In the matter of Gunyahweh Pty Limited

[2023] NSWSC 1133

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Gunyahweh Pty Limited [2023] NSWSC 1133

Hearing dates:

22-23 August; 29–31 August, 1, 6–7 September 2023

Date of orders:

19 September 2023

Decision date:

19 September 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Proceedings dismissed with parties to be heard as to costs.

Catchwords:

Oppression — Members’ rights and remedies — Whether conduct is oppressive to, unfairly prejudicial to, or unfairly discriminatory — Where Cross-Claimant made minimal financial contribution to company – where Cross-Claimant no longer occupies land owned by company.

Oppression — Members’ rights and remedies — Exercise of discretion as to remedy — Where compulsory buyout orders inappropriate in the circumstances — Whether to order company be wound up in oppression — Where relationship between the parties has broken down.

Legislation Cited:

- Conveyancing Act 1919 (NSW), ss 23C, 54A

- Corporations Act 2001 (Cth), Ch 6D, Pt 2J.1, ss 53, 113, 232, 233, 246B, 246C, 256A, 256B, 256C, 461, 467, 472, 708. 1324

- Evidence Act 1995 (NSW), s 135

Cases Cited:

- Ample Source International Ltd v Bonython Metals Group Pty Ltd (No 6) (2011) 285 ALR 488; [2011] FCA 1484

- Armagas Ltd v Mundogas SA [1985] 1 Ll R 1

- Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667

- Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; (2009) 257 ALR 610; [2009] HCA 25

- ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24

- Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97

- Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692

- Munstermann v Rayward [2017] NSWSC 133

- Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342

- OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1174

- Re Amazon Pest Control Pty Limited [2012] NSWSC 1568

- Re Bicher & Son Pty Ltd (2020) 147 ACSR 108; [2020] NSWSC 711

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749

- Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193

- Re ICB Medical Distributors Pty Ltd [2018] NSWSC 1315

- Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914

- Re QB Foods Pty Ltd [2021] NSWSC 1227

- Re SRD Property Pty Ltd [2023] NSWSC 441

- Ruut v Head (1996) 20 ACSR 160

- Snell v Glatis (No 2) [2020] NSWCA 166

- Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152

- Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310; (2011) 84 ACSR 121; [2011] NSWCA 104

- Tomanovic v One Australia Pty Ltd (2015) 104 ACSR 596; [2015] NSWCA 11

- Watson v Foxman (1995) 49 NSWLR 315

- Varma v Varma [2010] NSWSC 786

- Wain v Drapac(No 2) [2013] VSC 381

- Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68

- Zong v Lin [2022] NSWCA 136

Category:

Principal judgment

Parties:

Benjamin Smith (Defendant/Cross-Claimant)
Gunyahweh Pty Ltd (Plaintiff/First Cross-Defendant)
Anthony Grumley (Second Cross-Defendant)
Daniel Smith (Third Cross-Defendant)
Suzanne McKenna (Fourth Cross-Defendant)
Elizabeth Austen (Fifth Cross-Defendant)

Representation:

Counsel:
R Alkadamani (Cross-Claimant)
S Epstein SC (First to Fifth Cross-Defendants)

Solicitors:
Wall and Company Lawyers (Cross-Claimant)
PSD Lawyers (First to Fifth Cross Defendants)

File Number(s):

2022/0044427

Judgment

Nature of the proceedings and chronology

1. The Plaintiff, Gunyahweh Pty Ltd (“Company”) commenced these proceedings seeking orders for possession of part of land situated in Chowan Creek in New South Wales (“Property”) against the Defendant, Mr Benjamin Smith (to whom I will refer, without disrespect, as Benjamin, to avoid confusion with his cousin Daniel). Those orders were previously made by consent, but it remains to determine Benjamin’s Cross-Claim against the Company and four of its shareholders, Mr Anthony Grumley, Mr Daniel Smith (to whom I will refer, without disrespect, as Daniel, to avoid confusion with Benjamin), Ms Susanne McKenna and Ms Elizabeth Austen.

2. I now turn to a chronology of events, which raises issues of substance since the Company did not take, validly or at all, many of the corporate steps which were at issue in the proceedings. I have here drawn on the pleadings, the affidavit evidence and exhibits, and the Cross-Defendants’ chronology, where the Cross-Claimant did not provide a chronology.

3. In about July 2014 (Amended First Cross Claim Statement of Cross-Claim (“SCC”) [9]); denied First Cross-Claim Defence to Cross-Claim (“Defence”) [4]), Benjamin and his brother Sascha Smith (to whom I will refer, without disrespect, as Sascha, to avoid confusion with Benjamin and Daniel) commenced communications with Mr Bryant (“Bryant”), the then registered proprietor of the Property. On 20 August 2014 (SCC [10], largely admitted Defence [5]) Sascha and Bryant entered into a written agreement concerning occupancy of the Property, which provided for payment of a weekly rent and allowed Sascha the right to buy the Property for $1,100,000 during the term of the agreement (Ex J1, 10; Benjamin 27.5.22 [2]; Benjamin 7.11.22 [6]; Benjamin 15.2.23 [11]; Daniel 18.1.23 [19]). Benjamin pleads and the Company denies (SCC [11]; denied Defence [2]) that, although Sascha was party to that agreement, he and Benjamin were joint venturers in the performance of the agreement and the objective of securing the purchase of the Property. It is not necessary to determine that question to decide the proceedings. Benjamin also pleads and the Company does not admit (SCC [12], Defence [4]) that, after 20 August 2014, Benjamin and Sascha secured tenants and income and fulfilled the terms of that agreement.

4. A valuation report (Ex J1, 182) dated 23 November 2016 prepared by Gilchrist Valuers Pty Ltd for Southern Cross Credit Union Ltd, which had been initially approached to lend for the acquisition of the Property, assessed the Property’s then current market value as $1,400,000 and its rental value as $1,000 per week, which was a lower rental value than the amount that was being paid under the agreement with Bryant, and described the proposed purchase by Sasha and his associates as a “good purchase”.

5. The Company was incorporated on 20 January 2017 and acquired the Property under the arrangements between Sascha and Bryant (SCC [2]-[3]; admitted Defence [1]; Ex J1, 359). Benjamin pleads and the Company denies (SCC [14]; Defence [2]) that, prior to the Company’s registration, Benjamin, Sascha and Mr Grumley had agreed that the purpose of the Company was to be the registered proprietor of the Property and hold the Property so that existing and future shareholders of the Company could enjoy the benefit of a right to occupy a portion of the Property, on such terms as may be agreed between the Company and the individual shareholder. It is unlikely that such an agreement would have been enforceable, where the pleaded agreement would have depended on a future agreement with the shareholder as to the terms of occupancy. In a Notice to Admit Facts (Ex CC-5), Benjamin sought an admission that a document exhibited to Mr Grumley’s affidavit dated 10 June 2023 (Ex CD-3) was a true copy of the Company’s constitution from its incorporation to at least 1 February 2021; the Company denied that proposition (Ex CC-5), and it is now common ground that the Company’s shareholders did not take the steps necessary to adopt a constitution, either in that form or in a different from later put forward by Benjamin

6. On 20 January 2017, Benjamin sent Mr Grumley, Sascha, Daniel and others an email with attachments relating to the incorporation of the Company on that date (Ex J1, 273), which included information from the company registration provider as to how to set up a proprietary company, referring to the need for written consents to be given to act as directors and the need for the Company’s constitution to be executed by all of the Company’s members (Ex J1, 277). It appears that neither occurred. The constitution prepared by the company registration provider (Ex J1, 288), had it been adopted, would have provided for the issue of several classes of shares with specified rights. The attachments also included draft minutes prepared by the company registration provider for a meeting of directors and shareholders to deal with matters including the execution of the constitution (Ex J1, 360). It is now common ground that such a meeting was not held. The register of members prepared by the company registration provider recorded six ordinary shares owned by each of Benjamin, Mr Grumley, Sascha, Daniel, Ms Sandra Diwa (who is Daniel’s mother) and Ms McKenna (Ex J1, 371-376). The consents to act as a director provided by the company registration provider (Ex J1, 363-368) do not appear to have been signed.

7. Benjamin claims that, also on 20 January 2017, he and Sascha signed a “Gunyahweh Pty Ltd Founder Share Agreement 2017”, copies of which he initially said he could not locate (Benjamin 20.2.23 [4], [6]). I do not accept that document was then prepared or executed, given the limits of Benjamin’s recollection which emerged on his cross-examination, the issues as to the reliability of his evidence and the fact that it is highly unlikely that Benjamin and Sascha executed that document at that time or later when they did not then or later take other necessary steps relating to the Company’s incorporation, such as passing a resolution to adopt a constitution or providing written consents to their appointment as directors of the Company.

8. By April 2017, disputes had already arisen between Sasha and Benjamin (Ex J1, 423) and, in about April 2017, Sascha left the Property (Benjamin 7.11.22 [15]); Ex J1, 423-425).

9. In January 2019, Benjamin submitted a loan application to Westpac Banking Corporation (“Westpac”) (Benjamin 7.11.22 [22]). In February 2019, a meeting took place between Benjamin and Daniel and a representative of Westpac concerning funding for the purchase of the Property (Benjamin 7.11.22 [24]). Benjamin pleads (SCC [15]) that he was substantially involved in compiling a business plan which was intended to demonstrate the Company’s financial viability, the sources and potential sources of its income, its existing operations and the scope for expansion of those operations and its ability to borrow funds so as to acquire the Property. Benjamin pleads (SCC [16]-[18]) that the business plan was compiled so as to secure a loan and was provided by the Company to Westpac as part of the documents submitted in the Company's loan application to Westpac; and, on about 5 August 2019, Westpac approved a loan of $660,000 (“Loan”) to the Company, which accepted that Loan. Benjamin was then one of the guarantors of the Loan, although it appears that Westpac has now discharged him from liability as a guarantor (Ex J1, 2729).

10. Benjamin also claims that, in February 2019, the Company’s directors agreed that he “would be issued with a further three [G class] shares” in the Company (Benjamin 7.11.22 [21]). I do not accept that evidence, and Benjamin no longer presses his claim to have been issued G class shares in the Company. On 3 February 2019, Daniel sent Benjamin an email which attached a “Preliminary Inaugural Share Prospectus (Draft)” in respect of the Company (Ex J1, 722) which purported to amount to a “first public prospectus and preliminary offering of shares” and identified Mr Grumley, Benjamin and Daniel as the “founding directors” and referred to several categories of shares to be issued, there described as “founder investor wholesale shares”, “standard investor shares”, “founding director shares”, “manager share packages”.

11. On 28 March 2019 Benjamin sent to Daniel an email which attached a draft business plan (Ex J1, 771) and, on 29 March 2019, he sent Daniel a further email attaching a “Gunyahweh Landholder Share Agreement” and a further draft prospectus referring to “standard investor shares”, “founding director shares” and “manager share packages” (Ex J1, 778).

12. On 2 April 2019, a meeting took place on which Benjamin initially relied for a claim that the ordinary shares in the Company were “cancelled” and replaced by shares including “3x3 Founder Shares” (Ex J1, 849-851). I understand that claim is no longer pressed, where Benjamin no longer contends that he was validly issued G class shares. There is a dispute as to whether a meeting took place as recorded in minutes dated 2 April 2019 (Ex J1, 849), but little turns on that dispute where the steps recorded in those minutes, including Benjamin’s claim that he had “let all the appropriate people know and has the approval of the shareholders” did not satisfy the requirements for a share buy-back of the Company’s ordinary shares under Pt 2J.1 of the Corporations Act 2001 (Cth) (“Act”) or lead to the cancellation of those ordinary shares. It is not necessary to decide whether the mechanism described in that document could have effect to divide the “36 current shares” there referred to, however they originated, into specified classes of shares, or whether that course would have complied with ss 246B(2) or 246C(5) of the Act, since the parties took no point as to those sections.

13. On or about 8 April 2019, Benjamin lodged a notification of share buy-back with the Australian Securities & Investments Commission (“ASIC”) which wrongly recorded that the Company had undertaken an equal access share buy-back scheme within the 10/12 limit and, inconsistently but also wrongly, that shareholder approval had been obtained where the 10/12 limit was exceeded under s 257C(3) of the Act (Ex CD-3, 156). As I noted above, it is plain that the Company had not undertaken a share buy-back of its ordinary shares in accordance with the requirements specified in Pt 2J.1 of the Act and the parties do not now contend to the contrary.

14. By an email dated 23 April 2019 (Ex J1, 878), Benjamin sent Ms Austen a different version of a constitution of the Company (Ex J1, 881) together with an “Inaugural Share Prospectus” (Ex J1, 936) and, by a further email (Ex J1, 941), a “Landholder Share Package Agreement” (Ex J1, 942). There is no evidence that the constitution was adopted by the Company. The draft prospectus summarised the shares in the Company and described three “founder shares” held by each of the three directors (Ex J1, 936), likely referring to the three G class shares which Benjamin was then understood to hold, and stated that those shares entitled the holder to a position on the Company’s board of directors, were not transferable other than in limited circumstances and had dividend entitlements from five years after the purchase of the Property. It made no reference to any right of occupancy of the Property by the founding directors including Benjamin, by contrast with the description of “landholder shares” on the same page which referred to the fact that such share packages of 3 shares were available for $120,000 or $40,000 per share, entitled the holder to a position on the board of directors and “entitle the holder to build permanent dwellings (subsequent to local government approval) on one of the 3 currently undeveloped lots on the [P]roperty” and entitled the shareholder to “3 hectares of land for personal use along with building entitlements.” It seems to me highly implausible that those rights would have been described in detail in respect of the landholder shares but no reference, even in a summary form, made to corresponding rights attached to the founder shares, had such rights then been understood to exist.

15. For completeness, it is not necessary to decide whether the issue of a “prospectus” by the Company contravened s 113 of the Act, which relevantly provides that a proprietary company must not engage in activity that would require disclosure to investors under Ch 6D of the Act, other than an offer of shares or options in respect of shares to existing shareholders of the Company and employees of the Company or of a subsidiary of the Company. That would likely depend on whether the offers in this case had the “personal” character necessary for the exception in s 708(1) of the Act.

16. On 16 June 2019, Benjamin sent Ms Austen a further email (Ex J1, 1088) attaching documents including a “business spreadsheet” and “business plan” and a standard share purchase agreement. That email stated that it attached the Company’s constitution, but that is not among the documents tendered with that email. The attached business plan referred to three “founder shares” issued to each of the three directors, again likely referring to the three G class shares which Benjamin was then understood to hold, and stated (Ex J1, 1094) that those shares “are not sell-able [sic] though contain all rights to company dividends after 5 years and a position on GUNYAHWEH board of directors.” Importantly, it made no reference to any right of occupancy of the Property by the founding directors including Benjamin, by contrast with the description of “landholder shares” on the same page which referred to the fact that nine such share packages “contain right of long term residency on one of the 3 unoccupied lots” and that holders of the landholder shares “are entitled to first option on long term residential building rights on these lots” and those packages “also give entitlement to 3 hectares of property for private development”. It again seems to me highly implausible that those rights would have been described, now for the second time, in such detail in respect of the landholder shares but no reference, even in a summary form, made to corresponding rights attached to the founder shares had such rights then been understood to exist. That business plan and spreadsheet provided to Ms Austen (Ex J1, 1089) also made no reference to any liability of the Company for the monetary amounts which Benjamin later claimed against the Company

17. On 18 June 2019, the Company lodged a finance application with Westpac (Ex J1, 1119-1166). In June or July 2019, Benjamin also claims to have completed and signed a “Gunyahweh Pty Ltd Landholder Share Package Agreement” (Benjamin 27.5.22 [7]). I am not persuaded by his evidence in that regard, where no executed copy of that agreement is in evidence, and given his lack of attention to documentation in other areas, but there is in any event no evidence that the Company resolved to enter into such an agreement with him. Benjamin also contends that, in July 2019, a special general meeting of the Company adopted a new constitution (Benjamin 27.5.22 [6]; disputed Grumley 10.6.22 [11]). I am also not persuaded that occurred. On 26 July 2019, the Company executed a contract for the purchase of the Property (Grumley 16.1.23 [106]).

18. The Company entered an undated “landholder share package agreement” in mid-2019 relating to land now occupied by Ms Natalie Hollingsworth (Ex J1, 1321; T14). That document states that:

“This is an agreement between the purchaser and GUNYAHWEH PTY LTD Board of Directors (B.O.D.) for Landholder 3 share bundle purchase.

This agreement is to be considered legally binding on both parties.”

19. That document imposes certain conditions and obligations on Ms Hollingsworth including that all “[C]ompany business shall be conducted in line with the GUNYAHWEH PTY LTD Constitution”. That provision has the difficulty that, as noted above, there are two versions of the constitution, the evidence does not identify which constitution was there referred to and there is no evidence that either was adopted by the Company’s shareholders. That document also records certain commitments by the Company to allow use of its facilities by the “landholder” who would have an “automatic position” on the Company’s board of directors and gives permission for the permanent use of a worker’s cottage and two hectares of land on a specified lot, but provides for “share capital” to be returned to shareholders if the Property was not purchased before the end of the option to acquire it. It is not necessary to decide whether that agreement would be enforceable, where Ms Hollingsworth is not a party to it and has not signed it and it is not executed as a deed poll.

19. The Company also entered an apparently contingent “General Business Agreement” dated 18 August 2019 in respect of Ms Hollingsworth. The agreement provides (Ex J1, 1826):

“[The Company] agree that the sum of $67,500.00 will be held by the [C]ompany for the purchasing of [the Property]…

If [the Company] should fail to secure the property this amount shall be returned directly to Natalie Hollingsworth…This $67,500.00 will at time of purchase be considered part payment for 3 Landholder shares in [the Company]…”

It is not necessary to decide whether that agreement would be enforceable, where Ms Hollingsworth is not a party to it and has not signed it and it is not executed as a deed poll. The amount of $67,500 recognised as paid by Ms Hollingsworth under this agreement had not then been paid in money, but by about $13,000 attributed to the value of mechanical equipment, about $4,500 attributed to the value of a four wheel drive vehicle, and the balance was referable to work that she was recognised as having done (T189-190). The issue of a landholder agreement to Ms Hollingsworth, on the basis of a non-monetary contribution, distinguishes her position from that of other shareholders who had made substantial cash contributions in order to obtain such agreements, and from Benjamin’s position where the work that he had done was not treated in a similar way. There is a dispute as to whether Benjamin, or other shareholders, prepared the General Business Agreement with Ms Hollingsworth (T189-190, T350) which it is not necessary to resolve in order to determine these proceedings. That agreement, oddly, also contemplated that the amount of $67,500 would be paid to her if the Company failed to secure the Property, where she had not contributed that amount in money to the Company, and there is real doubt as to whether the Company would then have had the capacity to make that payment, at all or without substantial unfairness to other shareholders (see Ex J1, 1826 and see T233ff, T290-291).

21. A “landholder share package agreement” (Ex J1, 1653) in respect of Ms Talitha Mitchell is signed by her, but then only by a director of the Company as “witnessing director” rather than in a manner that would ordinarily bind a company. A share purchase agreement in favour of Ms Austen, signed in August 2019 (Ex J1, 1822) is in broadly similar form, and is signed by Ms Austen and witnessed by Daniel and Benjamin, but also not in a manner that would ordinarily bind a company.

22. At about this time, two B class shares in the Company were also issued, or purportedly issued, which were not associated with a building entitlement, and B class shareholders were to be granted “1 hectare exclusive use for projects approved by” the Company and use of Company resources “not utilised or required by the company”, including “the entitlement to share in shared land use, available accommodation, workshops, storage and agistment facilities, collective structures… and other assets” of the Company (Ex J1, 1660; T280).

23. On 5 August 2019, Westpac made on offer of finance for the purchase of the Property (Ex J1, 1399-1410) and, on 26 August 2019, the purchase of the Property was completed (Grumley 16.1.23 [108]-[111]). A further residential valuation report prepared for Westpac in mid-August 2019 (Ex J1, 1679) valued the land at $975,000 with improvements of $425,000 for a total of $1,400,000.

24. From about the date on which the Company acquired the Property, Benjamin expressed his unhappiness with his role and responsibilities within the Company in increasingly strident terms. By a Facebook message to Ms McKenna on 30 August 2019 (Ex J1, 1840), he stated that:

“Both Liz and Nat have no respect for the work I have done … I guess I just want to go and take a rest … I am not paid as a CEO I am only a secretary and for this I have had to do just about everything. Now people think I did it for free is just their god given right.”

25. By a second series of Facebook messages to Ms McKenna on 31 August 2019 (Ex J1, 1842), he advised that:

“… I am wanting to go elsewhere and vent. I want out of this place for a while … I am going to say no more. I am just really used up…”.

26. By a third series of Facebook messages to Ms McKenna on 3 September 2019 (Ex J1, 1843-1847), he stated that:

“This is not working for me S[us]anne … I am quitting the company. I can no longer work with the others. I will be dropping the websites, adverts, doing bills, social media, grants or anything else. …I have no interest in working for people who have no respect for me … I will never work for them again. Quite happy to invoice them for my work. Once they get the bill maybe they might start to appreciate my work a little more … I am not ever want to work for them again … I can not work with them any more … I have no interest in the role any more. I have done all I can for these self serving people”.

27. By a Facebook message to Mr Grumley on 3 September 2019 (Ex J1, 1858), he stated that:

“You fucking go to work to get paid. Yet you expect that I should work for nothing … I will never work for people who don’t respect me again …”

28. By a second Facebook message to Daniel on the same day (Ex J1, 1862), he advised that:

“…I expect to be paid for my hundreds of hours very complex work. I will be issuing an invoice to the company …”

29. By a third Facebook message to Daniel on 7 September 2019 (Ex J1, 1863), he stated that:

“I want my divid ends [sic] for the year. And the money the company owes me. My invoice will be $75000 which is way more than reasonable for the amount of work … “.

I note that his claim to dividends was in stark contrast to the statement in the business plan and initial prospectus, which I noted above, that dividends would only be payable on founder shares after five years from the purchase of the Property.

30. A share certificate dated 9 September 2019 was issued for three G class shares each in the Company in favour of Benjamin, initially showing $120,000 paid on the shares (Ex J1, 1894). On 9 September 2019, Benjamin pointed out that he had paid only $1 for his shares not $120,000, although he claimed the shares were “currently worth way more than that” and contested the validity of the then share certificate (Ex J1, 1896-1898). Mr Grumley responded that he would reissue Benjamin’s, Daniel’s and Mr Grumley’s share certificates showing $1 as paid (Ex J1, 1892, 1897). A second share certificate dated 9 September 2019 was then issued for three G class shares in the Company in favour of Benjamin, showing $1 paid on each share (Ex J1, 1895). I am satisfied that this was the genesis of the further share certificates on which Benjamin previously relied to claim that he holds six rather than three G class shares in the Company, and that claim was not well founded. In any event, Benjamin does not now contend that he was validly issued G class shares and the Company has denied in its Defence and in a Notice Disputing Facts that such shares were issued. The fact that no-one now contends that G class shares were effectively issued has significant implications for the scope of the remaining issues in the proceedings.

31. On 17 September 2019, a meeting took place at which Benjamin ceased to be the company secretary, whether permanently or temporarily, although nothing turns on that for the determination of the proceedings (Ex J1, 1911). It is plain, from the correspondence between the parties, that the relationship between Benjamin and the other shareholders was strained, if it had not already broken down, as early as September 2019 (Ex J1, 1845, 1858, 1860, 1891, 1909, 1969-1970, 2350, 2352) and the parties’ oral evidence also makes clear that the breakdown is by now irretrievable.

32. Mr Alkadamani, who appears for Benjamin, initially contended that Benjamin was allocated a further 3 G class shares for recognition of his efforts and Benjamin gives evidence of the suggested forfeiture in late 2019 of the further three G class shares (Benjamin 27.5.22 [9]). I do not accept this evidence, and I accept the submission of Mr Epstein, who appears for the Cross-Defendants, that Benjamin sought to develop a false claim to this effect from about mid-October 2019. On 15 October 2019, Benjamin sent a Facebook message to Ms McKenna (Ex J1, 1969) stating that

“Oh BTW do thank [Mr Grumley] for Dan and him signing my extra shares. Glad to see a little recognition …”

Benjamin would plainly then have known that the issue of replacement share certificates was directed to correcting the record of the amounts paid up on the shares, not to issuing him additional shares or giving him “recognition.” By further Facebook messages to Ms McKenna on 14 and 15 November 2019 (Ex J1, 2009, 2011), Benjamin hinted at the false claims now brought as follows:

“I also hold two lots of share certificates. Signed and sealed …”

“the founder shares ‘G’ class shares did not have a contract for their sale …There are now 12 of these shares. I do find it ironic that Dan[iel] and Tony by trying to dis me actually increased my holdings. It is their signatures on the shares and they are very legitimate share certificates. Signed and sealed (with the company common seal) as I said. My solicitor also knows of the shares. They are stored in a safe in my mother’s house.”

33. As I noted above, the issue of substitute share certificates that recorded G class shares paid up to $1 was plainly directed to replacing the earlier share certificates which falsely stated that the shares were paid up to an amount of $120,000, rather than to double Benjamin’s shareholding, and it is now common ground that effective steps were not taken to issue the shares in any event.

34. The “minutes” of a meeting of directors or shareholders in the Company on 3 December 2019 (Ex J1, 2046–2048) recorded, under the heading “Gunyahweh Main House and Tenants agreements” that:

“The board has decided to evict Benjamin Smith from the main house. A letter giving Benjamin 90 days to vacate was tabled and approved unanimously. It will be formally signed and issued with the company seal before being presented to Benjamin Smith in due course. The board has decided to renew all tenancy agreements for the top house. Due to Benjamin’s inhabitance [sic] of top house he has a conflict of interest and the board thus required his abstention from voting on this matter. 1. Talitha 2. Sanne. Unanimous agreement.

Furthermore the board decided Benjamin is not of sound mind to be representing the company in any capacity. 1. Nat 2. Tony. Unanimous agreement.”

35. On 9 December 2019, the Company wrote to Benjamin requiring him to vacate the premises where he was then residing (Ex J1, 2052; Benjamin 27.5.22 [12]). On 16 January 2020, the Company made an offer to Benjamin to occupy an area on the Property known as the “pirate ship” with necessary improvements to amenities being made (Ex J1, 2115) which Benjamin did not accept. That letter referred to that area as being “your share entitlement on the farm”, and I accept that phrase suggested that the Company and other shareholders then accepted that Benjamin had an expectation that he would be permitted to live on the Property, although it does not follow that that expectation was enforceable either in contract or by principles of estoppel on which Benjamin now relies. It should also be recognised that, on its face, that offer suggests a real attempt by the Company to meet Benjamin’s expectations and needs.

36. By an email also dated 16 January 2020 (Ex J1, 2096), Ms McKenna similarly seems to have sought to reach an acceptable arrangement with Benjamin, emphasising the benefits of the offer of occupancy of that area, including that he would be living “rent free” and only paying for costs and that he would “have [his] own home … before any of us others” and that “you can create a haven, it’s yours for life.” She went further to raise the possibility that he could “pick another spot” and stated that “[w]herever you choose pick [sic] as your permanent home on the farm, we will support you to get it sorted and livable.” Again, that appears on its face to have been a constructive approach.

37. An annual general meeting of the Company took place on 21 January 2020 and Benjamin claims that his original three shares were forfeited or deregistered by the Company on that date (Ex J1, 2142-2143; Benjamin 27.5.22 [11]).

38. On 12 March 2020, the Company commenced proceedings against Benjamin in the NCAT seeking his removal from the Property (Ex J1, 2198; Smith 27.5.22 [13]; Grumley 10.6.22 [24]). Those proceedings were dismissed for lack of jurisdiction on 25 May 2020 (Ex J1, 2234; Smith 27.5.22 [13]; Grumley 10.6.22 [24]).

39. By an email dated 11 August 2020 (T2111, T113-114), Benjamin advised that:

“I am invoicing [the Company] for $250,000 or the equivalent in shares for my work. I will hold the house in [lieu] of this payment being made.”

40. By a lengthy email dated 9 November 2020 (Ex J1, 2404), marked “without prejudice save as to costs” but tendered without objection, the Company advised Benjamin that, inter alia:

“You are a shareholder, who has been issued 3 G Class shares in the Company. Since it is the Company that is the proprietor of the [P]roperty, it is therefore the Company alone that may grant right to occupy portions of the [P]roperty. Exclusive use of a portion of the [P]roperty/occupation of any portion of the [P]roperty may only be obtained via a contract, lease, or individual share agreement entered into with the Company which must be approved by the [Company] Board of Directors or as stated in ‘The Shareholders Deed’ – referred to in the ‘Gunyahweh Pty Ltd Constitution’ as being created on or about January 2017. To be clear, you have not sought through valid application nor been granted any right to occupy any designated portion of the Company [P]roperty. All A Class and B Class shareholders have entered into agreements stating they have exclusive use of 03 hectares and 01 hectares respectively, with the Company, all approved by the Board of Directors. We have conducted several meetings and had many gatherings that you were informed of and were welcome to attend, where between the Board of Directors and the shareholders we worked together to figure out where each shareholders’ designated area was to be.

Your fellow G Class shareholders’ [sic] understand that they are not entitled to a designated area without approval from the Board of Directors. They are happy to wait until all other share packages are sold, [so] as to leave more attractive areas available for potential shareholders and have thus far seen no need to put in a proposal to the Board of Directors requesting approval. They currently have lease agreements with the Company to rent the spaces they are occupying, as these spaces are deemed of commercial interest to the Company in servicing all of its current liabilities…”

41. A further valuation of the Property dated 20 November 2020, obtained by the Company in anticipation of a selective reduction of capital in respect of the three G class shares that Benjamin was then understood to hold, valued the land and improvements with a mid-range value of $1,750,000, comprising $1,400,000 for the land and $350,000 for the value of the improvements (Ex J1, 400A).

42. Between 11 November 2020 and 11 December 2020, correspondence took place between the Company’s and Sascha’s legal representatives concerning his earlier exclusion as a director and shareholder of the Company (Ex J1, 2416, 2450, 2458, 2462). On 3 December 2020 (Ex J1, 2450), in responding to Sasha’s complaint as to the circumstances in which his ordinary shares had purportedly previously been extinguished, the Company gave its account of events as follows:

“On 2 April 2019, Benjamin Smith, acting as company secretary, convened a meeting, which inter alia, included the item of business for a corporate buyback of all shares.

On 8 April 2019, Benjamin Smith, lodged with ASIC Form 280 annexing the minutes of the meeting of 2 April 2019. The minutes record the following: “Benjamin has pointed out that the shares have to be re bought [sic] to re value [sic] and redistribute them. He has let all the appropriate people know and he has the approval of the shareholders.”

Again, Benjamin Smith certified to ASIC that the information was true and correct. If Benjamin Smith’s assertion is true and correct then your client raised no objection at the time.

The Company then asserted it was entitled to assume that Benjamin’s actions in that respect “were at all times lawful” although it is not apparent that any such assumption could be made, where the Company’s actions as undertaken by its directors (whether or not validly appointed) and Benjamin were in issue.

43. By letter dated 7 December 2020 (Ex J1, 2458), Sasha’s legal representative responded, with some force, that:

“Your letter indicates:

1.   The directors are not aware of the matters raised in our initial letter beyond publicly available documents lodged with ASIC;

2.   The documents lodged with ASIC are shambolic;

3.   The directors handed over control of the company’s running to the company secretary …;

4.   The directors apparently had and have no knowledge of the company’s affairs including during the period they were directors, and cannot provide an explanation for how, within their purview and tenure, our client was removed as director and stripped of his property (i.e. his shares);

5.   The company has no records in it’s [sic] control or possession;

6.   The directors have no proposal for resolving our client’s [sic] very serious concerns articulated in our previous letter.

These factors militate in favour of an order that liquidators be appointed to the company to sell its property and then be wound up.”

It appears that Sasha did not subsequently pursue that relief although, perhaps perversely, Benjamin now does so. By letter dated 11 December 2020 (Ex J1, 2462), the Company’s legal representatives responded to that letter denying Sascha’s claims and denying that they provided a basis for the winding up of the Company.

44. On 7 December 2020, the Company lodged a notification of a reduction in share capital with ASIC (Ex J1, 2479) which annexed notice of two extraordinary general meetings, the first of which provided for approval by all G class shareholders of the reduction in capital by the cancellation of only Benjamin’s G class shares, on the basis that the Company would pay an amount of $30,000 for each G class share to Benjamin, with the total amount paid being debited to the Company’s share capital account. A second extraordinary general meeting was to address a resolution for a reduction in the Company’s share capital by the cancellation of Benjamin’s shares.

45. The explanatory memorandum for that share cancellation recorded that a total of $90,000 was to be paid to Benjamin in compensation for the capital reduction, in nine instalments of $10,000 (Ex J1, 2484-2485). The explanatory memorandum stated that:

“The share reduction is being proposed due to persistent and continual disruptive and unruly conduct and a failure to follow the reasonable directions from the board. This has resulted in an inability of the Company to operate and undertake its usual business activities in a cohesive and efficient manner. In the board’s view the conduct is damaging and endangers the long-term viability of the Company.

The amount being paid in compensation for the Capital Reduction ($90,000) is based on the following formula to calculate the price:

Property Value + Assets + Retained Earnings less Current Liabilities less Cost/Damages divided by 26 (shares).

The Board has determined that the amount of compensation and payment plans set out above, will not affect the Company’s ability to trade and pay any creditors. The Board is confident that through retained earnings currently held, the prospect of selling more shares from several strong expressions of interest, some current shareholders have also offered to purchase more shares and the improved income from our rental property, we would have no trouble furnishing the debt incurred from the share capital reduction.”

46. Benjamin attacks the operation of that formula, so far as it includes an allowance for costs and damages allegedly caused by Benjamin to the Company and had an error so far as that amount was then deducted from the amount payable to Benjamin, rather than divided between the shareholders. That notice of the extraordinary general meetings also included an explanatory note referring to s 256C(2) of the Act, which requires, inter alia, that such a capital reduction be approved by a special resolution passed at the meeting of the shareholder(s) whose shares are to be cancelled. That requirement was not complied with, and required Benjamin’s approval of the cancellation of the G class shares (had they existed) which plainly could not occur.

47. By letter dated 11 December 2020 (Ex J1, 2477), the Company made an offer to acquire the G class shares that Benjamin was then understood to hold, on the basis of entry into a non-negotiable deed of settlement and release as follows:

“The Board and Shareholders of [the Company] have over the last year, been dealing with increasingly significant issues arising from your membership/shareholdings, to the point where … wellbeing is affected and the corresponding management of the Company has been impacted. The situation now is clearly at an impasse.

In an effort to resolve the impasse the Company makes the following one time offer: That the [C]ompany purchase the entirety of your G Class Shareholding, namely shares numbered 01, 02 and 03 for the total sum of $126,000.”

That letter indicated that, if Benjamin did not accept the offer, “the Company will have no option but to proceed with the foreshadowed Capital Reduction”.

48. Benjamin responded, by an email dated 11 December 2020 (Ex J1, 2478), in a manner which illustrates both the breakdown in the parties’ relationships and Benjamin’s inflammatory approach to matters, as follows:

“As I have stated several times already I am not interested.

You are welcome to sell your own shares though stop trying to illegally coerce me.

It is your inability to act within the law and your duty of care that has caused the issues. That is demonstrated clearly by the evidence I have. You have never addressed the original issues or the work I have done to bring us here.

You are welcome to take me to Court though any attempt to harm my shares will be seen as further illegal coercion on the part of the board.

You are breaking the law repeatedly in your attempts to attack me and I again request you cease and desist. Your hatred of me is not a legitimate reason for your actions.

[Y]ou fail to comprehend there would be no company or land to argue about if not for me.

So please wake up to the fact that I will not be going anywhere for the remainder of my life. It is why I did the work in the first place.

Have a nice day all of you.”

49. By an email dated 12 December 2020 (Ex J1, 2488), Benjamin advised that he had no interest in selling his shares, that no equivalent land in the Tweed area could be purchased for the money that was offered and inviting the board to “refrain from your attempts to rob me”. He also stated that he did not care that other shareholders did not like him and that he would not be “bullied” by them and advanced several allegations as to shareholders’ conduct before making the following threat:

“Do you know how this will look in Court? For one moment please put your heads together and think about that. I have refrained thus far from externalising the various issues. It would only serve to hurt the [C]ompany and all of you. It is not my aim. Revenge is not my driving force as it appears to be yours. Though if you all intend to continue down such a ridiculous path then eventually you will leave me no choice.”

50. By an email dated 14 December 2020, the Company convened two meetings to be held on 10 January 2021 to cancel the three G class shares which Benjamin was then understood to hold, with a total payment of $90,000 to be made to him (Ex J1, 2489-2494). By email also dated 14 December 2020 (Ex J1, 2500), Benjamin indicated that his vote was against the proposal, a matter that would have been of significance so far as the proposal could only have proceeded if Benjamin had voted in favour of it under s 256C(2) of the Act, if the G class shares which he was then understood to hold had in fact been issued.

51. On 10 January 2021, meetings of the Company’s shareholders resolved to cancel the three G class shares in the Company that Benjamin was understood to hold for a consideration of $90,000, which was ultimately not paid to Benjamin (Ex J1, 2529-2530). On 12 January 2021, the Company issued a notice to quit to Benjamin (Ex J1, 2548) and lodged a notice of a reduction in share capital with ASIC, attaching the documents to which I have referred above and minutes that recorded the passage of both resolutions at the relevant meetings (Ex J1, 2555).

52. By letter dated 27 January 2021 (Ex J1, 2572; Benjamin 27.5.22 [14]), the Company wrote to Benjamin advising that his shares had been “deregistered” and introducing an additional requirement, before he would be paid the $90,000 in respect of the reduction of share capital in accordance with the resolutions passed on 10 January 2021, that he sign a deed of settlement, and requested him to nominate a bank account to which payment could be made.

53. By letter dated 8 February 2021 (Ex J1, 2615), marked “without prejudice” but tendered without objection, the Company observed that Benjamin’s shares had been “de-registered” and that “the [C]ompany’s only remaining obligation to you is the payment of compensation” and enclosed a deed of settlement and release, indicating that Benjamin was required to sign and return the deed before any payments could commence. There was no statutory basis for that approach, if the G class shares then understood to be held by Benjamin had existed and a valid share capital reduction had occurred in respect of them.

54. On 30 April 2021, the Company obtained a share valuation of what were then understood to be Benjamin’s three G class shares in the Company, which it had sought “for the purposes of providing a compensation payment to a former shareholder following a capital reduction by the company” (Ex J1, 2634B). The valuer relied on a valuation of the Property at $1,750,000 (apparently reflecting the 20 November 2020 property valuation to which I referred above) and observed that the highest value of the shares is obtained by using the Company’s net tangible assets and, on the (likely incorrect) basis that there were 26 shares treated as having equal rights, valued Benjamin’s shares at $144,000, while expressing the view that “A” class shares should be valued more highly than both the “B” class shares and the “G” class shares that Benjamin was then understood to hold.

55. A current and historical company extract prepared from the records maintained by ASIC as at 23 June 2021 (Ex J1, 235) records the directors of the Company as Mr Grumley, Daniel, Ms McKenna and Ms Austen and records that 15 “A class” shares, 2 “B class” shares and 6 “G class” shares were on issue, with Mr Grumley and Daniel each holding 3 G class shares. As I noted above, Benjamin no longer contends that the G class shares were validly issued and it is common ground that Benjamin, Mr Grumley and Daniel each hold six ordinary shares and, by parity of reasoning, the other shareholders who were issued ordinary shares when the Company was incorporated also hold those ordinary shares.

56. On 9 February 2022 (Ex J1, 2729), Westpac advised the Company it had removed Benjamin as a guarantor and he would receive a letter in due course advising that he had been released from his obligations under the guarantee. It appears that process took some time, as Benjamin had refused to sign a release authority that Westpac had previously required to implement his release as guarantor. On 15 February 2022, the Company commenced these proceedings, initially claiming possession of the land occupied by Benjamin.

57. On 17 February 2023, Benjamin claims to have discovered, in a cupboard in his mother’s home unit, a USB drive including a copy of an unexecuted “Gunyahweh Pty Ltd Founder Share Agreement 2017” (Benjamin 20.2.23 [12]). I address his evidence in that regard below. On 21 February 2023, Lindsay J made consent orders for possession in these proceedings on the Company’s application and with Benjamin’s consent.

Affidavit evidence

58. I now turn to the affidavit evidence and cross-examination. The parties sought to read numerous and lengthy affidavits addressing unpleaded allegations of criminality against each other. Benjamin alleged that other shareholders in the Company, inter alia, engaged in unlawful drug dealing from the Property and in money laundering using the Company’s bank accounts and funds. The Company, under the control of the other shareholders, alleged that Benjamin was angry, aggressive, had unlawfully destroyed property and had violently assaulted them. For the reasons indicated in an ex tempore judgment, I rejected the parts of that evidence led by both parties to which objection was taken, since there would have been a fundamental denial of procedural fairness in determining unpleaded allegations against the other, where each party and the Court would have to deduce the scope of those allegations from voluminous and often inadmissible affidavit evidence.

59. It was not apparent that, in any event, the large part of that evidence would be material to a determination of the case. It is plain that the Company was established on a basis that assumed trust and confidence of the shareholders; that the relationship between Benjamin and other shareholders has irretrievably broken down; and that both Benjamin and other shareholders have contributed to that breakdown, at least by vitriolic correspondence on Benjamin’s part, and by other shareholders’ attempt to cancel Benjamin’s G class shares by a selective reduction of capital, initially on the basis that he would be compensated for their value, but in fact on the basis that the payment would only be made if he accepted their terms and over a long period in which he would be exposed to the risk of non-payment. I use the term “attempt” here because, as will emerge below, no party now contends that the G class shares that the Company sought to cancel, by a selective reduction of capital, had been validly issued and all parties accept that Benjamin still holds ordinary shares which the Company had not sought to cancel.

60. The affidavit evidence that remains, after excluding that relating to unpleaded allegations, is of limited scope and takes matters little further than what emerges from the documentary evidence. Nonetheless, in addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318–319; Varma v Varma [2010] NSWSC 786 at [424]–[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10]. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” (emphasis added)

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

61. I have here drawn on my summary of the applicable principles in Re SRD Property Pty Ltd [2023] NSWSC 441 at [8]ff.

62. Benjamin relies on numerous affidavits, significant parts of which were, as I noted above, directed to unpleaded claims of misconduct and criminality on the part of other shareholders in the Company, which were rejected for lack of relevance and under s 135 of the Evidence Act 1995 (Cth) (“Evidence Act”). By his affidavit dated 27 May 2022, Benjamin outlined the circumstances in which he and Sascha first dealt with Bryant in relation to the purchase of the Property and referred to his and Sascha’s decision to incorporate a proprietary company to own the Property and to his having originally been a director of the Company after its incorporation on 20 January 2017. He refers to the arrangements for occupancy of the Property after it was acquired, which included sub-letting rooms, houses and workshops and entering into agistment arrangements with third parties. He also refers to the financing of the purchase of the Property, which included the loan from Westpac to which I referred above and significant amounts paid by persons who acquired shares in the Company, including Ms Talitha Mitchell, Ms McKenna and Mr Alan Oshlack and lesser amounts contributed by Ms Natalie Hollingsworth (although partly not in money as noted in the above chronology) and paid by Mr Ron Berry and Ms Braja Mansfield. Benjamin’s evidence is that he previously “paid” to the Company an amount in excess of $120,000 by payment of expenses associated with it and the management of the land, but that proposition is not established by the evidence and he was unable to support it in cross-examination. Benjamin also refers to a copy of the landholder share package agreement distributed to shareholders (or potential shareholders) holding (or potentially acquiring) parcels of three shares in the Company in June or July 2019 and to the fact that the Company became the registered proprietor of the Property in September 2019. Benjamin also refers to a contentious meeting of members of the Company which he says took place in November 2019 and to the circumstances in which he believed the Company sought to forfeit or deregister his shares in the Company. In the event, although the Company sought to extinguish Benjamin’s three G class shares in the Company, which it then understood he held, it took no such step in respect of his ordinary shares in the Company.

63. By a second affidavit dated 7 November 2022, Benjamin expanded on his account of the initial lease of the Property, the Company’s incorporation and the subsequent purchase of the Property, and the circumstances in which he paid rent in respect of his occupation of a room in the main house of the Property and worked on business plans for the Property or the Company He refers to a suggested agreement that he should invoice the Company for work done for it and to the issue of a further three shares to him in payment for that work. I do not accept his evidence in that regard and find that three replacement share certificates were issued so as to correct the misstatement of the amount he had paid to acquire his shares, then understood to be G class shares, from $120,000 to $3, which it appears was also not paid (T126). Benjamin also refers to his dealings with Westpac in respect of a loan made to the Company to acquire the Property, his subsequent claims for payment in respect of work he had done and a dispute that took place at a meeting in mid-October 2019. He also refers to subsequent offers made by the Company to pay him amounts, initially of $120,000 and subsequently of $90,000, on extinguishing his shares. Benjamin did not accept the offer which contemplated payment of the higher amount and the Company did not pay the lesser amount.

64. By a third affidavit dated 15 February 2023, Benjamin responded to evidence of the Cross-Defendants, significant parts of which were rejected or were not read. By a fourth affidavit dated 20 February 2023, large parts of which were rejected, Benjamin claimed to have discovered a USB drive left in a cupboard at his mother’s home unit which contained copies of founder, A class and B class share agreements and claimed to have found a document titled “Gunyahweh Pty Ltd Founder Share Agreement 2017” located on that USB drive. Benjamin was cross-examined as to that evidence and gave a somewhat incoherent explanation, which sought to explain the fact that the USB drive which contained that document could not have been discovered in a cupboard at his mother’s unit in February 2023, since it had previously contained drafts of his affidavits for these proceedings prepared prior to that date (T164-171). The substance of that evidence involved attempts to explain there was another USB drive, not referred to in his affidavit, from which he had copied the documents found on the USB drive which had been tendered. I do not accept Benjamin’s evidence in that respect and I am not satisfied of the provenance of the document said to have been found on that USB drive which is attached to his affidavit. I do not go so far as to find Benjamin prepared that document in February 2023 to create a false impression that it had existed at an earlier time, where there is some suggestion in the metadata for that document that it may have existed in 2019, or possibly different versions of the agreement from which it was copied had existed in 2019. Even if a draft of that agreement had existed prior to February 2023, there is no satisfactory evidence that it had been executed, at all or with the Company’s authority, so as to become binding upon the Company or any of the shareholders.

65. A small part of Benjamin’s fifth affidavit dated 28 March 2023 was read. He there reiterated his evidence that the document annexed to his affidavit dated 15 January 2023 was located on a USB drive that he found in a cupboard at his mother’s home on 17 February 2023, and added a claim that he had copied the document into another USB drive so that he could print copies of it in about April 2019 (Benjamin 28.3.23 [138]). Benjamin also claimed to have had a discussion with Mr Grumley in early 2015 in which Benjamin said “[t]he founders will have the right to occupy and build on the property” (Benjamin 28.3.23 [138]). I am not persuaded that a conversation in those terms occurred, where the evidence suggests that the Company needed to raise funds from third parties by offering occupancy rights in order to fund the acquisition of the Property, and it was contemplated that the founding directors and other persons would rent rooms on the Property, rather than having a right to build on it, at least until the bank loan taken to acquire the Property was paid out.

145. Mr Alkadamani also refers to Wain v Drapac (No 2) [2013] VSC 381, where Ferguson J (as the Chief Justice of Victoria then was) observed (at [39]):

“At the heart of these principles is that the price to be paid is compensatory in nature and is aimed at addressing the wrong done (the oppressive conduct). Consequently, the price to be paid will not always reflect the actual or real worth of the shares that might be obtained on the open market.”

146. This proposition does not assist Benjamin here, where the deficiencies in both parties’ share valuation evidence noted below are such that they establish neither the price that would be paid by a hypothetical purchaser of Benjamin’s shares nor any fair value of the shares, having regard to the amount that could be realised on any exit from the shareholding, by sale or on a winding up of the Company, and the complexities introduced by the rights of shareholders who are party to landholder agreements.

147. Both parties led evidence as to the value of the Property. Benjamin read the affidavit dated 7 December 2022 of Mr Anthony Andrews, which annexed his valuation of the Property, which indicated a value of $3.3 million as at 15 January 2021 and $4.4 million as at 23 November 2022. Mr Andrews’ report involved reasonably comprehensive documentation of the improvements on the Property and their condition and he also addressed positive and negative impacts of the Property’s marketability and value, including its subdivision potential as a rural lifestyle development on the one hand, and its poor condition and limited ability to generate farm income and unapproved buildings and “overall poor … presentation” on the other. Mr Andrews also referred to other comparable properties as the basis of his valuation. By second affidavit dated 16 February 2023, Mr Andrews responded to Mr Cunningham’s valuation report, on which the Company relied.

148. Mr Andrews was cross-examined (T60ff). His evidence was that it was not surprising that there had been an increase in the value of the Property from $3.3 million on 15 January 2021 to $4.4 million on 23 November 2022, given substantial increases in real estate prices during 2021 (T61). However, it appears that he had not had regard to the original purchase price of the Property of $1.1 million in August 2019 in determining his valuations of the Property, although he indicated his understanding from local agents that the original purchase had been at a “good price” (T62). Plainly, his later valuations of the Property were also substantially higher than valuations of the Property which had been undertaken in 2019 (T64-65).

149. The Cross-Defendants read the affidavit dated 8 February 2023 of Mr Timothy Cunningham, which annexed his valuation report of the Property as at 15 January 2021 and as at 1 February 2023. Mr Cunningham also undertook a detailed review of the improvements on the Property and reviewed sales evidence in relation to sales of similar properties in order to derive the retrospective market value of the Property as at 1 January 2021. He also reviewed the real property market in the Tweed region from March 2020 onwards, noting an increase in prices during the COVID-19 period and to subsequent cooling of the market as interest rates rose. He assessed the value of the Property as at 15 January 2021 as between $1,850,000 and $2,150,000 with a mid-range value of $2 million, and the value of the Property as at 1 February 2023 as between $2,800,000 and $3,200,000 with a mid-range value of $3 million, including in each case the market value of the land and the value of improvements.

150. It is not necessary for me to reach a conclusion as to the value of the Property, where neither party led adequate evidence that would allow a determination as to the value of the Company’s shares based on any determination of the value of the Property, and it is not apparent that either the Company or its shareholders could fund a buyout of Benjamin’s shares. However, had it been necessary to do so, I would have preferred the evidence of Mr Cunningham to Mr Andrews’ evidence, where it seems to me that Mr Andrews’ application of a per hectare rate to the larger area of the Property significantly overstated its value to the Property, where a purchaser would likely discount the amount he or she was prepared to pay for additional acreage in the Property which could not be put to productive use, beyond the minimum size which the purchaser sought for a rural lifestyle property. It seems to me that Mr Andrews’ valuation would also imply a highly implausible level of increase in the value of the Property since the date of its purchase, notwithstanding the evidence of earlier price increases and then a stabilisation of prices in the Tweed region.

151. Turning to the question of the valuation of Benjamin’s ordinary shares in the Company, Benjamin read the affidavit dated 4 September 2023 of Mr Mathews, an accountant, which annexed a valuation of Benjamin’s shares in the Company on assumptions that were amended when Benjamin abandoned the claim that G class shares in the Company had been issued to him and instead relied on his holding of ordinary shares in the Company. The present state of those assumptions is recorded in a document marked MFI-4. Mr Mathews had limited experience in share valuations, although I admitted his report over objection, and his valuation had significant limitations.

152. Although Mr Mathews referred to the fact that the valuer retained by the Cross-Defendants had been asked to value those shares on the orthodox basis that their market value was the amount which would be paid for them by a willing but not anxious buyer, he rejected that basis of valuation and instead valued those shares on a net tangible asset basis. That approach did not allow for the fact that Benjamin is a minority shareholder in the Company, and a minority discount would arguably be applicable to the valuation of his shares, where his conduct has contributed to the other shareholders’ wish to exclude him from occupancy of the Property. That approach also did not allow for the fact that Benjamin could not extract the net tangible asset value of his shares from the Company in a winding up, because the Property would have to be sold subject to the rights of those shareholders with landholder agreements with the Company, or a liquidator would have to disclaim those agreements and recognise those shareholders’ claims for loss arising from that disclaimer as debts in the winding up. Those debts would rank in priority to the claims of ordinary shareholders including Benjamin and the liquidator’s costs also have to be met before any distribution could be made to ordinary shareholders. I recognise that Mr Mathews made an attempt to adjust for the rights of A class shareholders, by deducting the amounts that had paid to acquire their shares from the Company’s assets, although it is not clear that adjustment fully recognises the effect of those rights on the Company’s ability to sell the Property or Benjamin’s ability to extract value from his shares.

153. Mr Mathews was also asked to assume that the land and improvements on the land had a value of $3.3 million at 20 January 2021 and $4.4 million at 23 November 2022, drawing on Mr Andrews’ valuation evidence, which I would likely not have accepted for the reasons noted above. Mr Mathews was not asked the value of the land on the alternative basis that Mr Cunningham’s evidence was accepted, and the Cross-Defendants also did not seek to undertake an alternative valuation using Mr Mathews’ methodology on that basis.

154. Mr Mathews also offered various further observations as to the impact of contractual permissions for the use of land or buildings, introduced by the fair recognition that he was unqualified to value their impact, and identified a formula that could be used to determine a value of Benjamin’s shares “if the Court were to allocate some value to the contractual entitlements” to which he referred, but it is not possible for the Court to do so where neither party led evidence that would provide an adequate evidentiary basis for doing so. For completeness, Mr Mathews also disregarded two parcels of A class shares issued by the Company after it cancelled Mr Smith’s shares. On balance, it seems to me that those parcels should not have been disregarded, where they now exist, in determining the present value of Mr Smith’s ordinary shares.

155. The Cross-Defendants read the affidavit of Michael Williams dated 25 June 2023, which annexed the valuation report of Mr Williams, who had stronger valuation expertise than Mr Mathews. However, Mr Williams’ valuation is of no assistance because he proceeded on an assumption that the value of the whole of the land owned by the Company was attributable only to its A class shareholders who had contractual rights to occupy a relatively small part of that land. That assumption was obviously incorrect, because significant parts of the Property are not subject to any such right of occupancy by those shareholders, including the seven bedroom house on the Property and a large part of the unimproved land. Mr Mathews readily conceded the lack of basis for that assumption in cross-examination (T421) and his valuation of the ordinary shares as having no value as at 20 January 2021 was wholly dependent on that assumption. Mr Alkadamani also rightly points to the fact that, while the value of the Property was excluded from Mr Mathews’ valuation, he did not make any adjustment for the Company’s debt to Westpac which had been used to acquire that Property (T420). Mr Mathews’ report therefore provides no basis for determining the value of Benjamin’s shares, and it was notable that the Cross-Defendants did not make any attempt to value Benjamin’s shares on any more realistic basis.

156. I also recognise that an earlier valuation report dated 30 April 2021 obtained by the Company (Ex J1, 2634A), to which I referred in the chronology above, had valued Benjamin’s shares at $144,000 on a net tangible assets valuation basis, although that did not adjust for the valuer’s view that A class shares should be valued more highly than the B class shares and the G class shares that Benjamin was then understood to hold. I can give limited weight to that valuation here, where it does not adjust for that matter, or for the fact that Benjamin held a minority stake, or for the fact that he would not realise that entitlement on a winding up for the reasons noted above, even if he could cause one to occur.

157. I would have made a buyout order (including in preference to any winding up order or making no order) in this case, had it been possible to do so in practical terms. However, it is plainly not possible to make a buyout order. First, the valuation evidence does not allow a proper assessment of the value of Benjamin’s shares, given the deficiencies in both share valuation reports to which I referred above, and there is no reason to think that either party would lead better evidence even if I were to give them a further opportunity to do so. Second, there is no reason to think that the Company or its shareholders have the capacity to pay any substantial amount to acquire Benjamin’s shares. When the Company previously set a purchase price of $90,000 for Benjamin’s three G class shares, it did not pay it. When it offered payment on terms of a deed of release, it did so on the basis that it would pay that amount by monthly instalments over several months. The Company does not now make any open offer to buy Benjamin’s shares at fair value. There is no reason to think that the Company has the financial capacity to buy out Benjamin’s ordinary shares at their fair value, if it were possible to determine it, still less at a value comparable to their net asset backing. The individual Cross-Defendants all give evidence, and there is no reason to doubt, that they do not have the financial capacity to acquire Benjamin’s shares at their fair value (again, if it were possible to determine it) or their net asset backing and they have also made no offer to do so.

158. Turning now to the position in respect of a winding up order, I recognise that s 467(4) of the Act applies where a winding up order is sought on the just and equitable ground, and the matters identified in that section, including the availability of some other remedy and whether a plaintiff would be acting unreasonably in seeking to have the companies wound up instead of pursuing that other remedy, also apply where a winding up order is sought under s 233 of the Act. I also recognise that, in Snell v Glatis (No 2), Bell P (as the Chief Justice then was) observed at [6] that:

“Although statements may be found in the authorities that winding up is a last resort remedy in a case where oppression is found … the context in which the particular company or companies operate together with their structure and history will always be relevant to the fashioning of appropriate discretionary relief and generalised statements as to, for example, the inappropriateness of ordering winding up in cases of oppression other than as a last resort do not mean that that remedy should not be considered, in an appropriate case, even if neither party in fact seeks it.”

159. I also bear in mind that, by analogy with the position in respect of a winding up order under s 461(1)(k) of the Act, a person who is responsible for the breakdown of the shareholders’ relationship is less likely to be afforded relief, and that a winding up order is not “lightly to be made” and must be “just and equitable not just for the applicant, but for all”: Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193; Ruut v Head (1996) 20 ACSR 160 at 162; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97 at [90]; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342 at [90], [96], [117]; Byrne at [81]; Re Amazon Pest Control Pty Limited [2012] NSWSC 1568 at [19].

160. I have found the question whether a winding up order should be made in this case to be a difficult one. I have recognised above that there is evidence of an expectation that persons associated with the Company would live on the Property, although that expectation was falsified at an early stage in respect of Sascha, was not documented in respect of Benjamin or Mr Grumley and has now been falsified in respect of Benjamin. I recognise that the Company made an initial offer of $126,000 to acquire the G class shares that Benjamin was then understood to hold, which he rejected, although it is by no means clear that it could have funded that payment had he accepted that offer. I also recognise that the Company had committed to pay the amount of $90,000 on extinguishing the G class shares which Benjamin was then understood to hold and then did not do so. I recognise that there is significant disadvantage for Benjamin in losing his ability to occupy a part of the Property, without compensation, although he will retain his ordinary shares in the Company from which he will derive no apparent benefit. I also recognise that Benjamin has contributed to that result by the manner in which he has dealt with other shareholders, even apart from the unpleaded allegations against him as to which evidence was not admitted.

161. I recognise that, on the other hand, a winding up order would defeat what was originally likely an idealistic attempt to create a community with shared values at the Property. There would also be a significant detriment to other shareholders in a winding up, including the likely loss of their ability to occupy the Property, and the risk that ordinary shareholders (including Benjamin) would receive no or only a limited return, after Westpac’s debt and the costs and expenses of a liquidator were paid and the claims of shareholders with rights to occupy the Property under landholder agreements were met following any disclaimer of those agreements, where those persons would rank as creditors and their claims would have priority over claims by other shareholders. I also bear in mind that Benjamin has been confrontational in his dealings with other shareholders and has significantly contributed to the disputes with them, and has not led expert evidence that was capable of establishing that his shares have material financial value and has not established that he made any material financial contribution to acquire those shares. Weighing these various considerations, but with real hesitation, I have concluded that I should not make a winding up order. I recognise that reasonable minds may differ as to the result that should be reached in that regard.

Relief sought by Benjamin as to his guarantee

162. Benjamin also seeks (Relief [12]) an order that the Cross-Defendants do all things necessary to effect a release of any guarantees given by him in respect of the Company’s obligations. It is not necessary to make that order where Westpac has previously addressed the issue; the basis for making that order is also not apparent; and it is also not apparent that the Cross-Defendants have the practical capacity to cause Westpac to release that guarantee, beyond the steps that it has already taken or committed to taking.

Orders

163. For these reasons, the Cross-Claim should be dismissed, and I will also otherwise dismiss the primary proceedings brought by the Company where no issues in them remain to be determined.

164. My preliminary view is that there should be no order as to the costs of these proceedings, where the manner in which they have been conducted, by both parties, is such that it would be unjust to impose the burden of costs upon the other party. First, the parties led voluminous affidavit evidence, with much of the Cross-Defendants’ affidavit evidence being directed to unpleaded allegations of criminality and misconduct on Benjamin’s part, and much of Benjamin’s evidence in reply then being directed to equally unpleaded allegations of criminality and violence on the part of the Cross-Defendants and their associates. Second, significant parts of the cases of both parties were put on the basis of false premises as to the status of shares in the Company, including the position as to G class shares, and were directed to false issues including the validity of the capital reduction in respect of Benjamin’s G class shares that no-one now contends existed. Third, on any view, the time spent in the conduct of the case and the costs which will have been incurred in its conduct by both parties will be grossly disproportionate to the monetary amounts that were in issue, so far as it is possible to guess the likely value of Benjamin’s shares in the absence of adequate expert evidence. Fourth, and importantly, the failure of both parties to lead adequate expert evidence which might have permitted a buyout order, or at least permitted the Court to stay a winding up order for a period against the possibility that a buyout might occur on specified terms, has forced a result where Benjamin must either fail in his claim or the Company must be exposed to the risks of a winding up and its shareholders to the collateral consequences of a winding up, in a manner that is not consistent with the just resolution of the real issues in dispute between the parties. I will, however, allow the parties a further opportunity to be heard as to costs, if they seek to be heard in that respect.

165. I make the following orders:

1   The Cross-Claim be dismissed, reserving the question of costs.

2   The proceedings otherwise be dismissed.

1. Direct the parties to bring in agreed short minutes of order as to costs within 14 days or, if there is no agreement, their respective short minutes of order and submissions not exceeding 10 pages in one and a half spacing as to the differences between them.

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Decision last updated: 21 September 2023