraph 247.  Mr Campbell asserted that the management accounts for December which contained the real information had been given to Mr Weeks.

At 3583 his evidence is summarised.  It contains some important propositions.  In answer to the first question he accepts that this estimate of December was something which Mr Weeks was likely to rely upon.  That is correct, no mention of the warranty destroying reliance.  In the second answer down he admits he learnt there was an “8 per cent shortfall”.  In the third answer down he asserts that he told Mr Weeks about the estimate and he affirms that at the foot of that page.  So his sworn evidence twice was that he had given Mr Weeks the December document.  At 248 her Honour notes that he:

volunteered that a comparison of the estimate for 2004 with the actual operating result would be material to a purchaser –

That is an important admission.  The reference for that your Honours will find at volume 1, page 417.  Over the page 3584 at line 40 he says that he told Mr Horn, that is his own agent, that:

the actual operating results for December . . . [were] 10 to 15 percent less than the estimate –

At 3585, lines 30 to 35 he agreed that in the management accounts:

not only were the sales down by about 8 percent but also the cost had increased –

At 3586 at line 20 he retracted his evidence and admitted that he had not actually told Mr Weeks:

“The results for December show a shortfall of about 10 to 15 percent –

Her Honour finds at paragraph 249 that Mr Campbell:

had the management accounts for December 2004 available –

At page 3589, paragraph 252, her Honour makes a comprehensive credit finding against Mr Campbell on this issue.

At the foot of page 3590 he admits that he knew that Mr Weeks was actually trying to get a copy of these accounts and he had no knowledge that Weeks got them.  In paragraph 255 he agreed they were completed a long time before 24 January.  Her Honour then deals with Mr Horn’s evidence.  He agreed he did not give them to Weeks – 3591, line 35.  Her Honour accepts that evidence – 3592, line 35.  Her Honour’s ultimate conclusions are at paragraphs 258 to 259.

What we submit that amounts to is that Mr Campbell had the December management accounts.  He knew that Weeks wanted them.  He knew they would be highly material to Mr Weeks’ decision.  He knew that the sales were overstated by eight per cent in the earlier document.  He knew the costs had gone up.  He knew the EBIT was down and he deliberately omitted to give the document to Mr Weeks for only one purpose.  He knew if he gave it Mr Weeks might be deterred.  That, we submit, in a causal inquiry is a critical integer and everything that Mr Weeks did in the next 13 days in signing this contract, whatever was in it, was under the influence of this second species of contravening conduct.

GUMMOW J:   Just a minute.  But then her Honour went – she seems to have approached the question of reliance on the assumption as to representations at 260.  Is that right?

MR GLEESON:   Yes.

GUMMOW J:   Then she decides the question of reliance adversely to your side at paragraph 269.

MR GLEESON:   Could I be permitted, your Honour, to just show you the December management accounts and then come straight to reliance?  The December management accounts are found in volume 7.  I need to show your Honours three pages.  Firstly at page 3308, this is part of the joint experts’ report.  Your Honours see at the first line the experts agreed that sales as per the December document were about 8,000 down.  The second line is critical.  The experts agreed that the actual profit shown in the MYOB accounting system for December was a miserly $4,000.  The experts do some adjustments and they bring it back up to somewhere between $17,000 and $22,000.  The represented estimate had been $37,000.

The difference between those two bottom lines and the $37,000 is the effect of the blow‑out in costs that Mr Campbell acknowledged he knew of in cross‑examination.  Your Honours will see that from two other documents at page 2987.  In Mr Gower’s report he refers to the actual operating results for December – the sales are the 92,000 figure.  Gross profit 81,000; expenses 108,000.  That is the blow‑out in cost.  Operating profit you see about six lines down – $4,000.

Finally, on that topic, the actual document is at pages 3150 to 3151.  We submit that based on the findings and Mr Campbell’s cross‑examination, the document at pages 3150 to 3151 is the December management accounts which he had which showed him the massive problem.  Can I come then to reliance, your Honour, and make two initial submissions about her Honour’s finding adverse to us.

The first is that her Honour was not relying upon the qualifications for limitations in the warranties or clauses 7.4(a) or 9 because they were not explored in evidence.  The second is that a critical plank of her Honour’s finding unfortunately contained an error of fact which the Court of Appeal properly corrected.  Can I show your Honours that error.  Her Honour’s discussion of reliance is found in two places.  Can I identify them both.  The first place is found at pages 3570 to 3571, paragraphs 237 to 238.  The second place is 3594.

FRENCH CJ:   All this is against a background where her Honour has actually made no finding that any relevant misleading representation was made.

MR GLEESON:   Yes, and in fairness to her Honour, her Honour properly considered that oppression was a complete answer to this case.

FRENCH CJ:   I understand that.

MR GLEESON:   Contractual remedies was the second thing she looked at.  She dealt with this briefly and I just want to point out what we submit were the two brief errors the Court of Appeal corrected.  In paragraphs 237 to 238 where she is dealing with the add-backs document, what her Honour in fact reasons is a little different to the case Justice Hayne put to me in proposition form.  Her reasoning is this.  At 237 he is concerned about the estimates.  True, he did not rely upon them but went about trying to obtain documentary support for them.  That is the point at which the error has come in, that second sentence.  Her Honour has, before we ever get to warranties, said, “The mere fact that you are seeking documentary support for information about which you have a concern destroys causation”.

The third step in the reasoning is when that proves futile he decides, rather than rely upon them he will rely upon the warranty.  All of this is hinged on the notion that the very proper step of Mr Weeks in trying to get supporting documents has destroyed has reliance case.  Then her Honour says, “This is a different situation to that discussed by your Honour Justice Gummow and Justice Lockhart in Accounting Systems”.  True, that was a case where the contract was being relied upon as the conduct.  Here at least, on Weeks’ evidence, there was a clear indication he could not rely upon the figures represented before contract because there was no supporting documentation.  That is the same reasoning as the second sentence.  That, we submit, is what Justice Giles has corrected.  The paragraph where your Honours will see the correction of that error, if your Honours would keep volume 8 open, is in volume 9, at paragraph 45, on page 3807.

HEYDON J:   It is not so much a factual error as a difference of opinion as to an ultimate conclusion.  It is a factual matter, but it is not a factual blunder.

MR GLEESON:   I accept that, your Honour, and our ultimate submission is that the Court of Appeal, properly carrying out its rehearing jurisdiction on these facts, was entitled to come to the conclusion in paragraph 45.

FRENCH CJ:   So really, ultimately a different inference about Mr Weeks’ state of mind, is it not?

MR GLEESON:   Yes, although her Honour is not rejecting Mr Weeks’ evidence on any credit grant.

FRENCH CJ:   No, no – the primary facts are then said to support either the state of mind which he had decided not to rely upon the representations or the state of mind posited by the Court of Appeal, by Justice Giles.

MR GLEESON:   Your Honour is correct. The Court of Appeal is saying, taking a real look at that objectively, the fact that you asked for support does not mean you are abandoning your belief in the information.  It is because you want more to confirm you really can act upon it.  That is the first matter, and it is a very short matter. 

The second matter, which is an error of fact we would squarely submit, is paragraph 238.  Can I invite your Honours to read that?  What her Honour considered is that Mr Weeks deliberately structured his offer to give himself protection against the information being wrong in that a $300,000 bonus to Mr Campbell would be held back.  Her Honour in paragraph 238 is cross-referring to what she says below in much more detail between paragraphs 265 and 269 - your Honour Justice Gummow asking yesterday about 269 – what, if anything, was wrong with 269.

Your Honours see in 269 Weeks did not rely upon the estimates.  He doubted them to the point that he built in a protection, and the protection is clause 6.2 of the service agreement, with the bonus of $300,000.  That matter was corrected by Justice Giles at paragraph 46, on page 3808.  The short point was that the 300,000 holdback provided no protection against the information being wrong.  It was something which Mr Campbell might get if the performance was a whole lot better than the calculation Mr Weeks had done based on the information.  We submit that Justice Giles correctly dealt with that matter at paragraph 46, the result of which is that the very central plank in her Honour’s factual reasoning disappeared.

HEYDON J:   Where is clause 6.2 of Sentinel’s service agreement?

MR GLEESON:   In volume 4, commencing at page 2005 the clause is found on page 2007.

HAYNE J:   And mirrors, does it, the like agreement made with Backoffice?  See 1999 and 2000, does it?

MR GLEESON:   Not in this critical respect.

HAYNE J:   I see.

MR GLEESON:   What Mr Campbell was to get under clause 6.2 was that provided the minimum bonus was paid to each of them and the minimum bonus is essentially the same, that is 6.1 of Campbell and 6.1 of Weeks, then if there was more profit he could ask for up to $300,000.  In other words the company had to do that much better than the figures based upon which Mr Weeks was relying.  That is explained also if your Honours look at the ‑ ‑ ‑

HAYNE J:   Sorry, can I interrupt you.  You draw a connection with the figures upon which Mr Weeks was relying.  Where in the agreement do I see that connection or is it a connection drawn otherwise than from the terms of the agreement?

MR GLEESON:   The answer is both.  In the agreement it is found in the warranted material which your Honours were taken to yesterday and I will give you that reference now.  External to the agreement it is found in the original offer, so taking them in reverse order in the original offer that your Honours saw in volume 5 at page 2477 I took you to the first bullet point that based upon the above data – and that is the data which came from Mr Campbell – Weeks calculated earnings of 400,000 and multiplied by four to get the value.  He makes that clear in the fourth bullet point.  It is the fifth bullet point that explains the bonus.  If the company does better than the forecast he may get up to 300,000 ahead of Weeks.  So the holdback gives protection against performance better than a calculation based on the information sued upon, not the reverse.

In terms of the other document, at volume 2 at page 743, that is the warranty for the five‑month earnings with the reference at line 35 to the add‑backs document being built into the calculation.  That document shows that in the contract Mr Weeks is doing the same exercise as he did in the offer.  So, your Honours, that is why we submit that the Court of Appeal was entitled to intervene in paragraph 269.

To conclude the reliance case, if your Honours return to Justice Giles at 3808 to 3809, his Honour then carries out the balance of the rehearing exercise, looks at all the evidence, takes into account matters which might go both ways and finds that the representations remained operative, paragraph 48, because they went to two matters which were directly important to Mr Weeks’ calculations.

Your Honour Justice Gummow asked a question yesterday about paragraph 48, the reliance upon what Justice Wilson said in Gould v Vaggelas in paragraph 41.  Could we give your Honours a reference to a Full Federal Court authority; Como Investments Pty Ltd v Yenald, (1997) ATPR 41‑550 at page 43,619, second column, where the proper use of Justice Wilson’s statement in a section 52 type case is explained and, we would submit, correctly adopted. It is not the entirety of the planks of Justice Giles’ reasoning, he has relied upon the whole of the evidence, but it is a plank, we submit.

GUMMOW J:   It is really the first complete paragraph on page 43,619, is it not, that you rely on, not the Como case?

MR GLEESON:   Yes, your Honour.

GUMMOW J:   What we are construing is the word “by”, is it not?

MR GLEESON:   Yes.

GUMMOW J:   Do they say they are doing that?  We have to assume that, I think, from the opening paragraph of the reasons, I guess.

MR GLEESON:   Yes.

GUMMOW J:   So it really comes back to the matters the Chief Justice was raising with you this morning.

MR GLEESON:   Yes, your Honour.  There are two final matters on the Fair Trading Act Case.  The first is the proper construction of the disclaimer and the entire agreement clause, even if they be relevant.  Could I ask your Honours to go to the clauses in volume 4, page 1890.  The only clause that was invoked at trial is clause 7.4(b).  On its proper construction it recognises part of the factual situation your Honours have seen.  Mr Weeks was given an opportunity to inspect the company and the assets but, we know, not the supporting material.  We know that he availed himself of the opportunities given but not those denied and we know that he relied upon his own conclusions arising out of such inspections and also upon information he was not permitted to see the supporting data for.

As to clause 7.4(a), we submit that that clause goes no further than the clause considered in L’Estrange v Graucob itself.  Its effect is to make sure that any claim for warranty of a contractual nature, either implied warranty or collateral warranty, cannot be set up in the face of the contract.  In L’Estrange v Graucob [1934] 2 KB 394, the clause said:

“any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded.”

It is found at the foot of page 401.  At 402, at about point 4:

The clause here in question would seem to have been intended to go further than any of the previous clauses and to include all terms denoting collateral stipulations, in order to avoid the result of these decisions.

At 403, point 7, the court expressly excluded the case where a document had been procured in the face of misrepresentation from its analysis of the clause.  That leaves the entire agreement clause, clause 9.1.  Its primary purpose, we submit, is to ensure that any disputes about what is the contract, express or implied, are resolved in favour of the written document.

That is apparent from clause 9.1(a) and 9.1(b) opens with the important limitation “in relation to that subject matter”, “that subject matter” can only mean the entire agreement between the parties referred to in (a).  It “supersedes any prior” matters.  If the clause is intended to mean, “I agree that I will not have any remedy dehors this agreement in respect of misrepresentation conferred by the general law or statute”, we submit that is not a proper construction of it and that would directly contravene the purpose of the Act to give effect to such a clause.

Your Honours, the final matter on this part of the case is the assessment of damages.  We submit Justice Giles got this absolutely correct.  In volume 9 his Honour dealt with it between pages 3844 to 3847.  Backoffice’s contention for the proper assessment of damages is set out in paragraph 148.  The proposition Mr Bannon briefly alluded to yesterday that there should not be much damages or there needs to be some reassessment because the causal effect was minor is properly dealt with and rejected in paragraph 149.  His Honour proceeds on the basis Backoffice would not have purchased the share.

His Honour then correctly instructs himself in accordance with authority in 150 and in 151 identifies what we would call the first and most obvious component of the compensation.  Mr Weeks paid 850 for something which was worth $410,000.  The difference of $440,000 is loss or damage on a conventional Potts v Miller basis.  Mr Bannon suggested your Honours should leave alive the value of the share at the date of purchase.  We submit that two judges of the Court of Appeal have found $410,000.  Justice Young was a little higher at $500,000.  The Court can safely leave the matter at the finding of $410,000.

The second stage of the damages is then dealt with and the real question was, is Mr Weeks to be treated as if $440,000 is adequate sufficient compensation?  The reason it is not is set out in paragraphs 154 to 155.  The whole purpose of this was a long‑term investment.  He could not readily sell his share in the market and escaped the position he was in as a result of the conduct.  He was effectively locked in.  So within three months the share is worth zero.  The second limb of the damages, the $410,000, is still within the compensation for the damage caused by the misleading conduct.

We would only add to Justice Giles’ analysis the further plank that there were pre‑emptive rights provisions in the agreement which also would have prevented an early exit.  We have given your Honours our argument on this in detail in our written submissions.

FRENCH CJ:   Did he not say he could not readily sell his share on the market, and I understand that proposition.  Is that saying something about the value of the share?  Is that another way of saying it is actually considerably less than $410,000, in fact zero?

MR GLEESON:   We do not say that because we, for simplicity, just adopt the $410,000.  There has obviously been an element of broad-brush evaluation in the Court of Appeal deciding the true value.

HAYNE J:   Because true value masks all manner of difficulty.

MR GLEESON:   I accept fully, your Honour, but what the Court of Appeal has said is – and common sense does support this on the fact of it – this business was worth a lot less than the $850,000 because the earnings upon which such evaluation would be based, we know, were overstated and because – I will come to this in the warranties – the assets were overstated.  The Court of Appeal has looked at the two valuers, they gave evidence, and the Court of Appeal has decided $410,000, on a reading of all that evidence, is a fair amount.  We ask your Honours not to go any further into what two judges of the Court of Appeal have done by fully assessing the evidence of the experts.

HAYNE J:   Is the 410 fixed as the amount another purchaser, properly informed, would have paid for the entity as a going concern?  If it is, how does that fit with the observation that the asset acquired is, by its nature, an illiquid investment?

MR GLEESON:   The answer must be ‑ ‑ ‑

HAYNE J:   Are we not sliding over about three dozen gulfs of enormous breadth?  Maybe we should; let us at least know that we are in the air for a time, Mr Gleeson.

MR GLEESON:   I am inviting your Honours to not go behind what the Court of Appeal, exercising its rehearing power, reading the evidence of the experts, hearing the submissions, decided was a fair figure.  The dissenting judge has said 500,000, perhaps higher.  No one has gone lower than 410.

FRENCH CJ:   It really comes back to the question:  what is the point of the observation about the difficulty of disposing of the share?

MR GLEESON:   The only point was that if we accept in principle that at the date of purchase it was worth somewhere between 850 and zero, the damages award we are trying to hold on to assessed the compensation by reference to the value three months down the track, and we are simply submitting that it is not overcompensation to give him the diminution in value between the date of purchase and the date of ultimate realisation in circumstances where the plan was that he would be there and he was locked in.  There are a number of reasons why he was locked in.

HAYNE J:   You are restoring him to the position he would have been in had he not entered the contract.

MR GLEESON:   Yes.

HAYNE J:   But the asset the subject of debate is destroyed.  The undertaking is sold.  The company is destroyed, et cetera.

MR GLEESON:   Yes, and those events – I will come to oppression in a moment, but viewed through simply the causal viewpoint of section 82 – do not break any relevant chain of causation such as to say, “You can only have the diminution in value to 24 January”.

FRENCH CJ:   That is based on what happened and maybe what happened is based on the inherent weakness of the business, but none of that is informed by the disposability of the share.

MR GLEESON:   Yes.  So the detriment, we submit, properly attributable to the decision influenced by the contravening conduct is the loss of the full 850,000.

HEYDON J:   Is there anywhere in your written submissions, which might be the most convenient way of doing it, that underpins the reasoning of Justice Giles on page 3847?  In a nutshell, that reasoning is the dispute between the gentlemen caused the value to fall so as to give a damage figure of 850,000 and the dispute between the gentlemen arose out of their disputes about the negotiations that led to the agreement.  Paragraph 156:

these events and their consequences for the value of Backoffice’s share had such connection with the misleading or deceptive conduct that the loss or damage extended to them.

Now, where would we find the evidence to demonstrate the connection between the misleading conduct and the second element in the damages?

MR GLEESON:   Our submissions on this topic are found on pages 15 and 16.

HEYDON J:   Mr Bannon’s approach seems to be that the breakdown in the relationship was a totally extraneous event that should not reflect itself in any way in the second integer of the damages.  Justice Giles seems to be antithetical to that.

MR GLEESON:   Yes.

HEYDON J:   So this becomes a crucial issue really.

MR GLEESON:   We put this on two levels, because when we come, as I will shortly, to oppression, we submit that the correct analysis of this period of three months is that of Justice Basten – that the conduct of Mr Campbell was conduct which was oppressive, as a shorthand, within section 233; that it caused a paralysis of the company; it caused the destruction in value.  If we are correct on that ‑ ‑ ‑

GUMMOW J:   It is paragraph 67 of your submissions, is it, at page 16?

MR GLEESON:   Paragraph 67 is the lesser way of putting it which attempts to follow Justice Giles.  Without finding fault in Mr Campbell you certainly cannot attribute fault to Mr Weeks.  The contract that we were induced to enter by the misrepresentation carried with it a need for a working relationship.  That was never achieved and so within a short period of time it is worth zero.  That event is not one which ‑ ‑ ‑

GUMMOW J:   Then it is paragraph 68.

MR GLEESON:   In 68.  They are events which would not limit us to the smaller amount of compensation.

HEYDON J:   I just want to get into the nitty gritty though.  Was there a scene in which Mr Weeks said, “Look, you dudded me.  We have to co‑operate – and I discover you’re a liar”.  We cannot go on like this.

MR GLEESON:   There was.  What it is most convenient for me to do is to move to oppression and take your Honour straight to that evidence which we rely upon for both purposes.  I will give your Honours the reference before I do it in the submissions so you know where we have dealt with it.  It is in our cross‑appeal submissions.  The events are found between paragraphs 10(b) and 10(f) and paragraph 27.  They are events which made it impossible for Mr Weeks to do other than ‑ ‑ ‑

HEYDON J:   If you take 10(b), that seems to be some curmudgeonly behaviour, perhaps, by Mr Weeks, who instructed Ms Hunt to – by Mr Campbell, rather, who instructed Ms Hunt to give Weeks nothing.  There is no linkage with a complaint about being deceived.

MR GLEESON:   Can I explain the linkage and I will take you to the evidence?  What essentially happened was this.  The agreements which I have shown your Honour promised Mr Weeks he would become, as I started this morning, the joint managing director, equal control, that he would have a particular responsibility for finance and accounting and he would be a two‑year contractor on his 150,000 a year.  What happened was that when he presented his first invoice for his work, Mr Campbell said to him “I’m not paying you a cent”.  Mr Weeks said “But that’s the agreement I signed with you seven days ago”.  Mr Campbell said “I don’t care what’s in any agreement, you’re not going to get any money unless you do what I say and what I say is you will not be a person of equality with me.  I want you just to look after the sales and service and I will pay you if and when it suits me”.

HEYDON J:   Yes, but that is quite distinct from all the misrepresentations you have taken us to this morning about $100,000 in sales and $92,000 in actuality and so on.

MR GLEESON:   The underlying link was this; that the only justification Mr Campbell offered for not paying was he said “This business is in fact in a position where we don’t have the money to pay you” and that is the link.  What he said is ‑ ‑ ‑

GUMMOW J:   It was a link.  The question is, is it a legally sufficient link? 

MR GLEESON:   Is a legally sufficient link.

GUMMOW J:   This is the question that Justice Heydon is putting to you.  It does not seem to be at the moment.

MR GLEESON:   The link is that Campbell says, “We can’t afford to pay you what you were promised to pay.  I want you” – and he says this within days – “to surrender the rights you’ve got under the agreements and agree to be a person solely dealing with sales, getting paid as it suits me”.  That was in Mr Campbell’s mind linked to the financial problem of the company on the very date it was purchased.  Mr Weeks’ response was to say “I don’t accept that diminution in my status.  I want my rights under the contract”.  Mr Campbell proceeded to treat Weeks the way he had threatened and the finding is that there was a deliberate plan to prevent Weeks ever having the benefit of the contracts.

The link might be seen in different levels.  If one looks at the narrowest level, it is a financial weakness in the company, which is the pretext for the treatment that Mr Campbell applied to Mr Weeks, but at a broader level, Mr Weeks has been placed in this company and, as we say, what step was reasonably open to him to ameliorate the position he was placed in under the contract?  What could he do to escape the burdens that were being placed upon him by the way in which Mr Campbell was treating the contract.

HEYDON J:   Yes, I follow that, but that is not paragraph 156 reasoning.  That is really paragraph 154 reasoning of Justice Giles.

MR GLEESON:   Your Honour is correct.  There are those two strands in Justice Giles’ reasoning and what I will be seeking to add to it is the reasoning of Justice Basten and Justice Bergin and what actually happened.

HAYNE J:   Just before you do that, is not the conundrum that you have to face this?  You say your client was induced to make an agreement he would never have made.  Your complaint is that there was immediate departure from performance of the agreement that was made.  Now, what is the connection between departure from the performance of the agreement that was made with the consequences of inducement to make the agreement by hypothesis never performed, never implemented?

MR GLEESON:   The middle step which we seek to emphasise – we were induced by misrepresentation, went on agreement where we parted with $850,000 for something which was worth a lot less on that day.  It was worth less because it did not have the underlying assets and earnings we were told it had.  Being in that company then which was in a worse position than we had been led to believe where it was critical for this company to make the earnings so Mr Weeks could be paid his service fee so he could repay his debt the very thing that then happens is that his co‑partner says, “There aren’t enough earnings here to pay you.”  Now, if one is needing a positive factual link we invite your Honours to consider that fact.

FRENCH CJ:   It does seem to raise this problem, unless you can really solidly link it into the financial weakness of the company, where you are induced to enter into an agreement by representations on certain topics and then as a result of entering into that agreement you suffer loss and damage but its immediate cause is something which is not the subject of any of the representations and the question, I suppose, is really, one of whether that kind of loss is encompassed in the word “by” and that is really the proposition that Justice Giles is putting, is it not, that – it seems that he is accepting that that kind of situation can be encompassed in the causal connection required under section 41.

MR GLEESON:   In a situation, as he says in paragraph 154, where it happens within a relatively short period and there is no practical means for you to escape from the working out of that contract, even if the actual working out involves different conduct to the conduct you complain of.

GUMMOW J:   There is a really a breach of the contract, is there not?  You can characterise it as an oppression suit, I suppose, but there is a breach of the contract, or the series of contracts, actually, from day one.

MR GLEESON:   Yes, your Honour, we have put in the proposed cross‑appeal that this conduct amounts to a breach of the contract, a ripping up of the contract because there was a destruction of the co‑operation and sharing that was promised.  If that is correct, and I come back to what I said earlier this morning, if the law of contract would give you a remedy for this stage two loss, or if oppression were ‑ ‑ ‑

GUMMOW J:   You cannot have it both ways, you see.

MR GLEESON:   You cannot have double recovery.

GUMMOW J:   You want to approbate and reprobate.  That is the bottom.  That is your problem.

MR GLEESON:   You cannot have double recovery.  We accept that.  So, again these point to Justice Young’s observation that in one sense one would work through either the oppression remedy or the contractual remedy before saying the Trade Practices Act remedy needs to cover stage two and that is what the trial judge did with oppression.  She said because you are entitled to a buy‑out order and because of the fair way in assessing a price for that purpose you do not need contract and you do not need the Fair Trading Act, so I fully accept no double recovery at all.  That explains her approach.

Your Honours, what I would like to do is to move to oppression recognising that these are the issues that are thrown up.  The first is whether the conduct attracts the section.  I will use oppression for short but I accept that it is a much larger more complex phrase that has to be addressed in section 233 of the current Act.

The second question in section 232 of the current Act is whether, on the facts of this case, on 1 April when Mr Weeks started his action, would a buy‑out order at a price which disregarded the effects of the oppression have been a proper order?  The third question is whether, if that be so, the steps which Mr Weeks took to mitigate his position, which was to consent to the provisional liquidator and, it appears, consent to a sale which in the end were unsuccessful, whether they deprive him of the buy‑out order either as a matter of power or discretion?  Now, that third question is an important question of law.  What has occurred is that Justice Young has found – your Honours will see this at page 3915 at paragraphs 382 to 384 – that notwithstanding if proved oppression within the section and notwithstanding a buy‑out might have been available at an earlier point, namely, the first of April, once the company goes into provisional liquidation and ceases to trade and the shares are worthless, the only remedy you can have is a winding up.  Now, that, we submit, goes contrary to the text of the current section 232, it goes contrary to the original English provision and we wish to show your Honours that through the legislative history, if anything, the provision has been broadened to avoid this sort of limitation being imposed as a matter of law.  Justice Giles got to the same result not as a matter of power but as a matter of what he called “discretion”.  Your Honours will see that particularly at paragraph 137. 

GUMMOW J:   We first have to construe the section, which I do not understand very much.  Section 232 is oddly drafted, is it not?  It says: 

The Court may make an order under section 233 if –

certain things are happening.  At what time does it speak in?

MR GLEESON:   The “is” is used in the sense of past, present or future.  If your Honours could go to our legislative folder ‑ ‑ ‑

GUMMOW J:   Just a minute. It says, “The Court may make an order”.  This is a Barrett v Opitz problem, is it not, yet again?  That is creating a jurisdiction, creating a right, investing jurisdiction, what time are they doing it and unless we get all this straight at the beginning, we sink into the difference between Justice Young and the other member of the Court of Appeal, one of which, as you say, is looking at discretion and one of which is looking at power. We need to know how the section works.  Is there another section that invests jurisdiction in any court?

MR GLEESON:   It will only be the general ‑ ‑ ‑

GUMMOW J:   Where do we find that?  Section 59?  Is it those sections?  We have looked at this often enough.

MR GLEESON:   Yes.  Your Honour, what occurred ‑ ‑ ‑

GUMMOW J:   We need to know the section.

HAYNE J:   Section 58AA, do we not start there?

GUMMOW J:   Section 58AA, is it?

HAYNE J:   We are talking about a “Court”, are we not?

MR GLEESON:   Yes.

HAYNE J:   That is defined in section 9.  We go from 9 on our paper chase as ever in the Corporations Act and we come to 58AA.  We come to 58AA(2).  Now, is that where we begin, Mr Gleeson?  I know you want to gallop on, but is that where we begin?

GUMMOW J:   We like to start at the beginning because we see that that is where others derail themselves by their failure to do so.

MR GLEESON:   I fully accept your Honours’ approach.  I think it will also be helpful in this case in a moment to see how the current wording of the Act is a simplification of earlier wording which did separately vest jurisdiction and power.

GUMMOW J:   But the earlier wording was in another country and it was not federal jurisdiction.  It was not federal statute, is that right?

MR GLEESON:   No, it is not right, your Honour.  The original wording – your Honour is correct – in the 1948 UK Act ‑ ‑ ‑

GUMMOW J:   Exactly.

MR GLEESON:   ‑ ‑ ‑ was originally adopted in Australia.

HAYNE J:   State legislation.

GUMMOW J:   State legislation.

MR GLEESON:   As state legislation.

GUMMOW J:   1961 Act.  Anyhow, just tell us the answer to these questions and construe the section for us.  If you do not want to, do not.

MR GLEESON:   I do wish to, your Honour.  In section 232 of the current Act we submit that, subject to the underpinning your Honours have identified in section 58AA ‑ ‑ ‑

GUMMOW J:   It is not underpinning. 

MR GLEESON:   ‑ ‑ ‑ enables the identified court to make an order.  If there is one of those three matters ‑ ‑ ‑

GUMMOW J:   Where is the investment of federal jurisdiction?  Just as well Justice Gaudron is not here today.  You think some of us are grumpy.  Go on.

MR GLEESON:   The section is itself vested in federal jurisdiction, your Honour ‑ ‑ ‑

GUMMOW J:   I see.

MR GLEESON:    - - - identifying one of the defined courts as having the power to make the order.  That is my answer to your Honour’s first question.  The second question was, what does the word “is” convey?  We submit it conveys that if the conduct in question or the Act ‑ ‑ ‑

GUMMOW J:   Section 58AA(2) is the answer to the jurisdiction question that Justice Hayne was putting to you, is it not?

MR GLEESON:   I accept that, your Honour.

GUMMOW J:   Yes, go on.

MR GLEESON:   The word “is” is designed to identify, but if there is conduct, acts or omissions, past, present or future, which have the character identified in (d) or (e) ‑ ‑ ‑

HAYNE J:   Sorry, just before you gallop past conferral of jurisdiction, we also have to have regard, do we not, to Part 9.6A, 1337B in which we find the explicit conferral of jurisdiction.  It is always a paperchase in the Corporations Act, but unless you follow the paper trail, you get lost.

FRENCH CJ:   You get the jurisdiction and then you look to see whether 232 and 233 create a matter arising under.

MR GLEESON:   Yes, I accept that, your Honours.  The matter that we submit is identified by 232 is whether conduct, acts or resolutions, past, present or future, have the character identified by (d) or (e).

HAYNE J:   What species of 232 events or conduct was engaged here?

MR GLEESON:   Primarily (a), alternatively (b), not (c).  If the conduct has that character, then whether or not the conduct is still continuing, or indeed whether it is prospective conduct ‑ ‑ ‑

FRENCH CJ:   The character of the conduct you are referring to is (e), is it?

MR GLEESON:   Primarily (e).

FRENCH CJ:   Which elements of (e)?

MR GLEESON:   Each element.  It was oppressive, particularly unfairly prejudicial and unfairly discriminatory against Mr Weeks or his company both in the capacity as shareholder and in other capacities, in particular, as director and as contractor for the company.

HAYNE J:   So who is the member of the company?  Who is the shareholder?  It is Backoffice, is it not?

MR GLEESON:   Yes.

HAYNE J:   How do we get Mr Weeks on the scene?  I am not saying you cannot, Mr Gleeson, but I have to know step by laborious step how you are doing it.

MR GLEESON:   We do not shy away from invoking its direct effect on Backoffice as a separate legal entity, and the effect on Backoffice was to destroy the value of its share.  The way we put that part of the effect of the conduct is explained by Justice Basten.

GUMMOW J:   Before we go to Justice Basten, is not 232 drawn to an analogy of a mandatory injunction?  That is what the court was doing.  It would be odd to decide whether or not to award a mandatory injunction without having regard to the state of affairs at the time of the making of the order.

MR GLEESON:   There is no doubt you have regard to that state of affairs.  We fully accept that.

GUMMOW J:   .....having regard to.  That is when you look around.  That is when the judge decides it.

MR GLEESON:   This is the essence of our argument on that, your Honour ‑ ‑ ‑

GUMMOW J:   Related to that, it is a notion of utility, is it not?

MR GLEESON:   Yes.

GUMMOW J:   What is the utility at that stage when all these other events have happened?

MR GLEESON:   Because the conduct which attracted the section has paralysed the company on the findings and destroyed the value of the share and the purpose of the utility of the order is to do two things.  One is to ameliorate the unfair prejudice that has resulted from that conduct in a way which a winding‑up order could not do.  A winding‑up order, if that were the only remedy, would leave the shareholder with the break‑up value which is zero.  It therefore in no way has addressed the unfair prejudice and the detriment the shareholder has suffered through the conduct which attracted the section.  An appropriate remedy which does address that is to say the oppressor buys back the share at a price uninfluenced by his wrongful conduct.

HAYNE J:   But the whole focus of these provisions is on the company.  We are concerned with the company and what is to happen in the affairs of the company, not giving some personal cause of action looking to remedy the harm that has occurred.  It is directed to what is going to happen in this company having regard to the events that have happened and the order, I would have thought, has to speak to the circumstances as they exist at the time of the making of the order.

MR GLEESON:   We fully accept it has to address those circumstances but those circumstances include two facts.  The first is the one I mentioned, that the conduct which attracted the section has had the effect of destroying the value of the innocent shareholder’s share and, secondly, the steps which the innocent shareholder has taken to mitigate his or her position cannot be regarded as unreasonable.  The order addresses the conduct by saying to simply leave you with a winding‑up order, which would clearly be an available order, has not addressed the unfairly prejudicial or unfairly discriminatory conduct which attracted the section in the first place.  That is how the section has been applied since Scottish Co‑operative in the House of Lords, which I will come to in a moment, and we submit it is a proper use of the section.

KIEFEL J:   But section 233 is not a compensation provision, is it?  It is a provision to remedy matters that are occurring within the context of the company.

MR GLEESON:   It is not in terms a compensation remedy, but it is a provision to remedy, as your Honour says, matters which have occurred or are occurring, but we submit that includes taking into account the effect those matters have had.  So, in a case where this case could have come to judgment on 1 April where the oppression ‑ ‑ ‑

GUMMOW J:   But it did not.

MR GLEESON:   Of course.  It is useful to consider how the section would have enabled a court to properly act on that date.  On that date, on the evidence I am putting to your Honours, the share had deteriorated from $410,000 in value to something which was probably close to nil.

HAYNE J:   At date of application it had deteriorated thus?

MR GLEESON:   Yes.  Because of the conduct in the previous eight weeks which had caused the paralysis of the company.  We know that because when the provisional liquidator does his best to sell the company a month later and the costs are borne in, the effective value of it is nil.  If a buy‑out order had been made on that date it would have had a proper purpose of severing Backoffice from the company and enabling it to withdraw its capital from the company.

FRENCH CJ:   But Backoffice was both a shareholder and the provider of the managing director services.  Mr Weeks was not working for Healthy Water.

MR GLEESON:   Your Honour is correct.  I should have added that as an answer to Justice Hayne’s earlier question.  Had it been done at that date ‑ ‑ ‑

HAYNE J:   Backoffice never subscribed any capital.  Let us get that straight.  It bought a share for 850,000; it did not subscribe capital.  We are not withdrawing capital from the company, we are undoing a private agreement between shareholders.  There is a radical difference, Mr Gleeson.

MR GLEESON:   I accept the money was not contributed to the company.  However, having engaged in that private transaction, what did Backoffice have?  It had one share which, under the constitution of the company, gave it the rights in due course to return of capital from the company in the conventional means.  If that be an appropriate order that the Court would have made and could have made on 1 April, why would that be a proper order?  It would be proper because it would address conduct which was unfairly prejudicial or discriminatory.

The authorities are clear that when you assess the price of the buy‑out order it is to be a fair price and it is a price which seeks to remove the effect of the contravening conduct from the price.  Were you simply to assess it on its true value on 1 April it might be nil or close to nil.  That has not remedied the conduct which has attracted the section.  If the victim takes reasonable mitigatory steps in the face of the conduct – and it is hard to see what else Mr Weeks and Backoffice could have done other than consent to the provisional liquidator which they were being requested to do and to have it sold to try and get some value, why has that deprived him of a remedy is the question we ask.

Your Honours, in terms of the legislative history in our bundle, could we note that the table we have offered your Honours behind tab 1 shows how the legislation has been expanded.  If I can identify certain matters.  The Companies Act 1961, which was based upon the UK 1948 statute - as your Honours will see on page 3 of the note, having express limitation –subsection 2 – that the order had to be made “with a view to bringing to an end the matters complained of”.  The first point we note is that that express limitation on the power was removed in our Companies Act 1981 and has never been reinstated.

The second matter that we would note is in terms of the 1981 Act, page 2 of the note at the top indicates a broadening of the categories of conduct which will attract the section.  However, the absolutely critical change for Australian purposes occurred with the 1983 Act which followed the Jenkins Report which had been adopted into the 1980 UK Act.  Can I indicate some of the expansion that was added to the section on page 2 of the note?  In paragraph 1 we now see the expansion beyond merely oppression to unfair prejudice or unfair discrimination.  In paragraph II we see that acts or omissions can now be the subject of the section even if they are isolated.

On the last page of the note, the remedies available are now extended to include paragraphs (j) and (k).  In the attached documents your Honours have the supporting statutes.  Critical to our case is that the majority of the Court of Appeal has in fact read back in a requirement like “with a view to bringing matters to an end” which has been deliberately removed.

In terms of the explanatory material, the Jenkins Report is found at tab 8.  Page 74 of the Jenkins Report, at the bottom, indicates that the decision of the House of Lords in Scottish Co‑Operative has been regarded as improving the utility of the section, but the amendments are being made to make it even more useful.  Those amendments are explained over the page, particularly paragraph 203 indicates that the amendment to expand the notion of the offending conduct was to adopt the broader view in Scottish Co‑Operative v Meyer and what is involved is a departure from standards of fair dealing without it necessarily being illegal.

The recommendations of Jenkins are found at page 78 and that has come into the 1983 Act.  The adoption of Jenkins as to purpose can be seen from the document behind tab 10, particularly on the sixth unnumbered page to the end. 

FRENCH CJ:   What is the paragraph number?

MR GLEESON:   Paragraph 200, and at the foot of that page we would emphasise that the section was intended to:

apply irrespective of whether the conduct complained of is that of the directors, of the controlling shareholders in general, of the de facto controllers of the company –

“De facto controllers” is important because we submit that Mr Campbell, although he had in law only a 50 per cent interest, was the de facto controller by reason of his position as the incumbent.  Also, we would ask your Honours to note what is at the foot of that page where there is a reference to:

the most common form of oppression in the partnership company is directed at the interest of the members as directors or employees.

HAYNE J:   Why is that engaged here where the member is the corporation?  Why is there any question about oppression of a member in some other capacity where the member is Backoffice?

MR GLEESON:   As we have seen, Backoffice is both the shareholder and providing the services of Mr Weeks.  It has the entitlement to the fees and to provide his services in law and in that capacity it is unfairly treated.  Finally, we would offer your Honours tab 11, which is the explanatory memorandum in 1998 to the CLERP reform.

GUMMOW J:   Paragraph 6.1, on the very last page, bullet point 1:

to make it clear that the Court will be able to make orders even if the act, omission or conduct complained of has yet to occur or has ceased -

How has that been made clear?

MR GLEESON:   By the plain English use of the word “is”.  The change that is being made is to the provision previously at tab 5 where ‑ ‑ ‑

FRENCH CJ:   This is the word “is” that is before “either” in section 232.

MR GLEESON:   Yes, as opposed to the previous language at tab 5, which was the affairs of the company are being conducted in a particular manner.

FRENCH CJ:   President Clinton famously said it all depends on what you mean by “is”.

MR GLEESON:   Yes.  We submit that what they are seeking to guard against is that the words “are being conducted” might be unfairly and narrowly read as meaning, “You must have it happening at the date of your application, and under the old section 320(2) you must have it happening at the date of the order”.  That is not the true intention of it and that is rectified by the plain English “is”, which invites the characterisation question I mentioned earlier.

GUMMOW J:   I just do not understand.  What plain English word?

MR GLEESON:   The “is” which ‑ ‑ ‑

GUMMOW J:   At the end of 232(c)?

MR GLEESON:   Yes, “is” in the sense of, provided you can point to something, whatever be its temporal occasion, which is conduct, act ‑ ‑ ‑

GUMMOW J:   It does not say “is or has been”.  It says “is”.

MR GLEESON:   And “is” is not being used, we submit, to give effect to the report.  It is not being used in a temporal sense.  It is being used in a characterisation sense.  Provided you can point to a conduct, act or a resolution whenever occurring, which has the character of (d) or (e), the court is given the power to make an order.

GUMMOW J:   At any time thereafter.

MR GLEESON:   As a matter of power, yes.  As a matter of discretion, if the conduct had come to an end and all of its effects had come to an end and there was no remaining detriment arising from the unfair prejudice, there would be nothing to remedy.

GUMMOW J:   You keep.....“detriment” from “unfair prejudice”.  To whom and so on and so forth?

MR GLEESON:   We do argue for a broader view of paragraph (e) than Justice Hayne put to me earlier.  It is not just about regularising the affairs of the company.  Unfair prejudice or discrimination to a member in any capacity is something this section as beneficial legislation is designed to allow the court to remedy, and you cannot remedy it if the effects of it are still continuing and you merely give a winding‑up order on the facts of our case.

FRENCH CJ:   But notwithstanding that there is no current oppression, no current unfair prejudice, no current unfair discrimination?

MR GLEESON:   Yes, provided there is still the effect of such conduct.

FRENCH CJ:   When does that cut out?  Or is that just a matter of discretion?

MR GLEESON:   It is a matter of discretion, we submit.  Take an example.  If on the facts of this case the sale and the provisional liquidator had achieved what Mr Weeks and Backoffice thought of a means out of a terrible predicament and it had achieved a price of $410,000 for him which reflected the true value of the company, as a matter of discretion, nothing to remedy.  But since that did not happen there remains something available to be remedied, proper to be remedied under the section.

HAYNE J:   But in this regard it is not unimportant, is it, that the acquisition of the share was for a price that was set having regard to a future income stream?  As soon as the prov liq goes in and sells the undertaking, all the provisional liquidator is selling is the assets of the undertaking as they stand; no future income stream.  You have incommensurables on the table.  Now, how does the oppression provision engage with that where the ordinary form of corporate divorce is winding‑up?

MR GLEESON:   The sale occurs to Mr Campbell.  He buys back the business for $200,000.  What has happened is, he got $850,000 out of Mr Weeks in promising him a 50 per cent shareholding in the company plus the service agreement.

HAYNE J:   He gets the profit on the resale when he buys it for 200 and turns it over relatively soon after for a further price.  I understand that.

MR GLEESON:   The section engages because at 1 April Mr Weeks is feeling, in the most real sense, the effect of the oppression and it is continuing on that date.  If you were simply to give a winding‑up order on that date which would be available as a matter of discretion, it would leave the effect of the contravening conduct on him completely unremedied.  The whole purpose of the original 1948 UK Act, as Scottish v Meyer illustrates was to go beyond simply saying a winding‑up is the only remedy where in this sort of situation a quasi partnership has broken down because for the very reason it will leave you with a break‑up value.  Could I take your Honours to, just before your Honours adjourn, to Scottish Co‑operative [1959] AC 324.

Bearing in mind this is on the narrowest wording of the section which expressly required the order be made with a view to bringing to an end the matters complained of, your Honours see in the facts in the headnote a fairly stark parallel to the present case.  It is a company owned slightly more than 50 per cent by the holding company and slightly under 50 per cent by the two joint managing directors.  The holding company, through its inactive nominee directors, first of all attempts to force a reorganisation on the innocent parties, which is refused, and then drives down the value of the company.  At about point 5:

In consequence, the company’s business came virtually to a standstill and the value of its shares was greatly reduced.

That is what happened on our case.  A little further down:

It was common ground that at the date of the petition it was just and equitable that the company should be wound up : -

The court did not simply allow it to be wound up, but, as noted under the second holding:

the respondents were entitled to the relief sought, since the purchase of the shares by the society would bring to an end the matters complained of, namely, the oppression.  The making of a winding‑up order would unfairly prejudice the minority shareholders.

That is attempting to invoke the express language of the section.  Can I give your Honours the three places where that concept is developed in the judgment.  Firstly, at page 343, in the third‑last paragraph of the judgment of Viscount Simonds he deals with the argument raised against us in the present case.  He dismisses it as without substance in a very terse matter:

The matter complained of was the oppression . . . They will no longer be oppressed and will cease to complain if the society purchases their shares.

That may not be fully illuminating as to the underlying principle.

At page 364 Lord Keith exposes the underlying proposition better, we submit, in the first full paragraph:

It was said that appeal could not be made to section 210 unless the company had a continuing life ahead of it and here it was clear that the company would have to be wound up.  But that means that if oppression is carried to the extent of destruction of the business of the company no recourse can be had to the remedies of the section.  This would be to defeat the whole purpose of the section.  The present position is due to the oppression and but for the oppression it must be assumed that the company would be an active and presumably flourishing concern.

That, we submit, is the underlying principle and the next paragraph confirms that the value of the shares in this case is done “at the commencement of the proceedings” – that is 1 April – “had it not been for the effect of the oppressive conduct” – that is the approach we contend for in this case.  Lord Denning finally deals with the point at pages 368 to 369.  At the foot of the page he says:

The object of the remedy is to bring “to an end . . . the oppression, and this can be done even though the business of the company has been brought to a standstill.  If a remedy is available when the oppression is so moderate that it only inflicts wounds . . . also it should be available when the oppression is so great as to put the company out of action altogether.

Then his Honour refers to the buy‑out order and like Lord Keith says that the:

fair price would be, I think, the value which the share would have had at the date of petition, if there had been no oppression . . . It is, no doubt, true ‑

This deals with the matter raised by your Honour Justice Kiefel ‑

that an order of this kind gives to the oppressed shareholders what is in effect money compensation . . . but I see no objection to this.  The section gives a large discretion to the court and it is well exercised in making an oppressor make compensation to those who have suffered at his hands.

Beneficial interpretation in the next paragraph.  Your Honour, our short submission is that even on the narrowest wording of this section, Scottish v Meyer would give us a remedy.  On the broader wording we now have it is beyond doubt.

GUMMOW J:   It is not quite as simple as that.  This statute contains elaborate provisions regulating the dealings inside companies, does it not, with several penalty provisions and so on, and very generous standing provisions – Part 9.4B and 9.5.  There is a whole conglomeration of sections.  What has been unexplored in this litigation is the extent to which the maladministration, to use a neutral term, of the affairs of this company engage one or other of these other provisions of this Act.

MR GLEESON:   I fully accept that, your Honour, and it may have been ‑ ‑ ‑

GUMMOW J:   And the presence of those other provisions throws light on the construction of Part 2F.1.

MR GLEESON:   There I would beg to differ with your Honour.  Of course, the whole must be taken into account but where we have seen that this provision over time has only ever been expanded and not narrowed, as a matter of power we submit the order is available in our circumstances.

GUMMOW J:   You are taking about other statutes in other places and other times.  Our corporations law is now incredibly complicated and sophisticated.

MR GLEESON:   I fully accept that, your Honour, and we accept that perhaps ‑ ‑ ‑

GUMMOW J:   Much more so than Lord Jenkins ever dreamt of, I imagine.

MR GLEESON:   Although the remedies that your Honour has referred to in section 233(1) start with the broadest of expressions ‑ ‑ ‑

GUMMOW J:   To wind it up.

MR GLEESON:   I would start before that:

The Court can make any order under this section that it considers appropriate . . . including –

and you then start with what would be the ‑ ‑ ‑

GUMMOW J:   Most extreme and then you come down the scale.

MR GLEESON:   You come down to others.  Now, in a case where – and this is not the case for it – the defence was you should not get a purchase because your remedy is under Part 9.4B or elsewhere, the issue your Honour raises, we submit, could properly be joined.  That is an issue which has never been put as a defence to the case.  The central defence has been ‑ ‑ ‑

GUMMOW J:   I am just trying to construe the section.

MR GLEESON:   Yes.  My short answer is those sections would not limit it as a matter of ‑ ‑ ‑

GUMMOW J:   I am not getting a great deal of help at the moment by looking to the Act as a whole.

MR GLEESON:   They would not limit it as a matter of power is what I seek to put.  In discretion one would take into account other remedies that were available.  But we would ask your Honours not to adopt a view that the mere fact that there was a remedy for misfeasance elsewhere under the law would deprive the court of this power.

GUMMOW J:   No, but it seemed to be implicit to some degree in what you are putting to us was, if this cannot be done under this provision, this wickedness will go unremarked by the legislation.  I am not sure that is correct.

MR GLEESON:   If that is what I was putting I do not – I accept your Honour’s correction.

FRENCH CJ:   Mr Gleeson, how much longer do you think you will be?

MR GLEESON:   I think about three‑quarters of an hour, your Honour.

FRENCH CJ:   Mr Bannon, how much time do you think you are likely to ‑ ‑ ‑

MR BANNON:   In reply on the appeal, about 15 minutes.

FRENCH CJ:   Yes.

MR BANNON:   On the oppression, if it is just the oppression, maybe half to three‑quarters of an hour.  If I have to deal with breaches of warranty and all the other matters, I am not sure.  I cannot estimate that at the moment.

FRENCH CJ:   Yes, all right.  We will adjourn until 2 o’clock.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.02 PM:

FRENCH CJ:   Yes, Mr Gleeson.

MR GLEESON:   Your Honours, there are two matters arising from this morning I wish to supplement.  The first is in relation to the provisions of Part 9.4B, which might cast light upon the scope of section 232.  The possible remedies are found in three places:  section 1317H, which would not be available to a member, only to the corporation.  Secondly, under section 1324(10), damages is available as an additional substitute remedy for the grant of an injunction and, subject to the jurisprudence over many years on what the scope of that section is, it is possible that, because of the broad standing provisions of subsection (1), a member might, provided there were some legitimate basis to claim an injunction in the first place, frame a compensation remedy.  However, it still will not cover the field of section 232 because there must be a contravention of the Act, whereas the broader language of section 232 attacks conduct unfairly prejudicial or discriminatory which may not be a contravention of the Act.

The other provision we found is section 1325, which is only available in certain proceedings, not proceedings under Chapter 2D, where one finds the director’s duty obligation.  So the typical misfeasance case would not open up a remedy under section 1325.  We submit that in the light of that analysis, while taking the section into account, one would not read down the scope of section 232 in the light of them.

Your Honours, the second matter concerned the pleading point which several members of the Court raised with me.  The correct position, which I have now ascertained, is that in volume 1 at page 24, in paragraph 61, Mr Weeks did contend, in a paragraph which must be praised for its brevity, that he could invoke the combination of clause 10.1 of the contract and the knowledge of Mr Campbell, derived in January, that the December estimates were false.  While on the face of paragraph 61 it might be open to question whether it is invoking a contract claim or a section 42 claim, the case that was run is found at volume 8, page 3319.

Paragraphs 10a and 10b invoke paragraph 61 as both a warranty claim and as a misleading and deceptive conduct claim.  Page 3336 of the submission, at the bottom, makes a specific submission in paragraph 77 on the warranty aspect of the claim and the wording of paragraph 78 conveys that the case is – to the extent that the material was misleading – that Campbell was also in breach of warranty, invoking both legal bases consistent with the above.  In the light of that analysis, I seek leave to amend the notice of contention and the notice of cross‑appeal in the manner of the document that I hand up, and to pursue that claim under both guises.

HEYDON J:   What do the courts below say about it?

MR GLEESON:   The Court of Appeal never disposed of the claim based on the use of the contract as itself a breach of the Fair Trading Act.  That is Justice Giles at page 3822.

GUMMOW J:   Paragraph?

MR GLEESON:   Paragraphs 88 and 89.  His Honour took the view that whatever was in the contract could not detract from the causal effect of the misleading and deceptive conduct prior to the contract.  I believe it is true that on a fair reading of 88 and 89 his Honour does not in terms refer to this part of the use of the contract.  In any event, it is a case ‑ ‑ ‑

HEYDON J:   That is so because he is talking about Schedule 3, you are talking about Schedule 1.

MR GLEESON:   At the trial judge’s level her Honour – as paragraph 78 of Justice Giles indicates – did not expressly deal with misleading and deceptive conduct in relation to Schedule 3, nor expressly Schedule 1, for which he can be forgiven because it was one of many issues in a large case where she had otherwise found for Mr Weeks on two grounds.

FRENCH CJ:   Mr Bannon, do you want to say anything about this now or are you content to deal with it in response?

MR BANNON:   I will do my best to deal with it in response.  I do not consent to it now.

FRENCH CJ:   No, no, I understand that.  Yes, all right.  Thank you.

MR BANNON:   I only just heard about it as your Honours did.

MR GLEESON:   Your Honours, the next matter was to deal with the factual findings in relation to oppression to make the submission that they did attract section 232.  Can I start with the ultimate proposition we say was found which attracts the section and then come to the detailed support for it.  The ultimate proposition was that Mr Campbell, as the incumbent with de facto control, denied the incoming shareholder the status of an equal‑quasi partner which had been promised as a condition of Backoffice becoming a shareholder resulting in unfair prejudice and unfair discrimination directly to Backoffice, impacting on the value of its share and its ability to earn fees under the services agreement and indirectly on Backoffice by excluding its nominated director, Mr Weeks, from his proper role as joint managing director.

FRENCH CJ:   Mr Gleeson, speaking for myself, I thought that your submissions set out the findings of fact upon which you would be relying, paragraphs 9 and 10, to support that global proposition.  Do we need to get into the minutiae?

MR GLEESON:   I would ask your Honours to permit me perhaps 10 minutes for this reason.  The response that is essentially made in the written submissions is a dissection response saying of itself, not allowing the fees to be paid, denying him the password of the computer, putting wrongful expenses through their credit card are all but little matters that might found a remedy somewhere else but cannot of themselves constitute conduct that attracts the section.

FRENCH CJ:   You look to the constellation of events, do you?

MR GLEESON:   We look at a constellation of events.  The second matter is that we apprehend the substantial response to this part of the case is that we cannot identify a sufficient exercise of power by someone on behalf of the company, to our detriment, as a member which would attract the section.  We are only pointing to isolated, unhappy events.  If your Honours would permit me that short opportunity to show the facts have the character I put to them.  I think it is important for Mr Weeks’s defence of Justice Bergin’s decision on this.

HAYNE J:   This with a view to demonstrating that there was relevant conduct of the company’s affairs; 232(a)?

MR GLEESON:   Primarily under (a), alternatively acts or omissions, particularly acts, under the ‑ ‑ ‑

HAYNE J:   By or on behalf of Healthy Water?

MR GLEESON:   Yes, through Mr Campbell as the incumbent with de facto control of that company.  Can I take that course, your Honour?  I will attempt to be short.

FRENCH CJ:   Yes.  We just do not want to get into the minutiae of things we have already read.  So just take us to the salient features.

MR GLEESON:   Yes.  If your Honours could go to volume 8, please, commencing at paragraphs 44 and 45.  The initial conflict arose because Mr Weeks submitted those invoices which were consistent with the terms of the agreement.  Paragraph 46 sets out Mr Weeks’ evidence and he was accepted as a credible witness and Mr Campbell rejected, that within seven days of this contract being entered Mr Campbell did not give a damn about any agreement, he would consider paying Mr Weeks on 1 March if he brought in some business.  Over the page, Mr Campbell made it clear that suing him on the agreement was going to meet with a lot of difficulty.  So the very first step is that the member purports to exercise a right under the services agreement and is told the person who has got control over this company does not give a damn about agreements, “Sue him if you want”.

The second matter is that in paragraph 47, about line 35, there is a conversation later that day where, according to Mr Weeks, Campbell gave an instruction to Ms Hunt, the office manager, not to show Weeks anything.  That was disputed.  Her Honour found in favour of Mr Weeks at paragraph 108.  So he will not get his money and he is not to receive access to the documents of the company.

The third step, if your Honours could go straight over to paragraph 56, lines 40 to 50, provide the link in terms of the financial strain of the company that I mentioned this morning under the Fair Trading Act damages and over the page Mr Campbell made his demands, particularly paragraphs 1, 7 and 8.  That, we submit, is the best evidence of Backoffice being denied its rights as a quasi equal partner, particularly in 7, the “financial and administrative processing should return to” Campbell and Ms Hunt.  So he is to be excluded from that function, and 8, he is to go out and be a salesman.

The fourth step is that there was a meeting on 7 February, paragraphs 57 to 60.  At the top of page 3466 Mr Weeks asserted his rights under the agreements and why he needed his fees.  Mr Campbell, in colourful language, at line 25 told Mr Weeks what he thought about contracts, he had “been running this business for 12 years” and he would stay in charge.  At about line 45 he made the first invitational threat that Weeks should just get out of the company.  At the foot of the page he gave an instruction to Mr Horn to:

Get him out . . . Find a way to get rid of him.

So within two weeks of entering these agreements Mr Campbell indicates he will not respect any of them and Mr Weeks should get out and he will not be given his entitlements.  That disputed fact was again resolved in Mr Weeks’ favour, paragraph 108.  Mr Weeks refused to submit to that curtailment of his rights and Mr Campbell proceeded to enforce it upon him, in any event.

The only other matters that I would specifically draw attention to now are paragraphs 109 to 110.  In 109 her Honour specifically dealt with the submission that Mr Bannon seeks to make that all that occurred here was a deadlock, justifying a winding‑up order on the just and equitable ground but it did not attract the section.  Her Honour found in 110 that the conduct in this respect I have been to date “would satisfy an objective commercial bystander” of unfair and improper exclusion.

The conduct then proceeds to the other critical matters your Honours have seen.  In 111 he is denied access to the accounting system, paragraph 115, a credit finding against Mr Campbell and 116 – that is the finding of the second instance of oppression.  Paragraphs 117 to 121 are the refusal to have a board meeting without the condition imposed by Campbell and at 121 there is a finding that:

it was part of Campbell’s plan to keep Weeks and thus Backoffice from having any true management involvement with the Company.

We submit that finding of fact was properly open to the trial judge and attracts the section and finally, paragraph 123.

Justice Basten reviewed those findings and found no appealable error in respect to them, we submit correctly.  It really amounts to this.  How was Mr Weeks to exercise his position as joint managing director when he had been treated in this fashion?  In the Court of Appeal, if I can now come to Justice Basten, he correctly characterised the trial judge’s findings at two places; paragraphs 185 and 207.

The finding his Honour made at 185, that this wrongful conduct paralysed the company, his Honour then said was “conduct contrary to the interests of the members as a whole”, invoking that limb, not just the personal position of the member.  It operated “to destroy the value of the shareholding” and “was thus oppressive” to the member.  His Honour said that it found (a), (d) and (e) of section 232.  They are the primary paragraphs we rely upon.  So, we respectfully submit, the findings of the trial judge correctly justified that characterisation by Justice Basten.

If we could now return to the paragraph your Honours looked at this morning in Justice Giles, paragraph 155.  We submit that his Honour has not fully grappled with those findings that are made in what his Honour has there said.  When ones comes back to paragraph 137 – this is the final point on oppression – for his Honour to say that:

the inability of the Company to function as a jointly owned and managed entity was plainly enough due to more than the particular conduct –

we submit it is difficult to understand what preclusory factor is there being identified.  Is his Honour saying that there was another cause at work?  If so, what was the cause?  Why did it somehow dominate over or destroy the effect of the oppressive conduct on the paralysis the company suffered?  That has never been entered upon.  Then his Honour’s other statement that if Mr Weeks was acting with a view to the recovery of his investment, that denies the remedy, would simply invoke the ordinary law of mitigation on damages, that steps taken to ameliorate one’s loss do not ordinarily break the chain of causation.  We have given your Honour the reference to MaGregor on Damages (2003), pages 217, 260 to 265.  Your Honours, the final aspect on oppression is if a buy‑out order was appropriate, what would be the ‑ ‑ ‑

HAYNE J:   Just before you come to that, do either Justice Basten or Justice Giles deal with the matter raised by Justice Young at page 387?  That is, can there be oppression in a 50/50 company?

MR GLEESON:   Justice Basten does briefly at paragraph 212.

FRENCH CJ:   I think Justice Giles mentions it at 137, too.

MR GLEESON:   In the sense that a mere breakdown in a relationship in a 50/50 company will not constitute oppression, we agree.  What one needs is conduct by one of the parties which has de facto control as Mr Weeks did on the evidence I have been to which precludes the other from exercising the entitlements properly, flowing from its position as member or some other capacity.

FRENCH CJ:   That issue was not in contest in the Court of Appeal, was it?  I thought I saw a reference to Mr Bannon not denying the possibility that you could get oppression for the purposes of the Act in a 50/50 situation.

MR GLEESON:   It seems to have been raised only in the sense dealt with in paragraph 212 of Justice Basten.  It was never the full frontal defence of the case.  The defence of the case was ‑ ‑ ‑

FRENCH CJ:   It was raised in the context of this particular case, rather than as a general proposition.

MR GLEESON:   That is right and so there has been no consideration of the general propositions on it.  But if it arises we would submit what I have just put earlier.  If one of the parties has the control and that is exercised to the detriment of the other that attracts this section.  Your Honours, the final question in oppression is if there is a buy‑out order, what is the fair price?  We have submitted that the fair price must exclude the effects of the oppression.  I have taken you to the authorities.

What Justice Bergin did at paragraph 145 on page 3517 is, we submit, within the ambit of a trial judge’s discretion in selecting a fair price.  What her Honour has done, because she was satisfied at the date of acquisition the company had good potential and that but for the oppression the relationship could have worked in a manner which fostered growth, she would strike a fair price relying upon the potential approach of one of the valuers which in effect gave a higher figure than if one looked at what might have been the true value at the date of purchase in an independent third party situation which Justice Hayne put to me.  For that reason her Honour struck the price at 850, not 410.  We commend her Honour’s reasons at paragraph 145.

FRENCH CJ:   Was it not 853?

MR GLEESON:   Yes, 853.  There is a pleasing symmetry about the number.  We commend those reasons as being within her Honour’s discretion.  Our alternative position is that the price should be at least the objective value of the company at the date of purchase, which is, as Justice Basten found on page 3868, to be $410,000.

HAYNE J:   I take you back to oppression and 232(a).  Is section 53 of the Act engaged and, if it is, how and where do we find reference to that in argument, judgment, or anything else that has happened below?

MR GLEESON:   Question one, is 53 engaged?  We do not find “examinable affairs” in terms in 232, but we see the express cross‑reference to 232.

HAYNE J   Is not the reference, “For the purposes of the definition of examinable affairs in section 9”, for the purposes of section 53AA, for the purposes of section 232?  Is that the reading of the provision?  Or is “examinable affairs” carried throughout?

MR GLEESON:   None of this has been addressed, your Honour, until your Honour has raised it.

HAYNE J:   Just so.

MR GLEESON:   We do not find “examinable affairs” in terms in 232 ‑ ‑ ‑

HAYNE J:   Just so.

MR GLEESON:   - - - but the section your Honour takes us to assumes that it has work under 232.

FRENCH CJ:   It does not.  You do not need to go that far.  It has “the affairs of a body corporate include”.  That is what they are talking about, the affairs of a body corporate, at the end of the chapeau.

HAYNE J:   Have we not to read 53 with 232?  Have we not then got to go through ‑ ‑ ‑

MR GLEESON:   I am sorry; could I correct?  The answer to your Honour’s first question is yes, it is squarely applicable to the section. 

HAYNE J:   Then I would have thought that this was a matter that might go some way to making good some of the points you have been making.

MR GLEESON:   Yes.

HAYNE J:   But how?

MR GLEESON:   Within that definition, the affairs extend as far as these concepts control business tradings, transactions, dealings, liabilities, profits, income, et cetera, and each of those very broad terms taken as a group allow us to examine the conduct of Mr Campbell in the respects we seek to rely upon.

KIEFEL J:   What about paragraph (c)?

MR GLEESON:   Paragraph (c) equally squarely dealing with the refusal to permit him to have his directors meetings and, more particularly, refusing to allow him to be in charge of finance, as he was meant to be.  So we rely upon (a) and (c).  I just want to check that in Justice Basten’s discussion of the concept of “affairs” his Honour did address it.

At paragraph 176 his Honour recorded that there was no dispute that the relevant conduct in question involved the management of the company’s affairs and therefore fell within paragraph (a).  That may explain why it was not given more extended treatment.  We do rely upon it.

Your Honours, is it convenient to move to the remaining matters and leave oppression?  If your Honours go to our written submissions on the appeal first of all, commencing at paragraph 74, we identify that the trial judge made three findings of breaches of the warranties.  It is in relation to Schedule 3, and these are breaches to the knowledge of Mr Campbell, thereby attracting the warranty.  The most critical is the third.  He knew that the net assets were overstated by 25 per cent.  Her Honour did not find it necessary to assess the damages.  As we note in paragraph 76, Justice Young agreed with her Honour that there was a breach of warranty but said no more than nominal damages would flow from the breach.

The problem we currently face is we have a finding of breach of warranty, which has been upheld.  It is obviously a substantial matter, the assets being 25 per cent overstated.  We have no one assessing the damages, except Justice Young saying you get none.  It is a practical problem.  We accept ordinarily your Honours would remit damages to have them determined and that may be the course that has to be taken.  If it is taken we submit that it would have to be, unfortunately, to a differently constituted Court of Appeal, because Justice Young’s position on it is clear.  It would also be, we submit, on terms that if we lost on those parts of the appeal I have discussed so far, but only kept alive these assessment questions, your Honours would consider making the costs of this appeal costs in the cause in the Court of Appeal, because if Mr Weeks wins and gets the damages he has won the event and today’s victory for Mr Campbell is putative.

So, your Honours, we ask you to consider if there is a remit of those two conditions.  Having said that, my brief task is to attempt to persuade your Honours to at least entertain doing it for the simple reason that this dispute has gone on for far too long and has incurred vast costs which have eaten up the judgment.  Recoverability is likely to be nil and the loser in this case is fairly likely to be bankrupt on one side or the other.  We think there is a public interest, although it is not this Court’s duty to accede to it; it is the duty of the courts below to have dealt with these issues and, if possible, to bring it to an end.

The short argument we make on the damages your Honours will find in paragraphs 85 and following.  In principle, the contractual damages are to place the respondents in the position as if the warranties were correct.  That is conventional.  If they were correct this company would have had substantially more assets and would have been in a better position to meet its liabilities to creditors, including the amounts which were denied to Mr Weeks.

It is likely the provisional liquidator would have recovered far more than he did.  Adopting a relatively broad‑brush approach in paragraph 88 an available measure of damages is $440,000 being the same as the first limb of the Trade Practices Act case.  If your Honours consider that either for ordinary reasons of remitter or the brevity with which I have expressed that it is simply not possible to deal with this matter on our written submission, we ask for the alternative remitter.

If your Honours permit our amended documents that I have handed up this afternoon, we have a further and very substantial breach of warranty which is that we were told that the December figures were correct and they were known to be very considerably out.  Standing back from this matter, that is obviously critical to the diminution in value of this company, that December was a shocker.  That could also be taken into account in justifying the damages we ask for.  That is all I say on that question.

Could your Honours then go back to paragraph 78.  We here invoke the same three respects in which the warranties were false and false to Mr Campbell’s knowledge as representations.  Justices Gummow and Lockhart in the Accounting Systems Case considered that representations could as a matter of law arise from the terms of the contract.  We submit this is such a case.  We would seek to add to those representations the matter concerning the December estimates.  We then have four representations in the contract which were false, to his knowledge, and the most critical ones become paragraph (c) again, overstatement of the assets, and what we are seeking to add is a new (d) which is gross overstatement of the December position.

Had the truth been known in respect to those matters, Mr Weeks would not have purchased.  The damages exercise then becomes the same as under the primary Fair Trading Act Case.  I need only refer your Honours to volume 6 to the evidence of Mr Weeks.  The relevant parts are pages 2682 and 2683, which give but an indication that these matters would have been critical to him because of the effect it would have on a company which lacked assets and lacked cash flow.

While your Honours have that, could I ask your Honours to note, back in paragraph 87 the words “approximately $20,000”.  Time was taken up yesterday on whether the effect of that overstatement was just under or just over $20,000.  It does not matter.  The only step, therefore, we are asking your Honours to take on this case is to find the representations conveyed per the contract – the falsity has been proven on the other evidence – and then to find the damages as per the first part of the case.

That leaves only one matter, which is found in our cross‑appeal submissions at paragraphs 38 to 41.  If your Honours will forgive the summary nature of paragraphs 39 to 40, we there seek to identify the terms of the documents which were repudiated in a wholesale fashion by the conduct of Mr Campbell, conduct which had the effect of paralysing the company and destroying it.  We submit that by looking at those express terms and the implication arising from them under Mackay v Dick – that each party would do what was necessary to enable the other to have the benefit of these terms – there was a thoroughgoing breach of the implied duty.  The damages are the same as the damages in the alternative oppression case, namely the difference between the $410,000 and zero.

Finally, I have mentioned a particular request in relation to costs.  If your Honours considered that, depending how this case bears out, there is something to go back to the Court of Appeal, I have made our primary submission that you would make costs costs in the cause.  Our alternative submission would be that your Honours would take the unusual course of allowing separate written submissions on costs by reason of the complication of the remitter and by reason of matters between the parties out of court which I cannot put to your Honours today.  But our plea, and it is only a plea, is if your Honours can bring this disputation to an end and if we can persuade you that one of the four bases is sufficiently sound in law to be left in tact, we ask you to do it, if your Honours please.

FRENCH CJ:   Thank you, Mr Gleeson.  Yes, Mr Bannon.

MR BANNON:   May I address first, your Honours, the misleading conduct case.  There are two sets of representations.  One is the add‑backs representation and one is the December estimates.  It is important to keep them separate.  As to the add‑backs, none of the six propositions put forward by my learned friend address the following.  Our position is that there was no misleading conduct whatsoever in relation to the add‑backs, contrary to the Court of Appeal’s finding, but consistently with her Honour’s finding and a fortiori, but in any event there was no causal connection to these four matters.

Firstly, the trial judge’s finding that at the time of the provision of the add‑backs document in December Mr Weeks was told and understood that they were estimates.  That is the non‑recurring expenses.  That is paragraph 234 of her Honour’s judgment, 3567 at volume 8.  That finding was not overturned.  Secondly, Mr Weeks’ evidence, and if I may trouble you to go to it again in the light of the submissions which have been made which is at 8, 3548 in her Honour’s judgment, forming part of paragraph 199, at line 30 is the question and answer commencing, “You told her Honour that what you decided . . . and what you took were” – and I emphasise the words –“instead” were the warranties because he could not be satisfied and with the assistance.  So that is the second matter. 

The third matter is the warranty asked for and obtained was the one we have seen in the schedule, namely, a warranty that the proprietor’s estimate of non‑recurring expenses for the five months ended 30 November 2004 was 96,100.  That is part of Schedule 3, volume 2, at page 745 at line 30.  In other words, that is a warranty in conjunction, not only those express words “the proprietor’s estimate” in Schedule 3, but, as we know, in conjunction with the opening words of clause 10.1 is a warranty that the estimate was true, to the vendor’s knowledge.  Four, the unchallenged finding of her Honour, in effect, insofar as Mr Campbell was concerned, he believed the estimates were correct in the sense that there was no finding, that he thought the estimates were incorrect.

The Court of Appeal’s error was to overturn firstly the finding that a representation was made as to the absolute fact of those non‑recurring expenses and, secondly, that there was reliance on representation of fact rather than reference to estimate.  Neither of those findings can withstand an analysis of those four matters which I have put which are non‑controversial and they fit entirely with Justice McHugh’s approach in Butcher v Elder and, indeed, the majority in that case followed Justice McHugh in paragraph 102, but the majority approach, namely, to the effect, you have to look at misleading conduct in context.  You cannot take isolated acts and look at them on their own.

Here you have somebody who receives a piece of paper and told, “These are estimates”.  He says, “I’m not happy.  I want a warranty”.  He asks for and gets a warranty.  What, as to fact?  No, as to estimate and only as to knowledge.  There is complete consistency in the terms of the conduct in the pieces of paper with what we say on our case there could not possibly (a) be a representation as to fact and, a fortiori, there could not possibly be reliance on a representation as to fact.  The analysis of the Court of Appeal in.....relying on the terms of the contract to find a contrary position, we submit, as submitted before, involves error. 

The second area of misleading conduct alleged relates to the December estimates.  The findings made by her Honour in relation to the state of knowledge of Mr Campbell we submit are accurately encapsulated by Justice Giles in paragraph 73 of his Honour’s judgment in volume 9, 3817 and that is the reference at about line 20,leaving the estimate for sales revenue uncorrected for December 2004 left with an incorrect understanding and there is the reference to $8,000.  That is the conclusion of a reference to what appears is the discussion of her Honour’s findings starting at paragraph 70.  That is entirely consistent with what appears in her Honour’s findings on this topic which is, we respectfully submit, limited to a knowledge in relation to the $8,000, and that appears at paragraph 259 which is volume 8, 3593.

That is the conclusory paragraph at the end of that series of questions and answers which my learned friend took your Honours to, in particular, to the last sentence at 258.  The cross‑examination, to which reference was made, did refer from time to time to management accounts and to general shortfall.  The only specific figure ever put to him as to a shortfall related to the $8,000 on sales revenue.  There was no document actually put to him in relation to the EBIT figure.  While there was a general reference to management accounts, none was identified.  There was nothing put to him to say, for example, he knew that the EBIT was a shortfall of $25,000, which was the pleaded representation.

An allegation of knowledge of a false estimate requires, as an allegation of effectively fraud, it to be squarely put.  Your Honours will not find any part of the cross‑examination which is referred to squarely putting that proposition.  Hence her Honour’s finding limited to the $8,000, hence our submission to say that the sales estimate case is flawed for the simple reason that even on his own evidence, his reliance evidence to which your Honours have been taken to again, he said he would not have entered if he had known two things compound; the $8,000 shortfall and the shortfall on EBIT of $25,000.  That is his evidence.

It is said against us we did not cross‑examine.  That is so, but he cannot have a new case on reliance saying, well, even though he said that you should generally find that he would not have entered anyway because of $8,000 or some other shortfall.  If a forensic decision was taken, as to which I cannot comment, not cross‑examined, we get the benefit of that if he has a shortfall on that respect.

Could I just, without going back to them – my learned friend in that context took your Honours to a number of pieces of paper, such as volume 7, 3151, 3308, 2987.  Perhaps I should go to one of those.  Page 2987 is what was said by my learned friend to be demonstrative of what the actual management account was and, implicitly from my learned friend’s submission, was that this was what was being squarely put to Mr Campbell.  If one looks at what appears in paragraph 86, at line 30 on 2987, one sees an EBIT of 37,500, which was the December document which is provided.

The document next to it is a document which has a figure of 12,438.  That explains the pleaded difference of 25,000.  That is the shortfall.  That pleading is at volume 1, page 23.  That is a difference which is calculated by various add-back exercises undertaken by Mr Gower.  It involves all sorts of assessments.  Equally, the other document my learned friend took your Honours to is at 3308 in the same volume.  It is a repetition of what appeared there but it adds the other expert’s comments, Mr Russell.  He comes up with a different figure of 22,000, which means it is not a 25,000 shortfall.  None of this was put to Mr Campbell.  It involves estimation.

Lastly on this topic, if one goes to the document which was in fact provided, which was the estimate, which is in volume 5 at page 2454, the estimate about which complaint is made is the estimate which appears at the foot of the page under the column “Est Dec” and the figure is 37,500.  Your Honours will note it does not have, unlike the sales estimate above, any figures above it and it is opposite what is described as “Adjusted”.  So, in other words, it is an estimate without indication of how it is borne out of what is expected to be the EBIT, taking into account actual expenses and an estimate of likely add‑backs for that month.  There has already been no finding that he was false in his estimates of add‑backs in the specific one.  A fortiori there cannot be any finding as to falsity as to whatever it was that estimate, which is involved in December, never put to him, never found, and a fortiori when nothing was squarely put to him on this point.

So the attempt to resurrect a case of misleading conduct based on lack of knowledge or breach of warranty on this second element of the EBIT by $25,000 comes here with ingenuity but not supported by fair cross‑examination and unsupported by a finding from any other prior judge, and your Honours would dismiss it.  If one accepts what I have said previously and said again in reply on the add‑backs representation, the complete consistency between contract and the prior document about estimate, we respectfully submit we will succeed on that.  If one accepts what I have put now and put previously, how there are simply no findings to support the reliance on the other document, we succeed on that and any other version of that representation which is sought to be made and we are left in the position where, in terms of factual findings before this Court on alleged misleading conduct none from Mr Campbell in relation to estimates and one in relation to $8,000 revenue out of massive estimated revenue which came to his attention which he failed to draw to the attention, much as any attempt to paint Mr Campbell as some larger villain by reference to knowledge fails and is unsupported by prior findings in relation to misleading conduct.

Next on the misleading conduct case, none of my learned friend’s six propositions in relation to this issue address the point we sought to make and still make – namely, that there was a contemporaneity between the making of any offer and the raising of the need for a warranty.  The first offer which was made does not specifically refer to that – that is 5, 2490 in the appeal book to which my learned friends say, although it does say “unsupported”.  That reflected the discussion he had at the time with Mr Horn saying:  I’m going to need a warranty.

I am sorry - 5, 4249 is the later one.  Volume 5, 4290, if I could just go to that again briefly – that is the offer which is ultimately pursued, and it comes later in time, but that is the one which specifically says – I do not need to read it out but it says at about line 20:  we have to incorporate a warranty in appropriate terms.  That was an offer which was not capable of acceptance because there still needed to be an agreement as to the terms of the warranty.

Going back to that evidence of that concession by Mr Weeks that instead, because he could not get satisfaction about the information he was provided, he proposed to get a warranty in appropriate terms.  The analysis is, we respectfully submit, this.  In response to information as to which he could not get satisfaction he made an offer to enter into a contract with an appropriate warranty to be agreed which would provide him protection in relation to that information which he could not be satisfied about.  That is exactly what happened with the benefit of legal advice his offer – he got what he wanted.  One poses the question at a broader level:  in what way did he suffer loss?  Where can one find – extract out of that – leaving aside my first two points – some relevant conduct which is caught by the statute. 

Lastly on this topic as to the issue as to whether there was cross‑examination on any particular term, and I think I acknowledged there had not been, but can I just remind your Honours of what appears in our appellants’ submissions at paragraphs 19 to 21 which demonstrates that Mr Weeks himself led the evidence before the court that he had legal advice.  There is no question required in cross‑examination to this effect:  did you read the contract, did you understand it?

HEYDON J:   Are you talking about 19 to 21 of the respondents’ submissions?

MR BANNON:   The appellants’ submissions, I am sorry, if I said the respondent I am sorry.  That is our setting out of the factual detail.  Going to those references demonstrates that it was he, Mr Weeks, himself who led the evidence that (a) he had a solicitor, (b) that he got advice in relation to specific terms term by term, (c) that he passed that on and then Mr Horn said, “Yes, we had a conversation” and that was not the subject of any response by Mr Weeks.

If one looks at the cases to which my learned friend has referred – Leda in particular and the other one Poulet – what the Full Court in each case did was take into account as a relevant fact the terms of the contract.          It may be relevant to say to somebody if there is a tiny disclaimer somewhere or other you must have read that.  There was a bit of a debate in the Butcher v Elder Case as to the extent of prominence.  This is not this case.  Central to his offer was the warranty.  He negotiated it and it forms part and parcel of it and the price of that, including all the terms of the agreement.

HAYNE J:   In that regard what are we to make, if anything, of 10.1 of the first schedule?

MR BANNON:   Insofar as it is a breach of warranty case - 10.1, I will address that in a moment.

HAYNE J:   Come to it when you are ready.

MR BANNON:   But insofar as – and quite frankly I have not read properly the latest attempts at amendment – but if what is sought to be said now we respectfully submit, in terms of evidence, in terms of finding this is the first time to say he read clause 10.1 and saw in that a representation and he relied on that as a reason to enter into the contract as founding some misleading conduct case, we say the evidence just was not directed to that issue.  I have given a reference in our submissions to an aspect buried within…..in the case, an aspect of the case which was not the subject of an appeal and where Justice Sackville addressed an issue which we submit was not addressed in Accounting Systems.

Where you have a contractual warranty it exists as a contractual warranty only at the time when the contract is signed.  In one instance his Honour said you have to look at it, because of the evidence in that case, as to the fact that a draft contained particular words and they were read by an individual witness.  One of the aspects, his Honour said, well, there was no evidence from anybody at…..to say he had read that draft and took anything from it and that was essential to getting some reliance case.

Equally, his Honour said some other evidence was open to the conclusion – what it indicated was that the providing party was prepared, as a matter of contract, to enter into terms which included that.  If one is going to find a factual representation which was made on which there was reliance then one needs evidence to support it, it needs to be addressed and there needs to be factual findings relating to it.  We have none of that.  Again, to the extent it is sought to be raised - and I am not entirely sure whether it is in those documents – if it is we would formally object but we do not mind your Honours entertaining the argument, obviously, and the papers can be filed but we would say as a matter of evidence and absence of findings it cannot be entertained in this Court as a practical matter.

HAYNE J:   Just so there is no doubt about it, Mr Bannon, at trial her Honour finds at 219 particular breach of clause 10.1.  That is not the breach with which we are presently concerned.

MR BANNON:   That is right.

HAYNE J:   We find facts at 259 that Mr Campbell knew that results recorded in information given by or on behalf of Healthy Water to the purchaser was not substantially accurate in one respect, do we not?

MR BANNON:   Yes.

HAYNE J:   That is to say, we have a finding of fact in 259 that would put it within 10.1, regardless of whether that is pleaded for the moment.

MR BANNON:   Yes, I accept that.

HAYNE J:   And that presently the answer made at trial, upset on appeal, was the answer in 269 of no reliance.  Is that right?

MR BANNON:   Yes, and both then and now, and we say the evidence as to what he would have done to come to the damages of the whole contract says, “I wouldn’t have entered into it if I had known the falsity as to that and the falsity as to the 37” as to which there is no finding, so that does not get them to support‑ ‑ ‑

GUMMOW J:   Where do we find that actual statement of conjunction?

MR BANNON:   In volume 6, at 2682.

GUMMOW J:   I see.

MR BANNON:   It is to be distinguished between the opening words of paragraph 91, at the top of the page where he refers to two other matters but he specifically says either of those would have been enough to push me over the edge, or not over the edge.  He does not make the same point in 92.

GUMMOW J:   And 92(a) is the 8,000 figure, in effect?

MR BANNON:   Yes.  I think the 8,000 is a rounded‑up figure and we accept that is a finding of fact against us and we have never sought to overturn that.

HAYNE J:   But was the evidence in paragraph 91 accepted that had he been aware of the fact that the amounts owing to trade creditors were understated he would not have entered?  Was that accepted at trial and later left intact?

MR BANNON:   He was not cross‑examined about it.

HAYNE J:   I am even more lost than normal, Mr Bannon.  What are we fighting about?  We have an assertion not cross‑examined that “had I known that the amounts owing to trade creditors were understated by 12,360 I wouldn’t have gone on”.

MR BANNON:   Yes.

HAYNE J:   There is a finding at 219 that there was such an understatement.

MR BANNON:   Yes.

HAYNE J:   We are in a position, are we not, where he would not have gone on?

MR BANNON:   Two things about that.  Firstly, we challenge that finding as to the 12,360 and that was a challenge made in the Court of Appeal by reference to – and we have put some references in our submissions.  There is a debate as to the reliability of Mr Eustace’s figures.  He makes journal entries as to trade creditors which we say on proper analysis is mundane and the interstices of it is dead boring, but we put the argument in some considerable detail before the Court of Appeal and it has not been resolved.  My learned friend said in writing, and he said it again, that your Honours have before you findings of breach of warranty.  Your Honour has a finding by the trial judge.  You have Justice Young saying “I do not overturn those findings”. You have Justice Giles saying “I do not consider them”.  Equally, Justice Basten.  So that this Court, we respectfully submit, cannot go on and deal with the breach of warranty claim relating to the trade creditors without determining our position, which we fully argued, as to whether or not the trade creditors run.  That is the first answer. 

The second answer is, even if we could not overturn the trade creditor point, we say it only sounds in a breach of warranty.  That evidence about “I would not have entered into it” depends on finding that there was a misleading conduct by reference to what has now been put in the notice of contention, what was pleaded as simply the correctness of - represented the contents of Schedule 3.  That was the pleading at trial.  To date there has been no finding by the trial judge or the Court of Appeal which has addressed that allegation – and again we put this in writing – and we say the analysis of that allegation involves similar considerations to what I was adverting to in relation to any contractual warranty, be it accounting systems or otherwise. 

One needs somebody to say “I read that”, when they read it.  Was it after they had signed the contract?  Was it before?  Was it in draft?  And “I understood it.  I got these particular points out of it”.  A pleading to say “represented the contents of Schedule 3” which contains a myriad of material, we respectfully submit, requires much more analysis than that, be it by a trial judge deciding trials and questions of fact.  It has not happened.  It is fair to say it was still argued in the Court of Appeal, but this document which was filed yesterday or today which teased out what those representations were, that is the first time that has happened.  That was only responsive, we infer; we do not know. 

We put in our submission a couple of days ago saying that has never been teased out as to what the representations were.  The day before this comes on, they tease them out.  Well, that is a nice thing to do now, but really it does not advance the position.  So we respectfully say that is the second answer, that the Court would either dismiss that claim or would not entertain it and send it back if we otherwise succeed on what has been decided.  That is what I wish to say by way of reply to the misleading conduct case. 

I then address the question of oppression.  We respectfully submit that the first question which arises in considering the oppression cross‑appeal is whether the majority was correct – and this is a majority comprising Justice Giles and Justice Young – in taking into account as relevant to the exercise of discretion the circumstances that, by consent, a provisional liquidator was appointed and the business sold as a reason why there should not be a buy‑out order. 

The second question is whether the trial judge took into account those considerations.  The reason we put that – which is, again, set out in our written outline on that – is, although we have earlier defences on oppression, ultimately the issue, the order which they have to overcome is the decision by the Court of Appeal comprised by that majority I described to overturn that buy‑out order.  What we say is Justice Young decided it on the basis of there was power to make it but in the exercise of discretion, taking those matters in particular into account, it should not have been made.  Justice Young said there was no power but if there was, the discretion should have been exercised in that way for the similar reason.

HAYNE J:   Is it a question of discretion or is it a question of identifying an intersection between 4722, which was the power to make a provisional appointment, and 232 and 233?  The power to make a provisional appointment is before the making of a winding‑up order.  Now, is the hypothesis for the engagement of 4722 the hypothesis that the relief that is in suit is winding‑up?

MR BANNON:   Yes.

HAYNE J:   There was a prayer for winding‑up in this application, that I understand, but once the parties joined in appointing a provisional liquidator, could that appointment lawfully be made if the relief that was sought was other than winding‑up?  I do not know.  I am just very hesitant about saying all this just goes down in the miasma of discretion, Mr Bannon.

MR BANNON:   I will attempt to address your Honour’s question, I am not suggesting satisfactorily, but can I sidestep it initially by saying that Justice Giles – I do not think taking into account the consideration which your Honour raised, because nobody raised it, but in any event, assume power, but as a matter of discretion said the order should not have been, for the reasons I will come to, which I have briefly summarised.  Justice Young said, again for not that reason although perhaps it was built up into it, there was not power but, in any event, if there was, as a matter of discretion he agrees it should not have been made.  So what we say is the ultimately determinative decision of the Court of Appeal was as a matter of discretion there should not have been a buy‑out order, and the considerations which inform that discretion are set out in some detail by Justice Giles and more summarily by Justice Young.

So the second question is – so that assumes power.  Justice Bergin obviously assumed power.  Did her Honour take into account those matters?  We submit plainly she did not, but there is a bit of debate about that.  If they were relevant, one has to say that even if, as my learned friend urges upon this Court, it was a wonderful idea to make this order, he has to show a miscarriage of the discretion re‑exercised by that majority.  We respectfully submit, no real attempt has been made to do that.  When I come to the question of what is the nature of the relief which can be given, I will attempt to address that interaction between the provisional liquidator power.

HAYNE J:   Addressing the question of interaction later in your argument, it may or may not be important to consider what other form of external controller might have been appointed.  In particular, was it open to obtain appointment of a court appointed receiver and manager?  If it were, that might perhaps suggest – it might not; I do not know –that by going down the path of provisional liquidator a few bridges have been burnt.

MR BANNON:   Yes.  I think fundamentally our position is and always was once there was inevitable burning of a bridge to go down – whether by way of power or a matter of practicality, for reasons I will seek to endeavour to demonstrate.

As to the matters taken into account by Justice Giles on this issue it really appears in two parts, one part dealing with the question of whether or not there should be a setting aside of the sale agreement because of what was going to be misleading conduct.  Volume 9, 3823 – I am sorry, can I do one hyperspace and jump back to the misleading – there was one other point I meant to mention.

FRENCH CJ:   You are trying to make this not boring, are you, Mr Bannon?

MR BANNON:   That is this, that even if my friend be right and that 10.1 picked up prior information consisting of the December sales estimate, it must be on a matter of construction what was being said was the information which was provided which was an estimate was accurate.  In other words ‑ ‑ ‑

HAYNE J:   Exactly, hence the reference to the knowledge of Mr Campbell at the relevant time before sign up.

MR BANNON:   Well, we would seek to take it back further because the information which was provided was an estimate as at December.  What happened later seems to be an estimate.  It may be slightly technical, but if one is being technical then I think drag it into 10.1, one has to analyse what it was and what the information was the estimate provided.  As at December it was correct and there is absolutely no finding or any view that at that stage he thought it was untrue.  But that point is not completely technical, because it feeds into this proposition, namely, if he had been concerned that as to the accuracy of the actuals for December, well he would have built that in and demanded that that be in Schedule 3. 

Interestingly enough – more than interestingly – decisively, we say nothing about the December 2004 appeared in Schedule 3.  He did not require that to be in Schedule 3 as to the actuals or at all.  So sorry for that diversion back.  So then coming back to 3823 at paragraph 93 his Honour commences a consideration of what the remedy should be in the context of whether there should be an avoidance of the contract at about line 40.  It is in this context his Honour makes findings of fact or refers to facts and there is a reference to there being “loggerheads in the management” and there is a recommendation that it be placed into voluntary administration.  That was another alternative, “voluntary administration”.  But the administrator, of course, would continue to ‑ ‑ ‑

HAYNE J:   Well, that assumed insolvency, did it not?  I am not sure.  I thought it would have.

MR BANNON:   That is right.  It needed a resolution of insolvency and Mr Weeks refused to agree.  Well it says “insolvent, or is likely to become insolvent at some future time”, which carries with it a lot of unstated assumptions.  Then he deals with the reply in 96, 97 the response.  Then they commenced with the proceedings.  Then at 100 the appointment of a provisional liquidator, 101 the sale on 31 May, 2005 almost two months later, 102 money eaten up, 103 is his cross‑examination as to what he understood as to what was going to happen and 104 his Honour’s conclusion that:

the evidence did not disclose why the parties came to agree upon the appointment –

It was practically contemporaneous.  Finally, his Honour said “I understand the resolution”.  He agreed to it as a means of recruitment of investment. 

Then at 107 and 108 at 3828 his Honour concludes – in particular the finding in the first sentence of paragraph 108, and that is supported by Justice Young.  More than once today my learned friend has referred to - in effect it has been found that the breakdown paralysed the business of the company and rendered the whole business worthless.  It is not that at all.  Business was still functioning quite well in the sense that – perhaps I will develop that in a moment.

HEYDON J:   What about paragraph 97, where Mr Campbell’s solicitors contended that the company would soon become insolvent because of the frozen overdraft and the “inability of the two directors to agree on any matter including the signing of cheques”.  How can a business operate without cheques being signed?

MR BANNON:   Well, perhaps I overstated that to this extent – that there was nothing wrong with the integral nature of the business.

HAYNE J:   The economy was fundamentally sound, was it, Mr Bannon?

MR BANNON:   Well, Mr Campbell and his sales team were still selling filtered water.  Mr Weeks was – this period of dispute lasted about eight weeks.  He never actually went out and sold anything.  He was there for about a week.  He had a lot of arguments with Ms Hunt.

HEYDON J:   Whose credit was strongly attacked by the trial judge.

MR BANNON:   Yes, and Mr Campbell’s vigorous defence of the attacks on what – perceived to be Ms Hunt was one of his greatest crimes, perceived by the trial judge.

HEYDON J:   These are issues you lost on.

MR BANNON:   I will come to them on oppression very briefly, but all I am saying is that that was the first week of infighting, then he was off to New Zealand for a week, then there was another week where they were trying to negotiate a sale, and then he comes back and he continues to be involved in management.  I will address that in a moment. 

There is a dispute towards the end as to signing of cheques, but in terms of whether the business was still operating - employees are not still not driving out in trucks servicing, selling, et cetera.  It is still there as a functioning business.  Yes, there was a fundamental problem between management, but to say the business is now of no value as a result of this management dispute, there was no skill that Mr Weeks actually brought to bear which was essential to this business continuing.  The business had been successful for some period of time.  That is why I say to say that the business was worth nothing immediately as a result of this is just not true. 

At the top there had been a management problem.  Yes, I accept that.  In any event, his Honour indicates in 107 and in particular 108 that the relationship – what I have just said is summarised in the first sentence in 108:

the evidence did not warrant attributing . . . wholly or even substantially to that effect –

because they were not depending on Mr Weeks to sell anything, to put in any water filtration system.  Then next, at 137 - so his Honour concludes for those reasons, but for related reasons, that there should be a setting aside of the agreement and for related reasons the buy‑out was not an appropriate order.  The reasons are set out in that paragraph at about line 30:

The Company did not continue with the provisional liquidator holding the status quo until the Court came to consider what relief, if any, should be granted.  The sale of its business and assets was consensual.

Then paragraph 138.  There is reference to 139 which I will not pause on but we rely upon, through to 140.  We submit that those matters are pertinent and relevant matters to take into account assuming there is a power in the exercise of discretion.

HAYNE J:   Could the trial judge have ordered a buy‑out without terminating the provisional liquidation?

MR BANNON:   There may be an issue as to whether or not the share could be effectively transferred.

HAYNE J:   For a start, how do you transfer the share?  Secondly, what do you do about management and you have got this petition on foot?

MR BANNON:   You would have to remove the provisional liquidator.

HAYNE J:   You would have to remove the prov liq, you would have to terminate the proceeding.

MR BANNON:   The effect of Justice Giles’ reasoning, which is essentially agreed in by Justice Young, is to say effectively it may be a fair remedy for an alleged victim of exclusion from management to relinquish the company to the vendor and leave it as a going concern under the free hand of the vendor to claim back the purchase price.  In other words, to say “I came into this to be an equal partner, you do not want me in, we are having problems, all right, and you had told me it was going to be profitable because of this extra 300,000 which is going to come in.  The two of us fighting, we are not going to get those sales together, we are going to spend most of our time fighting or whatever”, because that is his point, if you want to pursue a buy‑out remedy, you leave the company as a going concern, you stand back, you go to the court and say “I am oppressed”, or whatever, “I seek a remedy”.  The effect of what Justice Giles is saying that is one circumstance, but it is a wholly different circumstance as a matter of fact to agree on the removal of control from the person that established the business and from the person who had come in, put in a prov liq, which of its nature is likely to damage the business, and agree on a sale of the business at a fair value, but much lower than – and then later seek to recover the purchase price.  That is a separate set of circumstances and the question is, is that a relevant circumstance ‑ ‑ ‑

HEYDON J:   You are saying it is a sort of an election.

MR BANNON:   It is in the nature of an election, quite.

FRENCH CJ:   It is a resolution of the oppression dispute.

MR BANNON:   We put it as an election at various points in time, but it does not matter whether there is a simple factual proposition.  They are the two competing different factual propositions and the second one is what obtained.  What Justice Giles simply said, whether it is a determinative factor or not, that is a relevant factor to take into account in deciding now whether to order a buy‑out.  What we say, as initially addressed, is that an irrelevant consideration, whether your Honours agree whether it is determinative, is it something that you would put out of your mind?  We have said in our written outline and we say again, plainly not.  At the very least it is a relevant consideration. 

We say more than that.  We say it is powerful.  It may be determinative that may go, your Honours, up the steps of the election, but at the very minimum, was it relevant?  Answer, yes.  Did her Honour take into account?  Answer, no.  Hence her exercise of discretion was vitiated, hence the Court of Appeal was entitled to re‑exercise it.  They did so.  Short of my learned friend persuading your Honours that those matters which I have identified are irrelevant, that argument on the oppression cross‑appeal does not get off the ground, we respectfully submit.

HEYDON J:   It is quite clear, is it, that it was put to Justice Bergin, this discretionary factor?

MR BANNON:   Yes.  When I say it is quite clear, Justice Giles said it was put and we submit it was.  Justice Bergin’s decision itself actually indicates that her Honour accepts it was.  Her Honour’s judgment, at page 3514 – this is in the context of the price to be paid – at paragraph 137 her Honour records at about line 40 the:

submissions in relation to the availability of the cause of action included a submission that the plaintiffs should not be able to pursue the oppression suit by reason of Weeks’ conduct –

In other words, not only was there a submission about availability, but they should not have it.

HEYDON J:   A matter of power.

MR BANNON:   We say that that would render unnecessary the words “should not be available”.  That is completely accommodated by the reference to availability.  I can give your Honours these references to a written submission, volume 8, page 3377.  Paragraph 43, line 30, refers to:

the underlying philosophy of the section which is to bring the relevant oppression, if any, to an end –

That followed the submission that the oppression was brought to an end by the provisional liquidator.

FRENCH CJ:   There was no contention that the consensual appointment of the provisional liquidator was a kind of settlement or resolution of the problems which led to the bringing of the oppression suit subsequently?

MR BANNON:   No, it was not put that that was – we put the submission it was either effectively or was an election.

FRENCH CJ:   But it just fed into the discretion.

MR BANNON:   All I can say is that by discerning what was put below I think the fairest way of putting it was that it was submitted that that fact and/or the sale of the business meant there was no power to do it and it was also said that an election had been taken.  Whether it went to perhaps the more refined level which your Honour has put it I suspect it did not but that may be embraced within the submission of election.  Also at 3378 – this is still within the heading of “Discretion”:

It is difficult to reconcile this stance with the present one which seeks a buy‑out after destruction of the entity.  This is also a basis for the exercise of discretion against the plaintiffs.

We submit that accommodates it.  There are admittedly very brief oral submissions on this but at volume 2, 672, there is line 35, which is just a general reference to say there is a discretion as well.  Justice Giles finds on his analysis that it was put.  Paragraph 147, at 3844, at line 25, is his Honour’s view of the matter.

Then could I just add some references to Justice Young at paragraph 461 on page 3929 where his Honour refers to her Honour’s comment about:

not satisfied that the appointment of the provisional liquidator precludes the plaintiffs from seeking an order . . . 

That conclusion may well be technically correct as a matter of general approach and jurisdiction, however, it seems to me that where one has a provisional liquidation in which the parties have agreed that the core asset of the Company be sold, the Company . . . there is a virtual complete liquidation.

Then his Honour says at 487 at 3935, what is the result on this claim:

It follows from what I have said above that the claim for oppression must fail for a number of reasons.  It fails on the merits.  If it had not failed on the merits it would fail on discretionary grounds.

So what we submit, there is a majority, although his Honour would have put an end to it, Justice Young, beforehand, he agrees with the discretionary decision which is what the ultimate decision which was the basis of the order which is made.

Could I then deal with the question of was there oppression and what is the position in terms of relief and power.  Can I put these general propositions?  Firstly, a court must exercise caution in determining an oppression action in order to avoid an unwarranted assumption of the responsibility for management of the company.  That proposition was set out in Wayde v New South Wales Rugby League 180 CLR 459 at the foot of page 467.

The second proposition is the remedy is for the benefit of a person who is, we submit, constrained to suffer the consequences of oppression and I emphasise the word “constrained”.  Thirdly, the oppression must involve the exercise of some relevant power relating to the affairs of the company which the plaintiff is constrained to accept and thus requires or warrants the intervention of the court.

Fourthly, the object of the section is to provide a substantive remedy to relieve the plaintiff from a state of affairs caused by the oppression.  It is not merely a declaratory power.  The shareholder’s agreement to which your Honours were taken, and if I could just go back to it briefly, at volume 4, page 1905 - it commences at 1905 but the relevant clauses to which reference was made is 1913 which is a quorum provision for directors meeting at line 30.  There needs to be two.  If one is not present then it has to be adjourned to the next day but there still needs to be two to transact business.  That is (c).  One goes over to page 1914 and clause 6.1 provides that:

Campbell and Weeks, as Joint Managing Directors, shall have the day‑to‑day conduct –

voting by the proportionate share, at 6.3:

Directors’ Resolutions

The Directors may make decisions and pass resolutions in respect of matters relating to the day‑to‑day conduct and operation of the Business and the implementation on a day‑to‑day basis of the Budget.

Then there is a list of certain things which are set out.  In terms of the formal agreement between the parties that power of day‑to‑day management which was agreed each would have was to be exercised as managing directors by means of passing resolutions in directors’ meetings.

There is also a deadlock provision which involves, at page 1916, which is referred to in the various judgments, where they cannot agree on a matter, they cannot resolve within 30 days, then they have to appoint by agreement, over the page 7.2, a chairperson to resolve the matter.  But the foreshadow submission we seek to make, the court’s intervention, and this really relates to this 50/50 power point, one may accept that, for example, if a meeting was actually convened and Mr Campbell did not attend or he only turned up with somebody else and would not come in otherwise, and it was adjourned to the next day, for example, and he did not attend again or that happened over a period of time, that may be an exercise of a power by him as a director or an act or omission by him as a director, which might qualify as stultifying the company and oppression.  That is something the court can look at and seize upon.

Equally, if he had turned up and they tried to agree and could not resolve and he was intractable and would not even agree on a chairperson, that again may be a circumstance where the court seeks to enter and be involved.

FRENCH CJ:   In other words, you do not know the possibility that oppression can apply to a 50/50 shareholding split?

MR BANNON:   Correct, but you need a circumstance where there is an exercise of a power, we respectfully submit, or a failure to exercise a power which is actually constraining the person who is oppressed.

HAYNE J:   Well, as I understood it, part, at least, of the case against you was that the conduct of the company’s business trading transactions and dealings – see section 53(a) and/or the internal management and proceedings of the company – 53(c) – was oppressive, unfairly prejudicial or unfairly discriminatory to Backoffice because Backoffice was denied by the conduct of your clients the benefit of the agreement to provide the services of the joint managing director.

MR BANNON:   Yes.  What I submit is that the court does not interfere in management of companies unless the power is activated.  You have to identify somebody who is constrained, you have to identify it is constrained by conduct by act or omission, which is an exercise of a relevant power.  In other words, it is not some sort of Star Chamber type exercise where allegations and counter‑allegations are thrown up and people say, “I really cannot get on with him/her.  He said very nasty things about me/her.  This is a disaster”.  Many organisations function with horrible things being said by people to each other, all sorts of threats being made.

In other words, the court as a judicial power being exercised, there has to be some notion of what it is which is actually being seized upon.  I am going to come very briefly to the findings to say, as Justice Young found, there may be a lot of nastiness going around, it just was not oppression, but my starting point is to say one looks to the agreement, there is a procedure to be followed.  The next point is he never followed the procedure.  He called the meeting.  This was referred to by the trial judge at paragraph 79.  He issued a notice of meeting on 24 February and that is the actual document.  I will not go to it.  It is at volume 4, 2018.  One of the matters he raised – it is not referred to in paragraph 79, it is in the notice – was payment under the services agreement.

There followed after that a debate as to who should come to the meeting, initially agreed that Mr Horn could come, then he changed his mind.  The specified date was 3 March, which is consistent with the seven days notice.  3 March came and went.  Mr Weeks did not sit in a room and say “Here I am, you have not turned up”, just did not do it.  He engaged in more debate.  Your Honour’s initial reaction to that may be to say “Well, so what?  You could see what was going to happen”, but you are exercising judicial power.  You have to identify what is the conduct – particularly in a 50/50 company - that is being exercised or not being exercised.

If you want to attract the jurisdiction of the Court in this regard, for example - he started to do it – put the opponent to the proof, call the meeting “Are you going to turn up?  Are you really going to exercise your director’s power in a way which is obviously wrong?”  He has legal advice.  Push comes to shove, what is going to happen?  Anyway, that just never happened and that is really one of the points which Justice Young makes to say there are available remedies.

Next, and we put this submission.  If there is a means of avoiding what is said to be oppression you must seek to exercise that and that was not done in this case.  If one looks at the actual findings of oppressions, we submit Justice Giles summarises them accurately and that appears at 114 at 3832 of volume 9.  Paragraph 114 was:

exclusion of Mr Weeks from the agreed day to day management of the Company, of which prevention of payment under Backoffice’s services agreement was part.  After extensive reference to the evidence -

paragraph 110 is set out.  These points I am making as to whether there was in fact oppression are arguments which we have put before the Court of Appeal and Justice Basten said there was oppression, Justice Young said there was not, Justice Giles did not decide it.  So that, to decide this oppression case, one has to determine as a factual matter, our outstanding appeal issue, or send it back.  In other words, if we do not win on the first point about the order, one has to determine these issues, but there is a fundamental problem with paragraph 110 of her Honour’s reasons, we respectfully submit, namely the sending of a letter which is a demand that something be done which Mr Weeks does not agree to, as a matter of logic does not constitute exclusion from management.

It constitutes non‑payment and I will come to that as a separate matter.  Paragraph 115 is the second matter - exclusion of access on 28 February to the MYOB and we have put a submission in writing and I will not go to it but in fact he got access after 28 February.  It was only on 30 March where he could not get it –long after that - and even then he got access by somebody else’s computer and the next day we were in Court. 

The third was the board meeting point and what we say in relation to that:  it just never got to that.  He did not sit in a board room saying “Here I am, where are you?”  It did not happen.  Fourthly, paragraph 117, there was a declining to find oppression in relation to one other matter, and then fifthly, without expressly labelling it as oppressive there is a reference to the $750 a week.  His Honour notes that her Honour did not describe that as oppressive and equally Justice Basten at 185 at 3857 describes the matter as:

The conduct identified by the primary judge as oppressive conduct involved attempts by Mr Campbell, as a director of the company, to exclude -

and that is a far more accurate – he was not actually excluded.  He was not paid, I accept that.  He was still there in the business, he was still accessing the accounts.  He did a whole series of things which we have referred to in the submissions.  He was not in fact excluded.

All sorts of things were said, terrible things, it is found, and terrible debates about Ms Hunt and “don’t give him anything”.  There is no finding that he did not get anything.  This is the problem with a melange of evidence.  It is a whole lot of conversations saying all these terrible things have been said.  You have got to be specific.  What is the conduct?  What is the exercise of a particular power which involves the court’s intervention, because the court has to intervene and one of the options is to consider stopping the conduct?  Precisely what is the conduct? 

If the conduct is not being paid, well, that can be addressed.  If the conduct is not attending the meeting or not appointing the chairman to resolve the dispute, that can be addressed.  But nasty things being said, bad thoughts being held by each other, saying, “Stop him, I hate him, out of the company”, using colourful language, that is not oppression because, if it is, it invites the courts into a debate which it cannot resolve.  Then at 206 his Honour Justice Basten agrees in the last sentence with his Honour Justice Giles’ summary:

Three bases upon which her Honour found oppression have been set out by Giles JA at [114]-[116] above.

I think we have given your Honours these references in the submissions as to Justice Young’s approach to these matters and I do not need to go back to it, but what we submit is, it introduces the three things; the letter and the so‑called exclusion.  We say, yes, the letter.  Where is the exclusion?  As to the password, we say that just does not go anywhere and as to the directors meetings, that really does not go anywhere either. 

After the letter of 6 February to which your Honours have been given the reference, there are just a couple of brief matters which are worthy of reference in her Honour’s judgment.  At paragraph 67 of volume 8, there is a letter written on 9 February by Mr Weeks’ solicitors, Watson Mangioni.  It is a comprehensive letter going to 3470, 3471.  It alleges entitlement to participate.  If I could drop down to – obviously the whole letter could be and should be read – line 40 on 3471.  It says, “Mr Weeks is going to be overseas.  We have instructions to send the attached letter to the Commonwealth Bank.  Mr Weeks will not countenance any payments being made without his joint authorisation.  You will require a statement of all expenditures.  Mr Weeks expects you scrupulously observe the shareholders agreement and accord him equal status paid on equivalent terms”.

So, in other words, the response of 6 February, the formal response, was this letter.  There is no finding by her Honour to say thereafter, apart from the fact he was not paid and apart from the password and apart from the directors meeting point, specific things happened where he did not get involved in management.  Far from it.  He was poking his nose in, as he is entitled to do, all sorts of things.  Yes, they still were not getting on. 

FRENCH CJ:   We have gone there.

MR BANNON:   Yes.  I am sorry.  Then her Honour says at 68, that refers to the letter.  So he was very much in control of the company and the finances by reason of that.  There is no suggestion that was not observed.  Paragraph 75 refers to the signing of cheques.  There is a dispute about some cheques.  Paragraph 76, there was a negotiation period between 9 February and 17 February.  Paragraph 79 is where the meeting was called and nothing much further eventuated about that.  He did not, basically, pursue his rights in relation to that.

So far as the non‑payment, plainly the non‑payment was outstanding as at the date of the proceedings.  But once the provisional liquidator gets appointed, when one asks let us assume non‑payment is oppression – we say it is not, but let us assume it is for present purposes – what is the remedy for non‑payment?  If the reason for the non‑payment is because the wrong people are in management, then the provisional liquidator is in there and that problem is solved.  Non‑payment cannot rationally found an oppression remedy under 232.  That is why I say you have to find incidences of actual exclusion.  Paragraph 110, notwithstanding what goes before it, simply says, in effect, with all due respect to the trial judge, illogically a letter attempting exclusion is actual exclusion.  It is not.

Having regard to the hour, I just wish to refer your Honours to some authorities and if I may do this by just giving the references, and there is a couple I want to hand up.  The first one is in our submissions.  That is the Jermyn St Case which contains the statement on our cross‑appeal submissions at paragraph 24, namely:

Oppression must, we think, import that the oppressed are being constrained to submit to something which is unfair to them as the result of some overbearing act or attitude on the part of the oppressor.

So it requires some constraint.  If a direct is wrongfully drawing remuneration, that is misfeasance proceedings.  That is not oppression.  Secondly, there is a decision of Justice Chesterman in Polyresins (1999) 1 Qd R 599 which discusses the question of whether there is power or whether it is by the power appropriate to grant relief to a majority shareholding in an oppression proceedings and in the context of that, there is some reference to 50/50 shareholding. But the essence of the reasoning process of his Honour – and the particular references are at 605 to 606, 610 and 613 – in effect, well, if you have the means to overcome the oppression, then you cannot be invoking, rationally, the jurisdiction of the Court. That is in the case of a majority shareholder. A fortiori in the case of a 50/50 shareholder, one, you need some constraining conduct, and, two, you need to exhaust whatever the means are which you have. They were not done here.

Secondly, on that same topic and in the other direction is a decision of Justice Barrett in Goozee v Graphic World Group Holdings 42 ACSR 534. The relevant passage at 37 to 45. On the same topic, and I will hand up a copy of this, re Legal Costs Negotiators, a decision of the English Court of Appeal 1999 2 BC LC 171 at pages 197 to 201, which come to the Justice Chesterman view.  Unless your Honours want these now, I can hand them up just after play.

FRENCH CJ:   Thank you.

MR BANNON:   Then going in the other direction, Watson v James, [1999] NSWSC 600, unreported, a decision of Justice Bergin, paragraphs [57] to [71] which refers to both – it certainly refers to Polyresins.  There is also an article by a Canadian author, which you also have a copy of, which I will hand up, again going in the direction of – contrary to Justice Chesterman.

GUMMOW J:   What is the debate in these cases about?

MR BANNON:   As to whether or not a person with majority power can get relief for oppression and it informs, we submit, the question of whether and in what circumstances a 50/50 shareholder can get relief.

GUMMOW J:   Can get, should get or may get?

MR BANNON:   Well, either.  It is put at a “can get” by Justice Chesterman in the English Court of Appeal, but I think that also embraced with that is a “should get” as well.  But we say it informs the debate as to whether and in what circumstances a 50/50 shareholder can do it.  But simply it is a confirmatory ultimate of the very short statement made by this Court in Wayde in how these sorts of issues arose, namely to say the court is cautious before it goes in.

Then, again weighing in on the Goozee side, another judgment of Justice Barrett, Darkinjung Pty Ltd v Darkinjung [2006] NSWSC 1217 between 64 and 67 and lastly there is a decision of Thomas v Thomas [1984] 1 NZLR 686 at 696, 697. That is a decision of the New Zealand Court of Appeal and referred to in Wayde.  It is often referred to.  Pages 696 and 697 refer to on one particular aspect of the case as to whether or not somebody’s shares were alleged to be valueless.  Their Honours refer to the fact the pre‑emptive right provisions had not been exercised to put it up for sale to see whether or not – in other words there were mechanisms available which had not been exhausted and the court was not going to interfere until they were so exhausted.

So for those reasons we say that the impression was not such or either did not exist at all or it certainly was not such other than to at best provide some remedy in relation to the payment of fees.  But as soon as the liquidator came in that went as well.  All I can say to your Honours is one has to be vigilant in requiring – or we submit the Court has to be vigilant – in requiring identification of particular matters which constitute oppression which is conduct, which can be identified which can be the subject of remedy and not broad‑brushed, kitchen sink‑type approaches which do not have that definition, a fortiori in a company in which these people have been out together – albeit tumultuously – for a very short period of time and then all of a sudden a provisional liquidator is put in.

We do say and support the proposition that the provision of the putting in of a provisional liquidator does preclude as a matter of power the exercise, but we also say and it is sufficient for present purposes that as a matter of discretion it is sufficient.

Could I refer to – I should, in the context of where the company was – paragraph 145 of her Honour’s judgment at 8, 3517 contains a finding in relation to – I do not think it really addresses the problem which arises – at line 40 a finding in relation to:

I am satisfied that at the date of acquisition, this Company had good potential for growth and success.  Campbell was obviously a successful operator within the business.  Weeks had the intelligence and wherewithal, if permitted to be part of this Company, to assist it to grow . . . but for the oppression the relationship could have worked in a manner that fostered that growth.

That was the basis of a fair finding, but again we submit that is different from a finding which is needed, we respectfully submit, but has never been made and indeed we respectfully submit never been sought, as Justice Giles indicated.  Nobody went to try and isolate the impact of the appointment of the provisional liquidator, what was the impact of the alleged oppression on the business of the company, as opposed to the personal impact on Backoffice.  Nobody attempted to address that by way of evidence.  It is not pleaded.

HEYDON J:   Is it necessary that that be so?  Oppressive to, unfairly prejudicial to a member?

MR BANNON:   It is if you wish to do one or other things, run, as they now wish to run this implied term provision of duty to co‑operate because then you have to isolate ‑ ‑ ‑

HEYDON J:   Yes, but that is a different category of the argument, is it not?

MR BANNON:   Yes, but it is related because much of what has been put in relation to whether it is – perhaps I should add, the reliance on the Scottish Amicable Case is to the effect that the oppression had run the company into the ground and you cannot have the benefit of that.

That is not this case.  It may have run the two individuals into each other, but they did not attempt to prove that the business was a disaster because of the oppression.  That would involve, for example, somebody saying, “Because we were arguing so much we could not actually go and sell water to somebody or other.  Because we were arguing so much or because we could not pay a particular creditor we lost business X, Y and Z”.  No attempt was made to deal with that and bring them within the Scottish Amicable‑type case.

Now, here, to attempt to invite your Honours to say, if you generally assume that – and contrary to what Justice Giles says and what Justice Young says, that there are no findings, they are not satisfied that the oppression did cause the loss in value, to invite this Court to embark on that exercise, and if it is an exercise to be embarked on it is not one which has really ever been addressed in the evidence and should have been if they were serious about it, but it is certainly not an exercise which we would respectfully submit this Court is equipped to addressed.  That is an answer to a number of the new claims sought to be brought.

Just in relation to that implied duty, there is an additional problem with the implied duty cases.  Even if one accepts a Mackay v Dick duty to co‑operate, that does not translate – the duty to give the benefit of the agreement to each other - that does not translate into a positive duty to co‑operate, a positive obligation to do X, Y and Z.  They are the things which are the stuff of agreement, and when there are express terms which set out various roles they are either caught by those express terms or they are not.

That is actually part of the logic of their Honours in the Court of Appeal in rejecting the other implied term case, and we say it informs that debate as well, so that would be another reason why your Honours would not deal with that implied term.  So far as the cross‑appeal issues on breach of warranty, et cetera, we have set out as fully as we can the factual matters on which we rely.  We would respectfully submit that as a practical matter this Court would have to decide the interstices of those and it is very difficult to do so.

So we would submit that if that is to be pressed – well, either the Court has just got to follow each side’s detailed written submissions and go through the material on that.  There is not sufficient time to address, but it really is a matter which warrants oral argument which cannot be done and should be sent back.

As to whether or not this should be sent back to a particular court, we would respectfully submit the ordinary order of this Court would be it would be sent back, remitted, and it would be a matter for the

Court of Appeal as to whether it felt capable of dealing with the matter, and who should address it, and it would be a matter for the parties if someone, for example, was going to raise an objection to any particular member rehearing it and we respectfully submit it is not a matter which this Court can usefully consider. 

So far as any question of costs is concerned, I accept that there can be potentially different outcomes.  The ordinary rule would apply.  I do not encourage separate submissions.  It is a matter for your Honours as to whether or not the particular contest which is decided warrants a costs order or if the particular contest warrants it being part of some other proceedings, then so be it, but we rather encourage your Honours not hearing from us again ‑ ‑ ‑

FRENCH CJ:   Thank you, Mr Bannon.  Mr Gleeson, you have something in reply on the cross‑appeal? 

MR GLEESON:   There are only three points, your Honour.  The first on the question of construction raised by Justice Hayne, we submit that the purpose of section 4772 is to permit the appointment of an officer who will hold the status quo until the period when the court can consider in the oppression action under section 233 whether a winding‑up is the appropriate remedy or one of the other remedies.  It does not of itself deprive the Court under section 233 of considering those other remedies.

HAYNE J:   That submission has to then accommodate 477(2)(c), the power to sell or dispose of the whole of the undertaking.  So that is more than just hold the ring.

MR GLEESON:   And if that power is exercised, then when one comes to the final hearing under section 233, one takes into account, as the trial judge did, that fact.  Secondly, your Honour mentioned the validity of the share transfer after the filing of the petition.  Section 468 permits the validation of the share transfer.  Such an order was made in the present case, volume 8, page 3602.  That would tend to indicate that a buy‑out order could be available and properly made under section 233, notwithstanding the commencement of the petition.

The second matter is we dispute the proposition that the trial judge did not take into account in her discretion the two factors.  A fair reading of paragraphs 127 to 133 and 137 indicates she did and we submit without appealable error.

Thirdly, Mr Bannon’s challenge that we did not identify error in the Court of Appeal’s exercise of discretion is answered by the submissions we put on paragraph 137 of Justice Giles and amply answered by what

Justice Basten said at paragraphs 184 to 204 and 215.  Those are our submissions.

FRENCH CJ:   Thank you, Mr Gleeson.  The Court will reserve its decision.  We will adjourn to 10.15 tomorrow morning.

AT 4.09 PM THE MATTER WAS ADJOURNED