Catto v Hampton Australia Ltd (In Liq) (No 3) - [2004] SASC 242

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS (No 3)
Judgment of The Honourable Justice Vanstone
19 August 2004
CORPORATIONS - CONSTITUTION AND LEGAL CAPACITY - INTERNAL DISPUTES - REMEDIES WHERE OPPRESSION - WHAT CONSTITUTES OPPRESSIVE CONDUCT
CORPORATIONS - WINDING UP - LIQUIDATORS
Resolution of company in general meeting that it wind up voluntarily attacked as being oppressive to the minority shareholders and as constituting an "equitable fraud" by the company and by its majority shareholder - various relief sought - appeal pursuant to s 1321 Corporations Act 2001 raising conduct of liquidator and mode of distribution - claim and appeal dismissed.

TORTS - MALICIOUS PROCEDURE AND FALSE IMPRISONMENT - ABUSE OF PROCESS
Counterclaim by majority shareholder for tort of abuse of process on basis that proceedings were commenced and prosecuted to obtain advantage not reasonably related to verdict - counterclaim dismissed.
Corporations Act 2001 (Cth) s 140, 232-233, s243N, ss411-414, s479, s491, s501, s506, s661, s1321, s1383, s1400; Corporations Act 2001 (Cth) Part 2D.1, Part 5.5, Part 2J.1; Corporations Law s701, s195, ss206C-206E, ss411-414, s260, s232, s180; Corporations (Ancillary Provisions) Act 2001 (SA) s7(3); Administration and Probate Act 1919 (SA) s5, s17, s46, referred to.
Re: Broadcasting Station 2GB Pty Ltd [1964-65] NSWR 1648; John J Starr (Real Estate) Pty Ltd v Robert R Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63; Shirim Pty Ltd v Fesena Pty Ltd [2002] NSWSC 10; Bosnjak (No 1) (1998) 28 ACSR 688; Fexuto v Bosnjak (2001) 37 ACSR 672; Heydon v NRMA Ltd (2001) 51 NSWLR 1; Byrne v Australian Airways Ltd (1995) 185 CLR 410; Nicron Resources Ltd v Catto (1992) 8 ACSR 219; Commissioner of Succession Duty v Hargrave (1972) 3 SASR 118; Williams v Spautz (1991-1992) 174 CLR 509; Hanrahan v Ainsworth (1990) 2 NSWLR 73, applied.
Ngurli Ltd & Anor v McCann & Anor (1953) 90 CLR 425; Peters' American Delicacy Co Ltd v Heath & Ors (1938-1939) 61 CLR 457; Melcann Ltd v Super John Pty Ltd (1995) 13 ACLC 92; Gambotto & Anor v WCP Ltd & Anor (1994-95) 182 CLR 432, distinguished.
Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459; Elkington & Ors v Moore Business Systems Australia Ltd (1994) 13 ACSR 342; Spautz v Williams [1983] 2 NSWLR 506; Varawa v Howard Smith Co Ltd (1911) 13 CLR 35; The Law of Torts (John G Fleming, 9th Ed, 1998, LBC Info Services); Shorter Oxford English Dictionary CT Onions, 3rd Ed, 1973, Clarendon Press, Oxford, discussed.
Coombes v Dynasty Pty Ltd (1994) 14 ACLR 60; (1995) 59 FCR 122; Jenkins v Enterprise Goldmines NL (1992) 6 ACSR 539; New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86; McWilliam v LJR McWilliam Estates Pty Ltd (1990) 20 NSWLR 703; Re G Jefferey (Mens Store) Pty Ltd (1984) 9 ACLR 195; Ebrahimi v Westbourne Galleries Pty Ltd [1973] AC 360; Tanning Research Laboratories Incorporated v O'Brien (1989) 169 CLR 332; Catto and Ors v Hampton Australia Ltd (In Liq) and Ors [No 2] (1998) 16 ACLC 1691 at 1694, considered.

CATTO & ORS v HAMPTON AUSTRALIA LIMITED (IN LIQUIDATION) & ORS (No 3)
[2004] SASC 242
Civil
VANSTONE J:
Introduction

The plaintiffs were shareholders of Hampton Australia Limited, now Hampton Australia Ltd (In Liquidation), the first defendant, which I shall call “Hampton”. The second defendant, Kalgoorlie Lake View Pty Ltd (“KLV”) held 99.75% of the issued capital of Hampton. On 5 December 1997 more than 75% of the shareholders in Extraordinary General Meeting resolved that the company be voluntarily wound up and that Mr Bruce Carter (the third defendant) be appointed liquidator. A further resolution was passed as to the distribution of the assets of the company. KLV voted in favour of all three resolutions.
The assets of the company included all the shares in Hampton Areas Australia Pty Ltd (“Areas”). Hampton also held all two of the shares in Hampton Jubilee Pty Ltd (“HJPL”). That company was insolvent, but one of its assets was a substantial interest in an exploration joint venture with New Hampton Gold Fields Limited (“New Hampton”).
In due course the liquidation was completed and an in specie distribution was made. In general terms it conformed to the resolution. The two shares in HJPL went to KLV. All shareholders except the estate of Joan Isabel Stewart Catto (the first plaintiff) cashed their distribution cheques.
The plaintiffs claim that this course of events amounted to “an equitable fraud” upon and oppression of the minority shareholders by Hampton and KLV. In respect of Mr Carter, they claim that the distributions were inappropriate and that he failed to have regard to alternatives. They seek relief in various forms.
As against Hampton they seek declarations that the resolutions are void, orders requiring Hampton and its directors to do what is necessary to restore Hampton to its pre-resolution state and damages for breach of contract or in equity. As against KLV they seek declarations that its conduct in the affairs of the company was oppressive to all the minority shareholders, contrary to the interests of the members of Hampton as a whole and contrary to s 233(6) of the Corporations Act 2001 (Cth) and damages in equity. In respect of the third defendant, Mr Carter, the plaintiffs seek orders reversing or modifying his acts and further orders pursuant to s 1321 of the Corporations Act.
By counterclaim the second defendant, KLV, seeks damages and other relief, contending that the conduct of the plaintiffs in relation to the institution and prosecution of these proceedings amounts to the tort of abuse of process. In essence KLV claims that the plaintiffs’ real purpose has been to use the threat of proceedings – which were always going to be lengthy and costly in terms not only of representation but through many hours of lost employee time – to extract a sum far greater than the true value of their shares and far greater than a court would ever order. It was put that what was sought by the plaintiffs was in truth “ransom money”.
Background
The plaintiffs’ case encompassed events and transactions occurring over the period 1991 to the filing of proceedings in 1998. The evidence of those events was presented entirely by way of documents, almost all of them discovered by the defendants. The plaintiffs attempted to prove that throughout, the purpose of KLV – and the Normandy Poseidon Group (“NP Group”) which owned KLV via its ownership of Gold Mines of Kalgoorlie Pty Ltd (“GMK”) and GMK Investments Pty Ltd (both companies forming part of the “GMK Group”) – was to eliminate the minority shareholders; and further that the resolutions of 5 December 1997 were the culmination of that plan.
The Statement of Claim, which was rather an unwieldy document, dealt with the matter in this way.
First it asserted breach of contract as against Hampton. It relied upon a term which it claimed should be implied into the contract between Hampton and its shareholders to the effect that any exercise of the Corporations Law power to wind up Hampton would be for a proper purpose and would not operate to oppress the minority shareholders. The asserted oppression was said to arise from the development and implementation of what was defined as “the Plan”, being the same events asserted to give rise to the causes of action against KLV.
The Plan was said to have had its genesis in March 1991. It was said to have developed over the ensuing period to 1997. Its existence was sought to be proved by some hundreds of documents, many originating in the NP Group rather than within Hampton or KLV specifically. The status of many remains in doubt. Many appear to be discussion papers prepared by officers of various rankings within the Group. The overall purpose attributed to the Plan was to rid Hampton of its minority shareholders so that “special benefits” in the form of utilisation of tax losses within the NP Group, savings of administration expenses and other efficiencies would accrue.
The Plan was said to have resulted in two attempts to eliminate the minority shareholders. The first attempt was in the form of a s 414 Corporations Law bid in 1991. Although a number of shareholders accepted the offer made at that time by KLV, some shareholders (including the plaintiffs) took the matter to the Federal Court where the dispute settled and their shares were retained. Punctuating the first and second attempts was a recommendation put to the GMK Board to the effect that the minority shareholders should be bought out. The Board did not accept the recommendation. The second attempt was the voluntary winding up, the core subject of this action.
In Appendix A is set out diagrammatically the corporate structure of the KLV Group within which Hampton sat during the period 1991 to August 1996.
Set out below are details of Hampton’s shareholders after the 1991 buy-out. At all relevant times the issued share capital of Hampton was divided into 38,823,555 fully paid shares. Those shares were owned as follows:
- KLV owned 38,725,053 shares, or some 99.75% of the total;
-GMK Investments Pty Ltd and North Kalgurli Mines Pty Ltd (both companies in the GMK Group) owned one share each, but not beneficially;
-the minority shareholders owned 98,500 shares or some 0.25% of the whole;
-of the minority stake, the plaintiffs owned some 17,500 shares or 0.0445% of the whole.
As at the time of distribution the plaintiffs held shares as follows:
·       Estate of Joan Isobel Stuart Catto, by the first plaintiffs, 500 shares;
·       Batoka Pty Ltd, second plaintiff, 7,500 shares;
·       Robert Franklin Cameron, third plaintiff, 7,000 shares;
·       AKW Investments Pty Ltd, fourth plaintiff, 2,500 shares.
I set out in summary form a chronology of the important events, and references to what the plaintiffs put as the most crucial documents demonstrating the Plan. The events themselves are common ground.
May 1991The plaintiffs and the other minority shareholders acquire their shares in Hampton.
17 May 1991                  Hampton is delisted from the Australian Stock Exchange.
17 May 1991                  KLV offers to acquire all of the shares of Hampton for a price determined by an independent expert. (Referred to by the plaintiffs as “the First Attempt”.)
1994-1995Consideration is given by employees of the NP Group to methods to disassociate from the minority shareholders in Hampton.
June 1995A recommendation is made to the GMK Board to make an offer to purchase the minority shares in Hampton at a price in the range $1.76 to $2.03. The recommendation is not adopted.
1 May 1996A Heads of Agreement is executed for the sale of the Jubilee Mine and its associated assets (then owned by Hampton through ownership of Areas) to Copperfield Gold NL which subsequently became New Hampton Goldfields NL. As the Jubilee Mine was Hampton’s main undertaking, the sale required shareholder ratification under Article 97 of the Articles of Association. A report from Deloittes & Associates was sought as to the merits of the sale.
27 June 1996                  Areas declares and pays a $50m dividend to Hampton.
23 August 1996              Deloittes report as to the Jubilee Mine sale.
12 September 1996       Sale Agreements for the sale of the Jubilee Mine are executed and completion occurs.
18 June 1997                  Areas is sold by Hampton to KLV and subsequently certain accrued interest receivables of Areas are reversed.
The corporate structure of the Hampton Group now changes.
18 June 1997                  Hampton is repaid, and itself repays its intercompany loan accounts, except for amounts receivable from KLV and HJPL.
5 September 1997         The directors of KLV, as majority shareholder, requisition a meeting of the members of Hampton to consider the winding up of Hampton and distribution of its assets in specie.
12 September 1997       The directors of Hampton call an extraordinary general meeting as requisitioned by KLV.
5 December 1997          The resolutions are passed and Hampton is placed into voluntary liquidation.
28 May 1998Litigation against Hampton is commenced.
14 October 1998           KLV is joined as a party to the litigation.
15 October 1998           Plaintiffs apply to SA Supreme Court for injunction to restrain liquidator from making distribution. Application refused by Master Burley on 21 October 1998 and appeal from Master Burley’s decision dismissed by Millhouse J on 3 November 1998.
11 November 1998        Liquidator makes his distribution. Cheques sent to plaintiffs.
From the time of the sale of Areas to the time of the winding up of Hampton the corporate structure of the Hampton Group was as illustrated in Appendix B.
The Evidence of a Plan
The First Attempt
By letter of 17 May 1991 sent to all shareholders of Hampton, KLV offered to buy each share in Hampton for $1.52. Accompanying the letter was a report by Messrs James Askew Appleyard, Resource Assessment and Management Consultants, expressing the view that the offer was fair and reasonable. KLV’s letter indicated that it was anticipated that in due course KLV would be in a position to compulsorily acquire any outstanding shares.
By way of explanation for that event the plaintiffs pointed to a “Discussion Paper” under the name of PMJ Dennis, then the General Manager, Finance, KLV, which was dated 4 March 1991. Mr Dennis recommended that such an offer be made. Under the heading “The Problem” the author observed that there was no point in Hampton continuing as a public company when less than 1% of it was owned by shareholders outside the GMK Group. Disadvantages including the inability to relieve tax losses within the Group, and the need to act in the interests of all shareholders were highlighted.
Many of the minority shareholders accepted the offer. KLV then moved to compulsorily acquire the outstanding shares. Some shareholders, including the plaintiffs, took proceedings in the Federal Court objecting to the acquisition, but the matter was resolved, the objectors retaining their shares.
The Failed Plan 1994-1995
The plaintiffs pointed to a number of documents leading up to the recommendation to the GMK Board in June 1995 to make an offer to the minority shareholders of Hampton, as demonstrating a continuing movement towards addressing some of the ongoing deleterious effects of the presence of a small number of independent shareholders on the share register. In addition they argued that the estimates within these documents of the benefits which would accrue to the Group, absent the minorities, provided a measure of the true value of the minority shares.
A document which incorporates a file management reference containing the date 29 June 1994 and the name “Laurencis” (presumably the document of a man by that name who was employed within the NP Group) compared the tax implications of recognising and not recognising Hampton Group interest for tax purposes. All that can be drawn from it is, I think, a concern within the NP Group, at some level, about that issue.
A letter of advice dated 29 July 1994 from Messrs Arthur Andersen to Mr Issakov, a director of both Hampton and Areas, discussed the tax and stamp duty implications of the “potential” liquidation of Hampton.
The plaintiffs then relied on an undated document of uncertain authorship, but which plainly was raised after the Arthur Andersen advice of 29 July 1994 headed “Hampton Australia Limited”, but with no addressee. It discussed the desirability of declaring a dividend from Areas to Hampton to reduce capital gains tax and the undeclared interest of $165,000 owing to Hampton from related companies which was, it said, always intended to be forgiven once the minority interests were eliminated and before Hampton’s liquidation.
Then there was a letter of advice by a tax adviser to the Group, Mr Corletto, in December 1994 which discussed the utility of a capital reduction of Hampton to eliminate the minorities, as compared with a liquidation.
In the first half of 1995 a lengthy document of unknown authorship entitled “Hampton Australia Limited Elimination of Minorities” was generated. It referred, among other things, to a number of options “currently available” to solve the problem of having minority shareholders in Hampton. It referred to an amount of $17m in income owing to Areas which had not yet been declared, and a concern that the Australian Tax Office might assess it at any time. The paper also discussed the possibility of paying to Hampton a premium on account of the tax benefits KLV would achieve if Areas were sold to KLV by Hampton. Reference was made to a recent case concerning valuation of minority interests. That could have been Melcann Ltd v Super John Pty Ltd (1995) 13 ACLC 92.
The paper then sketched the elimination of the minority interests in three different ways and purported to place a value on each minority share, depending on the method utilised. The values ranged from $8.04 to $28.65. The plaintiffs claim these valuations have validity. This paper seems to be very much in draft format.
In a further advice addressed to Mr Apted of Normandy Poseidon dated 7 April 1995 Mr Corletto suggested that the Jubilee Mine could be sold by Areas to a new subsidiary of Hampton and then Areas could be sold to KLV, leaving the way clear to liquidate Hampton.
What the plaintiffs put as the final version of this earlier plan was a memorandum dated 30 May 1995 sent to the general counsel of Normandy by Mr Laurensis. It compared the cost of doing nothing with the cost of the various means of eliminating the minorities.
On 13 June 1995 a paper dealing with the minority shareholders went to the GMK Board. The object of the paper was to recommend a strategy to resolve the “problem of the minority shareholders” in Hampton. It set out various solutions and rated them in terms of cost and chance of success. They included the liquidation of Hampton or Areas, a selective capital reduction and the sale of the Jubilee Mine. The recommendation to the Board was to offer to buy the minority shares at not more than $2.03 each, that amount being made up of the market value together with an “additional cost” of 27 cents.
The Board did not act on that recommendation.
In fact there is no evidence that following that meeting any of the avenues canvassed were pursued. The plaintiffs referred to the ensuing year or so as a “lull in activity”.
The Second Attempt
On 1 May 1996 a Heads of Agreement document was entered into for the sale of the Jubilee Mine to Copperfield Gold NL, later New Hampton Goldfields NL. Settlement occurred on 12 September 1996.
On 7 May 1996 Arthur Andersen (Mr Corletto) provided advice, expressed to be in draft form, to Normandy Mining Limited on structuring the sale of the Jubilee Mine within the context of a restructuring of the Hampton Group. It envisaged:
Step 1 -transfer of the remaining Jubilee assets to a new company, referred to as “Newco”;
Step 3 -payment of a special dividend from Hampton to Areas;
Step 4 -sale of Areas to KLV on arms length terms;
Step 5 -(optional) – liquidation of Hampton.
It was also recommended that Areas be liquidated.
In a document entitled “Hampton Arm Restructure” – a document said by the plaintiffs to be the final version of the Plan – which was undated, but postdated 24 September 1996 as it included cut and pasted parts of an Arthur Andersen letter of advice of that date – an expanded number of steps were set out. They included:
Step 1 -incorporate a new Hampton subsidiary to hold all the remaining mining assets and to enter into a joint venture with New Hampton. (The new company in fact became HJPL);
Step 2 -sale of the shares of Areas and KLV in Jubilee Minerals Pty Ltd to New Hampton;
Steps 3, 4 and 4A – related to the assignment and leasing of Jubilee Mine locations and other locations;
Step 5 -Areas to sell Jubilee assets to Copperfield Gold NL;
Step 7 -HJPL to enter joint venture with Copperfield Gold NL;
Steps 8 and 9 – concerned dealings with the consideration received from Copperfield Gold NL;
Step 10 -payment of dividend from Areas to Hampton, anticipated to be $50m;
Step 11 -Hampton to sell Areas to KLV; then the interest owed to Areas to be reversed;
Step 12 -liquidation of Hampton;
Step 13 -liquidation or deregistration of Areas.

Apart from step 13 which did not take place, the events outlined essentially occurred.
On 23 August 1996 Deloittes provided a report, for the information of the Hampton shareholders, as to the sale of the Jubilee Mine. That report contained the following passage:
In our opinion the consideration for the sale is not fair, because the independent value of the Jubilee Operations exceeds the value of the negotiated sale price.
The reasonableness of the offer has regard to issues other than price and the matters with respect to that transaction are set out in paragraph 36. It is significant that the sale is at arms length and alternative offers were considered by Hampton.
In our opinion having regard to the issues other than price, the transaction is reasonable.
In an explanatory memorandum accompanying the transmission of this report to its shareholders, Hampton indicated that it did not accept the Deloittes opinion that the sale was “not fair”. There was no complaint in the pleadings about the terms of the sale, as opposed to the fact of it and the motivation for it. Although counsel for the plaintiff was inclined to question the sale price and the extent of, and accuracy of, information given to shareholders in respect of the sale, I do not consider that these matters are put in issue by the pleadings and I propose to take the Deloittes report at face value.
Nor was the payment of a $50m dividend by Areas to Hampton prior to its sale a matter of complaint in the Statement of Claim. Neither was the fact of the sale of Areas to KLV. The relevance of these events to the case as pleaded was that they were said to be steps in accordance with the Plan towards the goal of liquidation of Hampton. It could not be suggested that either process resulted in any diminution of the value of Hampton. The dividend payment was part of what was referred to as a “round-robin” transaction. Immediately prior to it, KLV owed Areas about $94.6m. It advanced $50m to Areas. Areas paid a dividend in that amount to Hampton. It was paid out of retained profits. Hampton then loaned the same amount to KLV. Thus instead of owing that amount to Areas, KLV now owed it to Hampton. I find that the interest on the loan was charged by Hampton and accounted for up to and including the time of its liquidation, and to the point of distribution. In addition the loan to KLV was recovered at that time.
As for the sale of Areas, again, as mentioned, there was no challenge in the Statement of Claim to its propriety. Prior to the sale the question of compliance with s 243N of the Corporations Law was examined. Section 243N(1) relevantly provided:
A public company … may give a financial benefit to a related party of the public company if it does so on terms and conditions no more favourable to the related party than those on which it is reasonable to expect that the company or entity, as the case may be, would give the benefit directly if dealing with the related party at arms length in the same circumstances.
A report by Messrs Grant Samuel was commissioned on that issue. The opinion furnished was that this was a complying transaction under the section. Again, I do not consider that this issue is squarely raised by the pleadings and therefore it is inappropriate to attempt to go behind the opinion expressed by Messrs Grant Samuel.
The relevance of the events before the September 1996 sale of the Jubilee Mine
As seen, the plaintiffs suggested that throughout the period 1991 to 1997 the aim of KLV and the NP Group generally was to eliminate the minority shareholdings in Hampton. It put the Plan as the embodiment of one continuing, though developing, strategy.
KLV argued against such a view. It submitted that the sale in 1996 of the poorly performing Jubilee Mine and associated assets, which were Hampton’s main business undertaking, so changed the landscape that reference to earlier events and strategies became pointless. On that basis the earlier evidence was objected to and was taken subject to that objection.
I consider that the earlier evidence does have a degree of relevance but that it is marginal. It seems to me that once the mine was sold Hampton’s role within the NP Group altered markedly. Its role within the Group was now extremely limited. The arguments for simplification of the group structure became compelling. But even on a stand alone basis its nature was now very different. In those circumstances even though I am prepared to admit the evidence of events prior to the Jubilee Mine sale, ultimately I am not persuaded that the evidence assists the plaintiffs in the way put forward. I am not satisfied that the sequence of events from 1991 to liquidation occurred pursuant to a grand plan. Many of the documents used to prove such a scheme are not demonstrated to be more than efforts at “brainstorming” by officers without authority to take the steps contemplated.
As to the sequence of events after the Jubilee mine sale, they show only a determination by KLV to move towards a winding up of Hampton and a hope to persuade the liquidator that a distribution along the lines of that which took place should follow. There is nothing inherently reprehensible in such conduct.
Statement of Claim as it relates to Hampton and KLV
Reproduced are parts of those paragraphs of the Statement of Claim which encapsulate the allegations of minority oppression.
17.    Hampton, by reason of the matters referred to in paragraphs 24 to 44 [the sale of the Jubilee Mine and the second attempt], 45A to 46 and 48 [reproduced below], and KLV by reason of the matters referred to in paragraphs 18 to 23 [the first attempt] and 28 to 48 [the second attempt] have engaged in conduct oppressive to the minority shareholders of Hampton and contrary to … Sections 232-235 of the Corporations Act …
…
45.    KLV’s purpose in voting in favour of the resolutions was (inter alia) to eliminate and expropriate any interest the plaintiffs and other minority shareholders had in Hampton, its property and assets and was not in the best interests of the members of Hampton as a whole.
(a)…
(b)…
45A The plaintiffs say that the voluntary liquidation of Hampton was planned by Hampton & KLV and the other companies within the Normandy group of companies to restructure the Normandy group of companies so that:
-the minority shareholdings in Hampton would be eliminated and expropriated;
-KLV would acquire 100% ownership of the shares in HJPL;
-the Normandy group of companies could obtain the benefits referred to in paragraph 45A.1 (“the Plan”).
[45A.1 to 45E detailed the plaintiffs’ claims as to the special benefits to be realised by means of the Plan, further details of the Plan, its implementation and KLV’s and Hampton’s dealings with the liquidator.]
46.    The resolutions operated unfairly and oppressively on the interests of the plaintiffs and other minority shareholders for the reasons that:
46.1.the plaintiffs suffered the losses referred to in paragraph 16 above [loss of future dividends and other benefits and loss of value on basis of continued operation]; and
46.2the fair value of the plaintiffs’ shareholdings in Hampton (as pleaded in paragraph 49 below) has not been determined.
47.    By reason of the matters pleaded in paragraphs 8 to 14 above [contractual and equitable rights as shareholders], and paragraphs 29 to 46 [the sequence of events leading to the resolution] above KLV, as the majority shareholder, had a duty to disclose to the company Hampton and other minority shareholders all relevant information as to why it considered it was appropriate for the company to be voluntarily wound up.
48.    Further, by reason of the matters referred to in paragraphs 28 to 47 inclusive, the omission to provide any explanation or information by Hampton, its directors and KLV and the placing into voluntary liquidation of Hampton:
48.1.constituted an equitable fraud on the minority shareholders of Hampton by Hampton, its directors and KLV;
48.2constituted conduct in the affairs of Hampton by or on behalf of Hampton, its directors and KLV which was oppressive or unfairly prejudicial or unfairly discriminatory against the plaintiffs and contrary to the interests of the members of Hampton as a whole within the meaning of Section 232 of the Corporations Act;
48.3was intended to avoid the disclosure requirements relating to the acquisition of shares pursuant to section 414 of the Corporations Law.
The causes of action
Thus the Statement of Claim appears to assert two causes of action, being equitable fraud on the minority shareholders of Hampton, as well as oppression of the minority shareholders. As seen, most of the allegations are levelled against both the first and second defendants. It seems to me that in the circumstances of this case if the claim is found to fail as against the second defendant, then it necessarily fails too against the first defendant. It is questionable whether, upon analysis, the former adds anything to the latter. Certainly there is a good deal of overlap in the context of this matter.
Before turning to equitable fraud I make an observation about an aspect of the terminology employed in these critical sections of the Statement of Claim.
In paragraphs 45 and 45A the plaintiffs refer to KLV’s purpose in voting for the resolution as being to “eliminate and expropriate any interest the plaintiffs … had in Hampton, its property and assets.” The clear implication is that such a purpose would be wrongful. I agree with the submissions of KLV that the use of these verbs is inappropriate. In fact the corporations legislation has always provided a number of mechanisms for the “elimination” of minority parcels in corporations. The Corporations Law (as it was in 1997) provided for the following such methods:
-pursuant to s 701 after a takeover offer;
-by a selective reduction of capital pursuant to s 195;
-by a selective buy back of shares pursuant to ss 206C-206E;
-by a scheme of arrangement pursuant to ss 411-413;
-by a compulsory acquisition following a scheme or contract to which s 414 applies.
The Corporations Act (as presently applies) provides for the elimination of minorities by the following methods:
-pursuant to s 661A after a takeover offer;
-pursuant to s 664A by a holder of 90% of the voting power of a class of shares;
-by selective reduction of capital pursuant to Part 2J.1;
-by a selective buy back of shares pursuant to Part 2J.1;
-by a scheme of arrangement pursuant to ss 411-413;
-by a compulsory acquisition following a scheme or contract to which s 414 applies.
In my view there is nothing intrinsically inappropriate or unlawful in a majority shareholder in a public company, particularly one which is no longer listed, wishing to disassociate itself from a minority shareholder. Furthermore, where a company is wound up, the necessary result is that all shareholders are eliminated. Nothing is expropriated. To that extent the terms “elimination” and “expropriation” are inappropriate when sought to be applied to the resolution of 5 December 1997 and its consequences.
Equitable Fraud
By the use of the expression “equitable fraud” I take the plaintiffs to be invoking the principle of equity requiring that power vested in a person to deal with property not his own be exercised for a purpose within the scope of the instrument creating the power. Were it not so exercised it would be restrained as being “fraud on a power” or “abuse of a power”. (See Gambotto & Anor v WCP Ltd & Anor (1994-95) 182 CLR 432 per McHugh J at 451.)
Mr Angyal for the plaintiffs contended that the powers of a shareholder to vote in favour of a resolution to wind up a company are hedged with equitable obligations including:
(a)a duty to disclose to other shareholders all relevant information as to why it is sought to wind up the company,
(b)a duty to use voting power bona fide and for the benefit of the company as a whole,
(c)not to use the voting power for the purpose of oppressing a minority.
Mr Angyal placed particular reliance on Ngurli Limited & Anor v McCann & Anor (1953) 90 CLR 425 for the proposition that powers conferred on a shareholder by statute or articles of association can be abused, even where there is literal compliance with their terms. That case concerned a challenge to the allotment of shares, at par value, by the directors of each of the defendant companies. The allotment was not made on a pro rata basis. In the case of the plaintiffs it had the effect of diluting both the value and voting power of the shares they held in one of the companies. The plaintiffs claimed that the allotments were not made in good faith, nor in the best interests of the companies and were made with the fraudulent intent of advantaging the “governing” director and disadvantaging the other shareholders. The High Court dismissed the appeal against the South Australian Full Court’s decision setting aside the allotments and rectifying the share registers.
In the judgment of the Court the following observations were made (at 438):
But the powers conferred on shareholders in general meeting and on directors by the articles of association of companies can be exceeded although there is a literal compliance with their terms. These powers must not be used for an ulterior purpose. … Voting powers conferred on shareholders and powers conferred on directors by the articles of association of companies must be used bona fide for the benefit of the company as a whole.
The Court held that even in general meetings there is a limit to which shareholders may use their votes for their own benefit. It said at 439:
Nor can the majority of shareholders exercise their voting power in general meeting so as to commit a fraud on the minority. They must not exercise their vote so as to appropriate to themselves or some of themselves property, advantages or rights which belong to the company.
and at 447:
… a shareholder is not a trustee of his vote and can use it to advance his own interests at a general meeting. But even in general meeting a majority of shareholders cannot exercise their votes for the purpose of appropriating to themselves property or advantages which belong to the company for that would be for the majority to oppress the minority.
Mr Angyal argued that the effect of the liquidation of Hampton was to “transfer” all the assets of Hampton, bar the cash, to KLV in a way which was comparable to the actions of the governing director in Ngurli’s case.
The plaintiffs also relied upon statements of principle found in Peters’ American Delicacy Co Ltd v Heath & Ors (1938-39) 61 CLR 457. In that case the share capital of the company comprised a large number of fully paid shares and a smaller number of partly paid shares. The company held an extraordinary general meeting to vote on a proposed alteration to its articles of association to provide that dividends should be in future distributed in proportion to the amount of capital paid up on the shares, and further that bonus shares should similarly be distributed in accordance with the paid up value of shares. The resolutions were carried. The case was brought by the persons who held partly paid shares, invoking the doctrine of minority oppression. They sought a declaration that the alteration to the articles was not validly passed and an injunction restraining any action upon those resolutions. All members of the High Court agreed that the alterations to the articles should be upheld, but three separate judgments were published. In his judgment, Latham CJ set out some of the relevant principles. He observed that the fact that an alteration to the articles of association may prejudice or diminish the rights of shareholders, or some of them, does not, of itself, undermine the validity of the alteration. It is, however, necessary that the power be exercised in a bona fide manner and for the benefit of the company as a whole (480‑481). However, in some cases such a criterion would be incapable of resolving an issue and that might be so where the question was as to the relative rights of different classes of shareholders (481). A shareholder is entitled to exercise his vote in his own interests, but the power of shareholders to effect alterations to the articles of association is limited by the rule that the power must not be exercised fraudulently or for the purpose of oppressing a minority (482).
Counsel for the plaintiffs placed particular reliance upon a passage in the judgment of Justice Rich (495):
Where the very problem which arises contains as inherent in itself all the elements of a conflict of interests between classes of shareholders these authorities do not mean that the power of alteration is paralysed, they mean only that the purpose of bringing forward the resolution must not be simply the enrichment of the majority at the expense of the minority. The resolution in the present case was brought forward to solve a difficulty and make possible a capitalization. It can hardly be supposed that the only solution of such a difficulty which can be lawfully adopted is that which gives the minority an advantage at the expense of the majority.
Both the plaintiffs and second defendant relied on the judgment of Justice Dixon. A number of propositions were identified:
-the power to alter articles of association might readily be used for the aggrandisement of a majority at the expense of a minority (504);
-shareholders, unlike directors, occupy no fiduciary position and are under no fiduciary duties (504);
-since a power to alter articles of association necessarily contemplates alteration of the rights as between shareholders it is difficult to frame a test of validity in terms of impairment of rights;
-the authorities provide that an alteration or resolution is sound if its object is to advance the interests of the company as a whole; but that is a positive test, such that non-compliance will not necessarily vitiate an alteration;
-that test is inappropriate, even meaningless, where the subject matter involves a conflict of interests and advantages as between different classes of shareholders.
The plaintiffs also relied on the decision in Gambotto. In that case the company had passed a special resolution for the amendments of its articles of association to enable a shareholder who held 90% of the issued shares to compulsorily acquire the balance. The resolution was carried despite the fact that the majority shareholders, who between them held 99.7% of the shares, did not vote. It was passed on the vote of a minority shareholder who also represented two other minority shareholders. The appellants did not vote. The proposed purchase price had been the subject of a valuation which found it to be independent and fair. The price to be paid exceeded the net asset backing. The object of the proposed compulsory acquisition was to secure to the company considerable tax and administrative advantages which would accrue to it due to its position within a group of companies.
The High Court allowed the appeal, holding the relevant amendment to be invalid and ineffective on the basis that it was not made for a proper purpose. In their joint judgment, Mason CJ, Brennan, Deane and Dawson JJ rejected the “bona fide for the benefit of the company as a whole” test as being inappropriate for the circumstances which obtained. They categorised the case as one in which the purpose of the resolution was to confer upon the majority shareholders the power to compulsorily acquire the property of the minority, that power falling outside the contemplated objects of the power to amend the articles. Such an exercise of power would be valid if the relevant provisions of the company’s constitution allowed for it. Their Honours said at 445:
The inclusion of such a power in a company’s constitution at its incorporation is one thing. But it is another thing when a company’s constitution is sought to be amended by an alteration of articles of association so as to confer upon the majority power to expropriate the shares of a minority. Such a power could not be taken or exercised simply for the purpose of aggrandizing the majority. In our view, such a power can be taken only if (i) it is exercisable for a proper purpose and (ii) its exercise will not operate oppressively in relation to minority shareholders.

It was further held that advancement of the interests of the company as a legal and commercial entity was not a sufficient justification for the expropriation. An alteration to a company’s articles permitting expropriation had not only to be made for a proper purpose, but had also to be fair. The notion of fairness involved the requirement that all relevant information was disclosed as well as the requirement that the shares be valued independently. The Court drew short of deciding whether it was necessary that the majority shareholders refrain from voting.
In a separate, although concurring, judgment McHugh J also emphasised that an alteration of the articles enabling expropriation was at issue. His Honour observed that the power to alter articles of association might be found within those articles or might be afforded by statute. This observation was made (at 456):
In the absence of an article authorizing the expropriation of a member’s shares, members have a legitimate expectation that, unless some exceptional circumstance should arise, they will be able to retain their shares until they wish to sell or until the company is wound up. (emphasis added)
His Honour went on to express the view that even where an alteration to the articles is made for the purpose of expropriation it will not necessarily be oppressive, but to prevent it being so the expropriators would need to act fairly. Paying market value would go a long way to defend against (although would not be decisive as to) a claim of oppression.
It is noteworthy that these cases concern either amendment of articles of association or action taken by those in a position to control the company in general meeting to markedly alter the value or voting power of the minority’s shares. Such a power must not be exercised “for a purpose or with an intention beyond the scope of or not justified by the instrument creating the power”: Gambotto at 451 per McHugh J.
In his argument Mr Whitington QC sought to draw a distinction between a mere right – such as a right to vote for a winding up – and a power – such as to alter articles of association – which in turn has the capacity to create new rights and obligations. He submitted that the equitable doctrine of “fraud on a power” or “abuse of a power” had no work to do in respect of the exercise of a mere right.
Similarly Mr Wells QC, for Hampton, put that the entitlement of every company to wind itself up is a matter of right not power. He submitted that the word “power” connotes the ability or authority given to one to affect the property or rights of another. Where the entitlement is to terminate one’s existence, it is inappropriate to describe the action as an exercise of power.
The difficulty for the plaintiffs in relying on this line of cases as authority for a contention that there is a fetter upon the right a shareholder undoubtedly has to vote for a winding up is that they are so readily distinguishable on their facts; first because here no alteration of the Memorandum and Articles of Association was involved and further because the winding up process is not in any sense an expropriation, or analogous to one.
A comparable distinction was drawn in Heydon v NRMA Ltd (2001) 51 NSWLR 1. There, Malcolm and Ormiston A-JJA found that the Gambotto principle did not apply to the NRMA demutualisation because the demutualisation process could not be characterised as one involving the expropriation of the rights of NRMA members comparable to that which occurred in the Gambotto case. Malcolm AJA made the following observation at 64:
The effect of Gambotto was that the compulsory acquisition or expropriation by a majority of the shares of a minority, for the purpose of excluding the minority who voted against the proposal from participation in the future conduct of the affairs of the company would be prima facie invalid. This was clearly to be distinguished from a proposal to give all members a greater right of participation by an offer of shares in a company proposed to be listed on the Stock Exchange, converting whatever limited rights they had as members of Association into shares in the holding company of Association, on a basis which would ensure the continuance of their rights to receive services, to which would be added the tangible benefits of the assets controlled by Insurance also being brought within the corporate umbrella of Holdings, by virtue of Insurance being a wholly owned subsidiary.
I think these points of distinction apply to the case. There is no other legal basis which sustains the plaintiffs’ claim of equitable fraud. For these reasons I find that the plaintiffs’ case on equitable fraud fails. Specifically I find that KLV’s right to vote in favour of the winding up was unfettered, just as was Hampton’s entitlement, through its shareholders in general meeting, to wind itself up in accordance with the legislation. I consider that in the context of a winding up references to voting powers being exercised “for the benefit of the company as a whole” is meaningless.
Although raised under this heading of equitable fraud, it is convenient to deal with the suggestion of minority oppression within the statutory framework.
Minority Oppression
The legislation
The Statement of Claim invokes s 233 (and therefore s 232) of the Corporations Act. At the time the proceedings were instituted, the plaintiffs invoked s 260 of the Corporations Law. In 1998, s 260 was renumbered s 246AA (but with no change in the text) and in 2000, the section was again renumbered, this time as s 232 (and s 233) and it was amended in terms which are now reflected in s 232 and s 233 of the Corporations Act. The plaintiffs’ rights and liabilities arising under the Corporations Law are preserved by s 1400 of the Corporations Act and, at the commencement of the Corporations Act on 1 January 2002, the plaintiffs’ proceedings were converted by force of s 1383 of the Corporations Act into the equivalent proceedings brought in the Supreme Court exercising federal jurisdiction pursuant to ss 232-233 of the Corporations Act. Section 7(3) of the Corporations (Ancillary Provisions) Act 2001 (SA) terminated the pre-existing state proceedings at the time that the proceedings were converted to proceedings under the Corporations Act by the operation of s 1383.
The provisions are as follows:
232 The Court may make an order under section 233 if:
(a) the conduct of a company’s affairs; or
(b)an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d)contrary to the interests of the members as a whole; or
(c)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.
233(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)that the company be wound up;
(b)that the company’s existing constitution be modified or repealed;
(c)regulating the conduct of the company’s affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company’s share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company’s property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.
[Subsections (2) and (3) omitted]
The plaintiffs rely on the same factual material to make good their claim of minority oppression. It is, in the final analysis, the resolutions which are said to be oppressive.
The three limbs of oppressive conduct identified in s 232 conflate into one over-arching test of commercial unfairness, namely:
[W]hether objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair: Morgan v 45 Flers Avenue Pty Limited (1986) 10 ACLR 692 at 704 per Young J.
In the context of this case reasonable observers or shareholders could be substituted for directors.
This test has been consistently applied (see for example Coombes v Dynasty Pty Ltd (1994) 14 ACLR 60 at 99; (1995) 59 FCR 122 at 130; Jenkins v Enterprise Goldmines NL (1992) 6 ACSR 539 at 500) and is in conformity with the analysis of the High Court in Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459. In that case the decision of the NSW Rugby League to exclude a team (“Wests”) from the competition was under challenge, invoking the then s 320 of the Companies Code (NSW), which was in similar terms to s 232 of the Corporations Act. The articles permitted the Board of the League to determine how many and which teams would take part. The Board’s aim in utilising that power was to shorten the season and strengthen the competition. Wests argued that its exclusion was unfair, relying on Peters’ American Delicacy Co Ltd. The appeal failed. The majority, comprising Mason CJ, Wilson, Deane and Dawson JJ responded (at 467-468):
… no amount of sympathy for Wests can obscure the fact that the League was expressly constituted to promote the best interests of the sport and empowered to determine which clubs should be entitled to participate in competitions conducted by it. It was upon this basis that the clubs, including Wests, chose to incorporate. … Given the special expertise and experience of the Board, the bona fide and proper exercise of the power in pursuit of the purpose for which it was conferred and the caution which a court must exercise in determining an application under s 320 of the Code in order to avoid an unwarranted assumption of the responsibility for management of the company, the appellants faced a difficult task in seeking to prove that the decisions in question were unfairly prejudicial to Wests and therefore not in the overall interests of the members as a whole.
Brennan J agreed with the result in a separate judgment. He said (at 472):
Section 320 requires proof of oppression or proof of unfairness: proof of mere prejudice to or discrimination against a member is insufficient to attract the court’s jurisdiction to intervene. In the case of some discretionary powers, any prejudice to a member or any discrimination against him may be a badge of unfairness in the exercise of the power, but not when the discretionary power contemplates the effecting of prejudice or discrimination. It is not necessary now to decide whether “oppressive” carries in the context of s 320 the meaning which it carried in the context of the statutory precursors of s 320. At a minimum, oppression imports unfairness and that is the critical question in the present case.
The test must take account of whether the impugned conduct is that of a director on the one hand or a shareholder on the other, and the right or power which is being exercised. It is not oppressive for those in control of a company to insist upon the adoption of policies on matters of business on which there are legitimate differences of opinion: Re Broadcasting Station 2GB Pty Ltd [1964-5] NSWR 1648; John J Starr (Real Estate) Pty Ltd v Robert R Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63 at 66; Shirim Pty Ltd v Fesena Pty Limited [2002] NSWSC 10 (per Davies AJ at para 47).
The courts accept the traditional roles of directors and shareholders to manage and control their own companies, and consider the granting of relief under s 232 exceptional: New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86 at 101-102.
Accordingly a plaintiff must actually prove oppression before obtaining relief, and oppression is not normally established merely by showing that the minority shareholder is consistently outvoted: Bosnjak (No 1) (1998) 28 ACSR 688 at 740; see also John J Starr (Real Estate) Pty Ltd, and McWilliam v LJR McWilliam Estates Pty Ltd (1990) 20 NSWLR 703.
The oppression remedy is not a means by which a minority shareholder can force the purchase of his shares in a manner different from that prescribed in the company’s Memorandum and Articles of Association: McWilliam v LJR McWilliam Estates Pty Ltd; Re G Jeffery (Mens Store) Pty Ltd (1984) 9 ACLR 195.
In the case of a quasi-partnership company (as to which see Ebrahimi v Westbourne Galleries Pty Ltd [1973] AC 360 at 379), it is sometimes said that a minority shareholder may have a “reasonable expectation” of certain conduct: see, for example, Fexuto v Bosnjak (2001) 37 ACSR 672, at paras 415-422 per Priestly JA; but see Fitzgerald JA at paras 649-652.
In Fexuto v Bosnjak, Fitzgerald JA said in the context of a quasi-partnership company, at paras 650-651:
The issue seems to me always to remain whether, in all the circumstances including the conventional understanding on which the parties’ relationship was based, conduct engaged in was oppressive. That requires consideration of all circumstances, including the material conduct of all the parties, including the party alleging oppression.
It cannot be determined whether conduct is oppressive (or unfair) because it departs from a conventional understanding without an accurate perception of the conventional understanding from which the conduct is alleged to depart.
In this case, to the extent that it is relevant to speak of a “conventional understanding”, it is that contained in the Memorandum and Articles of Association of Hampton and the Corporations legislation. The provisions of the Memorandum and Articles of Association of Hampton by virtue of, inter alia, s 140 of the Corporations Act (and its precursors, e.g., s 180 of the Corporations Law) have effect as a contract between the company and each member and between a member and each other member, and operate to the effect that each person agrees to observe the terms of the constitution so far as they apply to that person.
Hampton is a public company and the plaintiffs acquired their shares at a time when it was listed on the Australian Stock Exchange. They did so pursuant to the provisions of the Memorandum and Articles of the company, which are unchanged. This is not a case of a quasi-partnership such as that identified in Ebrihimi in which the strict contractual rights of the shareholders are hedged with equitable obligations. In those cases the relationship and its terms are underpinned by an arrangement existing outside the Articles. In this case, the contract between the parties has full force and effect according to its strict terms.
Furthermore, the Corporations Act, s 491 (and its relevant precursor) confers certain rights upon the parties.
491(1) Subject to section 490, a company may be wound up voluntarily if the company so resolves by special resolution.
(2) A company must:
(a)within 7 days after the passing of a resolution for voluntary winding up, lodge a printed copy of the resolution; and
(b)within 21 days after the passing of the resolution, cause notice of the resolution to be published in the Gazette.
Those rights may be treated as incorporated into the contract between the parties or, alternatively, as conferred by statute (See Byrne v Australian Airways Ltd (1995) 185 CLR 410 at 420; see also Nicron Resources Ltd v Catto (1992) 8 ACSR 219 at 229-230). Whether the rights afforded by s 491 are seen as incorporated into the terms of the contract, or stand alongside it is, in this case, immaterial. Accordingly Mr Angyal’s attempt to align the utilisation of s 491 in this case with the alteration of the Articles in Gambotto, is in my view, not valid. That is so because the right to vote for a winding up was always a feature of the corporate relationship in issue. The source of the right is here of no consequence. Seen in this way it is impossible to see commercial unfairness in the decision to move for and vote for a winding up.
A majority shareholder, as much as a minority shareholder, has rights and interests which are entitled to protection, and it is legitimate for the majority shareholder to exert and enjoy them. “The Court is not the protector of underdogs exclusively”: Nicron Resources at 231.
Furthermore, a shareholder is not a fiduciary for other shareholders: Peters’ American Delicacy Co at 504 per Dixon J; also see Ngurli at 439. The general principle is that a shareholder can cast his vote at a general meeting with a view to his own advantage: Nicron Resources at 237.
There is no principle of law, at least not in the case of a public company in which the members join on an arm’s length basis, which requires the members to remain bound together by incorporation. As seen earlier, in 1997 the Corporations legislation provided, and now continues to provide, a number of means by which membership of a company and ownership of its shares can be brought to an end without the consent of all shareholders, including the process of liquidation and dissolution: Nicron Resources at 233-234 per Bryson J. Moreover, a company or its shareholders are not bound to pursue one option to disassociate ahead of any other legally available option to disassociate: Nicron Resources at 235.
Critically, s 491 of the Corporations Act (like its precursors) provides that “a company may be wound up voluntarily if the company so resolves by special resolution”. That is, it confers a right upon a shareholder to move and, if thought fit, to vote in favour of such a resolution.
Article 124(1) of Hampton’s Articles confers a further right upon shareholders to sanction the liquidator, in a winding up, effecting a division of the property of the company “in kind” or in specie. It provides:
If the company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the company and may for that purpose set such value as he considers fair upon any property to be so divided and may determine how the division is to be carried out as between the members or different members of classes.
Further, Hampton’s Memorandum of Association provides by clause 2(j)(xxiii) that one of the objects of Hampton is:
To distribute in specie assets of the Company properly distributed amongst its members.
Clause 4 provides that all shares shall participate equally in a winding up.
In light of the principles and rights identified above, it seems to me that the plaintiffs’ case of oppression fails at the first hurdle. There is no foundation for their claim. The passing of the resolutions could not be said to be oppressive because KLV was entitled to follow the course it did in moving for a voluntary winding up; the company in general meeting was entitled to determine to wind itself up and return its capital to its contributories.
The very nature of the winding up procedure and liquidation is such that s 232 cannot be applied to it. The resolution to wind up the company could not be characterised as “contrary to the interests of the members as a whole” or “oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members” of the company. The plaintiffs have not and could not demonstrate commercial unfairness in relation to the resolutions. The concept of winding up is not susceptible of being labelled “fair” or “unfair”. The exercise of the right to wind up the company does not involve the destruction of one interest to the advantage of another. Any desire of the minority to keep the company afloat is, no doubt, frustrated by the majority voting to wind up. But the rights attached to the shares of the minority are not discriminated against in any way. Rather, the legal consequences of the resolution to wind up apply, in like manner, to all shares and shareholders.

My reasoning to this point is based in part on the conclusion that voting to wind up a company is the exercise of a right rather than a power. However, even if it were otherwise, for the reasons given by me in relation to the plaintiffs’ claim based on alleged equitable fraud, the exercise of a “power” to vote for a resolution to wind up a company does not, on the facts as I have found them, constitute oppression or any other illegal act as alleged by the plaintiffs.
In terms of the liquidation and distribution processes, fairness is for the liquidator. The liquidator is an officer of the court and is bound to act according to the obligations imposed on him by law. Thus the legislation itself provides protection for all shareholders against unfairness in a liquidation. Therefore, contrary to the plaintiffs’ submission, there is no work for an extension of the Gambotto principle to do.
As seen, paragraph 48 of the Statement of Claim, as it relates to Hampton, focuses on the failure to provide explanations and information in relation to the steps leading to passage of the resolutions. Those steps included its prior knowledge of the likelihood of the company being wound up, the failure to make a recommendation as to how shareholders should vote on the resolutions, the failure of Hampton’s directors to explain KLV’s purposes in moving to a voluntary winding up and the failure to explain the basis of the valuation of Hampton’s assets.
In fact there was advice given to the shareholders of Hampton by the directors as far back as August 1996 in the context of the sale of the Jubilee mine that upon that sale alternatives for the future of the Hampton Group would be considered. Those alternatives were explicitly said to include a return of capital to shareholders. That possibility was again adverted to in the Directors’ Report forming part of Hampton’s accounts and statutory reports for the year ended 30 June 1997.
I do not consider that I am called upon to undertake an analysis of the sufficiency of the actions of the Hampton directors in advising shareholders of the relevant developments. The path of the directors was largely dictated by the obligations they had under statute and under the Articles of Association. Even if it were assumed that the quality and quantity of information provided to shareholders was inadequate – which assumption I do not make – it seems to me that that fact could not have affected the course of events, inasmuch as KLV overwhelmingly controlled the vote. In any event, such an inadequacy could not sustain allegations of equitable fraud or oppressive conduct. There was no misuse by Hampton of any power which it had. As earlier observed, the powers that both KLV and Hampton itself had both by statute and arising from the Articles of Association in my view were utilised for the very purpose for which they were provided.
Statement of Claim as it relates to the liquidator
As observed earlier, the essence of the claim against the liquidator is that the distributions he made were inappropriate and that he failed to have regard to alternative modes. The Statement of Claim makes reference to the important events leading up to the distribution and also to his state of knowledge of the hopes and expectations held within KLV and the NP Group that the distribution would ultimately occur in a particular way. But the essential allegations against the liquidator are found in the following paragraphs:
57.A On or about 9 November 1998 the Liquidator made the distributions to the shareholders referred to in paragraphs 51 and 52 hereof including a distribution to the plaintiffs in the amounts set out in paragraph 49.4 hereof.
58. The distributions were inappropriate because the independent valuations relied upon by the Liquidator failed to consider:-
58.1.the potential future value of Hampton’s shareholdings in HJPL including the assets held by HJPL in particular, the Head Lease; and
58.2the special value which the investments of HJPL have in the Normandy group of companies in particular, the Head Lease assigned to and held by HJPL; and
58.3the value of Hampton as an operating concern within the Normandy group of companies.
59. The Liquidator:-
59.1has not provided to the plaintiffs reasons why it was not commercially practicable to proceed with any other form of asset distribution;
59.2did not put forward for consideration by the plaintiffs any alternative proposal as to the distribution of the assets; and
59.3did not provide various documents relating to the independent valuations upon which the liquidation is proceeding until the commencement of the within action; and
59.4has not demonstrated that the distribution represents a fair and equitable distribution between the shareholders of the value of Hampton itself;
59.5in making the distribution referred to in paragraphs 51 and 52, failed to have regard to other methods of distribution.
60. By virtue of the matters pleaded above in paragraphs 49 to 59 the plaintiffs are persons aggrieved within the meaning of Section 1321 of the Corporations Act (formerly the Corporations Law).
A summary of the major events leading to Mr Carter’s appointment and then to the distribution follows. These are not subject to contest. The plaintiffs relied upon these events as explaining why Mr Carter closed his mind to alternative methods of distribution.
Bruce Carter was at all material times a partner in the firm Ferrier Hodgson, chartered accountants. Martin Lewis was also a partner.
On 5 May 1997 Mr Lewis attended a meeting at the offices of Normandy Poseidon to discuss the planned members’ voluntary winding up of Hampton and the question of whether Ferrier Hodgson would tender for the appointment as liquidator. It was made clear to Mr Lewis that the intention was that upon liquidation the minority shareholders were to receive only cash. That hope or expectation was later communicated by Mr Lewis to Mr Carter.
On 9 May 1997 Mr Carter submitted a tender for the job. On 15 September 1997 Mr Issakov, a director of Hampton, wrote to Mr Carter advising of the terms of the proposed resolutions. On 22 October 1997 Mr Carter was further briefed by Mr Corletto (Arthur Andersons) and others.
By letter of 14 November 1997, Hampton invited Mr Carter to advise shareholders of the manner in which he would, if appointed, effect the distribution. He did so in a circular of the same date. He indicated that he proposed a distribution in accordance with KLV’s wishes.
On 5 December 1997 in Extraordinary General Meeting the shareholders voted in favour of the resolution. Its terms were:
1. That the company wind up voluntarily.
2(a) That Mr Bruce Carter of Ferrier Hodgson be appointed as the Liquidator of the Company (or such other person as the Board may approve) for the purpose of winding up the affairs and distributing the property of the Company; and
2(b) That the remuneration to be paid to the Liquidator be $10,000 and his out of pocket expenses.
3.     That the liquidator be and is hereby authorised pursuant to Article 124 of the Company’s Articles of Association and directed (when and so soon as the debts and liabilities of the Company shall have been paid and satisfied or duly provided for) to divide the property of the Company amongst the members in specie in proportion to their respective rights and interests in the company in the following manner:
(a)     all members, other than Kalgoorlie Lake View Pty Ltd, are only to receive a distribution of the cash assets of the company; and
(b)    Kalgoorlie Lake View Pty Ltd is to receive:
(i)all the shares held by the Company in Hampton Jubilee Pty Ltd and all the Company’s receivables; and
(ii)such amount of cash as is necessary having regard to its proportional rights and interests in the company.
Resolution 3 was authorised by Article 124(1) of Hampton’s Memorandum of Association. For convenience I set out that Article again:
124.(1) If the Company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the Company and may for that purpose set such value as he considers fair upon any property to be so divided and may determine how the division is to be carried out as between members or different classes of members.
The term “special resolution” was defined by reference to the then Western Australian Companies Code, s 5, which in turn referred to s 248(1), being:
248(1) A resolution is a special resolution of a company if –
(a)it is passed at a meeting of the company, being a meeting of which not less than 21 days’ written notice specifying the intention to propose the resolution as a special resolution has been duly given; and
(b)it is passed at a meeting referred to in paragraph (a) by a majority of not less than three-quarters of such members of the company as, being entitled to do so, vote in person or, where proxies are allowed, by proxy, at that meeting.
Counsel for the plaintiff put that to the extent that Resolution 3 purported to direct the liquidator in how to distribute the property, it was bad. He did not suggest a term which should instead have been used. Whether that is so, turns on the meaning of the phrase “with the sanction of a special resolution” in Article 124(1).
The Shorter Oxford English Dictionary (CT Onions (ed), 3^rd Edition, 1973, Clarendon Press, Oxford) gives the following meanings for “sanction”:
1. To ratify or confirm by sanction or solemn enactment; to authorize; to countenance.
2. To enforce (a law, etc.) by attaching a penalty to transgression.
In my view the wording of the resolution was apt to indicate the course preferred by the company in Extraordinary General Meeting and it amounted to an authorisation for the course nominated. In any event the liquidator took the view – correctly in my opinion – that the wording of the resolution, viewed against the article, left him a discretion to proceed in the way resolved upon. That is, because of the resolution he could proceed in that manner; however it was a matter for his discretion whether he did so. Except in one particular which is not material, the distribution eventually made was in accordance with Resolution 3.
Statutory framework
Part 2D.1 of the Corporations Act sets out the manner in which the powers and duties of officers of corporations must be exercised. Those officers include liquidators. The obligations imposed include the duty to act with care and diligence and to act in good faith and for proper purposes.
Division 4 of Part 5.5 of the Corporations Act deals generally with the voluntary winding up of companies.
The central aim of the procedure is identified in s 501. It relevantly provides:
501. … the property of a company … must, on its winding up, be applied in satisfaction of its liabilities equally and … must … be distributed among the members according to their rights and interests.
The powers and duties of the liquidator are set out in s 506. Section 506(1)(b) imports to the liquidator the powers conferred by the Act on a liquidator in a winding up in insolvency or by the court. Relevantly, he must pay the debts of the company and adjust the rights of the contributories among themselves. Section 479, which deals with the powers of a court appointed liquidator, and therefore applies, requires him, inter alia, to have regard to directions given in a resolution of contributories at any general meeting. It further requires him to use his own discretion in the management of affairs and property of the company and the distribution of its property.
It is noteworthy that upon a literal reading, the complaints against the liquidator do not raise allegations of lack of good faith or even lack of independence. Mr Angyal argued that because the Statement of Claim set out the history of the appointment – including what he submitted were certain pressures brought to bear on Mr Carter to proceed in the way desired by KLV – and because of the suggested failure to canvass other methods of distribution or explain why other methods were not practicable and because the distribution took no account of so-called special benefits, a lack of independence could be implied. Mr Wells QC, for the liquidator, suggested I should be slow to entertain such a serious allegation where it was not specifically pleaded.
If lack of independence was claimed to be the necessary implication of the sequence of events outlined in the Statement of Claim, then I think it should have been explicitly alleged. But the events are readily susceptible of other analysis. It seemed to me that the contest between counsel as to the pleadings tended to highlight the difficulty with the plaintiffs’ case against the liquidator. As Mr Angyal frankly admitted during an interchange with me, an hypothetical liquidator, acting in good faith and entirely independently of any pressure, could reasonably have arrived at the very same distribution as did Mr Carter. As will be seen, the result of the contest is unimportant, as the plaintiffs have failed to persuade me that any of their criticisms of Mr Carter’s conduct as liquidator are justified and further, have failed to demonstrate that the distribution resulted in any prejudice to them.
The Statement of Claim invokes s 1321 of the Corporations Act. The section provides as follows:
1321 A person aggrieved by any act, omission or decision of:
(a)a person administering a compromise, arrangement or scheme referred to in Part 5.1; or
(b)a receiver, or a receiver and manager, of property of a corporation; or
(c)an administrator of a company; or
(ca)an administrator of a deed of company arrangement executed by a company; or
(d)a liquidator or provisional liquidator of a company;
may appeal to the Court in respect of the act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit.
Accordingly the plaintiffs’ case against the liquidator is in the nature of an appeal. I have treated it as an appeal de novo. (See Tanning Research Laboratories Incorporated v O’Brien (1989) 169 CLR 332.)
I do not propose to set out in detail the evidence Mr Carter gave. It is sufficient to deal with it fairly briefly. Mr Carter is an experienced chartered accountant and has experience in the role of liquidator. Upon his appointment, Mr Carter said he was aware of the possibility that the liquidation process would at some stage be challenged by the minority shareholders, if not the majority shareholders. In due course he took his own legal advice about the mode of distribution.
The steps Mr Carter took after appointment were unexceptional. He obtained books, records and information about Hampton from within the NP Group and ascertained what were Hampton’s assets and liabilities. He reviewed Hampton’s balance sheets and those of HJPL. Hampton’s accounts included cash (in excess of than $5m), a receivable from KLV (in excess of $50m), a receivable from HJPL (after provision worth about $7m), and the two shares in HJPL. There were also some items of real estate. Hampton’s liabilities were an intercompany loan of about $2,000.
Mr Carter found that HJPL was hopelessly insolvent. He arranged for valuations of HJPL. He sought proposals from shareholders as to the names of suitable valuers. The first plaintiff suggested a particular valuer, who was one of the two ultimately chosen. The highest valuation of the HJPL assets was used. That was a selection which benefited the Hampton shareholders.
Hampton itself was not valued, as in Mr Carter’s view it was neither necessary nor part of his duty to do so. Nor did he take account of any suggested “special benefits” which the plaintiff alleged Hampton enjoyed. Those were said to be the sharing of tax losses between companies in the NP Group - which could occur only if Hampton was wholly owned within the Group - the ability to forgive interest accruing on intercompany loans - thereby avoiding a taxation liability - and the saving of administration expenses in not having to keep minority shareholders advised or deal with them.
Mr Carter said that having regard to alleged special benefits was no part of his duty. In my view he was correct. It is plain that upon liquidation the asserted special benefits would disappear in any event. It is not clear anyway on the basis of s 501 of the Corporations Act how they could ever be brought to account in the context of a liquidation. It would be quite illogical to attempt to do so. Indeed to do so would result in an unequal distribution. The case of Melcann Ltd v Super John Pty Ltd relied on by the plaintiff in this context is readily distinguishable in that there what was at issue was a proposed selective reduction of capital under provisions of the Corporations Law, which necessitated a valuation of the shares to be cancelled. It was held that in those circumstances - comparable to an appropriation - the special value of the shares to the majority shareholders should be reflected in the price to be paid by them. As I observed, in my view, there is no available analogy.
Mr Carter said that in terms of distribution of Hampton’s accounts, three options presented themselves. The first was a distribution as set out in Resolution 3, the shares in HJPL going to KLV. The second was to distribute the assets in specie rateably among the shareholders. In this regard Mr Carter said he considered and rejected both the possibility of splitting the two shares in HJPL among all Hampton shareholders and the possibility of splitting the HJPL receivable among all the shareholders. The third was to put HJPL into liquidation and await the sale of its assets, thereby bringing into Hampton such cash as was available to meet HJPL’s debt to Hampton. In August 1998 Mr Carter decided to make the distribution ultimately made, although throughout it had seemed to him that it was not practicable to determine upon a different distribution.
Distribution
The actual distribution was made on the basis of the following:
- the debt due from KLV was called in;
-the higher valuation of HJPL was accepted. The value of the debt due to Hampton was then written down to the value of HJPL’s assets;
-the land and buildings belonging to Hampton was valued;
-the cash at bankers and accrued interest were brought to account;
-the two HJPL shares, although worthless, were attributed with their face value of $2.
From these figures a value per share was arrived at. The minority shareholders were paid out at that rate. Then the HJPL receivable, the land and buildings and the two HJPL shares were distributed to KLV, together with the remaining cash.
Mr Carter said that throughout the process of calling in the assets of Hampton and deciding on the distribution, he advised all shareholders of his progress, by way of sending circulars to them. He kept them advised of progress in the obtaining of valuations of HJPL and distributed copies of the valuations. He foreshadowed in at least two such circulars (dated 16 April 1998 and 22 September 1998) the manner of the proposed distribution. He expressed the view in the latter circular that it was “not commercially practicable to distribute Hampton’s assets in specie to the minority shareholders.” He received no correspondence arguing for a different distribution.
In my view not only was the manner of distribution determined upon by Mr Carter open to him, it was plainly the most practicable and sensible way to proceed. He was entitled to take the view - a view with which I agree - that no reasonable shareholder attending to his or her legitimate economic interests would require a division of the shares in HJPL (an insolvent company) and a rateable distribution of them.

Accordingly the plaintiffs have failed to make good their complaints in respect of the liquidator’s conduct of the liquidation. I accept the evidence given by Mr Carter as to the role he played in the liquidation. Specifically I find that he performed his role diligently, with due care and he brought to bear an adequate level of expertise and independence of mind. I accept his evidence that he was aware of the various options as to the distribution which were available to him. As I have said, it seems to me that distributing the two HJPL shares other than to KLV would have been commercially impracticable. I find that there was no obligation to give advice to the minority shareholders of the progress in the liquidation beyond that advice which he in fact gave. As I have already observed, in my view Mr Carter was correct in his opinion that the concept of special benefits said to attach to the acquisition of the minority shares is a consideration irrelevant to a liquidation. I consider that no other complaint about the way in which the liquidation was effected nor the way in which the assets of Hampton were valued is made out. Accordingly the plaintiffs’ appeal pursuant to s 1321 of the Corporations Act must fail.
It is convenient at this point to say something about the witness called by the plaintiffs, Mr Christopher Ryan. Mr Ryan described himself as a merchant banker who has qualifications in business administration and economics and who for a number of years has been the principal of Westchester Financial Services Pty Ltd. He provided three reports to the plaintiffs which were admitted into evidence and which purported to offer expert opinions on the valuation of the assets of Hampton during the period of liquidation and the appropriateness of the distribution effected by Mr Carter and the basis of that distribution.
Mr Ryan’s views as to these matters can be dealt with quite shortly. His opinions are all based on a particular view of the law, which view I have already rejected. That is, Mr Ryan’s opinions assumed that a liquidation was for certain purposes comparable to a selective reduction of capital or compulsory acquisition and that accordingly the special value of the shares to the majority shareholders should be calculated and apportioned appropriately. Since the plaintiffs have failed to satisfy me that such an approach can or should be imported into the context of a liquidation, Mr Ryan’s evidence becomes irrelevant. In those circumstances there is no warrant to discuss some of the more specific difficulties which would accompany acceptance of any of his evidence.
Status of the first plaintiff
The first plaintiffs face another difficulty in their suit. The first paragraph of the Statement of Claim is as follows:
1. Prior to her death, Joan Isobel Stewart Catto (“the deceased”) was the beneficial owner of 500 fully paid ordinary shares in the first defendant Hampton Australia Limited (“Hampton”). Robert John Charles Catto (“Mr Catto”) and Mary Graham Neild (“the executors”) are the executors of the estate of the deceased and in that capacity sue in the name of and for the benefit of the estate of the deceased.
Each defendant in its defence admitted that prior to her death Joan Isobel Stewart Catto was the legal owner of 500 fully paid ordinary shares in Hampton, but disclaimed knowledge of the further assertions in that paragraph.
A grant of representation in a deceased estate, whether of probate or letters of administration, authorises the legal personal representative to deal with that part of the deceased’s estate situated within the jurisdiction of the court making the grant. In all states of Australia except South Australia that is so by virtue of legislative provision, but in South Australia it is a matter of common law and of implication drawn from the Administration and Probate Act 1919 (SA), particularly s 5 and s 46.
But a grant of probate in one state does not afford to the legal personal representative any right to represent the estate in proceedings elsewhere. Nor, for that matter, does it give a foreign court jurisdiction to entertain an action against that representative: Commissioner of Succession Duty v Hargrave (1972) 3 SASR 118. However, in all the states there is power to recognise grants of probate in certain other jurisdictions. In South Australia the relevant provision is s 17 of the Administration and Probate Act:
17. When any probate or administration granted by any Court of competent jurisdiction in any of the Australasian States or in the United Kingdom, or any probate or administration granted by a foreign court, is produced to and a copy thereof deposited with the Registrar, such probate or administration may be sealed with the seal of the Supreme Court, and thereupon shall have the like force and effect and the same operation in this State, and every executor and administrator thereunder shall, subject to subsection (4) of section 65 of this Act, have the same rights and powers, perform the same duties, and be subject to the same liabilities, as if such probate or administration had been originally granted by the Supreme Court.
It is unlikely that the Registrar would act under s 17 unless he was satisfied that the estate owned assets within the jurisdiction: s 5 of the Administration and Probate Act.
There is no proof before me that the relevant grant of probate was obtained in South Australia or that it has been resealed by the Court. On the contrary, a photocopy of the probate was admitted into evidence at the first plaintiff’s instance and shows it to have been granted in the Supreme Court of Queensland on 1 October 1993. It was admitted by the plaintiffs’ counsel that it had not been resealed in this jurisdiction prior to issue of the proceedings and, notwithstanding that opportunity was given to the plaintiffs to attend to that matter during the trial, it was not done.
Mr Catto’s attention was drawn to the need to reseal probate in quite separate proceedings in 1994. He was one of five plaintiffs to commence proceedings in New South Wales to prevent the compulsory acquisition by the defendants of units they held in a trust called “The Computer Resources Trust”. The matter came before Bryson J in the Supreme Court. The case is reported as Elkington & Ors v Moore Business Systems Australia Ltd (1994) 13 ACSR 342. The units in the trust were owned, prior to her death, by Mr Catto’s mother, Joan Isobel Stewart Catto. In that matter Mr Catto gave evidence that he had obtained probate in Queensland only and that his co-executor had taken no part in the New South Wales litigation. On that basis Bryson J determined that Mr Catto had no lawful authority to represent the estate in New South Wales. His Honour said, at p.346:
Accordingly he has not at any time had any standing to bring the proceedings, he cannot obtain any order and his contentions do not require adjudication.
It seems to me that as much could be said for the first plaintiffs’ part in the current action.
Counterclaim
The second defendant, KLV, counterclaims against all the plaintiffs, seeking special damages in the form of legal costs and expenses, management and employee time lost in defending the proceedings, any reduction in the dividend payable to KLV in the liquidation of Hampton on account of the liquidator’s expenses in resisting the proceedings, monies lost to the Commissioner of Taxation if its position is adversely affected by these proceedings or the result of them, as well as a declaration that the proceedings were issued for an improper purpose and other damages. Essentially the second defendant’s claim is that the plaintiffs have committed the tort of abuse of process. It is alleged that the proceedings have been threatened and brought with a view to demanding and exacting a payment for quitting Hampton’s share register, being an amount far in excess of the fair value of the shares and unrelated to any verdict that might be returned in the proceedings.
The evidence upon which the counter-claim is based is that of the actions and words of Mr Catto, one of the first plaintiffs. Mr Catto is a director and shareholder of the second plaintiff and can be taken to have been representing that company as well himself in what he said and did. Insofar as the third and fourth plaintiffs are concerned, the second defendant pointed to certain matters which it says found an inference that Mr Catto was representing all four plaintiffs when he acted as alleged. Those matters included that Mr Catto alone was present at court almost continuously during the trial, seemingly instructing counsel and that he appeared, in the correspondence, to be speaking for all plaintiffs.
The tort of abuse of process was described by Hunt J in Spautz v Williams [1983] 2 NSWLR 506, 539 as occurring where the legal process of a court is:
… used to exert pressure to effect an object not within the scope of the process … or where it is used for a purpose other than that for which the proceedings are properly designed and exist … or where the plaintiff … in those proceedings is seeking some collateral advantage beyond what the law offers.
In Varawa v Howard Smith Co Ltd (1911) 13 CLR 35 at 91 Isaacs J spoke of proceedings amounting to an abuse of process as being “merely a stalking horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the Court is asked to adjudicate …”
However it is now seen to be sufficient to show that the predominant purpose of the litigant is the abusive one: Williams v Spautz (1991-92) 174 CLR 509.
In Hanrahan v Ainsworth (1990) 22 NSWLR 73 Clarke AJ, after an extensive survey of authority, held that proof of the tort would require the association of process with an “overt act”, which in combination could demonstrate the improper purpose for which the proceedings were used. His Honour said (at 122):
The institution of proceeding with an ulterior motive is not enough – proof of the misuse, or attempted misuse, of the process is necessary.
In that matter the Court of Appeal was unanimous in the result but each member of the bench wrote a separate judgment. The other members of the bench did not express a view on this point. Professor Fleming (John G Fleming, The Law of Torts, 9^th Edition, 1998, LBC Information Services, at 688) supports the position that there must be, in addition to the improper purpose, an overt act or threat, distinct from the proceedings, in furtherance of that purpose, in order to make out the tort.
The High Court in Williams v Spautz drew short of agreeing, certainly so far as the courts’ inherent power to stay proceedings as an abuse of process was concerned. It was that power, rather than the tort, that was there under consideration. But in their joint judgment, Mason CJ, Dawson, Toohey and McHugh JJ said in respect of the tort that (at 528):
… it is perhaps understandable that emphasis has been given to the need for an improper act which occasions damage to the plaintiff. At least in the United States, as the judgment in Rosemont Enterprises Inc v Random House Inc (1966) 261 F.Supp. 691 pointed out (at 695) “[t]he gist of the action for abuse of process lies in the improper use of process after it is issued” (emphasis added).
It can at least be said that in the view of the judges who, with Brennan J, formed the majority in Williams v Spautz, even if it is strictly unnecessary in an action for abuse of process for the person complaining of abuse to point to an overt act, without the availability of such an act, proof of an abuse would be very much harder. Their Honours said (at 529):
Inquiry into motivation alone might prove a fragile foundation on which to base an exercise of the power to grant a permanent stay. For that reason, apart from any other, it is more satisfactory to base an exercise of the jurisdiction in cases of improper purpose upon a use or threatened use of the proceedings for such a purpose. Then the conclusion which the court reaches is more likely to be founded upon objective evidence rather than subjective evidence of intention.
In his separate judgment, Brennan J discussed (at 532) what is contemplated by the term “purpose” when used in reference to a proceeding. He observed that the fact that a proceeding might be undertaken for the purpose of achieving an end outside the scope of the verdict sought did not of itself render its purpose illegitimate. But if the purpose of the plaintiff were to gain via the use of the proceedings a “collateral advantage”, but for which he would not have commenced the proceedings, that would be an abuse. His Honour suggested a test in these terms (at 537): “….. if there be a reasonable relationship between the result intended by the plaintiff and the scope of the remedy available in the proceeding, there is no abuse of process.” His Honour added that if there were mixed purposes – some legitimate and some collateral - and the plaintiff would not but for his ulterior purpose have commenced the proceedings, then that is an abuse. His Honour said in summary (at 537):
For these reasons, I would hold that an abuse of process occurs when the only substantial intention of a plaintiff is to obtain an advantage or other benefit, to impose a burden or to create a situation that is not reasonably related to a verdict that might be returned or an order that might be made in the proceeding.
The evidence tendered by the second defendant in proof of the tort included the following.
It was demonstrated that the first and second plaintiffs had taken, over a period of time, minority positions in a significant number of public companies. Some of those holdings had led to litigation and the decisions in some of those matters were reported and were referred to me. Mr Catto’s interest in such shareholdings was explained by him in a letter to which reference will be made shortly.
The documents relied on by KLV in proof of the plaintiffs’ intention included a facsimile letter to an officer of the NP Group on 7 November 1997 in which Mr Catto described, with remarkable frankness, the “investment philosophy” of his Batoka Group. He said that it was:
… to actively participate in minority situations as they evolve – both by buying into them as soon as the characteristics of a profitable squeeze are perceived AND then by proceeding with litigation and other administrative manoeuvres (if they are justified) in order to derive maximum commercial advantage out of the situation.
He added what KLV suggested was a threat:
As you can imagine there are presently, and in the future are likely to be, a number of such situations within the Normandy Poseidon group.
That this “investment philosophy” was to be employed in relation to at least the first and second plaintiffs’ Hampton shares was clear from the history of their holdings. At the time of purchase the vast majority of the Hampton shares were held within the NP Group. The shares were delisted in May 1991 due to an inadequate spread of shareholders. Instead of selling into the buyback (referred to earlier as “the first attempt”) the plaintiffs took proceedings to ensure they retained their holdings.
In October 1996 each of the plaintiffs offered to sell their shares to KLV for $10 per share. At that time the NP Group’s estimate of net asset backing per share was only about $1.40. The offer was rejected.
In September 1997 Mr Catto spoke with the liquidator and his partner, Mr Lewis, by telephone. He asked if they knew what they were “letting themselves in for”, pointing out that in the last attempt to eliminate the minority shareholders the NP Group had incurred enormous legal fees and had “walked away with its tail between its legs”.
Then in October 1997 Mr Catto wrote to the directors of both Hampton and KLV characterising the foreshadowed liquidation as an expropriation of the assets of the minority shareholders of Hampton and advising them to ensure that they held adequate insurance to cover their actions as directors. Those letters were closely followed by a letter to Hampton from Messrs Ward & Partners, solicitors, on behalf of the first and second plaintiffs and others, which made a number of claims, including that they had “never been offered a fair market value for their shareholdings in Hampton”. The writer enumerated various causes of action which were said to be available to challenge the proposed liquidation.
In a telephone conversation between Mr Hillier of KLV and Mr Catto on 6 November 1997, Mr Catto affirmed that he maintained that the shares were each worth between $7.50 and $10.00, notwithstanding their book value was between $1.52 and $1.70.
The second defendant pointed to the letter of Mr Catto of 7 November 1997 as encapsulating not only his so called investment philosophy but the way in which he was prepared to use threats and inducements to make it pay dividends. It was suggested that Mr Catto went on to offer confidentiality, which he presented as protection for the majority shareholders, but which was in reality designed to protect himself. The threats were not only of legal action with respect to Hampton, but also implicitly a reference to small shareholdings he had in other NP Group companies. He then offered to forego taking similar action for a period of five years if he received the price he sought.
It is important to note that at this time Mr Catto had not had access to the internal documentation of Hampton on which the claim for “special benefits” is now based. It would appear then that the price sought by him was an arbitrary one; a “ransom demand”, as the second defendant put it.
The second defendant then pointed to the way in which the proceedings were prosecuted. Although the plaintiffs were aware of the way in which the liquidator was likely to proceed from the liquidator’s circular of 14 November 1997 and of the way he intended to proceed from his circular of 16 April 1998 and although proceedings were said by the plaintiffs to be imminent as at 5 January 1998, they were not in fact issued until 28 May 1998. Even then, KLV was not joined until 14 October 1998, leaving the claim of oppression by the majority shareholders on barren ground at least until that time.
On 15 October 1998 the plaintiffs sought an injunction in this court to stop Mr Carter’s distribution. An affidavit in support of the same date was filed by the plaintiffs’ solicitor, Mr Blight. He deposed at one point as follows:
I am instructed that damages will not be an adequate remedy as the plaintiffs claim that the purpose of the voluntary administration of the first defendant is to effect compulsory acquisition of property against the plaintiffs’ will.
The second defendant contrasted that stance with the position in October 1996 when $10 was the asking price per share and with that expressed in Mr Catto’s conversation with Mr Hillier of 6 November 1997 and the letter which followed it of 7 November 1997 when $7.50 to $10 per share was acceptable.
The plaintiffs were unsuccessful in their quest for an injunction, both before Master Burley and before a single judge as well. Referring to the letter disclosing Mr Catto’s “investment philosophy”, Millhouse J said (in Catto and Ors v Hampton Australia Ltd (In Liq) and Ors [No 2] (1998) 16 ACLC 1,691 at 1,694):
The letter makes it clear, on the face of it, I suggest, that Mr Catto (whom Mr Whitington described without any protest from Mr Kourakis or his junior, as a “professional minority shareholder”) simply is after money and the more he can squeeze out of the situation the better he will be pleased. Indeed, if one is looking for improper purpose, one may well scrutinize Mr Catto’s intentions and actions. Equity will not stand by and watch a minority shareholder hold a company to ransom for his own benefit.
In further support for the contention that the proceedings were taken for a collateral purpose, KLV put that the relief sought by the plaintiffs was in its nature, untenable. The reversal of the winding up could not ever occur, particularly where not all the minority shareholders were joined. Moreover, it was argued that all such a reversal would do would be to reiterate the same situation and that no rational investor would seek such an outcome, unless motivated by an ulterior purpose.

The second defendant also placed emphasis on two further letters written by Mr Catto. The first, dated just before the listed starting date of the trial, suggested a settlement figure of $800,000, but, as an alternative, suggested that a parcel of shares in a company called Allstates Exploration Limited – an entirely unrelated company owned within the NP Group – together with cash, would be acceptable.
The second, written on about the eighth day of the trial, when the plaintiffs’ counsel was still opening the case, is in most respects difficult to fathom, but certainly places emphasis on the desirability of the Allstates shares – said to be worthless – playing a major role in settling the matter. As mentioned, the Allstates shares were quite outside the action. The second defendant points to the introduction of them to the negotiating table as further supporting the allegation of “greenmailing”.
I turn then to the question of the intention of Mr Catto and the second plaintiff in commencing and maintaining the proceedings. Can it be said that the purpose of bringing the proceedings was “not to prosecute them to a conclusion but to use them as a means of obtaining [an] advantage for which they were not designed or some collateral advantage beyond what the law offers”: Williams v Spautz, per the majority at 526-7. Or in the words of Brennan J, were the plaintiffs’ substantial purposes outside the scope of and unrelated to the remedy available in these proceedings?
The second defendant has failed to persuade me so. Whilst I acknowledge that the relief sought by the plaintiffs unrealistically included the reversal of the winding up - which would always have been attended by some difficulty since not all the minority shareholders were parties to the action - the nature of the modes of relief enumerated only followed s 1321 of the Corporations Act and the thrust of the claim was always for a price for the shares held, on what was claimed to be an appropriate basis. That contention does not therefore seem to me to carry the significance which KLV’s submissions afforded it. The difficulty, as it seems to me, for the counter-claimants is that the plaintiffs’ ultimate purpose as identified by KLV – an inflated price for their shares – too closely conforms to the verdict or relief sought in the Statement of Claim. As the majority of the High Court said in Williams v Spautz (at 526):
[T]he existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor’s favour.
Nor do I consider that the introduction by Mr Catto of the Allstates shares as a bargaining “chip” assists KLV. If KLV placed little value on those shares then it might well have “thrown” them into to a settlement equation. It could not be said that acquiring the shares was Mr Catto’s main objective or even one of many objectives in initiating the litigation, although his interest in the shares again appears to demonstrate adherence to his investment philosophy.
In the end I cannot uphold the counterclaim. I remain unsatisfied that any of the plaintiffs were more than supremely optimistic that the Gambotto principle would be extended – to the breaking point – in their favour. It seems to me to be at least arguable that the plaintiffs were seeking to exploit a situation which they thought their share of ownership gave them, as opposed to seeking an objective not reasonably related to the verdict. I consider they were also opportunistic in their calculation that the NP Group would choose to purchase a speedy cauterisation of the “sore”, rather than pursuing a long and expensive, even if quite likely successful, defence of the claim.
A factor which I have given weight is the very fact that the plaintiffs saw through their claim in a trial lasting some 20 days. Perhaps it could be said that the threat of the counter-claim left them little or no choice, but their perseverance in what was in my view, objectively, always a weak, if not hopeless, case is at least consistent with a genuine desire for a verdict on their claim.
Accordingly both the plaintiffs’ claim and the second defendant’s counter-claim are dismissed.
APPENDIX A
STRUCTURE OF THE HAMPTON GROUP PRIOR TO THE SALE OF THE JUBILEE MINE

APPENDIX B
STRUCTURE OF THE HAMPTON GROUP FOLLOWING THE SALE OF
THE JUBILEE MINE AND THE SALE BY HAMPTON OF AREAS TO KLV