Gambotto & Anor v WCP Limited

[1994] HCATrans 281

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl86 of 1993

B e t w e e n -

GIANCARLO GAMBOTTO and ELIANA

SANDRI

Appellants

and

WCP LIMITED

First Respondent

and

ACMEX INVESTMENTS (No 4) PTY

LIMITED

Second Respondent

MASON CJ
BRENNAN J
DEANE J

Gambotto(4) 1 21/4/94

DAWSON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 21 APRIL 1994, AT 10.18 AM

Copyright in the High Court of Australia

MR G. GAMBOTTO:	I appear in person.
MR A.R. EMMETT, OC:	May it please Your Honours, I appear

with my learned friend, MR N. PERRAM, for the

respondent. (instructed by Norton Smith & Co)

MASON CJ: Yes, Mr Gambotto.

MR GAMBOTTO:  Your Honour, there are a few procedural issues

that I would like to dwell into before I start with

my submissions. The first one, of course, is an

amended notice of appeal of which notice was given

to the office of the Registry two days ago, and

also to the respondents. I seek the gracious leave

of the Court to file it, and I have enough copies

for all Your Honours.

MASON CJ:  I notice the amended grounds of appeal include

some reliance on the Constitution in paragraph 2(f)

and (g).

MR GAMBOTTO:	Yes, Your Honour.
MASON CJ:	The Constitution can have no application to this

case.

MR GAMBOTTO:  Your Honour, I did prepare a notice of a

constitutional matter which was filed with the

Court some month ago, and was served on all the

parties required to be served.

MASON CJ:  I realize you have done that, but what I am

saying to you is that the Constitution can have no

application to the circumstances of this case.

MR GAMBOTTO:  I very respectfully put it to Your Honour, and

I prepared detailed submissions on what I am

saying, that the Constitution does come into play

in some very important respects.	I know,
Your Honour, that I am not a lawyer.	I have
prepared submissions which are detailed and not

straying off the Constitutional issues that I am

referring to. I would like Your Honour - - -

MASON CJ:  Mr Gambotto, you secured a grant of special leave

and the grant of special leave was confined to the

grounds in your draft notice of appeal and they are

reflected in paragraphs 2(a) and (b).

MR GAMBOTTO: That is exactly correct, Your Honour, and I

beg you -

MASON CJ: There is no reason why the Court should go beyond

that.

Gambotto(4)	21/4/94
MR GAMBOTTO:	The reason being, Your Honour, that as of the date of the application, which was 10 December,
there was no evidence before the Court that certain
things had been done by the respondents. On the
day before the Full Court in Sydney, certain
evidence was adduced by Mr Emmett, and certain
documentation was tendered and handed up to the
court which showed something of which the court up
to that point had not been aware of.

That, in my respectful submission,

Your Honour, opened the door to my constitutional

repercussions, so to speak. That is why, following

the evidence adduced by Mr Emmett to the Full Court

at the application, I could, at that point in time

and not before, appeal to Your Honours on the basis

of the Constitution. It is very detailed - - -

BRENNAN J:  What material was handed up in the course of

that hearing?

MR GAMBOTTO:  The material handed up was - first of all, the

transcript of the proceedings before the Full Court

on 10 December will clearly show to Your Honours

that Mr Emmett said certain things in evidence,

even though from the bar table, and also handed up

documentation of which I have some copies, because

I asked the office of the Registry, before this hearing, that they be made available to

Your Honours, so that Your Honours would know what

I am talking about.

In any case, if Your Honours will pardon my

looking for the papers - - -

MASON CJ:  The transcript of the special leave application

shows that Mr Emmett handed up a chronology to the

court, but that seems to be all that he handed up.

MR GAMBOTTO:  The chronology, and also attached letters from

the first-named respondent to all the shareholders

in reference to certain things that had been done

by the first respondent and, of course, showing

what had been done also by the second respondent by

implication. Up to that point in time,

Your Honour, there was no evidence absolutely

before your Court that certain things had happened,

and therefore I respectfully put it to Your Honours
that had it not been for that documentation, the

constitutional issues would not have been open to

me. But, because of that documentation, the

constitutional issues do come into play, and that

is why I amended my notice of appeal, and that is

also why, Your Honours, I sent the notice of a

constitutional matter_to all the parties.

Gambotto(4) 21/4/94

MASON CJ: But, Mr Gambotto, this appeal is being conducted

on the materials that were before the courts below.

MR GAMBOTTO:	I understand Your Honour's point.
MASON CJ:	So that the materials before the courts below do

not include any additional matters which would open

whatever door may exist to the Constitution.

MR GAMBOTTO:  I appreciate what Your Honour is saying to me,

and I respectfully submit to Your Honour that

perhaps - it will not take me long.	The
submissions are not very long and detailed.	They
do not refer to precedents at all. Perhaps

Your Honour may be gracious enough, along with the

other Honours, to allow me to make the submissions and then decide on the admissibility of my amended notice of appeal or not. I would, Your Honour, if

I may - I mean, I am not a lawyer, as I said, but I

do think that the relevance is of importance.

MASON CJ:  Mr Gambotto, we are prepared to hear a short

submission from you but, after all, it is an

application for leave to amend your notice of

appeal, and therefore you ought to deal with it

very shortly.

MR GAMBOTTO:	I am sorry, Your Honour, I did not quite
MASON CJ:	What I was saying was it is an application you

are presenting for leave to amend your notice of appeal. That being so, you ought to present the

submission very shortly.

MR GAMBOTTO:  Does Your Honour say to me that I should read

my constitutional issue of submissions at this

point of time?

MASON CJ: Yes, just outline it to us, if you would; outline

the constitutional submission so that we can

understand what it is you want to argue.

MR GAMBOTTO:  The constitutional submissions, Your Honour,

are very simple. First of all, it is my contention

that the Constitution implies, by its very fact,

that it is part of an Act, assented to by the Queen

in 1900, that I, as an Australian citizen have

certain rights. My submissions are about those

rights, moreover, and very shortly, Your Honour,

very concisely, moreover, I contend that section 92

of the Constitution, arising from the facts that

have been brought forward to Your Honours'

attention by Mr Emmett, at the hearing of the
application, section 92 comes into play, not only

to underline and confirm the contentions that I

hold about the rights I contend are within the

Constitution, but also to deal with the very

Gambotto(4) 21/4/94

factual matter that has been carried out by the

respondents against these appellants in so far as

section 92 is concerned.

Now, that is very shortly what I have to say

to Your Honours. One, that the Constitution gives

me, the first named appellant, certain rights, and

my submissions, the first part of my constitution

submissions, are based on that; and second, that

section 92 is in direct reference to the actions of
the respondent in so far as the property of these

appellants.

Now, it would not have been open to me - and I

concur with Your Honour - to raise these issues had

not Mr Emmett introduced the evidence that he did

introduce. But seeing that the evidence is before

Your Honours and that the respondents sought to use that evidence to stop me from appealing to this

honourable Court I should, on the other side of the
fence, be allowed to make my constitutional

submissions. This is the reason for my amended

notice of appeal.

MASON CJ: Yes, thank you, Mr Gambotto. Mr Emmett, do you

oppose the grant of leave to amend?

MR EMMETT:  We do, Your Honour.

MASON CJ:  We do not need to hear you any further. I just

wanted to know whether you were opposing it.

No ground has been shown by the applicant for

the grant of leave to amend covering grounds (f)
and (g) in paragraph 2 of the amended notice of

appeal. To that extent, the application for leave

to amend is refused.

As to the other amended grounds appearing in

the amended notice of appeal, they appear to go to

the relief sought by the applicant and the Court

will deal with those matters in the course of

argument or at the conclusion of argument.

Would you present your argument in support of the appeal, Mr Gambotto?

MR GAMBOTTO:	Thank you.
MASON CJ:	Now, would you present your argument in support

of the appeal, Mr Gambotto?

MR GAMBOTTO:	Yes, Your Honour. First of all, I would like to ask Your Honours if before them - well, I would
like to hand up to Your Honours actually, it is a
court document in the lower court and I think it
has relevancy as to my submissions in so far as the
Gambotto(4)	21/4/94

main appeal is concerned. It is an affidavit sworn by a director of both respondents on 4 August 1992,

in support of an application to expedite the

respondent's appeal, the then appellant appeal, the

first respondent now. I think it has relevancy to

my submissions and I would like to - with

Your Honour's kind leave, I would like to hand up

each of you a copy of said affidavit, because I

will be referring shortly, briefly, to some lines

in that affidavit.

MASON CJ:  Have you provided Mr Emmett with a copy of this

affidavit?

MR GAMBOTTO:  Mr Emmett - it is one of his own documents,

but I have a copy for him too.

MASON CJ:  Would you hand the affidavit in. Thank you.

Which paragraphs do you propose to rely on in your

argument?

MR GAMBOTTO:  Your Honours, mainly paragraph 4 as to my

argument, and the gist of the affidavit, in its

entirety, as to my closing argument I will be

putting some submission to Your Honours for

Your Honours' consideration. But mainly my

argument will direct itself to paragraph 4.

MASON CJ:  Do you have any objection to this affidavit,

Mr Emmett?

MR EMMETT:  At the moment I am not quite sure what it is

designed to achieve, Your Honours.

MASON CJ:  No, but after all we will only, as it were,

obtain further clarification, if at all, later when

we hear whatever submission is made about it.

MR EMMETT: There is no dispute, I do not think, as to the

facts that is deposed to in the affidavit.

MASON CJ:  Yes. On that footing this Court will receive

this affidavit.

MR EMMETT:  Yes. My only concern was that if some reliance

is intended to be put on it, for which there might

be an answer outside, then I might be prejudiced.

But perhaps if we could hear what the relevance

is - - -

MASON CJ: Well, we can deal with that if and when it does

arise, Mr Emmett.

MR EMMETT:  Thank you, Your Honour.

MASON CJ: Yes, Mr Gambotto.

Gambotto(4) 6 21/4/94

MR GAMBOTTO:	Your Honours, there is also another procedural issue involved here, I am afraid, and that is that
on the occasion or a couple of days before the hearing by the Full Court in Sydney of my
application I provided a certain - Mr Justice Brennan called it a white book, and it is indeed a white book - to state my application to
the honourable Court. In that white book,
Your Honour, there are, starting at page 8 under
the heading "Negative concepts", quite important
and time-saving, to these proceedings, arguments
that I would like to skip so as not to take the
Court's time unnecessarily.
MASON CJ:	I see, this is an argument in writing, is it,

that you want to use in support of the appeal?

MR GAMBOTTO:  Yes, it is part of the white book, and I may

add, Your Honour, that at that stage I did send up

to Canberra - I filed a copy in the office of the

Registry in Sydney, and I also - - -

MASON CJ:  As far as the Court is concerned, it is willing to receive this book. Have you seen it, Mr Emmett?

MR EMMETT:  Yes, Your Honour.

MASON CJ: Well, you can hand copies of the book in,

Mr Gambotto.

MR GAMBOTTO:  I have only prepared copies of the relevant

pages.

MASON CJ: That is all the better.

BRENNAN J: This really encapsulates your analysis and

criticism of the judgments in the Court of Appeal.

MR GAMBOTTO:  Yes, it does, Your Honour, to the extent that

since the hearing by the Full Court of my

application, there are other factors which have

come into play, one of which Your Honours have

decided not to entertain; the constitutional issue.

Alas, in my mind the additional submissions - and

when I say additional, I mean additional to those

that are before Your Honours now - are relevant in

my mind. It is a lay mind, Your Honour, it is not

a professional mind, and I would like to put them

to Your Honours.

But before I do that, when Your Honours have

all finished with wha·t I say in there, I would like

to discuss one further procedural issue. This is

that Mr Emmett has kindly informed me earlier this

morning that he did not see why I was getting on to

facts in so far as my·appeal is concerned, and he

was referring to my amended notice of appeal.

Gambotto(4) 21/4/94

Your Honours, I can well appreciate what is said to

me and I understood it. It is not that I did not

understand it.

What, as a result of what is said to me, I do

not understand is the fact that before three of

Your Honours in the Full Court in Sydney Mr Emmett

referred to facts and tendered factual evidence

without anything being raised as to the fact that
any answer to the application was not to come from

facts, whereas I find myself here this morning at a

loss and with all the respect in the world,

Your Honours, I cannot understand why Mr Emmett on

that day was enabled to tender various documents,

and he tendered them without any objection on my

part.

The documents were to issues of fact, not of legal argument, and here I am this morning trying to point out facts that, contrary to what Mr Emmett

did on that day, the facts that he was referring to apply to facts that had happened before the hearing

before the Full Court. My facts arise after the

hearing before the Full Court and I am not allowed

to discuss them.

MASON CJ: Yes, but what I said to you before was, "The appeal has to be conducted on the basis of the

materials that were before the courts below".	Our
consideration is confined to what was before -

MR GAMBOTTO: Exactly, Your Honour.

MASON CJ: the courts below - - - and you can refer to any

of the facts that were before the courts below.

MR GAMBOTTO:	I can - sorry, Your Honour?
MASON CJ:	You can.
MR GAMBOTTO:	Does Your Honour mean by that - if Your Honour

will excuse me from asking on this point, again,

does Your Honour mean to say that, although

Your Honours have decided not to accept any of the

amendments referring to the constitutional

issues - - -

MASON CJ:  You cannot refer to the constitutional issues;

they have been excluded.

MR GAMBOTTO:  Yes, but what I mean to say is this, that the

constitutional issues - I am not talking about the

Constitution as a document per se; I am talking about the Constitution as it comes into play in my

arguments.

Gambotto(4) 21/4/94

MASON CJ:  No, but we have excluded that. Our ruling

excludes that, Mr Gambotto.

MR GAMBOTTO: Right. So, I cannot refer to anything to do

with the Constitution?

MASON CJ: That is correct.

MR GAMBOTTO: Although, Your Honour, if I understood

Your Honour correctly, you just said to me that I

can refer to the facts of the matter - - -

MASON CJ:	The facts that were before the courts below.
MR GAMBOTTO:	The facts that were before the courts below.

Now, I am terribly sorry, Your Honour. I do not

want Your Honour to think that I am being difficult

or anything, but it seems to me that what Mr Emmett

did that day on 10 December - - -

MASON CJ: Well, let us not worry about what Mr Emmett did

that day. Let us proceed by you putting your

argument in support of this appeal to the Court.

MR GAMBOTTO:  Okay, Your Honour, I shall do that. Now,

Your Honour, I am a simple man, as Your Honour has

understood by now, and a layman at that, so I need

to refer to points of reference in my mind when I

discuss - when I put up any argument, and references to points of reference that have nothing

to do with the matter. It is just a separation

that I am using to distinguish one argument from

the other.

I have divided my submissions into four

related segments, and in addition to that, of

course, we have the constitutional issue which I

will not refer to any longer. Now, in my mind,

Your Honours, when one segment or argument is torn away, another succeeds.

The second segment - I have finished with my

first - involves a cursory glance at purported

article 20A of the articles of association of the

respondents herein, of the first respondent. Much

superior minds to mine, Your Honours, have graced

that article with careful examination and, no

doubt, were duly struck by the effectiveness of its
deadly aim. Now, the article in question is in the

appeal book, Your Honours, at page - - -

MCHUGH J: Page 71.

MR GAMBOTTO:  Right, thank you, Your Honour. The object of

the article was to obliterate all minority

shareholders of the first respondent to make it

Gambotto(4) 9 21/4/94

possible for Adsteam, the ultimate entity, to

strike down the curse of taxation. It is part of

my affidavit at the very beginning of the appeal

book, Your Honours.	I will refer to the page in a
minute.	It is page 8 of the appeal book in this

jurisdiction, Your Honours.

MASON CJ: Yes, Mr Gambotto.

MR GAMBOTTO: Well, if Your Honours will agree with me on

that point, and it is a point that it is confirmed

by the affidavit that I handed up a few minutes

ago, by the director of both respondents, the

intent of the respondents was to introduce this

article into the articles of association of the

first respondent to make it possible for the second

respondent to eliminate 70-odd small shareholders

which they could not eliminate by using the

provisions of the Corporations Law regarding

compulsory take-overs.

Now, I think we are on safe ground here and I

think Mr Emmett will agree with me on the point

that I have just made. They introduced this

article to get rid of us and they adduced to the

shareholders of the company, along with the

proposed article, a certain valuation. If I may

just point out to Your Honours, it is a question of
fact, but I do not know how far it could go in so

far as legal argument is concerned. If I may just

point out, the valuation is part of the appeal book

too, and is to be seen at page 10 of the appeal

book. As such, it plays a very important part of

the reasoning of the lower court.

I just point out to Your Honours that the valuation is not a valuation directed to

shareholders. The valuation is addressed to the

directors of WCP Limited, as can be seen at

page 10. It is a valuation done by Pannell Kerr

Forster, a firm of accountants. By perusing the

letterhead depicted at page 10 of the appeal book,

under the name of the firm, Pannell Kerr Forster,

which name at that point in time was in no way

known to the shareholders of the first respondent,

Your Honours will find that it says in small

letters, "incorporating Bowie Wilson Miles".

Bowie Wilson Miles had, until a few days after

that valuation was released to the directors of the

first respondent, been the auditors of the first

respondent and of most of the companies in the

Adsteam group. Why I am saying these things,

Your Honours, is because said valuation, as I said before, plays such an. important part in the lower

courts' reasoning and findings.

Gambotto(4) 10 21/4/94

It is referred to in those reasonings as an

independent valuation, whereas the people who wrote

the valuation, although they were at all relevant

times the auditors of the first respondent, do not

disclose so in the valuation apart from the small

letters to be found at the top of the letterhead,

and do not refer at all to any audited accounts.

They refer in their valuation to an unaudited set

of accounts, and this is signed by the auditors of

the first respondent at all relevant times.

I think I have said enough regarding that point, Your Honours. I think Your Honours are much

better equipped than I am to deal with what I have

just said. I thought I would say it because I

think it is an important consideration, and it did

not in any way touch any of the lower courts

justices' minds when reasoning and reaching their

judgment.

It was indeed one of Their Honours of the

lower court that by a certain reference to a

doctrine of illegality in his judgment, and I am

referring to none other than Mr Justice Meagher, in

his judgment to be found at line 10 page 121 of the

appeal book herein, where he says:

The Articles of Association of a company,

in their initial state, are subject to no

restrictions other than those imposed by the doctrine of illegality; they are infinitely
capable of amendment thereafter, so long as

the statutory procedures are utilized -

I refer Your Honours again to page 8 where the

article in question is brought to Your Honours'

attention, and I have this to say about this

matter. I would respectfully direct Your Honours'

attention to paragraph (1) of the then proposed

article 20A, a paragraph which is to be found at

line 36 of page 8.

MASON CJ: Yes, we have that.

MR GAMBOTTO: It says:

On receipt of the notice, stamped transfer and

payment -

from the second respondent - that is not said, I am

putting it in brackets -

the Company -

the first respondent -

will register the majority member -

Garnbotto(4) 11 21/4/94

the second respondent -

as the holder of the remaining shares and the

Company -

the first respondent -

will cancel the share certificates previously

issued for the remaining shares.

Now, I respectfully put it to Your Honours that at

least one of the actions required by such paragraph

is in breach of section 193 of the Corporations Law

as such cancellation of shares is not covered by

the provisions of that section nor, more

particularly, by the provisions of

section 193(l)(e). As such, the cancellation of

shares in question is in breach - direct breach -

of the provision required by section 195(1).

DEANE J: But it is not a cancellation of shares, it is a

cancellation of share certificates.

MR GAMBOTTO: Well, the article does not say that,

Your Honour.

DEANE J:  The article says "cancellation of share

certificates".

MR GAMBOTTO: Well, to all effects and purposes, if I may

respectfully put it. to Your Honour, it is a

cancellation of shares because we have the

situation where, subject to this article, what

happens at the company's office and share registry

is that a share certificate is issued to the second

respondent, not for each share certificate of the

small share holders. A total share certificate was

issued to the second respondent for the total

shares in question.	And then they then proceed to
wipe out shares.

In my respectful submission, there is further

argument on this point that will perhaps explain

much better what I was just starting to put to

Your Honour. If Your Honour can be patient enough

I would like to put it to Your Honours.

You see it is a cancellation, as Your Honour

rightly said, of a share certificate. But you see

I submit to Your Honour that Your Honour's argument

would be valid had the Gambotto shares, to take one

shareholding, been in their quantity issued to the

second respondent. The Sandri shares had in their

quantity, issued on a separate occasion to the

second respondent. But here we have one share

certificate covering the whole lot, a share

transfer that is filed, and I will refer to it

Gambotto(4) 12 21/4/94

later on, with the Stamp Duty Commissioner of

New South Wales to pay the stamp duty, and it does

not refer to any names of the shareholders that

have been wiped out.

So in my respectful submission, Your Honour,

although Your Honour has rightly said it is a

cancellation of a share certificate, it is also the

cancellation of a share. It is also the

cancellation of the proprietor's share of the

proprietors of the company. You see the evidence

that has been taken before all lower courts, the evidence, the mechanisms which have been used in

doing all this are all based, in my respectful

submission, on illegal assumptions, on illegal

grounds. I mean we have a share - - -

BRENNAN J:  Mr Gambotto, section 193(l)(e) is dealing with a

reduction of the capital of a company. You are

speaking about the cancellation of a proprietor's

share. The problems are different.

MR GAMBOTTO:  Yes.

BRENNAN J:  Now, you are on the wrong track. That does not

mean that the correct track does not have something

going for it, but 193(l)(e) is the wrong track.

MR GAMBOTTO:  Your Honour, I fully appreciate what I am

saying. I was going to deal with what I think is

the right track in my very next submission, because

I was going to say in the context of the article

the cancellation of shares is not one pertinent to provision - section 193(3), as Your Honour rightly

said it does not apply, or (l)(e) does not apply.

But section 193(3) says that any cancellation of

shares is subject to confirmation by the court.

Any cancellation that is not covered by the

sections prior to it, the sections I referred to

and that Your Honour said that I was on the wrong

track, Your Honour confirmed my argument by saying

that, that to speak of those sections is to be on	the wrong track, and the cancellation is directly
in breach of section 193(3) because it has not been
approved by the court, by the relevant court.

This is what my argument was all about. I was

not saying that they were breaching section

193(l)(e); I was saying that the cancellation was

not covered by those provisions, and therefore it

came into the ambit of section 193(3). If

Your Honour would care to refer to 193(3) - - -

BRENNAN J:	Am I right in saying that what your argument is is that Article 20A does not, in fact, effect an
expropriation of your.shares; it cancels your shares and provides for the issuing of other shares

Gambotto(4) 13 21/4/94

to the majority shareholder, and it is the

cancellation of your shares which is not authorized

by the Corporations Law?

MR GAMBOTTO: Exactly, Your Honour.

BRENNAN J: All right, we understand -

MR GAMBOTTO:  I am sorry, Your Honour, I said to Your Honour

before, I am a simple man, and a layman at that,

Your Honour. I will be saying many things that

will make your hair stand on edge a little bit.

BRENNAN J:	Do not worry about that, Mr Gambotto.
MR GAMBOTTO:	Thank you, Your Honour.

MASON CJ: But, Mr Gambotto, is not your case simply this,

that the principles of the Corporations Law does

not empower the majority in a company to amend the

articles of association for the purpose of, and

with the effect of, expropriating the minority

shareholders? Is that not your simple proposition?

MR GAMBOTTO:  Yes, that is my basic proposition,

Your Honours. That is my basic proposition, but we

have another side of the fence.

MASON CJ:	I realize that, but I am only concerned about your side of the fence at the moment.	I just want
to understand what your case is.

MR GAMBOTTO: 

My case is, apart from the arguments brought forward in that book, which I think have some

merit, I hope, apart from those arguments, there
are also other factors that apply to this

situation. Now, why am I using - - -

MASON CJ: 

Do you not want to concentrate on this basic

proposition? That really is the nutshell of your
case.

MR GAMBOTTO: Well, Your Honour, being a layman, I prepared

myself on certain points. It is very hard for me

now to disregard those points and go directly to

the heart of the matter like Your Honour is
suggesting. It is very difficult for me. If I

may, I will try to, but what I am saying is that all these things that I allege have been done by

the respondents are not only what Your Honour just

said, they are also very oppressive, and to use

illegal articles, this was my proposition in so far

as 20A.

MASON CJ: Yes.

Gambotto(4) 14 21/4/94

MR GAMBOTTO:  I am sorry, Your Honour, did I upset

Your Honour -

MASON CJ:	No, no, not at all.
MR GAMBOTTO:	I was just adding to the proposition that we

have here a very oppressive conduct on the part of

both respondents towards the small shareholders.	I
mean, I would like Your Honours - I have come this
far and, Your Honours, I could have - I think, according to what I understood, as a layman, from
the conduct of the application on 10 December, I
could have come here this morning and said, "Here

it is, Your Honours, here is my white book, and I'm

done." I think that in that book there were enough

grounds to make my case, but at the same time, I

think it is my duty to myself and my co-appellant

and to those poor hapless shareholders who are not

here today, that I say certain things. It is

mainly, I would say - apart from being a legal

argument, it impinges also on the moral issues

involved, which is part of the oppression alleged,

and I think that the points that I am trying to put

across to Your Honours, and if Your Honours will

stop me, I will stop, and we all go home. I will

stop right here and now and leave the floor to

Mr Emmett because, you see, there was this

cancellation of shares which, in my submission, was

not only oppressive but illegal.

I will read the other points not word by word,

but Article 20A, in my respectful submission,

Your Honours, is also in breach of the buy-back

provisions of the Companies Act. Now, that is an

illegality of a document, about which all this case

touches upon. The federal government three years

ago, I think it was in 1991, saw fit to introduce

buy-back provisions which were more or less copied

from the statutes of the United States of America

which is, I think, at the forefront of corporate

law making, and corporate restrictions to avoid

oppression - like we have in this case - and if I

am told that I cannot touch upon illegalities, I

will accept Your Honours' ruling. I have no one

else to appeal to apart from someone up there, so

according to me that article is contrary in breach

of the buy-back provisions of the Act.

According to me the article when presented to

the - and this is a question of fact, but of course

I can only use it in argument - according to me the

article when presented to the shareholders of the

company at a certain meeting was approved by the

unholy trinity. I call it the "unholy trinity",

Your Honour, because three shareholders were

supposed to have voted in favour of the resolution

by a poll card, which is a document, and one of the

Gambotto(4) 15 21/4/94

shareholders was not in attendance at the meeting.

If Your Honours will look at page 29 of the appeal

book herein. That third shareholder was not in
attendance there at, he did not sign himself in,
yet he voted and he used the poll card and the poll

card went to the unanimity of the approval of the

article in question.

It may be time wasting on my part to mention

this matter, so I do not know. I have never

appeared before this Court and I hope I will never

appear again - not because I do not like talking to

Your Honours, I like it very much and I think I

will come away from this courtroom enriched by the

experience, but it seems to me, and I compare
again, I will go back to that, because I cannot not
go back to it, I will compare to what happened at

the hearing of the application when Mr Emmett

produced documentation, said whatever he wanted to

say and not a word was said. Here I am trying to

raise what I think are important legal arguments

and I am directed otherwise.

Your Honour knows much better than I do,

Your Honour should not take what I am saying as

being in any way disrespectful of Your Honour's

words to me, it is not. It is just that I worked

for weeks on this, I have lived with this case for

two years. I know every single solitary facet of

it, whereas Your Honours will never be able to get

into such detail as I have because I have been part

of it. I came here, if Your Honour remembers, on

15 March when I appeared before Your Honour on a

certain application for expedition. I did make a

promise to Your Honour that it would not take

longer than a day and certainly it will not even

take half a day as far as I am concerned.

But when one comes before this Court,

Your Honour, one does not only come before this

Court, to my understanding - and it may be very

wrong at that - one does not only come before this

Court to rectify a wrong, one does come before this
Court to create precedents to be used in the

future, and that is what all my references to the

Constitution and to all these illegalities are

about.

As I said before, I could have come in and

said, "Your Honours, here are copies of my white

book. I rest on my case", and Mr Emmett would not

have had such a hard job afterwards, and I do not

think he will have a hard job anyway. Within

myself I feel obliged to dwell upon these things

because, Your Honour, _what happened to me and to us

in this instance is of paramount importance to the

community at large. There are hundreds of

Gambotto(4) 16 21/4/94

thousands of small shareholders who are - I am
sorry to use these highly emotive words, but they
are fact - hundreds of thousands of small

shareholders that are constantly trampled upon. I

am a shareholder, a small shareholder at that, in,

I would say near enough to a hundred companies, and

if I were to relate to Your Honours things that

have nothing to do with this case, but what goes on

in the corporate world in so far as the small man

is concerned, Your Honours would not believe it.	I
know Your Honours are men of the world apart from
being Justices - this is what this case is all about, oppression. This is what this case is all
about. Because somebody is big, because somebody
can employ 150 QCs and barristers and solicitors,
and so forth and so on, a small man has got no chance.

I will just point one thing out to Your Honour

which is part of my submissions this morning. The

judge in the lower court, God bless his soul, gave

me his verdict, he gave me his judgment,

Mr Justice Mccelland, a very highly respected

judge, and since my case he has, I believe, become

the head of the equity jurisdiction in New South

Wales. He said, and I quote the substance, not the

words, he said that in so far as the other small

shareholders of the first respondent, he did not see why they should not be dispossessed of their shares.

Your Honours, if I may just use an example, a

dodge the bullet? Am I guilty in the face of

reference: if somebody shoots me in the street, am

equity if that bullet was aimed at my back and I

did not even see it coming? Is that what

His Honour Mr Justice McClelland is trying to say,

that the other small shareholders are not entitled

to relief because they did not apply for relief?

But I have been overseas for a matter of months and

when I come back I find that things have happened

with my shareholdings. They have been

dispossessed; they have been bought out; I find

notices left, right and centre.	Am I guilty
because I was overseas?

This is what this matter is all about,

Your Honours, and what I would like - and I will

stop right at this very point because I know that

His Honour Justice Mason has given me the law and he rightly did so.

In a certain book, which is not a precedent

book, Your Honour, but I base most of my case on

it, a book by a lawyer called David Marr, and it is

Gambotto(4) 17 21/4/94

a biographical work on the previous Chief Justice

Mr Justice Barwick.

McHUGH J:  I thing you should be very careful what you say,

particularly if you are going to say anything

critical, Mr Gambotto.

MR GAMBOTTO:  No, Your Honour. No, as a matter of fact it

is completely the opposite. That book reports that

in 1970 His Honour Mr Justice Barwick, at that
stage not a Justice, I think, in an address called

Wither the Society which he gave to the Queensland branch of the Australian Medical Association, he is

supposed to have said that, "lawyers,

traditionally, regard the common law as nurturing

intense antipathy to tyranny, oppression and

unwarranted repression of the ordinary man, not

merely in relation to his person and his property

but in relation to his right of expression and of

assembly at any level of the social structure".

Now, that statement, Your Honour, has played

on my mind for the last two years. And I am not

saying by that, Your Honour, that I am to be taken

as an ordinary man - God forbid, that I am going to

pass through history as an ordinary man.

But there is another quote from that book I

would like to bring forward and this is what I was

referring to before. If I may just be allowed to

find it. I am sorry for the delay, Your Honours.

At page 292 of that book, the author reports on a

certain case that happened before this honourable

Court as recently as in 1977. It was a four:two

majority of this bench and as part of the majority

which was also in the book, a couple of quotations.

One was by Mr Justice Stephen and he says - Mr Marr

said that Mr Justice Stephen said:

He described the Barwick view as anarchy,

injurious to the whole community.

Now, section 92 was then under discussion, of

course. Then he goes on to say, in the same

paragraph:

Mason was rather more direct in his attack on

the notions of the 'old Spencerian liberal' -

and then he quotes -

For my own part I see no compelling reason why

we should interpret section 92 by reference to

doctrines current at the end of the

nineteenth century ..... the freedom guaranteed

by section 92 -

Gambotto(4) 18 21/4/94

MASON CJ: But you are now coming back to this

constitutional - - -

MR GAMBOTTO:  No, no. I am using the quotation,

Your Honour, if I may, not in so far as section 92.

It will be my closing argument and then I will sit

down and you will be rid of me, Your Honours:

the freedom guaranteed by section 92 is not a
concept of freedom to be ascertained by

reference to the doctrines of political

economy which prevailed in 1900 -

Now, that is the end of the court. I tender my

sincere apologies to Your Honour for not using your

name in the proper context and using the correct

titles. I was quoting.

DEANE J:  Mr Gambotto, you said that the resolution was

inconsistent with the buy-back provisions of the

Corporations Act.

MR GAMBOTTO:	Yes, every provision thereof.
DEANE J:	What sections did you have in mind?
MR GAMBOTTO:	It is a whole chapter in the Corporations

book. You see it is not contrary per se. What I

submit to Your Honours is that it is not - the

actions of both respondents are not in any way

covered by the buy-back provisions of the Act.

DEANE J:  I follow that - - -

MR GAMBOTTO:  I am using the contrary argument. I am not

saying he shot and killed the buy-back provisions. I am saying that the buy-back provisions would not

have allowed him to shoot.

DEANE J:  And you also said that the buy-back provisions of

the Companies Act were based on earlier

United States legislation.

MR GAMBOTTO:  Yes, yes.

DEANE J: Did you have anything particular in mind there?

MR GAMBOTTO:  No. No, I did not research the matter to that

extent, Your Honours. All I know is this,

Your Honours, and again it is general knowledge

rather than presidential knowledge that I am
bringing to your attention, all I know is this,

that we have a situation in the United States that,

although it is reputedly a lesser fair economy and

an economy of free enterprise and an economy that

has seen the excesses of the last decade in so far as taking over companies and so forth, one example

Gambotto(4) 19 21/4/94

is well described in this book, and it was the

take-over of RJR Nabisco in that decade and it has

a very apt title, The Barbarians are here this

Morning. The whole basis, from what I understand,

of that system in America is that rules are made so

that no oppression takes place.

Now, that does not say that if you can think of a way around the rules you can choose it.	What
I am saying, in this case, is that the brains

behind both respondents did not think of legal ways

to do what they did. They thought of oppressive

ways; they thought of illegal ways, and that was

what my whole argument was about. To point out the

illegalities, and point them out in the context of

oppression of the small shareholders.

Now, it is the principle of equity we are

talking about, I know that, and, Your Honours much

better know than I do about that, but at the same

time I feel the points ought to be stressed. I

mentioned the Court by Mr Justice Mason in 1977,

why did I mention it? Because, Your Honours

thought - like Your Honour rightfully pointed out

in that judgment regarding section 92 - thought he

was supposed to evolve, not regress. We are

supposed to look to a future where people are not oppressed; where people are not subjected to the

dicta of dictators. We are supposed to look to a

future where we are conscious of the freedoms that we are born with, and this is the whole point I am

trying to make to Your Honours. I know they are

highly emotive issues, I will be accused of wearing

my heart on my sleeve, and all that sort of thing -

I have not got a heart - I think of my pocket

mainly, but in so far as somebody putting his hands

in my pocket, then I think of my heart, because I

do not put my hands into somebody's pockets.

Now, I think having said that I have not

covered what I came here prepared to cover, but I

think that I put the whole thing in a nutshell. I

did not come here with 150 precedents, I can think

for myself. Now, I know that those people that are

involved in the precedents are much higher,
mentally and intellectually, and educational

stature than I am - by a mile - but, what is the

point of me coming to you, being a layman, and

pointing out Mr Justice this, Mr Justice that, he

said this, he said that. I can only use pure

reasoning, and refer it in the context of points of

reference, colourful at that. Thank you,

Your Honours.

MASON CJ: Thank you, Mr Gambotto. Mr Emmett.

Gambotto(4) 20 21/4/94

MR EMMETT:  In anticipation of what we understood the

arguments to be, we prepared an outline,

Your Honour. Might I hand that up. I have to say

that what has fallen from Mr Gambotto goes beyond

what we anticipated, so - - -

MASON CJ: Yes, I can understand that, Mr Emmett.

MR EMMETT:	Might I deal first, Your Honours, with the matters that were addressed on by Mr Gambotto this
morning.  The first matter of substance, as we
understand it, was an attack on the propriety of
the valuation. That was never put in issue below,
and there is no finding about that.  The matter
proceeded before Mr Justice McLelland and in the Court of Appeal on the basis that the valuation was
an independent valuation, and there was never any
suggestion to the contrary.

In view of what were really undisputed

concurrent findings below, it is not really open

now to Mr Gambotto to challenge the basis of the

valuation. It is that concept that Mr Gambotto may

have been referring to when he said that I

suggested to him before Your Honours came on to the

bench that there would be an objection to exploring

factual matters inconsistent with the findings

below.

The second matter concerned the question of

illegality. Again, these matters were not

ventilated below. That may not of itself be fatal

but, as we understand it, it was suggested that

there is illegality by reason of non-compliance

with the reduction of capital provisions. In so

far as Mr Gambotto referred to the cancellation of

the share certificates as being a cancellation of

shares, that submission, in our respectful

submission, is misconceived. Your Honour

Justice Brennan perhaps took that up and ran with

it to some extent, to suggest that, as we apprehend

what Your Honour was suggesting, that maybe one can	construe article 20A as not being a compulsory
transfer but a compulsory cancellation of shares
and issue of new shares.

As I said, that was never advanced below and,

in our submission, it is simply not open when one

looks at article 20A.	It clearly refers to the
transfer of shares.	Money must be paid to the

company first and that money is then paid out to

the shareholders. So that, on any fair analysis,

in our submission, 20A could not be construed as a

cancellation of old shares and an issue of new

shares.	So that that_question of illegality does
not arise.

Gambotto(4) 21 21/4/94

DAWSON J:  In respect of valuation, why do these shares not

have a special value? Putting expropriation aside,

these shares, to those other shareholders who want

to acquire them, may have had a value well above

the amount that was paid?

MR EMMETT:  They may have but that is something that could

have been proved.

DAWSON J:	To gain an administrative and taxation benefit.
MR EMMETT:	There could have been some particular value

which these shares had to the shareholders and, if

there was, it may be that that would be a ground

for showing why it was oppressive in a particular

case to expropriate those shares. But that was

never put below. It would have been open for the

plaintiffs, if that was a question, to advance

evidence as to why there was some special value

that these shares had to the plaintiffs, and it may

be that that would be sufficient to constitute the

expropriation oppressive, but there simply was not

any evidence of that below, and it was never

contended for below. And we have said in the

written outline that it may be that, if there is

some reason why, to a particular shareholder, the

expropriation is of greater harm to him than it

appears on the face to be, then that may, in

particular circumstances, constitute oppressive

conduct. But, absent any evidence, or any issue as

to that, then, in our submission, it just does not

arise. ·

McHUGH J: Well, except that these shares were valued on a

net asset value basis. One would have thought that

these minority shares had a very special value having regard to the benefits that the majority shareholders were going to get out of it, long

term.

MR EMMETT:  That was taken into account by the valuation.

But the fact is the propriety of the valuation, or

the appropriateness of the valuation, or the

principles of the valuation, were simply not put in

issue below. That might be something that could be

explored. If the plaintiff had adduced evidence to

show that these shares did have a particular value

to him, or that the valuation was misconceived,

then that was an issue that could have been debated

below. But it simply was not debated. The

evidence as to the v~luation went in without

challenge.

We accept that if there were a question about

that and if the price.at which the shares were to be acquired was in some way not an adequate price

or not a fair price, then we would concede that

Garnbotto(4) 22 21/4/94

might be a basis for the court intervening. But

absent any evidence that puts tha.t question in
issue, in our submission, that is the end of the

matter.

The next matter that Mr Gambotto raised, and

the way he put it originally, I think, was then

withdrawn and he put it in a slightly different

way, was the buy-back provisions. I think his

original submission was that what was done was in

breach of the buy-back provisions, and I think in

response to a question from Your Honour

Justice Deane, he said what he really meant was

that this was not authorized by the buy-back

provisions. We do not quarrel with that

contention, but it just does not lead anywhere.

The fact that it is not authorized by the buy-back

provisions, unless it is submitted that the

buy-back provisions are a code, then it really does

not lead anywhere. Indeed, the buy-back provisions

simply do not deal with this sort of question.

They involve an exception to the principle of

maintenance of capital by the company, that the

company cannot deal in its own shares or buy its

own shares, and that is apparent when one looks at

the preliminary subdivision that deals with the

buy-back provisions at section 206AA. The practice

of the legislature in some jurisdictions now seems

to be to include a little explanatory memorandum in
the statute itself, and Subdivision A of

Division 4B is headed "How this Division Works".

What it says is:

Subdivision C creates exceptions to the

section 205 prohibition on a company acquiring

its own shares or interests in its own

shares -

but that is just not what is involved here. It is

answered by the same submission that I put to what

Your Honour Justice Brennan was perhaps advancing,

that if one could find that the company was funding

the acquisition of these shares, then there would

be a contravention of section 205 unless one could

bring oneself within the buy-back provisions, but

that is just not the structure of article 20A, in

our submission. The structure of article 20A

clearly requires that the acquiring shareholder pay
the purchase price to the company first as a
condition of giving effect to the mechanism for

expropriation.

The next point that Mr Gambotto raised

concerned attendance at the meeting. I did not

quite understand what.the submission was but again,

although before Mr Justice McClelland there was

some question of the propriety of the calling of

Gambotto(4) 23 21/4/94

the meeting and the conduct of the meeting, those
matters were the subject of a notice of contention
before the Court of Appeal, but the notice of

contention was then abandoned before the Court of

Appeal and those matters were never pressed. So,

in our submission, it is not open now for

Mr Gambotto to rely on some impropriety in relation

to the conduct of the meeting as a ground for

interfering with the determination.

DEANE J: Mr Emmett, was there anything in the evidence to

indicate that the majority shareholder had

committed itself in advance to not voting on the

resolution?

MR EMMETT:  No, the evidence was to the contrary, I think it

is fair to say. It was only when Mr Gambotto did

not come that it was unnecessary one way or the

other.

DEANE J: Yes, I follow that.

MR EMMETT:  I think I would have to concede that

Mr Justice McClelland found that on the balance of probabilities if Mr Gambotto had attended, the

majority shareholder would have voted to ensure the

passing of the resolution. So we do not come here

on the basis that it was the independent majority

that passed the resolution. That is, in fact, what

happened. The finding was that if Mr Gambotto had
not been told that the majority would exercise its

rights, then a different circumstance might have

come, so we do not rely on that circumstance.

I think they are what we want to say in

response to what Mr Gambotto said this morning. We
had not realized that his submissions substantially

were to be taken from the white book, but having

now read the pages that are relied upon, I think

the written outline that I have handed up does

anticipate those submissions.	So if I might now
turn to what we understand to be the real thrust of	the argument, namely, the contentions in pages 8 to
16 of what Your Honour Justice Brennan, I think on
the hearing of the leave application referred to as
"the white book". It contained much more than
these matters, of course, but they are not relied
on.

Your Honours, the proposition upon which the

respondents rely is a simple one and it is this,

that prima facie there is power to alter the

articles in the way that is contemplated by

proposed article 20A. The law, itself, as had its

predecessors since the last century, conferred an

expressed power on shareholders by a specified

majority to alter their articles, something which

Gambotto(4) 24 21/4/94

finds its genesis in the old deeds of settlement

under which joint stock companies used to be

established and before the joint stock companies

legislation enabled separate legal entities to be

formed. And those deeds of settlement always

contemplated that arrangements between the parties

could be altered by an agreed majority, although

equity would always intervene where the exercise of

that power was for an improper purpose.

It is that notion that has ridden through

notwithstanding the absence of any expressed

reservation in section 176 and its predecessors.

It has always been accepted that notwithstanding

the apparent unrestricted power of alteration,

there is some restriction, namely one which equity

would impose. There has been great difficulty over

the years, from time to time, in courts trying to

formulate the principle which is to be applied.

BRENNAN J:  I understand that notion of mending the rights

which are incidental to a share, but if the old

notion of a statutory contract has any validity it

comes to me as a surprise that that power of

altering the rights which are attached to a share

extends to expropriating shares so that

shareholders no longer are parties to the contract.

MR EMMETT: Well, be that as it may, it is the fact that the

power of amendment is infinite, in a sense, unless

the court says that there is some limitation on the

power as distinct from an equitable limitation on

exercising the power for a wrong purpose - - -

BRENNAN J: Well, that seems to me to be - well, to my mind

at all events - the basic problem here. Is there

any case where a power of expropriation has been

upheld?

MCHUGH J: Yes.

MR EMMETT:  Yes. The English Court of Appeal in Sidebottom

v Kershaw Lease and Co did so. There are three

cases where this sort of provision has been

considered by English courts. In two of them

single judges said the particular alteration was

bad. In the one in which it was said that the

insertion of the article was good, it was a Court

of Appeal decision. The other two decisions are

single judges, and each of them has been criticized

by a Court of Appeal, not directly on point, but in

a way that suggests that in so far as it underlies

the decision to say that it is bad as a matter or

principle, then that is not sufficient.

McHUGH J: But, there does seem to me something inherently

unjust about the majority shareholder being able to

Gambotto(4) 25 21/4/94

time the expropriations. Take two years ago: BHP

shares are $11; I am a shareholder in BHP; majority

say, "We want to expropriate those shares, in fact

we will pay $1 over it." My view is, the market

price is ridiculous, it reflects the economic

conditions. Now, why should I be forced to sell my

shares; why should Mr Gambotto be forced to sell his shares at a time when the principal assets of

this group are broad acres of land, and it is

1991-1992 valuation when the market is at its

lowest?

MR EMMETT: Well, Your Honour, they - - -

McHUGH J: It just strikes me as oppressive to the rights of

shareholders that majorities can alter the articles

and take-over their shares against their will.

MR EMMETT:  With respect, Your Honour is confusing the two

issues. The way around that is by putting in

question the fact that you are being deprived of

perhaps just the opportunity of sharing in an

increase in the future. That is a matter for the

particular -

McHUGH J: 

But it may be an opportunity that depends on no

more than your faith or your vision which can be
valued.

MR EMMETT: 

It may not be, but that may be sufficient to

say, "This particular shareholder would find it

oppressive to have his faith denied". If there was

evidence to say, "I have a belief in what's going

to happen to this land in the future and although,

as at today's values, that gives rise to a

particular figure, I put something on it beyond

that". If there is evidence to that effect, it may

be that the Court would say, "Well, it is

oppressive for this particular shareholder to be

deprived of that opportunity", but it means

something more than that.

McHUGH J:  Why can we not act on that assumption in this

case? I gather from the material I have seen that

this company had not been paying dividends, at
least not for some time, and its principal asset

was this land, seven tracts of land that it still

had.

MR EMMETT:	One cannot, in our submission, make findings of oppression without facts. There must be some
evidence that shows that it is oppressive in the particular case.

McHUGH J: It is prima facie oppressive to a person to take

their shares from them.

Gambotto(4) 26 21/4/94

MR EMMETT: That really begs the question though, with

respect, Your Honour. This Court has said on

occasion that it is not prima facie oppressive.

McHUGH J: I can only say, you give them the value, as long

as it is a just value; that is all right. That

seems to me to be an infraction of the person's

right to - if he wants to have his property in the
form of shares, surely it is oppressive to say,

"Well, sorry, instead of the shares, your stake in

the future of this company, we will give you $1.80

for your piece of paper".

MR EMMETT: That, in our submission, though does beg the

question.

McHUGH J:	I know you say that.
MR EMMETT:	One cannot say just because it is an

expropriation that it is oppressive.

DAWSON J: Why not? The share obviously must have a price

to the shareholder and at some point in time he

will sell them. He might reasonably say to the

company or the majority, "You've got to dangle a

carrot and unless you dangle a sufficiently fat carrot, I'm not going to sell but, if you do, I

will".	Why is he not entitled to take that
attitude?

MR EMMETT:  It comes back to the same point I was putting to Justice McHugh, I think.

DAWSON J: It does; indeed it does.

MR EMMETT:  The court cannot assume that. If he says - - -

DAWSON J:	Why can it not?
MR EMMETT:	Because the court cannot find oppression unless

there are some facts to support the finding that it

is oppressive to the particular shareholder.

McHUGH J:  He says, "I don't want to sell my shares". What

is more, according to one of his letters, he has

resisted many overtures.

MR EMMETT:  But simply saying "I don't want to" is not

sufficient unless one can find some evidence to say

why he wants to keep them. If he just has an

irrational attachment.to them, it is not - - -

DAWSON J:	You can assume that if he were given a sufficient price, he would.
MR EMMETT:	One does not know.

Gambotto(4) 27 21/4/94

DAWSON J:	That is ..... assumption.
MR EMMETT:	But it would be open to a plaintiff to say in the particular circumstances, "I don't want to sell
my shares at that price because I have a belief
that this land has a future that's not recognized
by the present valuation". There was no attempt,
for example, to put in issue the underlying valuation on which the accountants relied for the
purposes of their assessment of the share value.

What Your Honour is putting is inconsistent,

with respect, with what this Court said in Peters'

American Delicacy Co.

McHUGH J: They were only dicta.

MR EMMETT: They certainly were.

McHUGH J:  Dicta. You have got one decision that is upheld

on expropriation, you have got a 1920 Court of

Appeal decision which applied a principle which

this Court has said is wrong.

MR EMMETT:  But this Court said it was right.

McHUGH J: Not in the terms they applied it.

MR EMMETT:  But in Peters' American Delicacy Co,

Sidebottom's case was cited with authority.

BRENNAN J:  Where?

MASON CJ: It is 61 CLR 457, at page 509, is the reference

to it.

MR EMMETT:  At 61 CLR, the reference is at 480. Starting at

page 479 Sir John Latham sets out what he says are

some relevant principles of law. The third

principle is stated at page 480, at which he says:

It follows that where the rights of members of

the company depend only upon the articles it
is possible to alter the rights of members or
of some only of the members by altering the

articles. The fact that an alteration

prejudices or diminishes some of the rights of the shareholders is not in itself a ground for attacking the validity of an alteration: See

Sidebottom v Kershaw, Leese & Co Ltd

(expelling a shareholder) -

which is the Court of Appeal decision to which I

refer. Mr Justice Dixon does not put it quite as

explicitly as that. aefore I go to

Mr Justice Dixon, Mr Justice Rich referred to

Sidebottom without any disapproval, at page 495.

Gambotto(4) 28 21/4/94

Perhaps beginning at the bottom of page 494, he says:

No rights given by articles of association can

prevail against a three-fourths majority and

it is well understood that all are subject to

it. It is true that the power of alteration

must be exercised bona fide with a view to the

advancement of the company considered as a

whole and not with a view to the advancement

of the interests of a majority of voters or of

a section of the company only.

And says after a few lines:

This seems to be the effect of Sidebottom v

Kershaw.

He does not deal with the question of

expropriation, as such. Mr Justice Dixon's

judgment begins at page 496. At 502, half-way down

the page, he refers to the history of section 20,

which was the predecessor of section 176 in the

Law. Then towards the bottom of that page, about

eight lines from the bottom:

But the power of altering articles of association now conferred by statute had its

analogue, if not its source, in clauses found

in deeds of settlement by which a specified
majority of the members of companies

constituted or regulated by such instruments

were empowered to alter or add to their

provisions. The mala-fide use or abuse of

such powers would naturally fall under the

jurisdiction of courts of equity, and from the

time of the Act of 1856 which included the•·

statutory authority to alter articles of

association, it has never been conceded that

the power is unrestrained. It is one thing,

however, to say that such a power is not

define the grounds upon which an ostensible	unlimited or uncontrolled and another to
exercise of the power should be considered
invalid.

Then, going to the bottom of the page:

the courts sought for a limitation in the more
general doctrine that a power must be
exercised bona fide for the end for which the

power is designed. Primarily a share in a

company is a piece of property conferring

rights in relation to distributions of income

and of capital .. In many respects the
proprietary rights are defined by the articles

of association, and it is easy to see that a

Gambotto(4) 29 21/4/94

power of alteration might be used for the

aggrandizement of a majority at the expense of

a minority.

Then, leaving out a few sentences:

It has seemed incredible that alterations of

such a nature could be made by the exercise of

the power. But reliance upon the general

doctrine that powers shall be exercised bona

fide and for no bye or sinister purpose brings

its own difficulties. The power of alteration

is not fiduciary. The shareholders are not

trustees for one another, and, unlike

directors, they occupy no fiduciary position

and are under no fiduciary duties. They vote
in respect of their shares, which are
property, and the right to vote is attached to

the share itself as an incident of property to

be enjoyed and exercised for the owner's

personal advantage. No doubt the exercise of

the right affects the interests of others too,

and it may be that an analogy may be found in

other powers which though given to protect the

donee's own interests affect the property

rights of others, as, for instance, does a

mortgagee's power of sale. Some such analogy

probably gave rise to the suggestion made in Buckley ..... that the limitation on the power is that the alteration must not be such as to

sacrifice the interests of the minority to

those of a majority without any reasonable

prospect of advantage to the company as a

whole.

It is in that context that one goes to the

bottom of page 511:

The chief reason for denying an unlimited

effect to widely expressed powers such as that

of altering a company's articles is the fear

or knowledge than an apparently regular	exercise of the power may in truth be but a
means of securing some personal or particular
gain, whether pecuniary or otherwise, which
does not fairly arise out of the subjects dealt with by the power and is outside and
even inconsistent with the contemplated
objects of the power.

Going over to the top of the page:

The reference to "benefit as a whole" is but

a -

referring to the expression that found its origin

in Allen v Gold Reefs, the dictum of Lord Lindley:

Gambotto(4) 30 21/4/92

very general expression negativing purposes

foreign to the company's operations, affairs

and organizations. But unfortunately, as

appears from the foregoing discussion, the use
of the phrase has tended to cause

misapprehension. If the challenged alteration

relates to an article which does or may affect

an individual, as, for instance, a director

appointed for life or a shareholder whom it is

desired to expropriate, or to an article

affecting the mutual rights and liabilities

inter se of shareholders ..... the very subject

matter involves a conflict of interests and

advantages. To say that the shareholders

forming the majority must consider the

advantage of the company as a whole in

relation to such a question seems

inappropriate, if not meaningless, and at all

events starts an impossible inquiry.

And, towards the bottom of the page, eight lines

from the bottom:

No-one supposes that in voting each

shareholder is to assume an inhuman altruism

and consider only the intangible notion of the

benefit of the vague abstraction called by

Lord Robertson in Bailey's case "the company as an institution."

And, at 513, the sentence before the paragraph:

But, when the very question to be determined

is a conflict of interests, unless the subject

matter is held outside the power, the purpose

of the resolution, as distinguished from the

motives of the individuals, often must be to

resolve the conflict in favour of one and

against the other interest.

And then, finally, at the bottom of that page,

having considered the particular article in

question, Sir Owen says:

In these circumstances it appears to me that

the resolution involved no oppression, no
appropriation of an unjust or reprehensible
nature and did not imply any purpose outside

the scope of the power.

Now, we would say, when one reads the reference at
the bottom of that page, in the context of his
earlier reference to the possibility of a

shareholder being expropriated, what Sir Owen is

saying is that approp~iation or expropriation is

not of itself bad, but only if it is an unjust or

reprehensible expropriation. He also refers to

Garnbotto(4) 31 MR EMMETT, QC 21/4/92

Sidebottom without criticizing that decision as

being bad as a matter of principle which, if what

Your Honours is putting to me is correct, would

have been the easy way of disposing of Sidebottom

and would have expected Sir Owen Dixon and anyway, because, as a matter of principle, you

cannot include an article which expropriates, or
has the capacity, or the potential to result in
expropriation".

We accept that it may well be that those observations are not strictly part of the ratio

that was necessary for the resolution of the issue

there in question. What was involved was an

amendment which was designed to eliminate what was

perceived to be some inconsistency within the
articles, but it did have the effect of depriving
shareholders of particular rights, although it

certainly did not have the effect of depriving a

shareholder of his status as shareholder. On the

other hand, it did give rise to the potential that

the shareholder might have been deprived of his

rights because - I withdraw that.

McHUGH J: But His Honour did seem to have some doubts about

an article that allowed for expropriation:

without cause and upon grounds unspecified and

not expressly limited.

MR EMMETT:  To where is Your Honour referring?

McHUGH J: At page 510. After referring to Dafen Tinplate,

about point 3 on the page, His Honour said - - -

MR EMMETT:  Dafen Tinplate was one of the two single judges

which said that it was - - -

McHUGH J:  Bad?

MR EMMETT:  Yes. But that would not be inconsistent with

what we are saying. If there was simply an

expropriation without any evidence at all as to the

gain or advantage to the company, one might be able

to draw the inference that it was simply to get rid

of the minority and had no attendant advantage. I do not think we would quarrel with an article that was introduced in those circumstances, but there

was - - -

McHUGH J: There seems to be some tension between the

expression "the benefit of the company" and - when

one talks about the benefit of the company as a

whole, is one talking about the company as the

legal entity or is one talking about the

shareholders?

Gambotto(4) 32 21/4/94

MR EMMETT:  That is a very interesting debate. We have

given Your Honours a reference to an article,

although we did not put it on the list because I

was not proposing to read from it, but it is a very

interesting article in the Modern Law Review in

which those questions are canvassed. It is an

English article but it considers Peters and

decisions of the High Court and decisions of the

English courts and draws that very distinction,

that the doubts that have arisen from time to time

as to whether the expression which Lord Lindley

invented is concerned with the company as a
corporate entity or with the shareholders as

shareholders.

One way in which Sir Owen Dixon suggests you

resolve the conflict is that it depends upon the
nature of the alteration. If the alteration is for
the purposes of getting a benefit for the company,
then maybe look at whether it is for the benefit of

the company. If the alteration simply alters the

rights of the shareholders inter se, then the

benefit of the company is irrelevant and that would

be an irrelevant consideration.

McHUGH J: Except this case really throws up the point, does

it not, in the sense that one of the principal

grounds on your case for making the alterations is

that it will enable the company to get a benefit

which will then be transferable to the shareholder?

MR EMMETT:  Ultimately it might give the shareholder a

benefit from the other point of view in that it

also is able to group, so both this company is able

to group and the other ultimate holding company is

able to group so that each gets the benefit of

being able to transfer tax losses from one to the

other. So we would say if one has to look at that

question this is in the interests of the majority,

but also in the interests of the company as such.

Our approach is really to try to ignore that

question and to say that you start with the prima

facie position that the majority can alter the

articles in any way they like unless it is an

illegal alteration, and it is up to the plaintiff

to show either that it is motivated by an improper

purpose, or that it operates in a manner which is

oppressive to the particular shareholder in the

particular case.

We have endeavoured to put together some

words, although there is no particular magic to

them, in paragraph 5 of our written outline. Some

of the language comes from the language used by

Sir Owen Dixon in Peters, some of it is our own and

some of it comes from· Sir John Latham. Our basic

submission is that no alteration is bad of itself.

Gambotto(4) 33 21/4/94

It is up to somebody who complains about it to

suggest why it is bad, either because the majority

had an ulterior purpose or because it operates

unfairly or oppressively to the shareholders in the

particular case. Either one of those matters

involves evidence. Maybe some inferences can be

drawn. For example, the old Mr Justice McLelland
in one of the cases which we put on the list which

I did not intend to refer to, Australian Fixed Trusts v Clyde Industries, said, "Well, in the

absence of any reason why this alteration is being

proposed, I may be able to draw the inference that

it has no proper motive and it is just designed to

interfere with the minority", but that is really

just a question of evidence.

Where there is positive evidence that says

there is some benefit for the company, then it is

clear that the complaint of ulterior purpose has

not been made out. It may nevertheless be possible

for the plaintiff to say, "Even though there is a

proper purpose or not an ulterior purpose,

nevertheless this article operates oppressively to me in the particular circumstance", and then I get

back to the debate I had with Your Honours

Justice McHugh and Justice Dawson that it is

necessary to find evidence that the terms of the

appropriation are unfair in an objective sense

because the compensation is inadequate, or

alternatively, are oppressive for the particular

shareholder in the particular circumstances.

Either one of those involves, in our submission,

some evidentiary basis.

BRENNAN J:	I take the force of your references to the existence of the power. But if you focus then upon
the benefit of the company as a whole, and in this case you see that the relevant benefit is one which
sounds in terms of tax advantages and
administrative costs, the question then is if the
acquisition of power is to be exercised by a
majority against a dissenting minority, must not
the expected benefit to the company be reflected in the terms of the acquisition?

MR EMMETT: Perhaps yes, but that is a matter for evidence.

BRENNAN J:  I mean in this case, for example, there is no

doubt, is there, about the relevant facts?	I mean
the relevant facts are that there will be
advantages to the company in the conduct of	its
affairs.

MR EMMETT:  Yes.

BRENNAN J: In terms of tax and administrative costs.

Gambotto(4) 34 21/4/94

MR EMMETT:  But those matters - I am sorry.

BRENNAN J: Is there anything which reflects those benefits

in the terms of the acquisition?

MR EMMETT:  The valuation took into account potential tax

benefits to the company, and that was taken into

account in arriving at a value of $1.30-something

for the shares.	The price that was paid was in
fact $1.80.	Now, it would have been open to

Mr Gambotto to put in issue the propriety of that valuation and to say, "You have not properly

compensated me for what these shares are really
worth" and if that had been put in issue, and one

does not know what the factual result might have

been, but if it had been put in issue and the

court found, "We think that the price fixed does

compensate you for what these shares are worth,

having regard to the tax benefits to the company",

that is an end to the matter.

On the other hand, if Mr Gambotto had put the matters in issue and the court said, after hearing

no doubt from expert valuers on both sides, "This

valuation and the price fixed does not give proper

allowance for the tax benefits which the company is

going to derive", then it would be consistent with

the principle that we advanced, to say, well, that

is a reason for striking down the amendment.

But that simply was not an issue in these

proceedings. So that, really, Your Honours have to

say that there never can be a resolution such as

this that gives a power of expropriation. It does
raise that bald question, having regard to the

absence of that factual issue in the trial court.

BRENNAN J: That is an expropriation not simply

expropriation simpliciter perhaps but an

expropriation of a minority by a majority. One can

understand that there might be expropriations in

the course of a reconstruction, for example. But

the notion of expropriation by a majority of a

minority seems to me a different - - -

MR EMMETT:  The Corporations Law itself recognizes that as a

possibility in the take-over legislation, for

example, where certain conditions are satisfied,
then an offerer has the right to acquire the shares

of the outstanding minority.

BRENNAN J: Yes, that is a statutory right.

MR EMMETT:  It is, but the only relevance of that is that

the law itself reflects the possibility that

expropriation is not such a heinous sin that it

should never be permitted.

Gambotto(4) 35 21/4/94

BRENNAN J:  Now, the real problem is this, is it not,

whether or not in the statutory contract - if I can

go back to that concept - the rights attached to

shares in the hands of a special majority, perhaps,
include the right to acquire if they see fit to

exercise it by amendment of the articles et cetera.

If it does, well, so be it; if it does not then it

does not.

MR EMMETT:  That probably is the short issue in the

proceedings and what we say is, "If you become a

shareholder in a company you know that you are

subject to the will of a majority and one of the

things that could be done is that you are

expropriated." What you do know is that you cannot

be expropriated for some ulterior purpose and you cannot be expropriated on some unfair terms. But you accept the possibility that you might

nevertheless be expropriated. That is the

proposition that we advance.

DEANE J:  You have to go a little further and you have got

to say that you may be expropriated by decision of

the majority in favour of the majority.

MR EMMETT:	Yes, but that must follow.
DEANE J:	Then that brings you back to Justice Brennan's

question and that is: in the statutory contract,

or if you go back earlier in the contract, while it

may be implicit that the contractors can have their

rights and liabilities governed by a decision of

the majority made in the appropriate way, is it

implicit that they can be excluded as contractors

and their interests expropriated to other

contractors by majority decision of those other

contractors?

MR EMMETT:  We would not dispute with that as the

formulation of the issue and, we say, it is not

implicit that that cannot be done, and we rely on

what the Court of Appeal did in Sidebottom's case,

and what this Court did in Peters.

DAWSON J: If, in fact, you reverse the tables, and you say

that a minority shareholder, a holder of a few

shares can act in a way which is oppressive to the
majority, in certain circumstances, by simply

preventing them from conducting the business of the

company in such a way as to be profitable.

MR EMMETT:  Well, that may be, and it may well be there is a

remedy under section 320 - - -

DAWSON J:  No, I am not suggesting that. I am just saying

that you can see when· a majority shareholder is

being obdurate about something which is rather

Gambotto(4) 21/4/94

silly, he could be holding the majority to ransom.

That is the way you could look at it, and - - -

MR EMMETT:  The minority could be holding the majority to

ransom.

DAWSON J: Yes. The majority must have a remedy, that is

the way you put it.

MR EMMETT: 

Yes, that is right, but so long as that remedy

does not unfairly expropriate, and so long as the
remedy is for a purpose of the company, and not for

some ulterior purpose - - -

DAWSON J: 

Which will benefit the majority, admittedly, but

yes.

MR EMMETT:  Yes. For what it is worth, this matter has been

considered by the legal committee of the Companies

and Securities Advisory Committee, may I hand up to

Your Honours some copies. We do not get much

assistance out of this, other than the fact that

there seems to be a tendency, these days, to have

regard to the policy of the legislature and this is

an issues paper dealing with various forms of

compulsory acquisition. One of the forms which is

referred to is the form that was established in

these proceedings. If Your Honours go to the

introduction, Your Honours will see that there is

stated the various purposes why compulsory

acquisition might be contemplated by companies, and

then there is a summary of the various means of

compulsory acquisition that might occur, and then

each of them is dealt with separately.	One of them
is at the top of page 2:

amendment of articles or rights attached to

shares -

and the commentary on that question appears at

pages 27 and following, and Your Honours will see a

of Appeal. reference to this case in the decision of the Court Now, the only reason we refer to this is that

it may be of significance that that body did not

seem to think there was anything bad per se, or

malum per seas Justice Meagher said, in an article

such as this.

I do not want to.take any more time, other than simply to make that available to Your Honours

so far as it has that notion of community
acceptance, in so far as this represents community

acceptance. It does ~lso serve to indicate the

various other ways in which compulsory acquisition

might occur.

Gambotto(4) 37 21/4/94

Your Honours, I am not sure there is much more

I can say on what we understood to be the first

ground of appeal. The issue is fairly clear.

MASON CJ: Yes.

MR EMMETT:	The second ground, although I am not sure - - -
DEANE J:	Mr Emmett, there is a New Zealand case on this

that supports you, is there not?

MR EMMETT:  I must say it has escaped us if there is one.

DEANE J: Well, what I said could well be wrong. What I was

really going to ask you is have you looked to see

whether there is anything in New Zealand or Canada

which bears on this?

MR EMMETT:  Our researches should have covered those areas,

so that if there is anything we have missed them.

But I would not warrant that there is not something

we have not missed. We did also look at the

United States' experience, although the underlying

doctrines there are somewhat different. They find

a fiduciary duty owed by a majority in some

instances, although there are American cases where

it is said notwithstanding that fiduciary duty, you

can still have what amounts to compulsory

expropriation by means of a merger.

DEANE J: Is there anything in the Supreme Court?

MR EMMETT:  No, that was not a decision of the

Supreme Court, no. It was a decision of a State

court, I think the State of Delaware. There are

Supreme Court decisions that say that there is a

fiduciary duty, and the case we found - we have not

given Your Honours a reference to it. Unless

Your Honours want to look at it, we did not think

it would really advance things because of the total

different underlying principles that one finds in

American company law. That is all I wanted to say on the first

ground of appeal. The second ground of appeal

concerns section 180 of the Law, although I am not

sure that Mr Gambotto has addressed on that. He

certainly did not orally, and I am not sure there

is very much referred to in the extract from the

white book. We have indicated in our written

outline the thrust of the argument, and it is
shortly this. Perhaps Your Honours need to look at

section 180. It is subsection (3) that was relied

upon in the notice of appeal:

A member of a company, unless either before or

after the alteration is made the member agrees

Gambotto(4) 38 21/4/94

in writing to be bound by it, is not bound by

an alteration of the constitution made after

the date on which the member became a member

so far as the alteration:

(c) increases, or imposes, restrictions on the

right to transfer the shares held by the

member at the date of the alteration.

Our short answer to that is that this does not

interfere with the right to transfer; these shares

are equally transferable. What that section is

concerned with is inclusion of such provisions that

are often referred to as pre-emption clauses or

rights of first refusal where there is in fact a

restriction imposed on the transferability of the

share itself. For example, the provision might

say, ttA shareholder may not transfer a share to any

person other than a member unless he first offers

the shares to all members at a price determined in

accordance with some mechanismtt.

We have given Your Honours a reference to other provisions in the Law which suggest that that

is what this section was directed at, and not a

provision such as this. So that, in our

submission, in so far as the attack on the

alteration to the article is based on

section 180(3), the attack fails.

BRENNAN J:  What do you say about this proposition,

Mr Emmett, that the benefits which were to result

to the company as a result of the operation of

article 20A were benefits which were denied to the

company so long as it had its existing

shareholding? The existing shareholding was of

course provided for under the antecedent articles

and therefore, whatever might be implied in the

ordinary terms of the contract, there is no

implication of a term which allows the insertion of

an article to reduce the costs or to diminish the

profits of a company when the level of profits or	of costs is a function of the company membership
prescribed by the articles. I have not expressed
it very well perhaps.

MR EMMETT: If I understand Your Honour correctly

BRENNAN J:	I have not expressed it very well.
MR EMMETT:	I think I understand what Your Honour is

putting.	We do not rely upon any implied term that
enables this amendment to be made.	The plaintiff

has to point to some implied term that says it

cannot be made.

Gambotto(4) 39 21/4/94

BRENNAN J: Yes, well, I suppose one can put it another way:

that the only circumstances in which there can be a

power to insert an article for expropriation is

where the insertion of that power would be for the

benefit of the company as a whole, whatever that

may mean. It cannot be for the benefit of a

company as a whole to insert an article, the object

of which is to enhance the profits, which are kept
at their present level, in order ~J answer the

requirements of the existing shareholders.

MR EMMETT: 

We would say there is no warrant for implying

such a term. For example, the amendment that was
proposed in relation to the Sidebottom case, which

was where the Court of Appeal did uphold the

alteration, was designed to enable expropriation,

or exclusion of a member who was trading in

competition with the company.

BRENNAN J: Right.

MR EMMETT:  So that, in that case, it was held not to be a

foreign purpose to say that the articles could be

changed and a shareholder excluded, simply in order

to achieve a benefit for the company itself. So

that we would say that that sort of principle would

eliminate a proposition such as Your Honour put to

me.

McHUGH J:  You are exercising a statutory power here when

you alter your articles.

MR EMMETT:	Yes.
McHUGH J:	Why should not a statutory power be read subject

to the exception if it is not intended to take away

such a fundamental right as your right to possess

their own share.

MR EMMETT: That, with respect, is just another way of

putting the proposition Your Honour put to me

before and our answer is the same; that there is no

warrant for reading into the statutory power a

limitation to that effect. The courts have always

read in a limitation, namely that you cannot

exercise it for a foreign purpose, nor can you

exercise it in a way which is unfairly harmful to

the particular minority. But, with respect, it

just formulates the issue in a different way. It

is either right or wrong.	May it please
Your Honours.

MASON CJ:  Thank you, Mr Emmett. Mr Gambotto, do you want

to reply to what we have heard from Mr Emmett.

MR GAMBOTTO:  If I may very briefly, Your Honour. From my

understanding, Your Honours, Mr Emmett made, either

Gambotto(4) 40 21/4/94

at his own prompting or arising from the benefit of

some of Your Honours' comments, five main points:

one is that he accused the appellants of not

raising the issue of the valuation in the lower

court. The comments that I made at this hearing

earlier about the valuation were not comments at

all designed to attach any impropriety to the

valuation itself.

The comments that I made were to point out to

Your Honours that the judges in the lower court did place a lot of emphasis on a valuation which was before them and was plagued by the faults that I

pointed out to Your Honours. Your Honours may well

come back to me on this point and say, "Why didn't

your counsel mention the very points that you
mention here today?". I do not know why. I just

thought that I would feel obliged to mention them.

But my remarks were not in any way attached to any

impropriety within that valuation.

Another point that has been made by Mr Emmett was in comment to my submissions regarding the

buy-back provisions of the Act. If it is accepted,

Your Honours, that the article is illegal, we have

a situation where Mr Emmett introduced evidence

before the Full Court on 10 December to the effect
that some of the minority shareholders have sent

back their shares and been paid for them. That, in

itself, I submit, and very respectfully at that, is

a direct breach of the buy-back provisions.

If it is accepted that the article is an

illegal article then each time the first respondent

pays somebody for their shares, he is in effect

buying back those shares and contravening the

buy-back provision. Now, that is my point, but it

is subject to the premise that the article must be

found illegal, as I submitted to Your Honours.

Now, Mr Emmett's main point, and main defence,

to my charges of oppression and illegality, and so	forth, and so on, is this: that it is a principle
of equity that has been passed by because it is a
1900 principle introduced by Mr Justice Lindley -
or whatever he was, anyway, "MR" I do not know what
that means - he said:

It must be for benefit of the company as a

whole.

I accept that principle because a company

cannot exist without its shareholders. On that

principle, even taking away the whole, and just

restraining one's argument, and one's view on that

phrase, not followed by "as a whole". "In benefit

of the company" I am talking about now, not "as a

Gambotto(4) 41 21/4/94

whole". The purpose for which the amendment was

brought forward to the shareholders by the first

respondent, or by the second respondent via the

first respondent, was that here we are, we are

going to make a lot of profit in years to come by

selling that beautiful piece of land, and some

other hidden assets of the company, for a great

amount of money, which will result in a great

amount of profits.

Your Honours have before you the affidavit by

the director of both respondents, to that effect. shareholders because if we throw them away we are

going to save hundreds of thousands of dollars,

millions of dollars, in taxation," and this is law,

this is not fact. I mean it is fact because of the

law.

The Taxation Act makes provision for that very

sort of situation. What the respondents are saying, "Unless you get rid of the rump", as

Mr Emmett called it, "we cannot get the taxation

benefit." The relevant taxation provisions in so far as taking advantage of losses or profits like

eliminating them one via the other, so to speak,

like they are trying to do in this instance, can

very well be carried out, and I am talking about

law, by applying what is called in corporate and

accountancy circles, the "back-door approach".

Instead of the respondents getting rid of Gambotto

and Sandri, those barbarians who have come and

challenged the will of Adsteam, the respondents
could very well achieve the same purpose and

achieve the same savings for the benefit of the

company and of the company as a whole by selling

the WCP group, the first respondent, those

wholly-owned subsidiaries that they allege

themselves have taxation allowable losses. Once

those subsidiaries become the property of the WCP

group, the first respondent, the taxation

provisions allow the WCP group to offset the

profits against the losses made by wholly-owned

subsidiaries, not of Adsteam, of the WCP group.

Let us not forget, Your Honours, in this

instance WCP group belongs 99 point something-or-

other per cent, 67 or 66 or 65, to Adsteam. In

other words, what I am saying is this, that all

their action in the lower courts has been to save themselves not the enormous taxation savings that

they allege in that affidavit, only .0030 of those

savings. That is the factual difference. The

back-door approach would allow them to save almost

the same amount of money if they showed those tax

losses subsidiaries to the WCP group without

getting rid of the rump.

Gambotto(4) 42 21/4/94

I hope, Your Honours - I am not yelling at

you, I am just trying to emphasize a point.	That
here has been made such a big point, that it	is for
the benefit of the company to save all those
hundreds of thousands of dollars because the
administration, of course, are a few hundred
dollars per year.	They are not really savings

because they still have to present a group set of

accounts, even if they become wholly owned

subsidiaries of Adsteam. They are not saving

anything by that. All they are doing is saving a

few dollars in share registry expenses because from

that time forward, if they get rid of the rump,
they will only have one shareholder in the company.

That is the whole purpose we are here for. That rather than choose the back-door approach,

which was quite legal and would have allowed them

to make the same saving, practically, apart from point something of a per cent, they chose to get

rid of the rump and one is allowed to ask why,

Your Honour. Why? Why all of this? Why two years

of my life to defend my own property when they

could very easily have done the opposite thing?

That is what I am talking about when it comes to

the purposes of this amendment. The back-door

approach is a well-recognized principle.

I cannot point out to Your Honours which

sections of the Taxation Act it is referred to.	I
had the sections but I did not think that I would
have to mention them.	I am now reading - I do not

know whether I am allowed to do so or not - and I

have not made any copies, I am afraid, because it

is a Court document, it should be part of

Your Honours' wardrobe of papers in this case.	I
am reading from Mr Emmett's submissions to the
lower court.	Of course the lower court, in my lay

eyes, has come up with its reasoning and its

decision is not only based on what our then legal

on what Mr Emmett said. representative said, but as it turned out, mainly Mr Emmett said, for instance - I pointed out

certain things about the valuation and, as I said,

why I pointed them out, he said, in the first page,

at certain point, "The price that was specified in

the article was appreciably higher than the

intrinsic value of the shares as determined by an

independent valuation". Now, I do not know what

view Your Honours would place on that term

"independent valuation" after I pointed out certain things to you. At another point in his submissions to the lower court, he said this, "a real

apotheosis of shareholder rights, in a sense", and

he is talking about the cases, the precedents and

Gambotto(4) 43 21/4/94

the schemes, "In a sense", he says, "they are

devices to achieve the same end; to get freed of a

small rump the continued existence of which

interferes with the administration of the company".

That is Mr Emmett's words. Then,

Mr Justice Meagher says - about the principle, but

the expropriation against one's will, he says,

Mr Justice Meagher says, "Why cannot it be

"That principle cannot be right", or whatever - and and

right? We do not like our property being taken".

Now, Mr Emmett, to that point he says, "The English

Court of Appeal has said you can include an expropriation article which entitles somebody to acquire at least a share of a competitor, Cyclops

decision."	I think Mr Emmett referred to that case
this morning.

Now, even then, Your Honours, I would like to

say something, if I may. Say that I am a

shareholder of the first respondent, and the first

respondent is engaged, his main business - I am

just bringing an example for Your Honours to weigh

this assertion by Mr Emmett - say that the first

respondent is engaged in manufacturing implements

to be used by the police forces of every State in

this country; like guns, handcuffs and all that

sort of thing, and I happen to be a shareholder

before the company engaged in that sort of

enterprise, and all of a sudden I go crazy and I
buy a Sten gun and stand in a shopping centre, of

any major city, and I start shooting around and

killing 150 people.

What Mr Emmett is saying is that following my

shooting of 150 people, WPC Limited, the supplier

of implements to the police forces of all the

States, can come to a court of law and claim that

it has to get rid of me because I am clearly a

competitor in the field of police work and so forth
and so on.	I have killed 150 people. This is what

he is, in effect, saying; that I can be gotten rid

of just because did something that was contrary to

what the company was engaging in after I became a

shareholder, not before, after I became a

shareholder. That is his point. Now it was on,

and Mr Justice Meagher makes this comment, followed

by a question mark - - -

MASON CJ:  Mr Gambotto, I think there is only limited

assistance we can get from your reading the

transcript of argument in the lower court. After

all, we are concerned with the argument that is

being presented here.

Gambotto(4) 44 21/4/94

MR GAMBOTTO: Well, Your Honour, I bow to your decision. I

thought that what Mr Emmett was saying to the lower

court was somewhat different to what he was saying

this morning, and that is why I raised the matter.

If Your Honour says that he is not to be guided

bywhat Mr Emmett said in the lower court, then I

rest my case.

Only one more thing, and this is very short.

I made the point in my white book, Your Honour, and

this is it, that whatever the reasons that were

adduced by the respondents to get rid of this rump,
whatever those reasons are and irrespective of the

taxation angle, could well have been eliminated by

liquidating the company. The company, by a

majority decision of its shareholders, and they are

the majority shareholding, they could have very

well applied to the court and liquidated the

company. The company - the rump would have been

eliminated, they would have adduced whatever

reasons they were adducing to Their Honours for

liquidation, and I think they had good grounds for

liquidation. Why did they not do that?

Now, this is what I am saying to Your Honours.

Why are we here? They had recourse under the laws and the statutes to eliminate the very rump for

which we have been assembled here.	Thank you
indeed, Your Honours.	You have been a pleasure to
address.

MASON CJ:  Thank you, Mr Gambotto. The Court will consider

its decision in this matter, and we will adjourn in
order to reconstitute for the hearing of the next

case.

MR GAMBOTTO:  Your Honour, can I just say two words on this

point?

MASON CJ: Very well, Mr Gambotto.

MR GAMBOTTO: Just two words. That is the reason why I gave

the affidavit by Mr Daniels to Your Honours before, at the very beginning. There are considerations in this matter, that the matter is rather an urgent

one. One, because of reasons of relief on these

appellants and also one is of the grave reasons

that Mr Daniels brings forward in his affidavit.

Thank you indeed, Your Honour.

MASON CJ:  The Court will now adjourn.

AT 12.45 PM THE MATTER WAS ADJOURNED SINE DIE

Gambotto(4) 45 21/4/94